#Amazon reported Q3 earnings in a somewhat challenging environment, mostly for operating profit but also for top-line growth.

Net sales up 15%. Seems like a small number for Amazon. Deceleration.

1 - Labor shortages are present across the network and costs are higher, signing bonuses are common and wages are rising.

It seemed to me this was a transitional quarter where they moved from one constraint (capacity) to another, bigger constraint (labor).

2 - A lot of unexpected operating costs due to labor shortages.

Not all facilities staffed properly. Causing “chaos” costs due to rerouting to products to facilities that were properly staffed.

This part of the earnings call sounded a lot like the #FedEx earnings call.

3 - They are finally ahead of previous capacity constraints, and even pulled in some expected 2022 capacity builds into 2021.

4 - Overall, doubled logistics network capacity in the last 18 months since start of pandemic.

- I came away thinking Amazon could literally not invest enough in robots :)

- Advertising or “Other” revenue grew 50% y/y, which is a material deceleration y/y compared to Q1 and Q2 which were in the 70-80% range. I think likely mix/shift back to travel/services in Q3.

5 - QuickCommerce question:

- Amazon doesn’t feel like it needs to change its model to compete with upstarts.

- Room for multiple winners. To win you need to have a cost structure + logistics network that pays for delivery over time.

It felt like this last comment was a shot at some of these unprofitable players.

6 - One answer their CFO said "we don't view retail separately from 3P from advertising - it's all part of the same flywheel" I thought this was a curious response since the questioner didn't mention it other than wondering how profitable retail was.

Given the Macy's/Saks backdrop, it's entirely possible that even someone like Amazon could feel pressure to separate some of these units out to maximize valuation.

#ecommerce