Amazon

Amazon’s Cashierless ‘Go’ Convenience Store Set to Open

22 January 2018

From The Wall Street Journal:

Nearly a year after it was promised, Amazon.com Inc.’s cashierless convenience store is slated to open to the public on Monday.

The new Amazon Go store, located in the base of Amazon’s main headquarters in Seattle, uses computer vision and machine-learning algorithms to track shoppers and charge them for what they select, thereby eliminating checkout counters.

In an interview last week, Dilip Kumar, vice president of technology for Amazon Go and Amazon Books, said testing with employees has trained the technology to work in the store, an experiment that is part of the company’s broader effort to reinvent how consumers shop.

. . . .

According to Mr. Kumar, while the store was originally expected to quickly open to the public to gain extra traffic needed for testing, the company decided it had enough employees to teach the system instead.

That training helped Amazon Go’s technology better identify objects and follow the different speeds and patterns of shoppers, tasks Mr. Kumar described as particularly challenging in a crowd.

Some people “move in very unpredictable ways,” Mr. Kumar said. “You’re always bending down, you’re examining items, you’re picking things up.”

. . . .

Amazon Go’s technology uses cameras throughout the store to track shoppers once they are inside, though it doesn’t use facial recognition, Mr. Kumar said. A customer entering the store scans his or her phone and then becomes represented internally as a 3-D object to the system. Cameras also are pointed at the shelves to determine interactions with goods.

. . . .

Among the challenges for the technology was telling the difference between similar looking products—say containers of vanilla and regular yogurt. Adding to the complexity, when customers pick up products, they usually cover the distinguishing aspects of the label with their hands.

Link to the rest at The Wall Street Journal

The Real Reasons Behind The Amazon Prime Monthly Price Boost

21 January 2018

From Seeking Alpha:

It’s no secret that the e-commerce business of Amazon is driven by its Amazon Price subscribers, who spend about double the amount on products served up by Amazon than non-subscribers do.

So when it announced it has boosted its monthly subscriber price from $10.99 to $12.99 for Prime members, and from $5.49 to $6.49 for students, it definitely warrants a look as to what is probably behind the move, which goes into effect on the first payment after February 18.

The new annual costs from the monthly increase will climb from $131.88 a year to $155.88 a year.

It’s important to know that in both increases, the annual fee of $99 for regular customers, and $49 for students, remain the same. This at least partially plays into the reasoning behind the decision.

. . . .

While Amazon has never released specific numbers concerning the number of customers subscribing to Prime, the general consensus is that in the U.S. there are about 90 million households subscribing. Again, those subscribers spend about twice as much as customers that don’t subscribe.

Growth for the service has continued to accelerate. In January 2018, the company said “more new paid members joined Prime worldwide this year than any previous year.”

. . . .

It has to be kept in mind that Amazon’s performance is driven by Prime subscribers, so when it raised its monthly price, it had to know there was little risk to that customer base in regard to churn.

The first and probably most important thing to consider about the monthly price increase is, if customers were to cancel their subscriptions over $2 a month, or $24 a year, they aren’t the type of customer Amazon is trying to reach with the service in the first place. If they aren’t spending on average like other Prime subscribers do, they are costing the company money to retain them.

So while it’s probable there will be some churn as a result of the increase in subscription price on a monthly basis, it’ll almost certainly be customers that aren’t generating much in the way of e-commerce sales for the company.

. . . .

What’s most interesting about the price move to me is the widening gap between the monthly costs and annual costs, which are now over 50 percent more. I think that’s the key to understanding what’s behind the decision.

I see Amazon trying to change subscribers’ behavior by making it much more desirable to choose an annual subscription against a monthly subscription. Why that’s the case is that it provides more visibility, continuity, and predictability to the performance of the company over time.

. . . .

Most of the churn will come from customers that aren’t contributing much if anything to its bottom line.

Link to the rest at Seeking Alpha

Amazon Announces Candidates for HQ2

18 January 2018

From the Amazon Press Room:

Amazon reviewed 238 proposals from across the U.S., Canada, and Mexicoto host HQ2, the company’s second headquarters in North America. Today, Amazon announced it has chosen the following 20 metropolitan areas to move to the next phase of the process (in alphabetical order):

– Atlanta, GA

– Austin, TX

– Boston, MA

– Chicago, IL

– Columbus, OH

– Dallas, TX

– Denver, CO

– Indianapolis, IN

– Los Angeles, CA

– Miami, FL

– Montgomery County, MD

– Nashville, TN

– Newark, NJ

– New York City, NY

– Northern Virginia, VA

– Philadelphia, PA

– Pittsburgh, PA

– Raleigh, NC

– Toronto, ON

– Washington D.C.

. . . .

