EP317 - Amazon Q4 Results

Episode Summary:

In this episode, Jason Goldberg and Scot Wingo dive deep into Amazon's fourth-quarter results for 2023, analyzing the company's performance in various segments such as retail, offline and online sales, marketplace, AWS, and advertising. They also explore the impact of AI on Amazon's business and provide insights into the company's future guidance for Q1 2024.

Amazon had a strong Q4 earnings report, beating analyst expectations for revenue and income. In fact, it was Amazon's most profitable quarter ever.

Retail sales were up 6%, which imputes a 2023 GMV of $515B - $660B in the US for all of 2023. The bottom end of that estimate would be a 9% growth over 2023, versus all of Core Retail in the US (x Gas and Auto) which grew 3.6% in 2023. This impressive growth was achieved while Amazon improved delivery times (6B packages delivered next day, and 1B delivered same day, same day offered in 110 metros) and reduced cost to serve by $0.45/package in the US (the first reduction in cost to serve since 2018).

AWS accelerated growth but slowly declined margins.

Ad revenue was again the brightest spot, growing 27% to $14.7B, resulting in $47B in revenue the last 12 months, and a $58B run rate. The income generated from that ad revenue was likely more than $27B, far in excess of the $21B Amazon earned from AWS. Once again demonstrating that Ads are Amazons biggest income generator.

Amazons total GMV in the US likely falls in-between Walmart's expected 2023 GMV of $442B and Walmart plus Sam's Club total US GMV of $519B. Walmart reports it's Q4 on Feb 20.

Amazon probably represented 24% of ALL retail growth in the US in 2023. Amazon, Walmart, Temu, and Shein alone likely represented 49% of all 2023 Us retail growth (leaving mostly crumbs for the rest of retail).

Amazon also announced Rufus, a new Gen AI based search amenity for the e-commerce site.

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Episode 317 of the Jason & Scot show was recorded on Wednesday, February 7th, 2024.

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 317 being recorded on Wednesday, February 7th, 2024. I'm your host, Jason Retail Geek Goldberg, and as usual, I'm here with your co-host, Scott Wingo. Scot: [0:38] Hey, Jason, and welcome back, Jason and Scott Show listeners. Jason, we've been talking about ARVR since before shop.org changed its name. And did you get a vision pro and how is it i. Jason: [0:57] Did not i feel like i've let you and our listeners down i desperately wanted to lie and say that we were recording this episode through our joint vision pros i did i did go do a demo and it it seems super cool i am sorting through my my highly poor vision to see what sort of corrective lenses i'll need to put into the thing, to pull the trigger. I heard yours has arrived though. Scot: [1:24] Yes, mine actually just came hours ago here to Jason and Scott, North Carolina headquarters. And it is sitting in a box staring at me. And I figured I would not get the show notes done if I started playing with that. So that's gonna be my weekend fun that I'm gonna work on. So I'll report back on that. Jason: [1:42] All of us that love you are slightly sad because we've seen your real eyes for probably the last time in a long while. Scot: [1:48] That is true yep yep these baby blues are going behind the goggles and i'm gonna drive the first thing i do is get in my car and drive that seems to be what everyone does on twitter so that'll be fun yeah. Jason: [1:59] That sounds wildly safe. Scot: [2:01] Yeah well you can see right through them so it's totally fun yeah. Jason: [2:05] No you can't. Scot: [2:09] Just kidding everyone do not do that at home and if you do blame jason Yeah. Jason: [2:13] But again, the Tesla is perfect self-driving anyway. So what, what would it even matter? It's like, I feel like you have multiple layers of AI overlords protecting you, Apple and Tesla. What could go wrong? Scot: [2:25] Yeah, it is not perfect by any means. Jason: [2:29] Yeah i'm glad we caught you i feel like there there's been a lot of travel and it's i know you you have kind of stepped away from the hustle bustle but i'm right in the middle of uh retail trade quarter trade yeah yeah. Scot: [2:41] How's that going you did so we haven't been able to catch up since you've done nrf i saw you were like posting like a wild man seems like you had a very active big show how was that. Jason: [2:51] Yeah it was pretty good i would big show is definitely back it was the largest attendance ever. There were over 40,000 people. So it was very robust. A lot of good, good conversations. I do have a lot of content out there. If anyone wants a deep