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E-commerce is no longer just Amazon's world.

Since the beginning of this year, Amazon e-commerce has been "dumb".

In its just-released third-quarter results, Amazon's quarterly profit fell 9% from a year earlier, and few key financial indicators met market expectations, causing its share price to plunge nearly 20% in the next few days, wiping nearly $200 billion off its market capitalization. If you want to sum up the reason for Amazon's slump in one sentence: e-commerce business is stagnant or even losses are expanding, AWS, as the main source of profits, is slowing down and its earning power is not as good as it used to be.

From last year to the first quarter of this year, Amazon can still be said to be due to the epidemic, supply chain and other problems led to the weakness of e-commerce, but this year, Amazon's e-commerce sector has handed over disappointing transcripts for three consecutive quarters, and even the magnitude of the decline is increasing.

Why is the e-commerce business of the "king of e-commerce" now a loss item that is holding Amazon back? In addition to the macro factors of the economic downturn, Amazon may now face the same "intergenerational dilemma" as Meta.

| stall e-commerce, no longer brilliant since this year, Amazon's e-commerce performance has been mediocre. In the first quarter, online store sales fell 3% year-on-year, lost $2.84 billion in the North American stronghold and international market (a profit of $4.7 billion in the same period in 2021), and Prime member revenue was the lowest in six quarters. North America lost money for two consecutive quarters and the international market lost for three consecutive quarters, the worst growth rate in 20 years.

While overall results were boosted by AWS in the second quarter, if you look closely, Amazon's online store business fell again by 4 per cent year-on-year, overall operating losses in North American and international markets remained above $2 billion, and Prime membership growth hovered at a low 10 per cent. At the time, Amazon said sales in the third quarter would be very optimistic, with revenue growth expected to reach 13% to 17%, led by Prime day, and revenue likely to reach $130 billion.

The picture is from geekwire, produced by Amazon earnings report each quarter. However, judging from the results of this quarter, Prime Day has not been able to save Amazon. Although the overall revenue entered the forecast space of the last quarter, the growth rate of online stores changed from negative to positive, but the soaring costs caused Amazon's profits not to rise but to decline. Several notable figures are that losses in North America widened to $412 million, while losses in the global market expanded by 171 per cent compared with the same period last year.

In the first few months of 2022, global operating revenue fell 61.1% from a year earlier, with a net loss of $3 billion, compared with Amazon's global operating profit of $19.04 billion just a year ago.

Amazon even launched two Prime day events for the first time this year to boost its e-commerce business. But according to Similarweb, the second Prime day, which ended not long ago, may have been far less effective than expected, with revenues on Prime membership days falling 46 per cent from those in the first half of the year.

Amazon is also pessimistic about its outlook for the next quarter, with sales expected to grow only 2% to 8% year-on-year and operating profit between $0 and $4 billion.

Judging from the performance of several consecutive quarters, Amazon's e-commerce seems to have entered a space of continuous decline from its rapid growth in the pre-and early stages of the epidemic. Behind it, there is not only the impact from the economic downturn and inflation, but also the impact from the former e-commerce environment.

| Amazon's e-commerce moat is gradually being breached. Amazon's previous position as the "king of e-commerce" is inseparable from several killer mace it has built over the years. To sum up, it can be divided into three major points: the first is the FBA (Fulfillment by Amazon) service on the merchant side, the second is the Prime membership mode on the client side, and the third is the support of AWS in technical facilities. But at present, a new generation of independent stations represented by Shein, Shopify and Temu are gradually breaking the Amazon moat.

First of all, on the merchant side, more and more sellers are choosing to "escape" Amazon to enter the new platform or develop their own independent sites.

In 2006, Amazon first launched FBA, an one-stop fulfillment service for third-party sellers, through the establishment of a centralized warehousing and intelligent and efficient allocation system for goods, the seller pays the FBA fee, and Amazon completes the processes including storage, sorting, distribution, customer service and return and exchange, thus reducing the seller's time and operating costs and attracting a large number of merchants to move in.

But now, FBA's model is beginning to be impacted by the new one-stop service represented by Shein. To put it simply, today's Shein model makes sellers less worried and more able to lie flat.

The picture from Twitter takes a cross-border seller in China as an example. In Amazon model, although FBA realizes one-stop warehousing and logistics, the seller not only has to bear the cost of FBA warehousing and transportation, but also has to bear the cost of first-journey transportation, commodity commission, and commodity promotion. But in the Shein model, sellers only need to prepare goods and wait for collection, and all other logistics, sales promotion, operation management, return and exchange are undertaken by the platform.

