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1) $AMZN. More transcript catch up. $TGT e-commerce accelerated YoY to 31% in the fourth quarter vs. prior year at 29% and best Q4 comp in 14 years. Comparing $TGT, $WMT, $W, etc. to $AMZN in the fourth quarter is not a good look for $AMZN.
2) $AMZN paid units decelerating for 7 quarters to 14% in Q4. The shift to subscriptions in media isn’t accelerating fast enough to explain this. $AMZN is at best holding share and likely losing share (no really good ecommerce industry growth estimates IMHO).
3) After my last $AMZN thread, someone pointed out that at current vectors $WMT would be at 17% share and $AMZN at 50%ish share in 10 years. Disappointing relative to several years ago when it looked like $AMZN might be at 60% share in 10 years with no one else above 10% share.
4) Relative market share matters in all industries, but especially online given the way the $FB and $GOOGL auctions work. Given that $WMT, $TGT, et al are obviously improving their relative e-commerce experience, this is likely manifesting in higher CTRs on $GOOGL, $FB ads.
5) CTRs are a significant component of quality scores. Higher quality scores will result in $WMT, $TGT winning more $FB, $GOOGL auctions at lower prices. While $AMZN will slowly have to start paying more as their quality score advantage decreases (likely to always have one tho)
6) Marketing efficiency is a critical metric in e-commerce. And it is likely going up for competitors like $TGT and down for $AMZN. Note that all of this is happening before $FB’s aggressive push into commerce and payments.
7) Also interesting that $TGT is improving their unit economics outside of CAC. Drive Up and Pick Up in Store cost 90% less than shipping from DC and good CX as well. Ship from store costs 40% less. Overall avg unit cost of fulfillment down 20%. Shipt was a good acquisition.
8) $TGT: “Our stores have Shipt four times the number of items out their back doors and they managed triple the demand for store Pickup services. This year during our fourth quarter, stores fulfilled nearly three of every four orders, effectively doing the work of 14 FCs."
9) $TGT: “that means we didn't have to spend nearly $3 billion on new warehouses… Our fulfillment sales per square foot have grown at an average 67% rate per year.” All while increasing in-store instocks. Impressive.
10) Virtuous ecommerce cycle: Higher ad quality scores = higher margins from lower CACs or faster growth at constant CAC. Better delivery unit economics = ability to run higher CACs if so desired.
11) i.e. $TGT can choose between faster growth at constant margins or constant growth at higher margins. Or reinvesting in other parts of the CX to further improve the experience, ad quality scores, etc. I've seen this called a "flywheel" somewhere. All before $TGT ramps 3P.
12) Net, $AMZN still a great story, but competition and the cost of growth are both increasing while growth is slowing. And I think their ads business is really misunderstood – both less incremental and open ended than often portrayed. More later. $TGT interesting.