dive recap, you can go find my recap on YouTube, but maybe we'll talk more about it later because we have such a meaty episode just talking about Amazon. But last week I got back from like, frankly, a more fun event then big show. Our friends at Commerce Next have a new show that they call their Digital Leader Conference. And it's kind of a small little gathering of like 50 digital leaders at a resort in Del Mar, California, exactly where I grew up. So I went and drank wine and talk shop with a bunch of folks and the Commerce Next team in San Diego and had a great time nice. Scot: [3:49] Did you have some say in where it was hosted you're okay i. Jason: [3:52] Did not um i think people were tired of hearing me say this but this is like a fairmont resort it's gorgeous but it was built on like what used to be like these trails behind my high school and i kept you know regaling everyone with how i probably thrown up all over this this facility from all the the runs our soccer coaches used to make us do there. Scot: [4:14] Nice that's a good pitch yeah. Jason: [4:16] Nice visual for all our good uh good podcast listeners uh and then i have two shows coming up so the end of this month is etail west which is usually a pretty good show in palm springs we'll probably be uh corralling a couple interesting podcast guests uh from that show and there's kind of a shop.org board reunion There was an actual shop.org board reunion that you and I missed that was last month, but there's like six former board members will be at ETL West. So we're going to get together and have a little catch up there. And then less than a month after that is our Shop Talk in Las Vegas. Scot: [4:59] Fun. Yeah. Have you had an opportunity to see the Sphere? Yeah, I have. Jason: [5:04] I have. I have not been in the Sphere, but I have gone by it. Hopefully, I'll be prominently featured on it for Shop Talk. Seems like that would be appropriate. Scot: [5:14] Yeah, yeah. That would be fun. Get a picture of you on this here and then go inside. Everyone says it's an amazing show inside of there. Jason: [5:20] Yeah, yeah, yeah. I definitely want to check it out when time permits. Scot: [5:23] Cool. Are you speaking at either of those or just all of you? Oh, wow. Are you seems like a part of your your 2024 New Year's resolution is to talk about Sheehan and Timu. Are you going to be doing that that whole dog and pony over there? Jason: [5:39] Neither of my sessions are specifically on that. I'm sure I'm talking about it a lot in the hallways. It's coming up a lot. It's probably spoiler alert going to come up again in this Amazon earnings call. Scot: [5:52] Yeah and we've got the super bowl this is like we're annualizing the big timu reveal and so it'll be interesting to see if they i guess they've actually said i think it's an article that said they're coming back in a big way so yeah. Jason: [6:03] They bought a second ad so. Scot: [6:04] They will they will be back on a few have you seen like a super secret version, uh i cannot say oh okay oh okay oh all right exciting well it would not be a jason scott show without some Amazon news. And this whole episode is essentially Amazon news. We are going to do a Amazon fourth quarter earnings deep dive. That's right. On February 1st, Amazon announced their fourth quarter 2023 results. The setup coming into this one was we had Microsoft announce really solid cloud results that was largely driven by AI. People are moving their workloads to Azure and they are doing that to get their data over. And due to Microsoft's partnership with OpenAI, that has been a really nice big draw for their cloud offering. Then we had Meta announced, the artist previously known as Facebook, and they had tremendous ad performance, largely driven by AI. Long-term listeners will remember Jason and I, I'm pretty sure we're some of the first to call the impact of this thing called ATT and IDFA, Am I remembering that? You nailed them. Jason: [7:24] Yeah. Scot: [7:25] Yep. And that just really, that was like, what, four years ago, three years ago? That walloped Facebook, Snap, and all these companies that their ad system relied on cookies and third-party data. data. Facebook slash Meta has kind of come back from that and they credit it to AI systems they've used that have really driven the optimization of their advertising products and made the targeting basically nearly as good as it was when they had more precise targeting. Then Google was kind of like had a bit of a rough patch there. I think it's hurting them. They don't really disclose much about youtube and it probably did okay but their ads were kind of flat and their cloud computing did not see the benefit that