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SpaceKnow Nowcasting Newsletter (SNN) #11

Amazon’s Black Friday

SpaceKnow’s indices suggest that so far, Amazon’s activity heading into the all-important Black Friday and Christmas spending season has been lackluster.

Amazon has a strong and growing presence in the US, which makes it an important indicator for retail sales. SpaceKnow indices play a leading role in exploring supply chain movements of the company by tracking activity at its distribution centers. We can observe how the company operations are performing in near-real time and understand how Amazon prepared for Black Friday and the Christmas season.

Recently, Amazon released its Q3 financial results and Q4 expectations. Amazon’s Q4 expectations were significantly affected by uncertainty in the economic environment. Amazon's net sales are expected to grow between 2% and 8% YoY in the fourth quarter, well below levels in the last two years.

Inflation has a significant impact on the retail sector. All else equal, high inflation levels will cause a slowdown in net sales in the fourth quarter.

SpaceKnow’s Amazon Accumulated Level Index (non-seasonally adjusted) for the U.S. tracks Amazon logistic centers. The number of locations are updated as the company opens or closes locations. Figure 1 shows that the growth rate of activity in Amazon Logistic Centers has decreased in time and it moves in line with the sales revenues of the company. We expect this to continue in the upcoming months.

Figure 1: SpaceKnow’s Amazon Accumulated Index, non-seasonally adjusted

Note: The last available data point is 11/26/2022, the data point reflects the Qtd change. The Amazon Accumulated Index is estimated in quarter terms and quarter-on-quarter change is estimated to compare the quarter-on-quarter change in the sales revenues of the company. The last data point represents the change.

Source: SpaceKnow

Figure 2 estimates the activity change from September 1st to November 26th for years 2017 - 2022. Here, we look at accumulated activity over 30 days on September 1st and compare it to accumulated activity over 30 days on November 26th for each year. We observed that the indices are losing momentum over the years. The company’s activities grew by 3% during the mentioned period in 2022 while it grew 11% in 2021 and 17% in 2020.

Amazon’s rate of change in Figure 2 is slowing for many reasons: higher sales levels as it becomes a mainstream provider, higher productivity levels at distribution centers, higher capacity as more centers were opened, changing consumer spending patterns, and slowing sales. However, this graph provides a nice snapshot of the issues the e-commerce giant is facing.

Figure 2: SpaceKnow’s Amazon Accumulated Index comparison over the years, non-seasonally adjusted, (30-day rolling sum)

Source: SpaceKnow

SpaceKnow’s Amazon Change Index (non seasonally adjusted) for the U.S. covers logistic centers open since 2017, and it observes the change in the area covered by trucks in these logistic centers. The index gives insights about long-term trends.

Figure 3 shows that this index has been dropping over time. Each data point is the sum of activity that took place in the previous 90-days. Our last data point is from 11/26/2022 and covers the activity from 08/29/2022 - 11/26/2022. We observed that the company’s logistic activities gained momentum since November and the last data point shows that the logistic activities in Q4 are showing some recovery during the last 3 months. However, the recovery remains muted compared to earlier this year.

Figure 3: SpaceKnow’s Amazon Change Index, non-seasonally adjusted

Note: The graph shows the change. The last available data point is 11/26/2022.
Source: SpaceKnow

Amazon High Activity Index and Low Activity Index (ASI) show the percentage of Amazon logistic centers exhibiting high or low change in activity in the observed time period. If the Low Activity index is 15%, the interpretation is that 15% of Amazon logistic centers showed low change in activity during the selected time point.

Figure 4: SpaceKnow’s Amazon High Activity Structure Index, non-seasonally adjusted

Source: SpaceKnow

Figure 5: SpaceKnow’s Amazon Low Activity Structure Index, non-seasonally adjusted

Source: SpaceKnow

How do we expect this to impact the consumer?

Despite some momentum in Amazon heading into the Christmas season, our indices remained low and limited compared to the company’s historical performance. As long as high inflation persists and energy prices continue to be a burden for the companies, we may expect to see further decline in Amazon indices.

SpaceKnow provides satellite activity data. We research and monitor hundreds of thousands of locations, spanning different industries, to create the world's most comprehensive activity datasets. Allowing users to see an unbiased and near-real-time view of current levels of activity, inflection points, and trends for countries, companies, and commodities. Our customers include investors, quants, asset managers, traders, corporate strategists, banks, economists, and governments.