Amazon HQ2 will be a complete headquarters for Amazon, not a satellite office. The company plans to invest over $5 billion and grow this second headquarters to accommodate as many as 50,000 high-paying jobs. In addition to Amazon’s direct hiring and investment, construction and ongoing operation of Amazon HQ2 is expected to create tens of thousands of additional jobs and tens of billions of dollars in additional investment in the surrounding community.

Link to the rest at Amazon Press Room

To Woo Amazon, Cities Tackle Everything From Traffic to Housing

18 January 2018

From The Wall Street Journal:

Amazon.com Inc.’s contest to find a place for its second headquarters is spurring civic leaders around the country to confront municipal problems that have confounded lawmakers and local leaders for decades.

Suddenly, some cities and states are highlighting plans such as easing traffic, adding housing and investing in higher education.

Among Amazon’s considerations are proximity to a big airport, commuting time and quality of life. The prize, Amazon says, is up to 50,000 full-time jobs and $5 billion in investment over nearly 20 years.

Analysts expect Amazon to unveil a short list of leading contenders any day now from the 238 cities and regions that bid for the project. Amazon, based in Seattle, has declined to comment on which locations it is considering.

. . . .

Based on interviews with site-selection experts and Wall Street Journal analysis, here is a look at a problem each of 10 potential leading contenders could fix to try to win the beauty contest.

. . . .

 AUSTIN, Texas

Problem:
Affordable Housing

Solution:
Austin’s popularity has come with a price: rising housing costs and a housing market struggling to meet the needs of a growing city. According to the Austin Board of Realtors, the median price for single-family homes in the Austin-Round Rock area jumped 48% in the past five years to $296,500 in November 2017. Last year, the city council adopted Austin’s first Strategic Housing Blueprint, with a goal of creating 60,000 affordable housing units over the next decade for households earning $60,000 or less.

. . . .

 PHILADELPHIA

Problem:
Poor public schools

Solution:
In November, Mayor Jim Kenney said he planned to bring the Philadelphia School District back under local control, which officials said is aimed at improving outcomes and giving more confidence to potential employers.

Link to the rest at The Wall Street Journal

PG notes that the WSJ ignored any locations farther west than Texas. He will also note (without naming names) that the WSJ list included some cities with seemingly intractable urban problems

Amazon laying off 58 workers at North Charleston self-publishing business

17 January 2018

From the Charleston Post & Courier:

Amazon says it’s cutting part of its office staff in North Charleston this summer, a year after the e-commerce giant moved its book-printing factory out of the city.

Amazon’s self-publishing service, Createspace, is laying off workers in its editing, marketing and design division in July because the company is getting out of the business of offering services to writers. The layoffs will mostly affect customer service positions. Createspace will continue to print books for authors with ambitions to sell their work without a publisher.

. . . .

This marks the second round of job cuts Amazon has made in the Charleston area in as many years. Last year, the company moved its on-demand book printing warehouse — and about 150 jobs — from North Charleston to West Columbia, where it runs a distribution center.

“After a thorough review of our service offerings, we’ve made the decision to discontinue Createspace’s paid professional editing, design and marketing services,” Amazon said in a statement. “We will work closely with impacted employees through this transition to help them find new roles within the company or assist them with pursuing opportunities outside the company.”

Link to the rest at Charleston Post & Courier and thanks to Elizabeth for the tip.

The Antitrust Case Against Facebook, Google, Amazon and Apple

16 January 2018

From The Wall Street Journal:

Standard Oil and Co. and American Telephone and Telegraph Co. were the technological titans of their day, commanding more than 80% of their markets.

Today’s tech giants are just as dominant: In the U.S., Alphabet Inc.’s Google drives 89% of internet search; 95% of young adults on the internet use a Facebook Inc. product; and Amazon.com Inc. now accounts for 75% of electronic book sales. Those firms that aren’t monopolists are duopolists: Google and Facebook absorbed 63% of online ad spending last year; Google and Apple Inc. provide 99% of mobile phone operating systems; while Apple and Microsoft Corp. supply 95% of desktop operating systems.

A growing number of critics think these tech giants need to be broken up or regulated as Standard Oil and AT&T once were. Their alleged sins run the gamut from disseminating fake news and fostering addiction to laying waste to small towns’ shopping districts. But antitrust regulators have a narrow test: Does their size leave consumers worse off?

By that standard, there isn’t a clear case for going after big tech—at least for now. They are driving down prices and rolling out new and often improved products and services every week.

That may not be true in the future: if market dominance means fewer competitors and less innovation, consumers will be worse off than if those companies had been restrained. “The impact on innovation can be the most important competitive effect” in an antitrust case, says Fiona Scott Morton, a Yale University economist who served in the Justice Department’s antitrust division under Barack Obama.

. . . .

“Forty percent of Google search is local,” says Luther Lowe, the company’s head of public policy. “There should be hundreds of Yelps. There’s not. No one is pitching investors to build a service that relies on discovery through Facebook or Google to grow, because venture capitalists think it’s a poor bet.”