that microsoft did and there's a growing concern there's more and more folks and some data coming out that shows that people are starting to use ais for interesting searches versus google i do find we were talking about it before we got got on here, I am using it more and more. For example, I was telling Jason, I found OpenAI slash ChatGPT announced this little, it's not a store, but a... [8:39] Add-ons or like almost like an app store but it's called gpts and i found one that enables me to load a bunch of pdfs on a common topic and then just like ask chat gpt about it and yeah so so i found i'm using it more and more for informational queries just generally and then also for things like that like research for work and and for the pod and so i think i think there's a growing concern that google is watching this ai thing kind of like run away from them and there's There's growing talk that they're stuck in an innovator's dilemma. So that was the setup. And the market was kind of nervous coming into Amazon earnings because a big chunk of Amazon is the cloud, which is their AWS segment. And then folks, we really didn't have any great idea how their holiday sales were. And then last, that Google piece made people a little nervous about the ad business, which has become almost a third leg to the Amazon stool. tool. So, and then as you keep kind of pointing out, Timu and Sheehan are just like really on the rise and could they, you know, you also have said, I don't want to put words in your mouth, but you've said, you know, you don't think they're being impacted by it too much. That is some other folks. But, you know, there's definitely overlap there. So people worried, are those up and rising stars going to be the Grinch? So we're going to walk you through that and peel the onion. [10:01] We're then we're going to go into how the retail offline and online did and then marketplaces cloud AWS. And that's where we'll talk about AI. You can't talk about anything now without talking about AI. So we'll hit that and then Amazon ads and then kind of finish up with how Amazon guided to next quarter, which will be Q2 Q1 of 2024. Anything you want to add in that setup before we jump in? Jason: [10:28] No, I think you've queued it up well. I'm eager to hear how Amazon did. Scot: [10:32] Yeah, well, it is what in the Wall Street world we would call a beat. So they, you know, back in Q3, they set some guidance and they beat that on the top and bottom line very handily. And then I would call it a raise. It was kind of a slight raise. They raised the range. Amazon has gotten very good, especially in the Jassy era of not getting too ahead of their skis on expectations. Expectations so but now that we're you know a fair amount into the Jassy area Wall Street's starting to get his number so now Wall Street's not really believing the guidance it's kind of interesting phenomena that we'll talk about when we get to that part but that's you know if we're going to characterize it it was a win and a win so it was a win on the pass quarter which is Q4 and it was a win going into Q1 and you know Amazon historically if you've been following it as long as jason i have they go through these periods of what i call invest and harvest so they'll invest and invest and invest everyone's like gosh and then people think all right there's no way this thing's going to be either profitable at all or as profitable as it once was or whatever it is they start to lose faith and then amazon goes into a harvest phase and then they just print money and it always surprises people and they're able to do that and that's what what But this quarter really is kind of the –. [11:49] Output of focusing on that a lot in 2023 where they kind of had this post-coveted hangover they had overbuilt a bunch of stuff and now it feels like they have righted that they've stopped a lot of the things that since jesse came in that maybe were investment areas that they shouldn't have been investing in and and they've got a lot of discipline on expenses and that has turned out really well so those numbers work is revenue came in at 170 billion and wall street had 166 billion So that's a beat of a mere $4 billion, which is very good. That represents 14% year-over-year growth. Operating income came in at 6.1%, which is the highest since 2019. So they're kind of back in pre-COVID shape, if you will, and doing better than pre-COVID. So that's good to see. Operating income came in at $13.2 billion, and Wall Street had $10.4. So this was a pretty big beat. it's only three billion ish but you know that's a 30 percent beat so that's a that's a nice win when you can deliver 30 more profit than wall street's looking for