In the early morning of February 3, Beijing time, Amazon released its financial report for the fourth quarter and full year of fiscal year 2022. The time is short and easy to interpret.
Unlike previous years, whether Amazon will "earn" or "lose" in 2022 has always been confusing:
On the one hand, the "Black Friday Cyber Monday" revenue continued to grow, and there were two big promotions a year; on the other hand, it issued a "zero profit" warning for the fourth quarter, and a large number of layoffs and warehouse closures in the second half of the year.
Therefore, this annual financial report is particularly exciting. It is not only the " transcript " of Amazon's 2022 performance , but also the " reference " for sellers to go overseas in 2023 .
Key info from Amazon's earnings report
The simplified version of the financial report:
1. Throughout 2022, Amazon's net sales will be US$514 billion , a year-on-year increase of 9% ; a net loss of US$2.7 billion will be the worst performance in Amazon's history .
2. In 2022, North American business sales will be US$315.9 billion, an increase of 13% compared to 2021 ; international business (UK, Germany, France, Japan, and China) sales will be US$118 billion, a year-on-year decrease of 8% ;
3. In 2022, the North American business will suffer a loss of US$2.8 billion. Compared with the 2021 fiscal year, it will turn a profit into a loss; the international business will lose US$7.7 billion, and the loss will expand;
4. In the fourth quarter, Amazon’s net sales were US$149.2 billion, a year-on-year increase of 9% ; net profit was US$278 million, a year-on-year decline of 98% , which was also the worst profit in the same period since 2014.
5. In the fourth quarter, net sales in North America increased by 13%, and losses continued to expand by 17% year-on-year; international business decreased by 8%, and losses expanded by 37%.
6. In the fourth quarter, the net sales of e-commerce business were US$64.531 billion, a decrease of 2% compared with US$66.075 billion in the same period of the previous year ; the net sales of third-party seller services were US$36.339 billion, a year-on-year increase of 20% ; Prime member subscription service Net sales of 9.189 billion U.S. dollars, a year-on-year increase of 13%; advertising revenue of 11.557 billion U.S. dollars, a year-on-year increase of 19%.
To sum it up in one sentence: Revenue growth, profits gone, main business stagnant, sideline business booming .
Looking forward to fiscal year 2023: Amazon expects net sales in the first quarter to be between US$121 billion and US$126 billion , a year-on-year increase of 4%-8%; operating profit is US$0-4 billion.
Since its listing in 1997, Amazon's market value has been growing steadily. It peaked at US$1.880 billion in July 2021, but fell to US$800 billion at the end of 2022. Others are erasing zeros, Amazon is erasing zeros in reverse, leaving only a fraction. Behind the growth and decline of the market value, from the outside, it is the outbreak and fading of the epidemic dividend, and from the inside, it is the resistance of Amazon's "growth flywheel". The model of the "growth flywheel" is rumored to have been drawn by Amazon founder Bezos on a napkin:
The operating logic of this " flywheel " is: by reducing the cost structure, the price of the product will be reduced, thereby improving the buyer's shopping experience, attracting more buyers and traffic, and more buyers will attract more sellers to settle in. The product categories will be more abundant, the buyer experience will be better, and the traffic will be greater…
According to system dynamics, the wheels turn faster and faster, and the snowball gets bigger and bigger . Theoretically speaking, this "growth flywheel" will continue in a virtuous cycle like a perpetual motion machine.
This is what Amazon has done for years, and it has been very successful, but the reality is unpredictable, and it is hard to catch one trick.
The word " growth " in the "growth flywheel" is very misleading. The flywheel is like a windmill or a snowball. Where there is growth, there will be slowdown, stop or even reverse. Because the "growth flywheel" will encounter friction sooner or later , otherwise Mr. Newton should not be happy.
With the blessing of the 2020 epidemic dividend, this "friction force" can be offset, but when the dividend ends, growth resistance will be exposed, and performance will decline.
