EP324 - Amazon Q4 Earnings

The Jason & Scot Show - E-Commerce And Retail News

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Amazon's Q4 Earnings: Navigating AI and Advertising

This chapter analyzes Amazon's Q4 earnings in the context of rising competition in AI and advertising. It discusses the impact of DeepSeek's R1 model on Amazon's strategy, the importance of third-party sellers, and the challenges of balancing ad revenue with customer experience. The chapter highlights Amazon's efforts to invest in AI technologies while addressing concerns over its proprietary capabilities and future growth potential.

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EP324 - Amazon Q4 Earnings

In this episode we do a deep dive into Amazon Q4 and Full Year 2024 results. Amazon had an overall strong quarter with record profits from their retail business unit. Amazon GMV grew 11% in 2024 vs. 2023, almost three times as fast as the retail industyr as a whole. Amazon's North American GMV also nearly matched Walmart's in 2024 (Walmart reports it's Q4 results next week).

We also cover the impacts and implicates of the de minimus ban in the US (which was lifted after only 4 days).

We wrap up by comparing Amazon's 2024 growth to the rest of the retail industry. Amazon, Walmart, Costco, Temu, Shien, and Tik Tok Shops representing 62% of all retail growth in 2024 (this is a revision from the 70% estimate we shared in the podcast).

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 324 of the Jason & Scot show was recorded on Monday, February 10th, 2025.

http://jasonandscot.com

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

Transcript

Jason

[0:23]Welcome to the Jason and Scott Show. This is episode 324 being recorded on Monday, February 10th. I'm your host, Jason Retail Geek Goldberg, and as usual, I'm here with your co-host, Scott Wingo.

Scot

[0:36]Hey, Jason, and welcome back, Jason and Scott Show listeners. Jason, how was your Super Bowl?

Jason

[0:43]My Los Angeles Chargers did not do well in the Super Bowl this year. Or my adopted Detroit Lions.

Scot

[0:50]Well, as a chief digital payment retail advertising officer for a big ad firm, I'm sure you were there for the ads. What any ads catch your attention?

Jason

[1:02]Were there ads in the Super Bowl?

Scot

[1:04]Yeah. Yeah. It's supposedly one of the more expensive places to buy an ad.

Jason

[1:08]Yeah. Yeah. I mean, this is kind of hackneyed, but it's near $8 million for each 30 second spot now. And what people miss is that most of these ads cost more than twice that. That both the production of the ad is quite expensive. And then there's now this whole, it used to be that you just surprised everyone by running an ad. And what everyone has learned is you get a lot more mileage by hyping the bejesus out of your ad for weeks before the Super Bowl. And so now the Super Bowl is like step four in a 10-step process and it's all super expensive. So the money is higher than ever. I would not say it was a standout year for e-commerce. Like the last two years, like two years ago, we had this surprise new, not only Super Bowl advertiser, but surprise new retailer in Timu.

Jason

[2:02]And, you know, then last year they were surprised in that they bought so many ads. So that was remarkable. Over the years, we've had some really interesting Amazon ads. And then occasionally we have some weird venture funded, like digitally native direct to consumer companies try to make a splash in the Super Bowl. So I'm not sure I would characterize anything that this year as super standing out from an e-commerce standpoint. Instacart was like the most significant new e-commerce player to do a Super Bowl ad. I thought they did a good ad that was well received with the famous brands. And then, you know, there's some weird stuff. Most of these ads are just to increase brand awareness. And in fact, the way they measure them is things like unaided brand recall, which are, these are metrics that I personally hate. But one of the ads for Fetch, which is arguably an e-commerce company, it's a, you know what Fetch is, Scott? It's a, it's like a purchase affinity program.

Jason

[3:08]So... Brands buy promotions. They're from Fetch. Customers subscribe to Fetch, and when they take advantage of the discount on General Mills goods, they earn Fetch points, which they can then redeem for prizes. So it's, it's a multi-brand customer affinity, digital native customer affinity program. And they did an ad in the last two minutes of the Superbowl that was essentially open our app right now. And in the next five minutes, we're giving 120 people, $10,000.

Scot

[3:44]Well, and so the.