so all that was really good so jason how did you think that the retail and offline online parts of the business did. Jason: [13:03] Yeah well it was certainly a good part you know reminder amazon reports their online sales which which is a global number, and Amazon's in a different set of countries than anyone else. So you almost can't compare it to any other retailer because there's no retailer that does business in the same geographies as Amazon. And that online stores has their first party sales in it, and it has just the profit from their third party sales in it. So it's not a real GMV number, but that number was over 70 billion, like 70.5 billion versus 68.6 billion. So that was up 6%. That was a beat for Wall Street. Physical stores were 5.1 billion, which is slightly down. So that was one of the few misses in there. [13:52] What I suspect most of our listeners are more interested in is if you convert all those sales into a GMV number and you strip out just the U.S. So you can kind of compare it to other U.S. retailers. What does that look like? And there's a number of different estimates out there. One that we pulled was Citibank's. So the Citibank estimate for total GMV for the year was $904 billion. billion, the US portion of that would be like $659 billion. And that implies that the third party sales were particularly profitable. So I'll call that a optimistic estimate. And then Marketplace Pulse did an estimate using a much more conservative figure for how profitable third party sales that was largely based on the one year Amazon really really told us what the numbers were, which was 2018, right? And so based on those kind of 2018 ratios, Marketplace polls estimated that global GMV is about 700 billion, US GMV would be 510 billion. So that's up, if we take that conservative number, the 510 billion, that would be up 9% from the previous year. All of retail in the United States grew 3.6%. So 9% growth for one of the largest retailers in the market is terrific. [15:20] We'll talk a little bit more about what that might mean, but they also, they had some other interesting successes in the retail business. They talked about the, it was their fastest speed of service ever. So you know, we've talked in previous quarters about how they really shifted from a national fulfillment network to these regional fulfillment models so that packages would be staged closer to the consumers that bought them. And they said this quarter that 7 billion packages, or I'm sorry, for the whole year, 7 billion packages were delivered next day or same day. A billion packages were delivered same day. And there are now 110 metro areas in the United States that get same day delivery. So I still talk to other retailers all the time that talk about competing with Amazon's offer. And they always talk about two day delivery. And the reality is that's not the Amazon offer anymore. They're same day in 110 metros, and they delivered $7 billion packages in zero to one days. So speed of service, super impressive. And while they got faster, they also got more efficient. So for the first time since 2018, they actually reduced their cost to serve, the total cost to get a package to a customer. And so in the US, they said the cost to serve went down by 45 cents a package. package. So that's a pretty meaningful cost reduction. [16:45] Volume went up, which sometimes makes it easier to be cost efficient, but, you know, to actually get better service and lower your costs at the same time is an impressive feat and a big win for Amazon, which, you know, probably contributed a lot to that particularly high operating income, which I'm not sure if you mentioned, but I think that's the highest operating income they've ever announced. Scot: [17:06] Yeah. Yep. It's pretty good. They're actually profitable now. Just saying they've been profitable a long time. Jason: [17:12] Yeah. Yeah. So for all of our, our friends that don't think Amazon's profitable, the, so overall you have to call that, that a really good quarter on the retail sales side. Scott, did you kind of do a deeper dive in how much of that was the marketplace versus 1P? Scot: [17:30] Yeah. It was interesting. You read your GMV data and Scott Devitt, he's at Wedbush now. He's a longtime friend of the pod. He also put out his number and he came in around that market pulse side. So more like the 700 billion combined. Those numbers are 1P plus 3P? Yeah. Is that right? Yeah. Okay. And global. Yeah. So he was in the same zone. And what I found was interesting is because we're heading into 24, he pushed his forecast for GMV. He's the only one I've seen that forecast GMV. And it's obviously driven from like the revenue. So he