Amazon Isn’t the Only Reason US Retail is Suffering (Apr 18, 2017)
Snapchat Now Offers Online-to-Offline Tracking for Ads (Apr 12, 2017)
Flipkart raises $1.4Bn from Tencent, eBay & Microsoft at $11.6Bn valuation, acquires eBay India – Economic Times (Apr 10, 2017)
There were recent rumors that Japan’s SoftBank might want to combine its investment in Snapdeal with an acquisition of Flipkart, but this funding news suggests that’s going to come later if it comes at all. The trio of companies investing here is intriguing. Tencent is perhaps the least surprising, as a company that invests heavily overseas including the US in minority stakes. eBay is apparently using this investment as a vehicle to buy into a bigger e-commerce business in India, as it’s transferring its own Indian operations to Flipkart as part of the process. Microsoft is the most interesting of all – though Flipkart recently switched to Azure for cloud services, Microsoft has no significant direct stake in an e-commerce anywhere else, so this is something of a departure for them, though of course major competitor Amazon already combines cloud and retail. Flipkart had in the past seemed to be the leader in the Indian e-commerce market, but has fallen from that role in the last couple of years as two overseas companies – Amazon and Alibaba – have made inroads there. This is a down round over the company’s previous valuation, but it and its new investors will be hoping the infusion of cash helps it get back into contention.
via Economic Times
Amazon and Walmart are in an all-out price war that is terrifying America’s biggest brands – Recode (Mar 30, 2017)
This is a fascinating article that looks at the competitive dynamics between two of the most powerful companies in retail: Amazon and Walmart. Walmart is legendary for the pressure it puts on its suppliers to conform to price expectations, but it appears that it’s going even further in demanding that those suppliers get their costs and prices down so as to allow it to compete with Amazon more effectively. Meanwhile, Amazon is pricing in a way that’s not necessarily rational or consistent with generating profits, which means that the competition between the two, while great for customers in the short term, is likely unsustainable for both the retailers and their suppliers, and something will eventually have to give. No surprise, then, that some of the CPG companies are starting to look to alternative channels, though realistically no big brand can afford to be off either of these companies shelves – in warehouses or stores – for long. This is likely to get a lot uglier before it gets any better. Meanwhile, that means that we may see more slowing of growth at Amazon along the lines for what we saw a little of in Q4 last year, while Walmart and its ilk will continue to pursue stronger growth at lower margins.
Amazon has announced two grocery pickup locations that are free for Prime members – Recode (Mar 28, 2017)
These stores have been in the works for a while, and launch has felt imminent as people have spotted signs going up and other indications that they would be opening soon. So I’d take with a pinch of salt the slightly cynical take here that this announcement was a response to the negative Amazon Go story from yesterday. However, it is worth noting that these stores are opening to employees only for now, apparently with no set timeframe for public launch, though the pricing model is already clear: Prime subscribers get to use the service and these locations at no additional cost, versus the additional monthly fee Prime subscribers have to pay for Fresh delivery at the moment. As I pointed out earlier, this is a much less groundbreaking model than the Go concept, one that’s already being offered both in other markets (this piece mentions the UK) but here in the US too, with big grocery chains including my local Smith’s store. But it’s still a useful additional feature for an online-only (for now) grocery retailer to offer, and part of Amazon’s broader experimentation with physical retail.
The High-Speed Trading Behind Your Amazon Purchase – WSJ (Mar 27, 2017)
This is a fascinating article looking into some of the mechanics behind how Amazon’s third-party sellers price their products on the site. I was actually aware of quite a bit of this already because I have a neighbor who runs a business which operates as a third-party seller on Amazon, and he’s told me a little of how his company operates. This piece only has a couple of examples, but in essence these sellers hunt down product categories where there’s room for price arbitrage by undercutting the current lowest price while still maintaining a margin. Suppliers in China will make many of the products cheaply enough to allow undercutting of the current top option on the site, and so there’s this constant hunt for the next product category with an opportunity for becoming the top seller by offering a lower price. It’s obviously great for Amazon and for its customers to have sellers competing so aggressively for business, because it brings down prices and raises sales, but Christopher argues in this piece that in some cases the same computerized models sometimes lead to price increases rather than just drops. Well worth a read of the whole thing.