This model, coupled with the large-scale closure campaign conducted by Amazon since last year, has prompted many Chinese small commodity sellers to try to turn to platforms such as Shein and Temu, or to use the one-stop logistics and warehousing system provided by Shopify to set up their own websites. And many sellers find that the profits generated by using the independent site path after deducting labor costs may be basically the same as or more than Amazon.

In addition to warehousing and logistics services, Amazon's rising advertising and sales costs are also constantly "dissuading" sellers. If you look at Amazon's results in recent quarters, you may find that the company's advertising revenue has been rising recently, but in fact it comes from sellers.

The cost per click for ads placed on Amazon in 2014 was only about 0.14 cents, but by early 2022 it had soared to about $1.60. In addition, Amazon has raised fees for six FBA services across the board so far this year, with details rising by as much as 150%.

Sellers are watching, and many consumers are starting to flee. In the past, due to the inefficiency of logistics in many countries, the next-day arrival and free return and exchange services provided by Prime members used to be a sharp tool to attract overseas users. But now, through the establishment of a real-time supply chain system, independent station platforms such as Shein and Temu can control the delivery time within 10 days or even a week, and can also provide free return and exchange services.

So for many consumers, when products are available on Amazon and other platforms and are cheaper on other platforms, people are more likely to wait a few days but save more money.

In addition, Amazon e-commerce can maintain a stable and efficient operation on the back of AWS, but now with the intensification of competition in the cloud service market, the overall infrastructure of the e-commerce industry has been very mature, and Amazon's advantage space has been greatly reduced.

| from "one big company" to "a hundred schools of thought contend", Amazon has been the king of e-commerce for a long time, but in the past two years, the overseas e-commerce industry has accelerated its development in the epidemic, under the catalysis of emerging social models, many new e-commerce channels and platforms have also begun to enter the attention of overseas consumers.

For example, Shopify led the rise of independent e-commerce stations. There is a fundamental difference in underlying logic between Shopify and Amazon, with Amazon focusing on serving consumers and Shopify focusing on service sellers. By providing a complete set of cost-effective solutions for sellers in terms of store creation, operation management and logistics services, Shopify makes many sellers find that they can live well without Amazon's e-commerce ecology, thus creating a completely different, seller-driven flywheel effect from Amazon.

In 2020, Shopify's global merchandise trading volume (GMV) grew by 96%, ranking fifth among all e-commerce platforms in the world, second only to Amazon, Alibaba, JD.com and pinduoduo. In 2021, its merchandise trading volume reached 175.4 billion US dollars, an increase of 46.7% over the same period last year. Its growth rate is much faster than that of Amazon and is in the stage of accelerating expansion.

The growth rates of Shopify and Amazon come from JR Research. In addition to independent sites created by Shopify, the rise of new cross-border e-commerce platforms such as Shein, Shopee and Temu is also eroding Amazon's international market share. Unlike Amazon's relatively rational and restrained style, the design and marketing styles of these emerging platforms are younger and more radical, attracting young users to migrate to them.

In May last year, Shein overtook Amazon for the first time to become the most downloaded shopping app in Android and Apple stores in the United States. Since then, Shein has almost firmly ranked first among the downloads of shopping apps in the United States, with GMV and download growth lagging Amazon far behind.

In the Southeast Asian market, Shopee, lazada and other new e-commerce development speed is also eye-catching. In 2021, Shopee orders grew by 116.5%, ranking first in the global shopping App in terms of total downloads and second in the average number of monthly active users. According to Alibaba's quarterly financial report, the consumer of its e-commerce platform lazada has exceeded 300 million, and the number of users has increased by more than 80% in 2021, which has become one of the new growth points of Alibaba's business.

In the current e-commerce market, not only independent stations are active on this stage, some social media are also beginning to join the fight. TikTok, Facebook, instagram and YouTube have successively launched the merchandise purchase function. According to Statista, nearly 1/10 of online merchandise purchases are made through social media in 2021, and social e-commerce sales are expected to exceed $3 trillion in 2028.

The picture is from marketplacepulse, and the copyright belongs to the original author. Amazon has accumulated a lot in the field of e-commerce in recent years, but from its official establishment in 1994 to today, the age of Amazon e-commerce is coming to the beginning of three words. Today, just as the "middle-aged" Facebook is experiencing the TikTok crisis in the social world, Amazon is facing challenges from new e-commerce models and e-commerce platforms.

These independent sites, aimed at the younger generation of users and trying to revolutionize the e-commerce shopping experience, are trying to climb and climb the walls of Amazon.

This article comes from the official account of Wechat: Silicon Man (ID:guixingren123), author: Juny, Editor: VickyXiao

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