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Amazon
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Table of Contents
1. Overview 3
1.1. Presentation 4
1.2. Segments 5
1.3. SWOT 6
2. Corporate Strategies and Recent Events 7
3. Financial Indicators 11
4. Statistical Appendix 15
5. Glossary 23
Amazon
Reporting segments:
2018 key figures • Amazon’s main activities consist of selling merchandise online and in
physical stores (mainly Whole Foods outlets, since 2017); operating
Consolidated sales €197.23bn
marketplaces that enable transactions between third-party sellers and
Operating margin 5.3% consumers; providing cloud infrastructure and services; manufacturing
Capex ratio 4.9% and selling proprietary devices (Kindle e-readers, Echo speakers, etc.);
and developing entertainment content (the company is also a book
publisher, a TV/movie producer and and a music publishing company).
2018 revenue by region
• The company’s appetite for growth does not look to be waning. Recent
United States 68.8% Germany 8.5% years have seen it make big moves into new sectors (fresh food, via the
€11.2bn Whole Foods acquisition in 2017; healthcare, via the creation of
United Kingdom 6.2% Japan 5.9%
a healthcare JV with Berkshire Hathaway and JPMorgan in 2018)
Rest of world 10.5%
• In September 2018, Amazon became the world’s second trillion dollar
company (a feat also achieved by Apple a month earlier).
2018
% of sales in
Segments operating Description
2018
margin
Amazon has seen stellar growth rates and shows no sign of letting up
SWOT analysis of Amazon
Strengths Weaknesses
• By far, the world’s leading online retailer and the world’s leading • The company’s rapid rate of expansion places significant strain
public cloud provider on operations (e.g. infrastructure and services development)
• Broad range of products and services (ranging from consumer • High seasonality of retail sales, particularly tilted towards the
goods, entertainment content and web services) generates end of the calendar year, increases risks and creates significant
significant network effects logistical and inventory challenges
• Vast network of suppliers and third-party retailers • Continued dependence on North America, which accounted for
• Synergies between its web services and retail businesses allow it 60.7% of retail sales in 2018
to develop unique product offerings (e.g. Echo speakers) • Recent abandonment of HQ2 project in New York has hurt
• Robust product and services pipeline brand image and put a spotlight on the company’s tax practices
Opportunities Threats
• Unparalleled access to user data on its platform gives it a • Growing public distrust worldwide of leading technology
sizeable competitive advantage in the development of its own companies and their indiscriminate use of user data
private label products that compete with those of its suppliers • Increasing media scrutiny into tax practices, employee
• Advent of 5G and faster internet infrastructure favours cloud treatment and competitive behaviour, accompanied by
computing demand growth and IoT roll-out proliferation of legislative constraints, e.g. GAFA (Google, Apple,
• Growing presence in high growth, high margin markets (cloud, Facebook, Amazon) tax in France
entertainment, healthcare, etc.) and highly experienced with • Sizeable international business (€56bn in retail sales alone in
disruption as a business model 2018) exposes company to significant currency effects
Add value to retail operations by extending the range and depth of adjacent services
Amazon’s recent performances have been characterised by stellar growth rates, with annual net revenues almost tripling in the
past five years, from €75.4bn in 2014 to €197.2bn in 2018. Average year-on-year revenue growth during this period stood at
27.25%. To achieve this feat, the company has been expanding its offering of products and services at breakneck speed.
What started as an online bookstore now offers everything from fresh produce and digital voice assistants to original
entertainment content and internet applications. While Amazon is best known as an online retailer – the largest share of its
revenues continues to come from Amazon online stores (52.8% in 2018) – its rapid revenue expansion has mainly been due to
the group’s other business areas. In fact, Amazon’s online stores are generally its slowest growing retail category, by some
distance (growth rate of 13.5% in 2018, vs. 34.1% for third-party seller services, the next slowest growing category).
One adjacent space where Amazon has recently been making efforts to squeeze out more revenue is advertising services.
In 2018, this was one of the company’s fastest growing categories, with revenue expanding approx. 117.2% year-on-year (only
physical stores saw faster growth, essentially due to the Whole Foods acquisition in 2017). To increase advertising dollars
generated on its online store platform, Amazon has made its marketing analytics data and tools more accessible to advertisers
and businesses. It plans to offer more brand-building features, such as video streaming, in its search and display settings and
has increased advertising real estate across its entire site (even at checkout). Given Amazon’s standing as a platform dedicated
primarily to online shopping (as opposed to the broader search and social network orientations of Google and Facebook,
respectively), along with its extensive and loyal user base, the company aims to provide advertising clients with higher ROAS
(Return On Ad Spend) rates than competitors, and thereby increase its share of the lucrative online advertising pie.
Faced with increasing questions on its treatment of sellers and growing antitrust scrutiny, Amazon agrees to
drop price parity provisions for third-party vendors. Users of Amazon’s Marketplace will no longer be required
to offer their lowest prices on the platform. The move is likely to strengthen the competitiveness of rival retail
platforms .
