Amazon Retail Unit Economics

In Practise Analysis

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Last week, we interviewed a Former Finance Manager at Amazon who was partly responsible for collating separate country and retail product category financials into one consolidated AMZN P&L for Brian Olsavsky, AMZN’s CFO.

In this analysis, we breakdown AMZN’s non-AWS P&L to better understand the underlying e-commerce unit economics.

The first insight from the interview is that the S-Team looks at the retail P&L excluding ads and Prime.

If you include ads in the core consumer business, you are unable to assess the health of the business, at its fundamentals. When you think about core ecommerce, because the fulfilment network and those investments are so massive, there is a relentless focus on optimizing the opex/capex outlays associated with those operations…if you include the advertising numbers in the core consumer business, it entirely obfuscates how that business is operating independently of the advertising. - Former Finance Manager at Amazon

This is so AMZN: management doesn’t include advertising or subscription revenue when calculating e-commerce gross or contribution margins.

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