Amazon

Amazon: The Emporia Strike Back

22 May 2017

From Seeking Alpha:

Over the past week, Barron’s has been working on an article centered on retailers that are resisting the Amazon (NASDAQ:AMZN) tide. Over that same period, I’ve been doing the same thing, but my focus has been on AMZN, and how the hunter may become the hunted; the disrupter suddenly disrupted. That’s the theme of this article.

As a sense of how even a bull on some non-AMZN retail names gushes about AMZN, the interviewee for that article, Dana Telsey, said this in mildly questioning the extent of AMZN’s stock price surge in 2017:

Amazon’s opportunity to expand in so many categories is amazing.

Yet, I wonder.

. . . .

My reaction to the research I’ve been doing is that AMZN is at risk of another difficult spell. Competitors can possibly exceed it, as shown below. Even Ms. Telsey went on in the next breath to criticize the mighty AMZN, saying:

Amazon does very well on the basic soft offering, but still has work to do to improve the offering and the experience. Retail is a roller coaster. You need to reinvent, remodel, remerchandise. Brands matter. Whether it’s Victoria’s Secret for L Brands; PVH, with Tommy Hilfiger and Calvin Klein; or Coach, they have staying power, and they’re innovating…

Neiman Marcus technology allows customers to compare how they look in different outfits. And more retailers are working to make visiting a store not just about buying an item, but about engagement, creating a social and/or unique experience for the consumer that makes them want to visit again and make a purchase.

I’m not predicting that AMZN is the next BlackBerry or Nokia, but I wonder if the next few years will see a revaluation of AMZN downward and its competitors – the ones that are the true innovators and fighters – upward.

. . . .

It appears that after years of faltering online activity, AMZN’s competitors are taking increasingly effective action. In addition, they may eventually prove that having numerous stores (“emporia” especially when large), having higher profit margins than AMZN, is a huge advantage in this fight:

Ultimately, it’s not too onerous for a large, profitable retailer to add e-commerce capabilities, though it takes time and money to get it right. The price is a temporary strain on profits.

In contrast, it’s impossible for AMZN to develop anything approaching the physical store system that the large, multi-state, and sometimes international, retailers have taken many years, sometimes many decades, to put together.

Link to the rest at Seeking Alpha

PG disagrees with the statement in the OP, “Ultimately, it’s not too onerous for a large, profitable retailer to add e-commerce capabilities.”

The large multistate physical store systems of formerly-profitable retailers like Barnes & Noble, JC Penney, Sears, Aéropostale, Macy’s, Sports Authority, Office Depot, etc., etc., have not done very well lately.

An even bigger question in PG’s mind is, exactly which “large, profitable retailer” has added a successful ecommerce operation?

Walmart qualifies as a large, profitable retailer.

The Wall Street Journal reported that Walmart’s e-commerce sales in 2015 totaled about $14 billion. As a comparison, Amazon’s sales hit $107 billion that year, a figure that included its web-service division.

Walmart’s first ecommerce strategy was to build its own e-commerce capabilities when Amazon was much smaller than it is today. The execs in Bentonville spent gobs of money, but that strategy bombed. It turned out that ecommerce was harder than it looked.

Walmart’s more recent ecommerce strategy is to buy ecommerce companies. Last year, Walmart bought the e-commerce startup Jet, which also owns online furniture seller Hayneedle, for $3 billion. The company also acquired ShoeBuy, a competitor to Amazon-owned Zappos and Moosejaw, an online retailer of outdoor apparel and sporting equipment. Walmart also bought a stake in JD.com, a Chinese e-commerce company that competes with both China’s market leader Alibaba and Amazon.

PG still hasn’t seen any particularly successful ecommerce capabilities show up at Walmart yet.

Here’s the thing with buying technology companies, including ecommerce companies — the best programmers own a lot of stock in the acquired companies. Ditto for the best product managers. Typically, these people are locked into the acquired business with three-year employment contracts as part of the acquisition.

The best programmers have been working 80-100 hour weeks to push the acquired company’s valuation as high as possible. After the acquisition, their main focus is on relaxing and buying expensive toys with a bit of the money they’ve made off their stock. Sure, they show up at work, but they’re also best friends with the local Ferrari dealer. And the local Tesla dealer. And a couple of boat and airplane sales people. Plus they’ve always wanted to hike the Pacific Crest Trail but never had the time before.