kind of takes the revenue growth rate and uses that to kind of like get to the growth rate of GMV. [18:08] But he pushed it out to 2025. And then if I push it out one more year, just kind of using the same, what I think he's doing, it crosses a trillion dollars. If you could wrap your head around that. I remember you and I, one of the first discussions we ever had was about this frustration that people didn't understand this GMV thing and they were underestimating. You know, you'd see these charts that showed maybe Amazon never catches up to Walmart. And at that point, you know, Amazon was at a hundred billion and Walmart was at 400 loosely. Maybe that's the ex-grocery. I can't remember the specifics. This is going back like seven, eight years. And now we're at a point where not only have they crossed them from GMV perspective, but even revenue is crossing Walmart or very close to it. And there's a shot at a trillion dollars of transactional flow going through Amazon between 1P and 3P. That's pretty, that's crazy. Like, and it makes sense. You drive around anywhere. All you see is Amazon last mile delivery and long haul, you know, trucks. There's just like the economic impact of what they're doing is monumental. Jason: [19:13] Yeah, it's crazy. I remember when the first e-commerce sites sort of passed the billion dollar mark and how amazing that felt. Yeah, yeah. This thing could work. Scot: [19:22] Work this thing has legs exactly they thought we were crazy yeah. Jason: [19:29] Um so you know normally the narrative is all this retail stuff loses money but that's okay because aws is so profitable and if if there was like any sort of cautionary tale in this earnings call at all i would say it was aws the growth was decent right like what the i think the the estimates were 11 to 15 and they came in right in the middle of that like 13 but the operating income actually went down slightly. So like that, that is a mild concern for some folks. If you, if you kind of convert AWS to it, the last, the trailing 12 months of revenue at, at there, I want to say it's like 24% or 24.1% gross margins. You generate about 40, $21 billion in, in operating income from AWS. So that, you know, 20 billion here, 20 billion there, it starts to add up. But as, as I quickly checked that that's significantly less income than for example, the ads business probably generated for them. So it's a good business. They are growing slower because they are the biggest player. They are growing slower than their competitor, certainly than Microsoft. And it, And their profitability did slightly tick down. [20:51] But on the exciting side, they talked about a lot of the AI workloads that were moving to AWS and what a headwind that is. And one of the workloads they announced is Rufus, which is an e-commerce search engine that runs on Amazon. So, so that, that giant text box that we're all used to for finding our products and that's helping you find what, what SKU to buy amongst the 800 million SKUs available on Amazon is now rolling out a much smarter generative AI amenity that can help, help you find products with much more sophisticated searches. Scot: [21:33] Yeah. Yeah. I have not seen any screenshots of it or anything. Have you? Jason: [21:37] I saw a demo. though. I have not seen it in the wild yet. You know, they're not the first mover here, right? Like Instacart adopted a version of OpenAI pretty early. Walmart rolled it out in their iOS app at CES a few weeks before Amazon. And so it's funny, like, you know, Amazon, there are some rumors that some of the AI tools in Amazon aren't performing as well in internal tests as people would like. So there's some concerns about that. [22:11] What we'll probably have to do a deeper dive on another show is this whole interesting thing as all the text boxes that you can enter text in and e-commerce are moving from keyword searches to these ai engines customers have to re-learn how to use them and right now they're not right and so you know you go to the walmart app and you know it's a generative ai search engine but you still type the same same you know basic keywords in that you always have and so i'm kind of interested in the long run, is that really where the AI is going to live in these e-commerce sites? Or will we have, you know, sort of a different amenity for doing these more intent based searches than we do for the keyword searches? Or will people just learn how to use them different? I don't know. It's a TBD thing as the world evolves right now. [23:02] But you also alluded to the ads business. That was definitely another bright spot. They sold 14.7 billion dollars of ads which was above the wall street estimate it's a 