Jason

[3:46]The, yeah, you had to watch to the bitter end and the game was no longer interesting at that point. But the interesting thing about that is that this is one of a handful of attempts over the years to do real activation in a Super Bowl ad versus just generate awareness. So I don't think anyone thought it was super well done or super effective, but I admire the effort to try to make some of these ads work harder. Like you'll remember past years, there were interesting, like there was a one year where the ad was just a QR code that stood on the screen for 30 seconds.

Scot

[4:23]Yeah. Yeah. And bounced around. It did the bouncy thing.

Jason

[4:25]Yeah. To make it harder to scan, which is, yeah.

Scot

[4:31]Cool. I liked the Instacart. That one kind of caught my attention.

Jason

[4:35]Yeah, I was just sad that there was no Timu jingle to get earwormed into my head this year.

Scot

[4:42]Yeah, I was confused by the water bottle thing. I had never seen that.

Jason

[4:46]Yeah, that got kind of panned. That didn't get circle or whatever it's called. Yeah.

Scot

[4:53]Yeah.

Jason

[4:54]Yeah. So it didn't get great reviews as an ad, but it was super confusing. People didn't understand what they were even trying to do.

Scot

[5:00]Yeah, I thought it was like a delivery network. And then I was thinking, oh, we'll have to mention this. And I was like, wait a minute. They're only delivering water bottles. I must have misunderstood the whole thing.

Jason

[5:08]Yeah. It's a filtering, it's a filtering water bottle.

Scot

[5:11]Yeah. I guess I didn't understand why they were distributing a hundred.

Jason

[5:14]I guess they gave away like a million starter kit sample packs, but it was not clear to anyone watching the ad that that's what they were talking about or doing. They, they tried to get too much in a short ad, but I think the, the plot in theory was that the the celebrity who's the the guy from mean girls and or pitch perfect yeah um that he who apparently is a real life fan of the product and got this contract as a result of his like, social shares about the product that he inadvertently ordered a huge surplus of the of these these products and then had to give them all away.

Scot

[5:54]Well we'll have to have you do a live stream next year to explain the commercials to me.

Jason

[5:58]Yeah i think we should get someone that understands.

Scot

[6:05]I got none of that whatever you guys got so.

Jason

[6:07]Yeah yeah that's just all the water cooler conversation i get in my company today the coolest ad in our world i should have said is starbucks that did not advertise at the super bowl but they've created a new holiday which is called i think I think it's called like super Monday and so it's, everybody's like tired and low energy on the Monday after the super bowl. So Starbucks gave all, all rewards members a free coffee today.

Scot

[6:40]Yeah, that was smart.

Jason

[6:41]Yeah.

Scot

[6:42]The, it doesn't work for the kind of drinks we have though sadly.

Jason

[6:45]Not trying to use a little. Basic brewed iced coffee does count. So I didn't, I didn't go, but I could have gotten a nice coffee.

Scot

[6:52]Yeah. Okay. I liked, I thought it was interesting that the Dunk Kings were, or Dunkin' Donuts was basically making fun of Starbucks. They were kind of dissing them.

Jason

[7:03]Yeah. Yeah. I didn't like that at all. No. And that was kind of a sequel, right? Like that was a sequel from last year's ad. Although I think Matt Damon got bumped for Ben Affleck's brother. So that, I will say the, the. The david beckham ad was pretty cute.

Scot

[7:20]Yeah that was funny yeah.

Jason

[7:21]The other david yeah.

Scot

[7:23]And he kicked the ball.

Jason

[7:25]Yeah oh it's the thing i do yeah and so this is for people that didn't watch matt damon portrayed david beckham's long lost brother that his parents never told him he had and, and the other david grew up in america versus david beckham growing up in in england obviously But at the end of the ad, David Beckham explains that he's a pretty famous soccer player. And Matt Damon goes, you mean like Matt Damon famous? And David Beckham goes, more like Ben Affleck famous. And Matt Damon goes, oh, that's too bad.

Scot

[8:00]Ouch.

Jason

[8:01]Yeah.

Scot

[8:03]Cool. Well, today we are going to talk about Amazon's fourth quarter. So the, before we go into there, the setup was you, did the Department of Commerce ever come out with their data for, for the holiday or we're still waiting on it?

