It is no secret that Amazon (NASDAQ: AMZN) is one of the largest online retailers in the world, with global e-commerce sales of $89 billion last year. The company continues to expand into key foreign markets, including China where major growth opportunities are somewhat offset by increased competition from Chinese e-tailer Alibaba . If you are wondering which markets are the most important to Amazon today, we have you covered.
North American sales growth continues to outpace international markets
Last year, Amazon grew sales nearly 25% to $55.5 billion in North America, compared to more tepid growth of 12% abroad. Still, international sales now account for 38% of the top line, down slightly from 40% the prior year.
Image source: Amazon.
Amazon posted international sales of $33.5 billion -- not bad given the labor disputes the company endured overseas in key markets such as Germany. I mention this because Germany is, in fact, the largest international market for Amazon, generating $11.9 billion in revenue and accounting for more than 13% of the top line
Amazon employees at five of nine German distribution centers went on strike last year to protest for higher wages. While the strikes have soured public perception of the company in the country, it should have minimal financial impact. Verdi, the labor union behind these strikes, has been organizing worker protests against the company since 2013 . However, Amazon remains adamant that these employees, classified as logistics staff, receive "above-average pay" according to Reuters.
Other key markets
The United Kingdom trails Germany as the third largest market with $8.3 billion of sales in 2014, up 14% from the prior year. Investors may be surprised to learn that Japan, not China, is the fourth largest market. Sales in Japan have been the weakest of the major markets, falling 2% in 2013 only to recover 3.6% last year to $7.9 billion. That allowed the United Kingdom to overtake Japan for the first time in 2014.
Together, Germany, Japan, and the United Kingdom now account for more almost 85% of international sales, despite the fact the company operates in as many as 12 key markets, including China, Spain, India, and Australia.
So what can we take away from these numbers? The North American market is clearly the major area of focus at Amazon. And because of a recent slow down abroad, continued international growth could end up being one of the fiercest challenges the company faces going forward.
Aside from China, India could quickly become one of Amazon's hottest markets outside North America. Last year, the company moved to capitalize on India's $13 billion online retail sector when it invested $2 billion to expand operations there . "At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales," said CEO Jeff Bezos.
While these international ambitions are promising, investors should know that operating in overseas markets is often challenging for online retailers. According to Morningstar, "foreign governing bodies are constantly amending online commerce laws ," which could put some foreign investments at risk if those efforts runs into regulatory holdups. There are also major currency headwinds to consider -- unfavorable foreign exchange rates took a $636 million bite out of Amazon revenue last year. That said, North America should continue to drive impressive sales growth in the years to come.