27 growth year over year and so if you look at the trailing 12 months that's like 30 billion dollars 27 billion in ad sales if you look at a run rate if that fourth fourth quarter number were to go four consecutive quarters it's a 58 billion dollar run rate so they are they're like a clear third largest digital ad platform in the United States and rapidly gaining ground on the other two. And the most conservative estimate I've ever seen for this business is that it's 60% gross margin. At 60% gross margin over the trailing 12 months, the ads business contributed $28 billion billion in operating income to Amazon versus the 21 billion for AWS. So ads was $7 billion more profitable than AWS over the last 12 months. Scot: [24:08] Yeah. That would be net margin, I think you meant to say. Jason: [24:11] Yeah. Sorry. And in fun fact, they also announced this little thing called Prime Video Ads, which which, you know, is a huge new source of revenue for them. And that is expected to tack on another like six and a half billion over the next 12 months or 24 months. So like there's a lot of upside still in the ad business for Amazon. Scot: [24:37] Yeah it's gonna be crazy back on marketplaces i skipped a couple data points because i was so excited about the trillion dollars the as far as the quarter they they kind of have a couple of things that they report on you know the gmv we we we talked about analysts have to kind of back into and they use this one data point to kind of triangulate the things they do tell us is there's this piece called third-party seller services and that's basically you know where they make money from prime and other things of that nature and that grew 20 percent year-over-year beat estimates it was everyone was thinking 42 billion and it came in at 43 and change and then the other thing they tell us is units and that's tricky because you don't know the relevant price of a third-party unit in a first party so you can't just assume it's 61 of revenue that that's a little trick in there that that's that's why the analysts have to do some different math to get in there but third Third party was 61% of units in the fourth quarter. Last year, you have to look at year over year because of the seasonality. It was 59. So that's up 2%. So more and more products that they're selling are third party, which is, you know, just juices their margins that much more. Jason: [25:46] Yeah. Just looking at the Citibank model for that, Scott, it would be seven globally. It would be like 71% of total GMV is third party. Scot: [25:55] Yeah. Jason: [25:55] By revenue. Scot: [25:56] Yeah. Jason: [25:57] Yeah. Scot: [25:57] Yeah, because first party, back when I was modeling this, I've since abandoned that because the Wall Street guys do a better job than I ever could. Jason: [26:04] Their spreadsheets are a lot prettier, for sure. Scot: [26:07] Yes, it was similar. It would add about 10 points because the AOV on first party is relatively low compared to third party because of all the books and digital little things that they have that are a dollar here, a dollar there kind of things. Things okay so then we go into next year with the guidance and they guided the top line 138 to 143. This was Wall Street's consensus is in the middle but they really raised the top end of this and it gives it a growth band of eight to thirteen percent and what's happened in the jassy era is it either comes in right at the top or a notch or two above so Wall Street thinks that you know While the midpoint was aligned with what they're thinking, many of them have bumped up their, models to the 143. [26:58] And then also the similar kind of situation on operating income, Amazon raised it a fair amount more. And then what that did is it increased the price targets. And the stock has been on a really nice tear since earnings, thanks to this. And I think AWS wasn't what everyone wanted to see, but. [27:16] It reaccelerated growth, which folks want to see, and it doesn't feel like they're losing AI. I do think Microsoft's got more buzz, but at least they're in the game. Whereas I think people are starting to worry Google's not really. Google's talking a good game with Bard, but they're really slow to put stuff out. Like, you know, they announced this. What is it? Ultra version. Bard has three flavors, and, you know, they're way behind on each one they've announced. They're behind weeks or months on. And then the last one is, like, really taking a long time. So everyone's like really starting to worry about Google's ability to execute quickly. And, you know, so I would say the winners of this earnings season were definitely Meta, Amazon, Microsoft up in kind of a league of their