Amazon’s core e-commerce business (reported in quarterly earnings as “Online Stores”) slowed to 11% year-over-year growth in Q3, down from 22% a year ago. This is surprising, especially given that Prime Day sales are reported in Q3. So what’s happening?

It appears that Amazon is beginning to saturate the US e-commerce market, particularly in well-established categories such as books and electronics. Less developed categories such as fashion and groceries are more competitive, with a greater number of legacy retailers building up their own e-commerce operations.

Amazon

Opportunities abroad are looking bleaker as well. Emerging markets such as China and India have been heralded by Amazon’s management team for years as the firm’s next big opportunity, but disrupting those markets has proved challenging. Revenue from Amazon’s international business grew just 15% YoY, down from 28% a year ago.

With customer acquisition opportunities drying up at home and abroad, Amazon is now looking to maintain its image as a growth story by increasing the average revenue per user—both from consumers and from brands who sell on its marketplace. For example, as Prime membership sign-ups began to plateau, Amazon increased the annual fee from $99 to $129.

Advertising is another way Amazon has further monetized sellers on its platform. Revenue from its “Other” business, which primarily consists of advertising, grew 123% YoY to $2.2 billion in Q3. So as Amazon faces increasing headwinds as a retailer, look for the company to increasingly rely on services to further monetize its user base and brand partners.

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