March 2019
Amazon announces that its selling partner conferences have sold out in six weeks. More than 1,800 small and
medium enterprises that supply Amazon will take part in events across the US from March to October 2019
where they will learn about effective ways to scale their business on the platform.
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Amazon launches Belei, a line of 12 high quality skincare products, including eye cream, moisturizers and
serums. This is Amazon’s first move in the skincare space.
March 2019
Amazon rolls-out its new Kindle e-reader worldwide. Retailing at €79,99, this is the company most affordable
model and features an adjustable front light.
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Maintain industry leadership of Amazon Web Services and encourage cross-pollination with retail activities
Established in 2006, AWS has become, by far, Amazon’s most profitable reporting segment. In 2018, AWS operating margin
stood at 28.4%, significantly higher than Amazon’s next most profitable unit (North America, at 5.1%). AWS’ public cloud
offering leads the cloud computing market, generating almost twice as much revenue as its closest rival, Microsoft, in 2018, and
controlling about a third of overall market share. Amazon’s clients include not only include individuals and companies but also
US government agencies such as NASA and the CIA. The company looks to be the favourite to secure the US Department of
Defense’s massive €8.5bn Joint Enterprise Defense Infrastructure (JEDI) contract over the coming months.
In order to extend its market leadership in this area, the company has released its own semiconductor chip to power its cloud
services. The CPU, called Graviton, was announced in November 2018. It is designed in-house to fit Amazon’s processing needs
and is manufactured by TSMC, the same company that manufactures Apple’s chips.
While AWS has become a key growth driver for the company in and of itself, advances made by the division, whether in terms of
hardware or software (data storage, analytics, cybersecurity, AI etc.) have knock-on effects for the rest of Amazon’s products and
services. For example, the company’s recent expansion in the smart home space has been driven by IoT and machine learning
technologies associated with AWS. While Amazon’s best known example of this technology cross-pollination is its Alexa voice
assistant, which uses AWS cloud capabilities to carry out its natural language processing functions, the company has been
actively adding products and expertise across its entire smart home portfolio. In 2018, the company’s biggest acquisition was
the approx. €711bn deal for Ring, a home security company specialized in Wi-Fi-enabled camera doorbells. More recently, in
February 2019, the company agreed to acquire eero, a company specialized in home Wi-Fi systems. The strong emphasis on Wi-
Fi in these recent acquisitions is testament to the central role that AWS will play in integrating Amazon’s smart home devices
into a comprehensive smart home offering (Wi-Fi provides access to the AWS cloud).
In collaboration with LaGuardia Community College, the City University of New York and the State University
of New York, Amazon launches a cloud computing certificate programme. Students will receive training for
entry-level roles in the tech industry. The programme will launch in fall 2019.
Jan 2019
AWS launches AWS backup, a new service that allows clients to easily backup their data across the cloud and
on-premises in accordance with business and regulatory backup compliance requirements.
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Net sales (€bn, left scale) Annual % change (right scale) Op. income (€bn, left scale) Op. margin (%, right scale)
Net profit (€bn, left scale) Net margin (%, right scale) No. of employees (left scale) Annual % change (right scale)
10 5%
8,53 800 647,50 80%
8 4%
566,00
3% 600 60%
6
2% 400 341,40 40%
4
2,57 1% 230,80
2,01 154,10
2 200 20%
0,50 0%
0 -1% 0 0%
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
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2017-2018 2016-2017
North America 11,0%
AWS
60,7%
North America
AWS
0% 10% 20% 30% 40% 50%
2017-2018 2016-2017
United States
10,5%
Rest of world
5,9%
Germany
Japan
6,2%
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100% 1,2
80% 1,0
60% 0,8
40% 0,6
20% 0,4
0% 0,2
-20% 0,0
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
10,0 8 8%
15,0
8,0
6 6%
6,0 10,0
4 4%
4,0
5,0
2,0 2 2%
0,0 0 0,0 0%
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
units: billion euros; % change; operating income and net income as % of sales
North America 119.72 60.7% 5.1% 89.86 59.7% 33.2% 67.57 33.0%
2017-2018 2016-2017
Region 2018 sales 2018 % share 2017 sales 2017 % share 2016 sales
change change
Revenue
2017-2018 2016-2017
generating 2018 sales 2018 % share 2017 sales 2017 % share 2016 sales
change change
activities
Third-party seller
36.20 18.4% 27.00 17.9% 19.47 38.7% 34.1%
services
Subscription
12.00 6.1% 8.23 5.5% 5.41 52.0% 45.7%
services
Interest
Interest
Year Total assets Total liabilities Total equity Debt ratio ROE ROA coverage
expenses
ratio
ENGLISH FRENCH
CATEGORY
ITEM DEFINITION ITEM DEFINITION
Assets encompass all the economic resources owned by a L'actif regroupe toutes les ressources économiques détenues
Assets company. They are commonly divided into short term (cash. Actif par une entreprise. On distingue généralement actifs
trade receivables. etc.) and long term assets. circulants (trésorerie. créances. stocks) et actifs immobilisés.