There are key differences between today’s tech giants and monopolists of previous eras. Standard Oil and AT&T used trusts, regulations and patents to keep out or co-opt competitors. They were respected but unloved. By contrast, Google and Facebook give away their main product, while Amazon undercuts traditional retailers so aggressively it may be holding down inflation. None enjoys a government-sanctioned monopoly; all invest prodigiously in new products. Alphabet plows 16% of revenue back into research and development; for Facebook it’s 21%—ratios far higher than other companies. All are among the public’s most loved brands, according to polls by Morning Consult.

Yet there are also important parallels. The monopolies of old and of today were built on proprietary technology and physical networks that drove down costs while locking in customers, erecting formidable barriers to entry. Just as Standard Oil and AT&T were once critical to the nation’s economic infrastructure, today’s tech giants are gatekeepers to the internet economy. If they’re imposing a cost, it may not be what customers pay but the products they never see.

. . . .

The story of AT&T is similar. It owed its early growth and dominant market position to Alexander Graham Bell’s 1876 patent for the telephone. After the related patents expired in the 1890s, new exchanges sprung up in countless cities to compete.

Competition was a powerful prod to innovation: Independent companies, by installing twisted copper lines and automatic switching, forced AT&T to do the same. But AT&T, like today’s tech giants, had “network effects” on its side.

“Just like people joined Facebook because everyone else was on Facebook, the biggest competitive advantage AT&T had was that it was interconnected,” says Milton Mueller, a professor at the Georgia Institute of Technology who has studied the history of technology policy.

Early in the 20th century, AT&T began buying up local competitors and refusing to connect independent exchanges to its long-distance lines, arousing antitrust complaints. By the 1920s, it was allowed to become a monopoly in exchange for universal service in the communities it served. By 1939, the company carried more than 90% of calls.

Though AT&T’s research unit, Bell Labs, became synonymous with groundbreaking discoveries, in telephone innovation AT&T was a laggard. To protect its own lucrative equipment business it prohibited innovative devices such as the Hush-a-Phone, which kept others from overhearing calls, and the Carterphone, which patched calls over radio airwaves, from connecting to its network.

After AT&T was broken up into separate local and long-distance companies in 1982, telecommunication innovation blossomed, spreading to digital switching, fiber optics, cellphones—and the internet.

Link to the rest at The Wall Street Journal

Amazon: Just Keep Buying

16 January 2018

From Seeking Alpha:

[Y]ou have to like the situation Amazon is in thanks to the recently passed tax reform bill. Consumers are going to spend more and Prime memberships are going to keep surging. On the business front, companies are likely to plow some of their higher income back into technology, and that will certainly help AWS as it remains the cloud leader. A full year of Whole Foods revenue will keep Amazon’s top line growth rate at a decent clip.

For those that complain about the bottom line, something I used to do, the lower corporate tax rate is definitely welcome for Amazon. According to the company’s 10-K filing in early 2017, the company’s effective tax rate the past three years was 36.6%, 60.6%, and 150.4% (in 2014). Through the first nine months of 2017, the tax rate was over 37%. Likewise, Whole Foods had a high effective rate, so even an improvement of just a few percentage points could have a massive impact on earnings per share.

The second item I’m watching will be a series of positive analyst notes coming in the next few months as the street adjusts to the recent surge in shares. As you can see in the graphic below, 43 of 47 analysts currently have a buy or strong buy rating on the stock.

. . . .

The US tax reform bill will help fuel a mix of consumer and business spending, helping the retail business as well as AWS.

Link to the rest at Seeking Alpha

Why Amazon is the new Microsoft

16 January 2018

From TechConnect:

A few years ago, chatbots were supposed to take over as a leading way to interact with the internet. They would live on our phones and in our messaging apps. Whenever we needed anything, all we had to do was type out a question.

Things are turning out … differently.

Chatbots, bots, virtual assistants and agents are all about the conversational UI — about interacting with a computer through natural-language words and sentences.

The conventional wisdom used to be that the chatbot revolution would be driven by pre-emption, interjection and agency, as exemplified by Facebook M and Google Now.

Instead, the killer features are hands-free voice interaction and ubiquity — the main strengths of the Amazon Alexa platform.

. . . .

Facebook M is dead.

Facebook plans to close it’s M chatbot service on Jan. 19.

Facebook M, which launched in August 2015, was experimental, available to only 10,000 people in Silicon Valley.

When M first emerged, it was widely assumed to represent the future of how chatbots should and would work.

. . . .

Google Now is dead, too — sort of.

A few years ago, the conventional wisdom in tech circles was that Google Now was the most sophisticated virtual assistant.

Google Now was introduced in Android in the summer of 2012.