These same programmers are adding venture capitalists and headhunters to their phone contacts. The VC’s and headhunters are happy pay for long and expensive lunches and dinners and share industry gossip about hot new startups until the employment agreements expire.

Problems also arise when the really smart talents from the startup discover they’re reporting to not-very-bright corporate types at the acquiring company.

Microsoft, which is a reasonably competent technology company, has acquired a large number of smaller tech companies over the years. PG has known some of the top talent in those tech companies. They rent a nice house on one of Seattle’s many lakes, disappear into the Redmond maw for three years, then they’re out doing what they want to do, either sailing around the world for a year or, more likely, starting a new tech company. In any case, most of the real value Microsoft (and other large companies) acquired in the tech acquisition walks out the door.

It takes real and rare talent to do ecommerce well and, while getting the user interface right is vital, there are an even larger number of things to get right behind the scenes. Not just any programmer can do this and the behind-the-scenes stuff can be very difficult to copy or reverse-engineer.

Even though it’s a large company, Amazon has shown a continuing ability to attract and retain top-tier technical and marketing talent. It has also demonstrated the ability to constantly push the boundaries of ecommerce. Even if a competitor could build a perfect copy of this year’s Amazon ecommerce platform, by the time the copy was finished, Amazon would have made hundreds of improvements to its systems and deployed thousands of additional warehouse robots. This requires a combination of brilliant management that really understands technology and creative technologists that can respond to extraordinary demands management places on them.

The critical raw material for any technology business or operation is technical talent. With it, you can leap tall buildings and recover from bad business decisions. Without it, you’re going to either be lame or copying other companies’ products.

One final question: Where would a talented computer science major from Stanford or Carnegie Mellon or MIT rather work – Amazon or Calvin Klein?

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Amazon and Target’s Retail Rumble

22 May 2017

From Boston Magazine:

It didn’t take more than a few minutes of wandering around the sparkling new Target store in Central Square for it to dawn on me: Somehow, contained in this 21,000-square-foot expanse, is everything that most people, on most days, could ever need. There’s trail mix, school binders, blazers, smartphones, basketballs, Star Wars toys, bedding, toilet paper, Beats by Dre headphones, and at least half a dozen passable button-down shirts. Given the current retail climate, it felt like a store engineered specifically to keep me from buying things on the Internet—an act of war, so to speak, against Target’s archrival, Amazon. Which, it turns out, is exactly the case.

Practically overnight, Boston has become one of the most important national battlegrounds as Amazon and Target vie for retail supremacy. This year, Amazon announced the local launch of its one-hour Prime delivery service, by way of a fulfillment center in the heart of Boston. Need diapers, a digital food thermometer, and a desk lamp before noon? Jump online, enter your order, and wait for your doorbell to ring. And Amazon’s onslaught doesn’t stop there: The city is speckled with the company’s storage lockers, the suburbs are home to some of Amazon’s first brick-and-mortar bookshops, and company executives are scouring Boston for larger office space. Rumor has it that Amazon has been toying with the idea of buying out BJ’s, the Framingham-based wholesaler, in a deal that would not only be a significant move for the company, but also a massive local real estate play.

For its part, Target is no less enamored of Boston, a so-called “priority area” to grow new stores and help the company shore up sales and its stock price—both of which are plummeting while Amazon’s numbers soar. As a result, the company is embracing cities and opening small-format stores like the ones in Central Square and on Boston University’s campus, hoping to make itself irresistible to college students, tech-savvy professionals, and youngish urbanites with money to spend. A Target spokesperson tells me that they are constantly scouting real estate in Boston and have plans to open a new location in Roslindale, which will be the fourth new Target to hit Boston within the past two years.

It is, to say the least, a risky bet for Target. Many once-prominent American retailers have become extinct, or, like JCPenney and Sears, are slowly getting stomped to death by Amazon’s on-demand delivery services. “We’ve never seen a period like this, where stores were in so much trouble,” says Harvard Business School historian Nancy Koehn. “Amazon has wreaked its havoc.”

Link to the rest at Boston Magazine

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Amazon Takes On New York Times Bestseller List As Standard For Book Success

19 May 2017

From Publishers Weekly:

Amazon has long featured bestseller lists track sales ranking by the hour, but what the e-commerce giant has lacked is a weekly list. That changed this week with the launch of Amazon Charts, a new feature that will include not only the top 20 bestsellers at the retailer in both fiction and nonfiction, but also the 20 most read books in both categories. Adult books and children’s books will be included on the lists.

