Despite a 39.3% increase in North American revenue in the third quarter, Amazon’s share of the dollars spent online by U.S. shoppers declined slightly in the third quarter to 23.1% from 23.6% in the second quarter, according to a Digital Commerce 360 analysis. That dip reflects the sharp ecommerce growth of other retailers.

It’s a sign of how much online shopping has surged during the COVID-19 pandemic that Amazon.com Inc. could turn in blockbuster results in the third quarter of 2020 and still capture a slightly smaller percentage of U.S. online retail sales to put into its bank account.

Amazon’s revenue from U.S. consumers’ web purchases amounted to 23.1% of U.S. online retail sales in the third quarter of 2020, down a tad from 23.6% in the second quarter, according to an exclusive Digital Commerce 360 analysis of Amazon’s Q3 report and estimate of U.S. ecommerce sales for Q3.

The pandemic pushed many more consumers online, and they’re not all going to Amazon.
Fareeha Ali
Digital Commerce 360

Amazon’s share of U.S. online retail spiked at 26.0% in the first quarter of 2020, likely because many consumers turned to Amazon to stock up on essentials as brick-and-mortar stores closed in March due to COVID-19. Amazon’s percentage of e-retail revenue has slipped each quarter since, a sign of gains made by other big competitors, says Fareeha Ali, research and editorial director at Digital Commerce 360.

“While its share fluctuates from quarter to quarter, the decline from Q1 to Q2 is the largest drop in at least the three years Digital Commerce 360 has done this analysis,” Ali says. “It’s significant, but not surprising. The pandemic pushed many more consumers online, and they’re not all going to Amazon. At least some are shopping on other large online retail sites, such as Walmart, Best Buy, Target, Kroger and Costco—all top 20 retailers on track to grow online sales more than 80% this year, according to Digital Commerce 360 estimates.”

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The calculation of Amazon’s Q3 share of U.S. online retail revenue is based on an exclusive estimate by Digital Commerce 360 that U.S. online shoppers spent $218.1 billion on retail purchases in the third quarter of 2020, up nearly 50% from the $145.5 billion the U.S. Commerce Department reported for the same quarter a year ago. The U.S. Commerce Department will report its estimate of Q3 2020 online retail sales on Nov. 19.

Ali will reveal her projection of U.S. online retail sales during the fourth quarter, which includes the crucial holiday period, and for the year overall during a keynote presentation Nov. 12 at the IMPACT Ecommerce virtual conference.

Digital Commerce 360’s estimates for Amazon’s ecommerce revenue capture: first-party sales of merchandise it owns; its commission from third-party merchants selling on its marketplace; revenue from the Fulfillment by Amazon service, which warehouses and ships orders for sellers; and subscription revenue including the annual fee Prime members are charged in lieu of paying for shipping on each order. This methodology accounts for the portion of Amazon marketplace seller sales that wind up in Amazon’s bank account.

 

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Amazon’s share of U.S. online retail sales, calculated this way, has steadily increased over the last few years. In 2017, Amazon captured 20.3% of the dollars U.S. consumers spent on retail purchases online, rising to 22.2% in 2018 and 23.6% in 2019. For the first nine months of 2020, Amazon’s take rate is 24.0%.

Where Amazon’s revenue comes from

About half of Amazon’s revenue on a worldwide basis comes from first-party sales of merchandise it owns, and that percentage ticked up a bit to 50.2% in the first nine months of 2020 from 49.5% in the same period a year earlier. The big increase, however, was in seller services, which increased to 20.4% of Amazon’s revenue from 18.8% a year ago. That suggests more of Amazon’s sales on its 17 online marketplaces worldwide are coming from third-party sellers, or that those sellers are relying more on Fulfillment by Amazon, or both.

Sales from physical stores—mostly the Whole Foods Market supermarket chain Amazon acquired in 2017—accounted for 4.7% of sales in the first three quarters of 2020, down from 6.6% a year earlier as those sales slipped a bit when Whole Foods stores closed during the pandemic.

Revenue in the category Amazon calls “Other”—mostly advertising on Amazon sites—shot up 45.2% to $13.5 billion in the first three quarters of 2020 from $9.3 billion a year earlier. But that category still represented a relatively modest 5.2% of Amazon’s global revenue in the first three quarters of 2020, up from 4.8% in the first nine months of 2019. Subscription revenue, mostly from Prime members, has accounted for 7.0% of year-to-date revenue, down slightly from 7.2% last year.

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Amazon Web Services, the company’s market-leading cloud computing unit, accounted for 12.5% of revenue in the first nine months of 2020, down slightly from 13.0%. But AWS accounts for most of Amazon’s profit: 62.2% in the first nine months of 2020 versus 62.0% in the same period a year earlier.

Despite its share of U.S. online retail not quite keeping up with the market’s robust growth in Q3, Amazon still reported tremendous results in the quarter. Its global revenue increased 37.4% to $96.15 billion, and its operating income reached a record $6.33 billion, up 196.7% from $2.13 billion in the same period in 2019.

Amazon is No. 1 in the 2020 Digital Commerce 360 Top 1000.

Percentage changes may not align exactly with dollar figures due to rounding.

 

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