CAGR Acronym for Compound Annual Growth Rate. TCAM Acronyme de Taux de Croissance Annuel Moyen.
Short for "Capital Expenditure". an item of the cash-flow Abréviation de "Capital Expenditure". un élément du tableau
statement used as a proxy for investment in property. plant and de trésorerie mesurant l'investissement dans les
Capex CAPEX
equipment (PPE). Generally entails physical assets used immobilisations corporelles. Il sert à évaluer l'effort consenti
to maintain or increase operation capacities. pour maintenir ou développer les capacités de production.
Capex ratio The percentage ratio between capital expenditures and net sales. Ratio CAPEX/CA Ratio entre dépenses d’investissement et chiffre d’affaires.
The current ratio is found by dividing current assets by current Le ratio de liquidité générale exprime le rapport entre actifs
Ratio de liquidité
Current ratio liabilities and indicates whether the company has enough circulants et passifs circulants et reflète la capacité de
générale
resources to pay its short term debt (12 months). l’entreprise à couvrir sa dette de court terme (12 mois).
Interest coverage is calculated by dividing operating income by Ratio entre le résultat opérationnel (EBIT ou EBITDA) et les
Ratio
Interest net interest expenses and reflects the company's debt burden. dépenses nettes d’intérêt; reflète la charge de la dette pour
de couverture
coverage i.e. its ability to pay interest on outstanding debt. The lower this l’entreprise (capacité à payer les intérêts annuels). Plus le
des intérêts
ratio. the more the company is burdened by interest expenses. ratio est faible. plus l’entreprise est à risque de faire défaut.
Liabilities encompass all obligations arising from a company's Le passif comprend toutes les obligations contractées par
past operations and which will result in an outflow of resources une entreprise dans l'exercice passé de ses activités et qui se
Liabilities in the future. Liabilities are divided into short term and long Passif matérialiseront par des décaissements à terme. Le passif
liabilities. and represent the debt a company owes to its peut être courant ou non-courant. et représente l'ensemble
creditors. des créances d'une entreprise.
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ENGLISH FRENCH
CATEGORY
ITEM DEFINITION ITEM DEFINITION
Net debt is calculated by subtracting a company's cash Endettement L'endettement net se calcule en déduisant le cash disponible
Net debt
from its total debt. net d'une entreprise du montant total de ses dettes.
Net profit refers to a company's total earnings. It is the Le résultat net est le bénéfice net d'une entreprise. Il correspond
Net profit/ result of the difference between net sales and all à la différence entre le chiffre d'affaires et toutes les dépenses
Résultat net
net margin operating and non-operating expenses such as taxes. opérationnelles et non-opérationnelles comme les impôts. les
interests. depreciation and amortisation expenditures. intérêts. les charges de dépréciation et d'amortissement.
Operating profit refers to the earnings generated by the Le résultat opérationnel désigne le bénéfice dégagé par une
normal business operations of a company. Operating Résultat entreprise grâce à l'exercice de ses activités traditionnelles. Le
Operating profit/ profit is the result of the difference between sales and opérationnel/ résultat opérationnel est obtenu en déduisant les dépenses
operating margin total operating expenses. Operating margin is expressed marge d'exploitation du chiffre d'affaires. La marge opérationnelle.
in % and is computed by dividing operating profit by net opérationnelle exprimée en %. est obtenue en divisant le résultat opérationnel
sales. par le chiffre d'affaires.
Expenses associated with the research and development Dépenses associées au processus de recherche et de
Dépenses
R&D expenditure process of creating new products or services; it is often développement de nouveaux produits et de nouveaux services.
de R&D
used as a proxy for innovation. C'est un indicateur de la capacité d'innovation d'une entreprise.
Return on assets is calculated by dividing a company's Le retour sur actif est calculé en divisant le résultat net d'une
Basic Return on assets
net income by its total assets. It measures the ability of Retour sur actif entreprise par le total de son actif. Il mesure la capacité d'une
financial (ROA)
the company to generate profits from its assets. entreprise à créer de la richesse à partir de ce dont elle dispose.
analysis
Return on equity is calculated by dividing a company's Le retour sur fonds propre est calculé en divisant le résultat net
Return on equity net income by its shareholder equity. It measures the Retour sur d'une entreprise par le total de ses fonds propres. Il mesure la
(ROE) ability of a company to generate profits from its fonds propres capacité d'une entreprise à créer de la richesse à partir des
investment funds. capitaux apportés par ses actionnaires.
The quick ratio is calculated by dividing current assets Le quick ratio équivaut au rapport entre actifs circulant
net from inventories by current liabilities and measures (diminués des stocks) et passifs circulants. Similaire au ratio de
Quick ratio Quick ratio
the company’s immediate capacity to repay its short term liquidité générale. il exprime la capacité immédiate de
debt. l’entreprise à couvrir sa dette de court terme.