The “most sold” chart will rank bestsellers based on aggregated sales (including pre-orders), as well as books borrowed. Sales will be based on activity from all of Amazon’s platforms (Amazon.com, Audible.com, and Amazon Books), and across all formats (print, digital, digital audio and books read through Amazon’s subscription services).

. . . .

The “most read” list will be based on titles read, or listened to, via Kindle devices and Audible. Naggar thinks that feature will reflect “what is going on in the zeitgeist” more than Amazon’s lists based solely on sales.

Both lists will be unconventional. There is a buy button on each bestseller, as well as an icon that lets readers view a few pages of the book (via the company’s Kindle Instant Preview technology). Other features are intended to provide fun insights into the books on the list; Amazon, for example, will tag books as that its data indicates were “unputdownable.”

Link to the rest at Publishers Weekly

PW is pretty low-key — “both lists will be unconventional” — about something that PG thinks will upend tradpub bestseller metrics.

From a practical standpoint, which list will drive the most sales – NYT or Amazon’s? PG suggests the list that is seen by the most people will drive the most sales.

According to Statista, on average, 183 million users have visited Amazon’s websites per month in 2017. According to SimilarWeb, during the last six months, Amazon had 2.2 billion visits (visits, not visitors). Amazon doesn’t report the number of worldwide active customer accounts any more, but, in 2015, that number was over 300 million.

And, finally, 80% of all US Amazon customers purchase something from Amazon at least once per month.

According to CNN, the “Trump Bump” powered a big increase in New York Times subscribers during Q4 of 2016 and Q1 of 2017, bumping digital and print subscriptions past 3 million.

Fortune has a different take:

Amazon is creating its own version of the New York Times bestseller list.

The e-commerce giant debuted a new formula on Thursday for ranking books sold on its site called Amazon Charts. The new list, which will be updated weekly, will track the top 20 most sold on the site and the most read books.

Link to the rest at Fortune

Deadline Hollywood is even more enthusiastic:

Amazon Takes On New York Times Bestseller List As Standard For Book Success

Amazon continues to disrupt the publishing industry. After changing the way books are consumed — and pushing out brick-and-mortar booksellers in the process — the online goliath is now taking on The New York Times Bestseller List, forever been the standard of success for authors and publishers.

. . . .

Things have never been cordial between Amazon and The New York Times Bestseller List. The latter uses its own algorithm that insiders say excludes books that Amazon publishes on its own imprint because they are not sold in bookstores. Amazon has the ability not only to know how many books are sold online, but how many are actually read.

Link to the rest at Deadline Hollywood

PG suspects the NYT bestseller lists will continue to be authoritative in Manhattan while Amazon Charts will be the go-to lists for the rest of the world.

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Amazon will own half the total U.S. retail market in 5 years

19 May 2017

From CNBC:

Amazon can’t and won’t stop growing, according to one firm that upgraded the stock on Monday.

“We believe Amazon’s established dominance in U.S. is sustainable with Prime, mobile penetration and third-party growth,” Needham analyst Kerry Rice wrote in a note to investors. Further, Amazon Web Services will continue to be a “key driver” for the e-commerce giant to grow its profits, he added.

. . . .

Over the next five years, Rice said he anticipates Amazon to grow its U.S. market share by 16 percent, which would make the company a majority player — dominating more than 50 percent — in retail. Needham estimated Amazon’s 2016 market share in the American retail sector to be 34 percent, based on gross merchandise volume.

Link to the rest at CNBC – note that there is an annoying auto-playing video with sound at the link

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Amazon offers UK Prime members a free, rotating e-book library

19 May 2017

From Engadget:

While Amazon offers a variety of Prime perks for Britons, it can often take a while for some of them to make it across the Atlantic. Take, for example, Prime Reading: a “free” book subscription that launched in the US last October but is only now coming to the UK. Unlike Kindle Unlimited — which offers unrestricted access to over a million books, magazines and audiobooks for £8 a month — Prime Reading is bundled with Amazon’s annual subscription and delivers a rotating selection of popular e-books, magazines and short content.

Link to the rest at Engadget

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Introducing Amazon Charts – A Bestseller List for What People are Really Reading and Buying

18 May 2017

From the Amazon Press Room:

 Amazon today launched Amazon Charts, a reimagined weekly bestseller list that shares which books are being read the most and which books have sold the most across all formats each week. The Top 20 Most Read is the first ever bestseller list to measure the books millions of Amazon.com customers are really reading and listening to by looking at the average number of daily Kindle readers and Audible listeners. The Top 20 Most Sold list ranks the most books sold, pre-ordered or borrowed each week from Amazon.com, Audible.com and Amazon Books. Amazon Charts include data across all reading formats – whether books are bought or borrowed, listened to or read – to accurately reflect how readers are really reading and buying books today.