The best thing about Google Now was pre-emption: Display cards would pop up to alert you to things (rather than waiting for you to ask). Google Now used your location, calendar and, above all, Gmail messages to figure out what kind of help you needed, and it would try to give you that help with suggestion cards. One of its best tricks was to see on your calendar where you were going, check your current location, check the traffic between those locations, and give you advice about when to leave.

Meanwhile, the coolest feature of Google Assistant is interjection, which means it will pay attention to conversations in Allo and make suggestions based on the conversation.

Unfortunately, hardly anyone uses Allo, and so the amazing interjection powers of the Google Assistant are largely unknown and generally unused by the larger public.

. . . .

A couple of years ago, Amazon Alexa was considered to be the weakest and least sophisticated chatbot or virtual assistant on the market. (Oddly, MS-DOS and, later, Microsoft Windows initially had similar reputations.)

While agency, including the ability to buy things, was once assumed to be an important feature of a virtual assistant, it’s clear even for Alexa that buying things is secondary.

According to an Experian study last year, fewer than one-third of surveyed Echo owners have ever bought something through Alexa.

The vast majority of tasks involve setting a timer, playing a song, reading the news, checking the time — really, the most basic functions of a smartphone made convenient by voice interaction.

And yet Amazon is clearly dominating the space. This week’s CES showed that the industry is following Amazon’s lead.

Alexa appeared at the show inside projectors, ceiling lights, cars, glasses, showers, washing machines, earbuds, speakers — and even Windows 10 PCs.

. . . .

Amazon CEO Jeff Bezos this week became the world’s richest person, according to the Forbes list. Over the past few decades, that spot was normally occupied by former Microsoft CEO Bill Gates.

The symbolism is timely; it was at CES this week that Amazon became the new Microsoft.

Microsoft rose to dominance by controlling the operating system that the majority of people and businesses used.

Amazon is now doing something similar with Alexa. While Alexa isn’t even close to becoming as important as Windows, it is becoming the operating system of the post-PC, post-smartphone future.

The reason is very simple, and perfectly described by Sam Dolnick, who oversees digital initiatives at The New York Times. He said: “We are living in a world where the mobile phone is dominant, and audio, which doesn’t require your eyes or your hands, is the ultimate mobile medium.”

Link to the rest at TechConnect

If Retailers Want to Compete with Amazon, They Should Use Their Tax Savings to Raise Wages

12 January 2018

From The Harvard Business Review:

Walmart announced today that it is raising its starting wages in the United States from $9 per hour to $11, giving employees one-time cash bonuses of as much as $1,000, and expanding maternity and parental leave benefits as a result of the recently enacted tax reform. It is part of Walmart’s broader effort to create a better experience for its employees and customers. The new tax law creates a major business opportunity for other retailers as well — if their leaders are wise enough to take advantage of it.

The U.S. corporate tax rate is dropping from 35% to 21%. Retailers, many of whom have been paying the full tax rate, are going to benefit substantially. Take a retailer that makes 15% pretax income. Assuming its effective tax rate goes from 35% to 21%, it could save the equivalent of 2.3% of sales. Specialty retailers with higher pretax income will save even more.

. . . .

Retail executives have a choice in how they use these savings. I believe the smartest choice — one that will help them compete against online retailers like Amazon — is to create a better experience for customers and to achieve operational excellence in stores. For most retailers, doing both requires more investment in store employees — starting with higher wages and more-predictable work schedules. My research shows that combining higher pay for retail employees with a set of smart operational choices that leverage that investment results in more-satisfied customers, employees, and investors.

Retailers that do not provide a compelling draw for their customers may not make it. In 2017, according to Fung Global Retail and Technology, there were nearly 7,000 store closing announcements, the second-largest number since 2000.

. . . .

[T]wo of my MIT Sloan MBA students analyzed store openings and closings from 2015 to 2017, looking at department stores with more than 50 stores and over $100 million in revenues, and found a positive correlation between customer satisfaction, as measured by Yelp ratings, and the net change in the number of open stores.

. . . .

Many companies can no longer grow profitably just by adding stores — they need to get more out of their existing stores. Operational excellence makes that possible by ensuring that merchandise is in stock and well displayed, checkout is efficient, stores are clean, and employees are responsive to customers.

. . . .

Creating a great customer experience and achieving operational excellence both require a capable and motivated workforce. You need knowledgeable employees who are cross-trained to manage customers’ needs wherever they arise. You need employees who can empathize with customers, are empowered to solve customer problems, and can spot opportunities to improve operations. You also need a capable and motivated workforce that can embrace and leverage new technologies.

Yet most retailers are far from having that kind of workforce. In 2016 the average employee turnover in retail was 65%.

Link to the rest at The Harvard Business Review

Inside Amazon’s Quest for Global Domination

12 January 2018

From The Wall Street Journal:

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