Is Amazon FBA slowing down in 2022?

Amazon online sales and FBA slows down year on year

According to Amazon’s Q1 financial report, the company’s growth rate slows down significantly. Is Amazon FBA slowing down? Despite the slowdown in the overall Amazon financials, Amazon’s growth in FBA is still expected to continue at a steady rate. This is because the company is still lapping Covid-19’s boost.

First-quarter 1P sales were lower than the year-ago period, which was the first time in two decades that they’ve experienced a decline. However, the same quarter last year was up 44%, which was an unusually high growth rate, due to the e-commerce spending boost.

Amazon Online First-Party Sales
First-Party Sales Actual vs Prediction

From 2016 to 2020, Amazon’s sales grew at an average rate of 17%. However, the high growth rate in 2020 is being offset by slower growth in the last four quarters. If the company’s sales had grown at the same rate in the previous two years, it would have been up 18%. Instead, they’re up 1.8% from their trendline. By 2022, it’s expected to fall below the trendline.

The total number of products sold by Amazon during the first quarter was flat from a year earlier, as the consumers shifted its mix of products bought. However, the sales by the company’s marketplace and third-party sellers were still strong, and they were back on track.

The lack of growth in the first quarter was mainly due to comparisons with the previous year. The combined performance of the previous year was an impressive feat, and it resulted in a 20% average annual growth.

Amazon Paid Units Growth

E-commerce penetration rate continues in the U.S

Despite the Covid-19 boost, Amazon’s results reinforce the belief that e-commerce penetration in the U.S. is still at levels that it would have reached even without the pandemic. However, it is not true across all product categories.

One year ago, e-commerce businesses were too optimistic about the growth. However, growth looked terrible today in 2022 Q1. If looking at the last 2 years together, there would be a more holistic view on the overall market trend. In 2022, e-commerce should be back to its normal growth rate. A good news for sellers is that Amazon says it has excess capacity in its transportation and fulfillment facilities. Inventory and shipping should not be a problem anymore, at least on the US side.

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