. . . .

“When friends make a book recommendation, they recommend books they are really reading and loving,” said David Naggar, vice president, Amazon. “Many well-known bestseller lists today add, remove, or re-rank books based on editorial considerations and customers have asked for a bestseller list that is based on reading engagement and sales data, rather than an opinion-based list of what books they should be paying attention to. We’re excited to give book lovers Amazon Charts to help them discover their next great read.”

Key Amazon Charts features include:

  • What’s really being read: Amazon Charts Top 20 Most Read is the first list to rank books by the average number of daily Kindle readers and daily Audible listeners each week – giving customers the opportunity to see what’s actively being read or listened to every week.
  • What’s really being bought or borrowed: Amazon Charts Top 20 Most Sold ranks books according to the number of copies sold and pre-ordered through Amazon.com, Audible.com and Amazon Books stores and books borrowed from Amazon’s subscription programs such as Kindle Unlimited, Audible.com, and Prime Reading.
  • The stories behind the books: When exploring Amazon Charts, readers can browse fun insights into how other readers are reacting to each book. From which books were Most Anticipated according to the rate of customer pre-orders, to which Kindle books were simply Unputdownable, according to how quickly customers read a book from cover to cover.

Link to the rest at Amazon Press Room

Here’s a link to Amazon Charts

PG thinks this looks like a tremendous resource for authors and others who are watching the book markets. It’s also a reflection of Amazon’s continued innovation in the somnolent business of publishing.

PG predicts Amazon Charts will help to speed the demise of the NYT, USA Today, etc., bestseller lists as providers of meaningful market information.

PG was fascinated to review the Most Read listings for Nonfiction. Alexander Hamilton, a truly superb 2005 biography of one of the most fascinating personalities in US history is ranked number 5 on the most-read list and The 7 Habits of Highly Effective People, Stephen Covey’s evergreen book, first published in 1989, is ranked number 12.

It is also noteworthy that being included in the Amazon Charts Most Read list is noted in the product description for each book on the list, right below the number of reviews. It will be interesting to see how the Most Read lists impact sales of books that have fallen off the bestseller lists.

PG predicts Most Read romance, YA, etc., lists will not be far behind.

PG also suspects Data Guy at Author Earnings will have some intriguing ideas for using this additional data.

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Amazon is hiring people to break into the multibillion-dollar pharmacy market

17 May 2017

From CNBC:

Amazon is hiring a business lead to figure out how the company can break into the multibillion-dollar pharmacy market.

For the last few years, Amazon has held at least one annual meeting at its Seattle headquarters to discuss whether it should enter the pharmacy business, says two people familiar with the company’s plans.

But this year, with the rise of high-deductible plans and the trend toward consumers paying for health care, it is ready to get more serious.

Two people said that it’s not a done deal that Amazon will move into this space, given the complex web of established players. But it is bringing on a new general manager to lead the team and formulate a strategy, and is deep in discussions with industry experts. That hire would sit under the consumables business, the source said.

Another person said Amazon has started to recruit more broadly from the pharmacy space.

. . . .

“I think Amazon would introduce a lot of transparency to what drugs really cost,” said Stephen Buck, a health entrepreneur and co-founder of GoodRx, a service that promises to save consumers on the price of prescriptions.

Link to the rest at CNBC

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Introducing the All-New Amazon Fire 7 and Fire HD 8 with Amazon Alexa

17 May 2017

From the Amazon Press Room:

Amazon today announced two new additions to its Fire Tablet lineup—the all-new Fire 7 and all-new Fire HD 8. Amazon’s best-selling tablet is now even better—Fire 7 features a thinner and lighter design, an improved 7” IPS display with higher contrast and sharper text, longer battery life with up to 8 hours of mixed use, 8 GB of storage with support for up to 256 GB of expandable storage, and better Wi-Fi connectivity, plus Alexa—all for only $49.99. The all-new Fire HD 8—the next-generation of Amazon’s highest customer-rated tablet—offers a stunning 8” HD display with over 1 million pixels, a quad-core processor, up to 12 hours of battery life, 16 GB of storage with support for up to 256 GB more, plus Alexa—now only $79.99. Both Fire Tablets are available for pre-order starting today.