Jason

[8:21]No, they did. The December data is out. And so it ended up being a good holiday. November sales were really soft by historical standards, but then December sales were really strong. The partly, I think that's partly because the, October. Literally, the holiday season started in October this year. For the first time ever, they really got consumers to buy more stuff in October. And so then there was kind of a lull in November and sales picked back up in December. Also, just weird vagarities of the calendar. Cyber Monday was in December this year, which it's normally in November. So that had some impact. But cumulatively, between November and December, sales were up 4% year over year, which NRF had forecasted that they would be up two and a half to three and a half percent. So being up four percent is pretty solid.

Scot

[9:13]Yeah. Good. Cool. So then coming into, oh, the other thing I wanted to hit before we get into the deep dive of Amazon earnings is the end of the de minimis thing that you've been talking about.

Jason

[9:26]Yeah. See, we can do a super short version of this. When you import stuff into the United States, you have to pay duties and taxes on those things and you have to meet import requirements. So you can't import products that are made with, you know, dangerous chemicals or made by a child political prisoners or things like that. But we don't have enough inspectors to make sure that everything comes into the United States meets all those criterias. So for a long time, we've had this exception on the import thing, which is if it's a very small package of low value, it does not need to be inspected and you do not need to pay customs. So if you make a container full of t-shirts and send them to the United States to sell, you pay duties on that container. But if you put a single t-shirt in an envelope and ship it to a single customer, it's under the de minimis threshold and nobody has to pay customs on it. And it was a clause that was just to save on labor to process all this paperwork. No one wanted to collect $0.30 of duties and have to spend $5 processing that $0.30 payment. But over time, that threshold crept up and up. And under the Obama administration, it got raised to $600.

Jason

[10:42]And so there's companies like Shein and Timu shipped the vast majority of their packages into the U.S. When they first started via that mechanism. So they, in essence, didn't pay any duties or taxes. And, you know, a lot of people felt that's unfair, that Gap is paying a lot of duties because they're importing containers, a lot of stuff, and Timu is shipping individual packages to consumers and not paying duties. And so Biden actually...

Jason

[11:11]Issued an executive order to cancel De Minimis from China, but he wrote it in a way that it would be like carefully considered and slowly implemented. So it hadn't been implemented by the time he left. And then Trump issued an executive order on like a Thursday saying it's, it's closed on Tuesday over the weekend. And so everyone's like, oh man, Timu and Sheehan are going to be out of business. This is going to be great for Western brands and blah, blah, blah. and it's still all playing out. Who knows what really will happen. My own personal opinion is Timu and Sheehan needed De Minimis to get started and they took full advantage of it. They are now so big that they don't need it. And both of those companies have half the goods they sell are already in warehouses in the US. They were already paying customs on it. They mostly decided that the popular items needed to get to Americans faster. So they have one and two day shipping. That's all coming from the U.S. So they're not dependent on de minimis anymore. And so banning de minimis, I think, is an inconvenience to them, but I don't think it's a death blow.

Jason

[12:19]Also, it doesn't necessarily save you money to use de minimis because while you save money on duties, it costs you a lot more shipping money because you're usually air freighting something instead of ocean freighting it. And that's much more expensive. So arguably, there's a trade-off between the air freight and the ocean freight. And then the secret dirty thing of all of this is every Western brand also figured out this was a thing. And so all the athletic shoes you buy get shipped in a container, not to the United States, but to Mexico, and then de minimis into the United States from Mexico. And so a lot of people assume, oh, this is only going to affect these Chinese brands that we don't particularly like doing well in our market, but it actually is likely to have an equal impact on many big brands.

Jason

[13:07]Trump also banned a minimus from Mexico and Canada, but then that got reprieved. So at the moment, it doesn't affect those. Nobody knew how to and still doesn't know how to process all of this. So literally the post office stopped accepting packages from China altogether for a day because they didn't know how to do this. Nobody solved the fundamental problem that we don't have enough inspectors to inspect all these packages. So in theory, if we try to inspect them all, there's not going to be any more goods in the United States because it's going to take a year for anything to clear custom. So there's a lot of confusion and uncertainty out there. I just sum it up by saying Amazon took full advantage of not paying sales tax when they got started. And it was a huge advantage and it helped Amazon scale.

Jason