Narrative: Amazon Dominates E-Commerce
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Narrative: Amazon Dominates E-Commerce (Dec 27, 2016)
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Amazon Debating Entry to Online Prescriptions Market (May 16, 2017)
Amazon today announced its earnings for Q1 2017. Revenues grew strongly, but as with Q4 the rate of growth was slower than it had been for most of last year. Operating margins also continue to fall, driven by a slight dip in AWS margins in the last couple of quarters and continued big losses in the International business. The feeling I have is that e-commerce growth is just a little slower than Amazon anticipated – several metrics it normally keeps within very narrow bands have crept out in the past couple of quarters. I take that as a sign that retailers like Walmart are fighting back more effectively, sacrificing margins in pursuit of higher growth, and that this is affecting Amazon’s growth rate (though it still remains far higher than any other retailer’s organic growth, online or otherwise). Following some additional disclosure in its 10-K last quarter, Amazon has now shaken up its reporting segments for the non-AWS business and provides a little more visibility into its subscription and fulfillment businesses. The subscription business – mostly Prime but also other smaller businesses like Audible – generated 5% of revenue. Fulfillment and related businesses generated 18% of revenues, and the growth of that third-party seller business on Amazon, which now accounts for 50% of units sold, continues to be an important driver of higher gross margins along with AWS. From the 10-K, I estimated that Amazon had roughly 70 million Prime subscribers at the end of last year, and though the quarterly numbers are a little harder to pass it looks like it may have seen decent growth this past quarter too. Prime continues to be one of Amazon’s greatest strengths as a driver of stickiness and revenue growth.
Amazon Isn’t the Only Reason US Retail is Suffering (Apr 18, 2017)
Amazon’s Third-Party Sellers Hit By Hackers – WSJ (Apr 10, 2017)
The bigger you get in almost any technology business, the more hackers will try to find ways to infiltrate that business and skim off some of the money. That now appears to be happening at substantial scale with Amazon’s third party sellers, many of which are likely relatively unsophisticated from a computer security perspective. The hackers are engaging in at least two separate behaviors, in some cases merely redirecting sellers’ proceeds into different bank accounts, and in others taking over dormant seller accounts and posting fraudulent products. Though it sounds like Amazon is making both buyers and sellers whole, it could be doing more to prevent the issues from occurring in the first, place, not least by requiring two-factor authentication for seller accounts. Though there’s often reluctance to force 2FA on users in the consumer space, these aren’t consumers, and the amounts of money involved make that an entirely sensible precaution. Given how much of Amazon’s total sales goes through third party sellers at this point, this could become a massive issue if it doesn’t do more to lock things down.
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
In some ways, it’s very easy to predict what Amazon will do next in its e-commerce business, by simply identifying the biggest barriers to its continued growth. Which categories is it under-represented in? Clothing and groceries, and so you get private label clothing lines and various takes on combining online and other technologies with brick and mortar pickup. In the case of this item, we’re answering the question: what are the biggest remaining barriers to people buying stuff from Amazon online, to which at least part of the answer is that lots of people (around 7% of households in 2015) don’t have bank accounts or credit cards. Several times that number also regularly use check cashing, payday loan, and other related services, which expands the addressable market for something like Amazon Cash, which is intended to allow people to put money into an Amazon account by paying cash at a retailer. This is a logical next step in enabling more people to buy things from Amazon.com, and I expect we’ll see more efforts at this kind of thing going forward.