. . . .

Alexa makes it easy to have your favorite entertainment right at your fingertips. With a simple long-press of the home button, you can ask Alexa to play your favorite movie or TV show, read aloud the latest audiobook you’ve been reading, open a game or app, turn off the lights, or adjust the temperature controls. You can even ask Alexa for the news, weather, jokes, questions, and more. Alexa provides natural-language responses, combined with on-screen information on the tablet’s display—ask for the weather and see the week’s forecast, ask to play a song and see the album cover. Since bringing Alexa to Fire Tablets last year, customers have asked Alexa for millions of songs, jokes, the weather, trivia, movies, audiobooks, and more every week.

Link to the rest at Amazon Press Room and here’s a link to more on the new Fires.

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Etsy: The Little Marketplace That Could

16 May 2017

From Fortune:

Chad Dickerson, CEO of crafts marketplace Etsy, has every reason to be down. Shares in his decade-old company trade for about $9, down from their post-IPO high of nearly $36. What’s more, e-commerce monster Amazon is coming after tiny Etsy with its Handmade at Amazon offering. (Etsy’s market value is $1 billion; Amazon’s is more than 300 times that.)

Yet Dickerson is downright chipper. He takes heart that shares of Netflix and Facebook fared poorly after their IPOs. (Reed Hastings, CEO of Netflix, recently told him to buck up.) As for Amazon, Dickerson faces the retail giant with a sense of humor, first feigning ignorance of its initiative and then falling back on the defense of niche players everywhere. “We’ve been doing this for 10 years,” he says. “We know our sellers well. It’s not a side project for us. It’s not a test.”

Dickerson visited me in San Francisco Thursday to share the latest about his plucky company. It’s a delightful example not so much of disruption—the artisan market carries on one Christmas ornament at a time—as of innovation. Etsy’s market by all rights should be eBay’s. Yet the Brooklyn, N.Y., outfit found a niche the company didn’t serve well and made the most of it. “In 2005, you could sell on eBay, but it was a hostile environment,” Dickerson says. Skilled craftspeople weren’t enthusiastic about their wares being posted between a used Dell computer and a new Honda Civic.

Link to the rest at Fortune

For PG, who is not an Etsy expert, the design of Etsy’s website has always reinforced the idea of a series of small shops run by individual creators. eBay, on the other hand, reminds PG of a lot of stuff piled on someone’s driveway.

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Amazon’s IPO at 20

15 May 2017

From The Wall Street Journal:

A $10,000 investment in Amazon.com Inc. 20 years ago would be worth $4.9 million today. Good luck finding an Amazon investor who can brag about a return like that.

Monday is the 20th anniversary of Amazon’s initial public offering. Its vertiginous stock chart is a reflection of the internet giant’s dominance. Shares have gone from under $2 on a split-adjusted basis to $961.35 at Friday’s close. The 36% compounded annual gain by buying Amazon at its first-day closing price earned an investor 155 times what would have been made in the S&P 500, including dividends. At $460 billion, Amazon now sports the fourth-largest market capitalization in the S&P 500.

. . . .

“This massive outperformance has led to an explosion in hindsight bias, with investors fooling themselves into believing Amazon’s ascent was somehow obvious or inevitable,” writes Michael Batnick, director of research at Ritholtz Wealth Management and author of the popular “Irrelevant Investor” blog. “You had to be some sort of sociopath, void of any human emotions, to earn these monstrous gains.”

Zooming in on Amazon’s stock chart shows a wild ride. It is one that likely sapped gains from market-timing investors who either bought or sold at the wrong time.

History shows stock investors regularly underperform the market’s returns. Volatility often triggers irrational behavior when investors almost always would fare better by ignoring the noise. Similar patterns are only exacerbated when focusing on individual securities.

As Mr. Batnick points out, Amazon shares have had daily declines of 6% 199 times. The stock has fallen 15% over a three-day span on 107 different occasions. And the damage was far worse over longer time horizons.

Amazon has suffered at least 20% pullbacks in 16 of its 20 years on the public markets. The drawdowns were more than 40% apiece in nearly half of those instances, including a 64% plunge in 2008 during the depths of the financial crisis. Worst of all, shares lost 95% of their value when the tech bubble burst from December 1999 through October 2001.

Link to the rest at The Wall Street Journal (Link may expire)

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