own, and then Google and some of the others. I think Snapchat, I don't follow them this close, but I think they had a really rough quarter. So there's definitely an interesting AI has thrown a whole new mix into how these big, you know, either trillion dollar mega super mega caps are doing or meta is not in that discussion. It's a little bit smaller, but these big some people call them the significant seven. And they when they say that on CNBC, they're throwing NVIDIA in there and a couple others. But, you know, AI has just changed the game in the last year. It's been amazing. Jason: [28:30] Yeah, for sure. Sure. And they, you know, along those lines, they also announced a bunch of sort of AI-driven new inventions at Amazon. So we talked a little bit about Rufus. They, they have part of that reducing that cost of service. They have a lot of smarter robots in the fulfillment centers that are like interfacing with humans more and doing more stuff like that. And I saw they had one, one AI innovation right in your space, right? Like they're using AI to inspect respect all the Amazon vans and identify any service needs before the vans break down. Scot: [29:02] Yeah yeah yeah these these last mile vans are they get pretty beat up as you can imagine sure you know being in Chicago you see how they can that can be pretty bunged up and all kinds of things happen so, you know they it's interesting I've been to tour several of these because we work on them at my day job spiffy and it's pretty wild we don't have time to go into it maybe we can do a whole pot on on it. But anyway, they, they line them up and drive them through a single area. And they have this like arch of cameras that they put them through. And I imagine that's what that system is. It's, it's using this kind of 300, almost like a ring of cameras that the vans drive through, and they must be using the AI to detect what's going on there. Jason: [29:45] Yeah it's crazy um so anything else jump out at you on specific on the amazon earnings because i wanted to take a last minute to kind of put these amazon earnings in context for the rest of us retail but i want to make sure i didn't miss anything you wanted to. Scot: [30:00] Yeah one last thing in my little auto world that i live in now they kind of made a almost you know i haven't seen a lot of buzz about it i know you work a lot with the auto company so you're you're probably getting some feedback on it which is why i'm kind of curious but they announced hyundai is going going to start selling cars on Amazon. And for a long time, everyone's thought Amazon would maybe compete with Carvana or buy Carvana, some of Carvana's used cars. So it's like e-commerce for used cars. And a lot of Carvana's competitors, Vroom and Shift, have kind of hit the skids and actually are out of business now. And some people thought Amazon would buy them, but it looks like Like they're actually going to be maybe an ad unit or a showroom and then send, you could transact on Amazon or start your transaction on Amazon and then go to the dealer. So that has been, there's a lot of buzz in my world around that. And we keep hearing many more OEMs are coming and the dealers are, the Hyundai dealers I've talked to are very excited about this and expecting kind of a different customer than they're used to. And there's some prime tie-in there too, which is kind of interesting. So it's going to be interesting to see Amazon has their eyesight on this auto category and they're doing more and more in there. And it's going to be interesting to see what they do. Jason: [31:14] Oh, for sure. I have this giant deck of industries where the leaders in the industry would say like, oh man, e-commerce is amazing in these other industries, but here's why it will never be relevant in ours. And I think the car industry is the one that this is playing out in right now that, you know, they used to all say like, oh, there's never going to be e-commerce. People want to go to the dealers and drive it. And there's three tier distribution and all these things and it'll never happen. And you know, now it's certainly happening. Scot: [31:44] Yeah. Yeah. It's going to be interesting to see that. Jason: [31:46] Fun times. So I just want to put all this in a little bit of context. So before the pandemic, retail in the United States of America grew very consistently. 