With Amazon reporting its earnings this week, there was much news about eCommerce, competing platforms and the challenges around supply chain, inventory and fulfillment.
The metaverse also continued to earn space in the news, with Activision Blizzard and Meta releasing earnings reports too.
Teikametrics CEO Alasdair McLean-Foreman joined PYMNTS to discuss some of the headlines in This Week in Payments.
Amazon’s Growth Rate Slows, Although on a Bigger Base
During the week, Amazon reported blockbuster earnings. The growth rate was a little lower in the past but on a much bigger base.
Read more: Amazon Hikes Prime Price Tag, Third-Party Sellers More Than Half of Unit Volume
Google talked about its own growth in advertising revenue as well as the things it’s doing to drive business to small businesses.
See more: For Google, Retail’s Omnichannel Future Is Happening Now
McLean-Foreman said Amazon and its third-party sellers continue to be hampered by inventory challenges and shipping costs, with the average cost of shipping a 40-foot container around the world having risen 80% or 100% over the last year to around $10,000.
“The earnings report in Q4, it was muted, but a lot of that is to do with the supply chain and holiday being impacted as such,” McLean-Foreman said.
Third-Party Sellers Account for Greater Share
The percentage of units sold on Amazon by third-party sellers continues to increase. McLean-Foreman said Teikametrics has seen signs of improvement for third-party sellers even though they still face challenges in inventory, consolidation and competition from Chinese marketplaces.
“On average, we are going to see it perform better, I think, this year and in the first half of 2022,” McLean-Foreman said.
This earnings report was the first in which Amazon cited and listed the revenues from advertising, and it was over $9 billion in the quarter — larger than YouTube.
“The profitability from that advertising business for Amazon is really a cost for the sellers,” McLean-Foreman said.
eCommerce Grows on TikTok, Facebook Shops and Instagram Shops
The growth of eCommerce on TikTok, Facebook shops and Instagram shops will put pressure on the other channels around advertising. For example, while Amazon knows what you buy, Facebook parent Meta knows who you are, so it is well positioned to focus on eCommerce.
“I think that will lead to an opportunity for sellers and brands and direct consumer businesses to find other channels, other than Amazon,” McLean-Foreman said. “I’m excited about that future.”
In addition, Meta’s Instagram platform provides consumers with the opportunity to discover brands they’ve never heard of, so there’s an opportunity for it to close the loop by enabling them to make the purchase there too. That eliminates the conversion loss experienced when consumers must go to another store with another mechanism.
What they lack is the fulfillment infrastructure that Amazon has. In time, that need will be met by autonomous vehicles and robotics. In the meantime, Walmart’s fulfillment service is growing quickly.
“I think that’s the missing link to the purchase experience on other channels, but I think if you can nail that, which I’m confident innovation will in the next 10 years, we’ll see all of these other channels that can connect supply and demand,” McLean-Foreman said.
More Options for Sellers
The percentage of retail on eCommerce will continue to increase, so the question is where it will be. McLean-Foreman said he doesn’t think it will be centered around Amazon, noting that this week’s earnings report showed Amazon’s growth rate for eCommerce was flat while eCommerce in general has increased. By contrast, Shopify has grown tremendously, and Walmart is growing too.
Read more: Payment Declines Double in Value as Consumers Ramp up Big-Ticket Purchases in January
“I think it’s great for consumers, I think it’s even better for brands,” McLean-Foreman said. “We believe in this future to maximize the interests of the sellers, and the more optionality they have, the more opportunity.”
The Metaverse Continues to Seek Applications
This week also included news about the metaverse, with PYMNTS reporting on Activision Blizzard’s earnings call and noting that it’s been a good couple of weeks for businesses at the intersection of nonfungible tokens (NFTs), gaming and the metaverse.
See more: Activision Blizzard Earnings Show the Metaverse in Gaming’s Future
McLean-Foreman said he is skeptical about the intrinsic value of digital goods in the metaverse.
“Where is the utility?” he said. “I just think there’s so much speculation. If you go back to the earnings report for Meta itself, I think there’s a long way to go before we see true value.”
Read more: Meta Earnings Hit by Metaverse Investments as Stock Plunges 20%
He added that there are applications of augmented reality that have value, such as the fitness-and-digital crossovers that create a game-like environment during a workout. The metaverse also has value as an advertising platform.
See more: Retailers Use Digital Blueprints to Reinvent the Physical Store Experience
“So, we should be super open-minded and figuring out how to launch products on TikTok, as an example, or exploring our brands connecting the dots between the digital world and physical,” McLean-Foreman said.
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