Amazon's "growth resistance" mainly comes from three points:
1. One is external resistance . The dividend of the epidemic has subsided, global inflation, the war between Russia and Ukraine, the general environment is not as good as before, buyers are more cautious in consumption, and the stock market is so large, growth must become more and more difficult.
2. The second is competition resistance . The paradox of Amazon’s growth flywheel itself—the starting point of the flywheel is “ low prices attract buyers ”, but low prices cannot be infinitely low. If the price is too low, it will be unattractive to sellers, and even lost to competitors.
During the "Black Friday" period last year, Amazon's search volume has lagged behind Wal-Mart and Target, and independent sites represented by Shopify are also booming; in December, Amazon's downloads in the United States were 4.2 million times, far lower than TEMU's 9 million times , and TEMU is also taking the "extremely low price" route, pinching the supply chain by itself, "10% off the whole site", and a down jacket for $2.9, how can the simple American people withstand such a temptation?
3. The third is internal resistance . After the epidemic, the scale of FBA storage has doubled, and the number of Amazon employees has increased from more than 500,000 in 2018 to more than 1.8 million in early 2022. When performance growth gradually fails to cover the cost of expansion, after operating profit decreases, labor costs become prominent.
The above three points, in fact, correspond to the "people and goods yard" behind it, which used to be the driving force for the right time and place for people and harmony. After the environment changes, it is the resistance of the flywheel rotation. Therefore, " cost reduction and efficiency increase " is expected to be the main theme of Amazon in 2023, and it is not surprising to adjust storage capacity policies and performance costs.
What will 2023 look like?
Looking forward to 2023, Amazon reported a forecast of " median revenue of $123.5 billion and median profit of $2 billion ."
It is not a "good start" and did not meet the expectations of the Wall Street analysts, but compared with last year's first quarter revenue (116.4 billion) and fourth quarter profit (278 million), it has improved, which is a bit of a " bottom out " meaning .
The official interpretation of Amazon's financial report has not yet started, but after the start of the year, the market is generally a little more optimistic about the economic recovery in Europe and the United States. This may be the reason for Amazon's "cautious optimism" in the first quarter, and it can be regarded as some relief for cross-border people to start the year.
In the United States: On February 1, the Federal Reserve announced a 25 basis point interest rate hike. This is the eighth rate hike. The previous four times were 75 points, and the second time was 50 points. It shows that the inflation in the United States has eased. The wording "remains high" was changed to " inflation has moderated, but remains high ".
Although the U.S. will inevitably fall into recession in 2023, the market is still optimistic and predicts a soft landing of a " moderate recession ". Sluggish consumption and severe employment problems have forced the Federal Reserve to start "slowly raising interest rates", which is good for cross-border e-commerce.
As of the latest data, the CPI in the Eurozone has dropped for 4 consecutive months , and the consumer confidence index has risen for 5 consecutive months , which is also good news for cross-border e-commerce.
As a leading platform in the industry, Amazon’s financial performance trends are representative. Referring to its performance last year and forecast for the coming year, this curve seems to be climbing from the bottom.
2023 is about the year when cross-border e-commerce bottoms out.
We do not deny the significance of the "growth flywheel". The performance of a quarter or a fiscal year cannot replace the past and the future. " Long-termism " is the secret of a company's success. Amazon is especially an excellent representative of it. Cross-border e-commerce is even more worthy of long-term A deeply cultivated industry.
In the beginning of 2023, the recession will be accompanied by recovery, and the bottom will be followed by a rebound. The market environment is constantly changing, and cross-border people are required to update their strategies accordingly and find new business growth points. Without fighting for the gains and losses of a city or a place, regardless of the overnight profit and loss, the "growth flywheel" can be turned again, which is true for Amazon and sellers.
Reprinted from: Barn GoodCang
Official account: Bai Xiaosheng, cross-border e-commerce logistics