4.1% a year with some very minor deviations, but that's kind of what you expected just from normal inflation and the growth in the population, 4.1% a year. So then the pandemic happens. We mail out a couple trillion dollars in economic stimulus. We lock everyone in the house so they can't spend as much money on services. And we had the three greatest years in the history of retail. We grew 7.7% in 2020. We grew 13.6% in 2021, that's the best year of all times, and we grew another 8% in 2022. So those were those three crazy outlier years. So the end of 2022 comes and everyone's like, what's 2023 going to look like? [32:37] We just had these three years that were more than double the industry average. The NREF came out early in the year and said, hey, we're forecasting 4% to 6% growth. So bottom end of their range would be average, 6% would be sort of halfway to those last three years. So we now know what actually happened and we came in at 3.6% growth. So missed the NREF estimate, missed the traditional average, it's a down year. And this is $5 trillion is the total sales. So missing by half a percent is pretty meaningful. So all of retail grew 3.6%. If you convert that into a number, that's $180 billion more stuff we sold in 2023 than we did in 2022. [33:25] And the numbers I'm using for all this are retail without auto or gas in it, just because that's what the nrf calls core retail and it's kind of amazon doesn't sell a lot of cars or gas yet right so so amazon grew nine percent if we use that conservative gmv number for the us. [33:42] That means amazon alone grew 43 percent last year 43 billion dollars last year so amazon alone was 24 of all retail growth in the united states of america and they're the first or second largest retailer in the country and they grew a quarter of all growth which is pretty phenomenal Walmart also wildly outperform the industry they grew and there they won't announce their q4 till for a couple more weeks but assuming they they have like hit the low side of all the estimates so only 4% growth in q4 though that that'll bring them in at 6% growth for the year that means they They grew by $29 billion, which is 16% of that total growth last year. Then I keep talking about Timu and Shein. Timu only grew 3,100% last year, which is a pretty good growth rate. So they contributed $9.3 billion in growth, 5% of the total. And Shein grew 30%. So they contributed another $7 billion in growth, 4% of the total. So you just take those four retailers, Amazon, Walmart, Timu, and Shein. That's half of all U.S. retail growth last year. So those four companies had a terrific year, but they essentially left crumbs, for the rest of the retail industry in what without those four companies is pretty much a Debbie Downer year. Scot: [35:09] Yeah yeah it's amazing share there it's kind of crazy. Jason: [35:13] Yeah and it's it's just so weird to see the biggest two retailers in the market amazon and walmart growing faster than like almost anyone else that that to me is a a very anomalous circumstance that you you don't normally see, there is this super interesting horse race who is the biggest retailer in the u.s and the the sort of unfortunate answer is it depends a little bit on how you count because you you've got Walmart's total US GMV which we also don't know by the way because the there now is a meaningful marketplace at Walmart not as meaningful as as Amazon but like you know Walmart doesn't disclose its actual GMV. [35:59] But Walmart also has Sam's Club. And so if you take just Walmart's GMV and shoot, I thought I had the number in front of me, but now that I'm talking about it, I of course don't. But from memory, it was about $442 billion last year would be my estimate for their GMV after they announced that's their Q4. And so that would be lower than even the conservative estimate for Amazon's US GMV. If you add Sam's GMV in the US to Walmart's GMV in the US, Walmart gets to about $520 billion. So that would be above Marketplace Pulse's estimate for Amazon and below Citibank's estimate for Amazon. So no matter how you count, these two companies are very close. A few years ago, you and I were talking about Amazon being close to Walmart if you take grocery out, which grocery is 60% of Walmart sales. But now we're in a year where Amazon may have passed Walmart, but however you count, it's very close. And they're obviously continuing to grow faster than Walmart. So if it wasn't 2023, it likely will be 2024. That's the year that Amazon actually takes the title as the largest retailer in the US. Scot: [37:18] Yeah, it's crazy. We knew the day would come and here we are. Jason: [37:22] Exactly. So Scott, I feel like we nailed it. We targeted to have a slightly shorter show to just keep the meat in there and we have succeeded. Scot: [37:33] Yeah. Yeah. Thanks everyone for joining us. Don't forget, if you have a second, leave us a review. We'd really appreciate that. And. Jason: [37:41] Until next time, happy commercing!

VPR Season 6 Rewatch - The Reunions