There’s a certain amount of schadenfreude around about this story this morning, both from tech observers and I suspect from other retailers smirking at Amazon’s apparent inability to deliver on its store of the future concept. The idea of tracking products as they’re taken off shelves, placed in baskets and then ultimately carried out of a shop has seemed enormously ambitious to me from the start, because there just seemed to be so many ways it could go wrong. And now it seems that Amazon is holding up the launch of its Amazon Go store to regular customers because the technology can’t handle more than 20 people in the store at once, people who move too quickly around the store, or products which get moved from their original locations. These all seem like obvious bugs to have been worked out early on in development, and also ones which will all get worse when you go from friendly employee testers to real-world customers, so it’s a bit baffling Amazon would have whiffed on this so badly this late in the game. I’m very curious what happens from here on: whether we see Amazon launch just a little later than planned, with the bugs fixed, whether it launches despite the bugs (and risk of under- or over-charging customers), or whether it keeps the store employee-only for quite a bit longer. The last scenario seems most likely at this point.
Amazon to acquire Souq, a Middle East clone once valued at $1B, for $650M – TechCrunch (Mar 23, 2017)
This would be one of Amazon’s biggest acquisitions to date, ranking fourth behind Zappos ($1.2 billion), Twitch ($970m), and Kiva Systems ($775m) if it goes ahead at the price reported here. And given how Amazon is competing with local competitors such as Flipkart in India and Alibaba in China, it’s interesting to see it absorbing a smaller one in a region where Amazon itself has no presence. Local infrastructure is critical to Amazon’s success elsewhere, and an acquisition like this potentially gives Amazon a huge head start in the region. I could definitely see it taking out more second-tier e-commerce players in other regions like this over the next few years as a way to accelerate its international growth.
I’m not sure if it’s admirable restraint not to mention Amazon once in this article, or if it’s denial. The retail apocalypse described here is clearly driven by growing e-commerce spending, and indeed a number of the specific companies cited are closing physical retail stores while maintaining an online presence. Amazon is of course not the only online retailer, but it’s a major force in both the growth of e-commerce in the US and in the decline of physical retail stores and demise of certain physical retail brands (Sears looks to be the next – and one of the biggest candidates for that category). Of course, though Amazon’s success is one cause, retailers’ own inability to transform their businesses to compete more effectively is another major one.
via Business Insider
I joked on Twitter earlier that this is basically Content ID for the physical world – Amazon is now allowing brands to register their intellectual property in physical goods, so that Amazon can more easily identify and remove from its listings any counterfeit goods. That’s important because the company has been increasingly criticized in recent months for selling knockoff items from counterfeiters without doing much about it, and in some cases those goods have even been dangerous (for example fake iPhone chargers and cables). This feels like a step in the right direction, but to draw another Google analogy, this is a bit like Google policing videos on YouTube – the raw scale here is impossible for human employees to monitor alone. In this case, Amazon needs customers and brands to flag counterfeit items, but at least this registry makes it easier to match those items to copyrighted originals and therefore to take them down more quickly.
It’s interesting to see Walmart dialing this kind of thing up, while Target recently discontinued several efforts along similar lines. Walmart’s approach certainly makes a lot more sense – retailers absolutely have to be innovating around the in-store experience if they’re to preserve and build whatever advantages physical retail has, and technology is going to be central to that effort. That’s not to say Walmart will succeed – arguably most of its past innovations have been about merchandizing rather than technology, but it’s certainly got the resources to invest significantly in figuring things out.
eBay: Yes, speedy shipping really is a thing with us – CNET (Mar 20, 2017)
eBay is announcing that it now offers guaranteed 3-day shipping on 20 million items, compared to Amazon Prime’s two-day shipping for over 50 million items. The difference in the range and timing here highlights another big difference: whereas Amazon increasingly controls its logistics infrastructure, eBay has very little control at all, which is why it’s been reluctant in the past to commit to delivery dates even though it says almost two thirds of its sales already reach customers in three days. That’s because eBay buyers are responsible for shipping their own goods, while Prime and Fulfillment by Amazon leverage the company’s massive distribution infrastructure including an increasingly deep investment in its own shipping. Yes, eBay is making progress here, but it’s going to be hard for customers not to notice both the difference in the number of items and the speed of delivery and spend their money accordingly.
Documents reveal ‘AmazonFresh Pickup’ as the tech giant’s next physical retail concept – GeekWire (Mar 14, 2017)
The concept here isn’t new, either for Amazon or in general. With regard to Amazon, it was one of several physical retail concepts discussed in an article last year, and looks like it’s now coming to fruition. But the concept of ordering groceries online and picking them up outside a store isn’t new either – my local Smith’s grocery store (part of the Kroger company) does this today. The big difference will be that this AmazonFresh Pickup store won’t be a regular grocery store, but just that pickup experience. This would fill a gap in the current AmazonFresh service for those who won’t be home (or don’t know when they’ll be home) when groceries might be delivered, but can schedule a stop at a grocery store on their way home. I think we’re going to continue to see Amazon experimenting with lots of physical retail models until they get the right mix to complement their online presence.