Amazon's financial report made a big turnaround! Third-party revenue surged

Today, Amazon released its financial report for the first quarter of 2023. Compared with the losses in the first quarter of last year, Amazon has experienced an unprecedented reversal!

Amazon's net sales in the first quarter of this year increased by 9% to US$127.4 billion, compared with US$116.4 billion in the first quarter of last year. Excluding the sales loss caused by exchange rates, the year-on-year growth rate in the first quarter of this year reached 11%.

More importantly, the company lost $3.8 billion in Q1 last year after deducting costs. This year, it turned a profit of $3.2 billion in Q1. The most outstanding performance was the sales of the North American e-commerce department, which went from a loss of $1.6 billion last year to a profit of $900 million this year. It can be said that this is the department with the biggest change in the entire Amazon business. Last year's pillar business AWS actually shrank in Q1, with profits falling from $6.5 billion last year to $5.1 billion.

Amazon has finally gotten rid of the shadow of its Q1 deficit last year. Looking back at Amazon's actions last year, it has to be said that it is quite impressive for such a large company to achieve this level of breakthrough.

When Amazon's Q1 financial report came out last year, it was the first time that everyone saw that the fast-growing Amazon had suffered such a huge loss, which directly shook the confidence of Amazon sellers. What big problem did the platform have? CEO Andy later came out to clarify that it was fuel costs and low consumer confidence due to inflation. These two reasons also caused old retailers such as Walmart, Target, Home Depot and Lowe's to suffer losses in their Q1 financial reports, which foreshadowed a cold winter sweeping the entire retail industry.

Andy also pointed out directly at last year's shareholders' meeting that Amazon now has too many redundant costs, and made a bold statement that he would lead Amazon to reduce costs and increase efficiency within a year and return to profitability. After this bold statement, Amazon started a vigorous wave of layoffs. In the three months from Q1 to the end of Q2, Amazon laid off a staggering 100,000 jobs, with an average of more than 1,100 people leaving every day. Most of them were front-line warehouse staff. If calculated according to the staffing of FBA warehouses, it is equivalent to a warehouse being emptied every two or three days.

Back to the overall situation, tens of thousands of layoffs were not the end of the matter. Amazon then began to close FBA warehouses in batches, and many half-built warehouse plans were directly shelved. In September last year, the number of FBA warehouses that had been closed and cancelled had reached 42.

Not only has Amazon made drastic cuts in its expensive FBA logistics system, it has also not spared its small, high-output advertising business department. At the beginning of this year, it announced a new layoff plan, which included the advertising business department. And just in the past two days , there was explosive news that Amazon laid off 9,000 employees in its AWS department!

You have to know that AWS and advertising business were the only two businesses with huge profits when Amazon suffered losses last year. It was the profits of these two departments that made Amazon's losses last year not so ugly. Moreover, the business attributes also determine that these two departments will not be too large. Even so, they were able to cut such a big knife. Combined with the recent serious overcapacity in FBA warehouses, it means that the front-line warehouse staff can no longer be laid off.

Of course, in addition to cost-cutting measures such as layoffs and warehouse closures, Amazon has also done a lot of work on open source, especially from us sellers.

If you count the price increases Amazon has made after the losses, it really brings tears to your eyes.

First, not long after the shareholders' meeting, it was announced that a fuel and inflation surcharge of about 5% would be imposed on third-party sellers. You see, the shareholders' meeting told you that the high fuel cost is not in vain, it is all laying the groundwork for price increases.

Then came the year-end peak season, and a peak season surcharge of about 35 cents per order was added on average. Later this year, a warehouse utilization surcharge and an overage warehouse surcharge were added... The sky-high surcharges are already dizzying for sellers, and this does not include the regular FBA shipping price increases.

Don’t underestimate these messy fees. I’ll just paste Amazon’s Q1 financial report for you to take a look.

Look at the Third-party seller services and Advertising services highlighted in red. These two are the businesses with the largest growth in the entire Q1. Advertising and third-party seller services are both businesses that take money directly from sellers, and they support the facade of Amazon's Q1 financial report.

Previously, the media broke the news that Amazon’s revenue from third-party sellers in the form of platform monthly rent, commissions, FBA fees, advertising fees, etc. accounted for about 34% of the sellers’ total sales in a year! This means that for every $100 worth of products sold, sellers have to pay Amazon $34. I dare not even imagine this ratio now. Amazon has gradually changed from selling products to earning commissions from the platform alone.