Amazon Wants Cheerios, Oreos and Other Brands to Bypass Wal-Mart

30 March 2017

From Bloomberg: Inc. has invited some of the world’s biggest brands to its Seattle headquarters in an audacious bid to persuade them that it’s time to start shipping products directly to online shoppers and bypass chains like Wal-Mart, Target and Costco.

Executives from General Mills, Mondelez and other packaged goods makers will attend the three-day gathering in May, Bloomberg has learned. Attendees will tour an Amazon fulfillment center and hear a presentation from Worldwide Consumer chief Jeff Wilke, who reports directly to Jeff Bezos.

Amazon is looking to upend relationships between brands and brick-and-mortar stores that for decades have determined how popular products are designed, packaged and shipped. If Amazon succeeds, big brands will think less about creating products that stand out in a Wal-Mart Stores Inc. aisle. Instead, they’ll focus on designing products that can be shipped quickly to customers’ doorsteps. Brands have been experimenting with such changes, so the Seattle event may well resonate.

. . . .

Amazon has been struggling to crack the food and packaged goods market—an $800 billion category still dominated by Wal-Mart and other traditional chains. Persuading brands to design their packaging and operations for the online world would make it easier for Amazon to ship common household goods to urban dwellers in less than an hour, potentially making last-minute dashes to the store obsolete. Amazon must convince brands that even though online purchases represent a small part of their sales, e-commerce is the future.

“Most of these people haven’t been interested in e-commerce because e-commerce has been such a small piece of their overall sales,” says Melissa Burdick, vice president of e-commerce at The Mars Agency marketing firm. “But we’ve reached a tipping point. We’re at a time when companies are ready to start figuring this stuff out.”

Amazon is looking to influence product makers the same way Costco and other club stores convinced brands more than 20 years ago to create bulk sizes sold at a discount.

Link to the rest at Bloomberg

Amazon and the socially conscious Seattle customer

30 March 2017

From the Seattle Times:

Amazon’s nascent grocery store venture puts Seattle residents between a rock and a hard spot. Rock: Many of us treasure our local retailers. Hard spot: Amazon is a locally headquartered company of enormous value to the city.

. . . .

I never did like the term “consumer.” It conjures the image of an insatiable creature consuming the resources of an overcrowded planet (the cheaper the better), a number to aggregate by giant corporations and their environment-stressing 10,000-mile supply chain.

Customers, on the other hand, realize that every purchase they make have consequences. Each potentially is a vote: for sustainability, responsibility and, not least of all, the health of their local economies. The more votes given to big corporations, the less viable are the local, or local branches of, retailers that are essential to the strength and fabric of their communities.

. . . .

Most Americans are consumers, so the battle will be between Amazon and other giants, especially Wal-Mart. But Seattle has plenty of socially conscious customers — and Amazon puts them in a bind.

On the one hand, e-commerce generally and Amazon specifically have put innumerable local shops out of business here, their empty storefronts filled by restaurants (how many restaurants can a city sustain?). What’s lost is community leadership on the part of owners, as well as providing employment and mentoring of new local retailers from their former employees. Like other giants, Amazon is “cheap,” but also expensive. The costs are tallied up quietly over many years in a city more drab, more conformist, more part of the international corporate Borg.

On the other hand, Amazon is the biggest driver behind Seattle’s remarkable prosperity, bringing capital and talent at prodigious rates. Without Amazon, the city wouldn’t be sweet Seattle circa 1990. It would more likely be like other struggling American metropolises, with a dash of Microsoft. Also, the fees and taxes brought in by Amazon’s construction pay a big part of Seattle’s most cherished progressive programs.

I face this dilemma as an author: Amazon carries and sells my books to a wide audience. But Amazon is also the enemy of the local independent bookstores that were essential to launching and maintaining my book-writing career. Plus, Amazon is largely making my neighborhood, Belltown, better. In our family, we try to spread the love: spending as much as possible at downtown and local retailers, including Pike Place Market. But we also inevitably buy from Amazon when a product can’t be had nearby.

Link to the rest at the Seattle Times and thanks to J.A. for the tip.


Brick And Mortar Is Dead, Long Live Brick And Mortar

29 March 2017

From Seeking Alpha:

The brick and mortar retail space has seen major devastation over the past several years. The writing has been on the charts for a long time; however, many refused to see it. Or rather, refused to interpret what it means.

. . . .

[S]ome of the most iconic retail brands over the past 12 months have performed horribly. Macy’s and Sears  have lost about 36%, Stage  has lost about 75%, but at the same time, Amazon has returned about 46%.

As we all know, there are many reasons for this, among other:

  • People are shopping more and more online.
  • Specialty stores are taking more market share.
  • The plethora of variety in online stores cannot be matched by traditional retailers.

. . . .

You can make all consumers shop online some of the time, and some consumers shop online all the time, but you cannot make all consumers shop online all the time.

. . . .

According to data from the Federal Reserve (seasonally adjusted), only about 8.5% of retail sales are done online. And if you look at the chart closely, online sales seem to be flattening lately. Is it possible that we have reached peak online sales?

I doubt it; however, I am sure of one thing. At some point, we will reach a point where online sales will peak. I have no idea at what percentage of sales that will happen, but at some point, it will happen.

There are many reasons for this. You cannot buy furniture online. You actually have to feel it, see it up close and sit in it. Yes, you can buy some apparel online, but only if you are sure the size will fit you.

. . . .

The NYT reported that [Amazon] is also thinking of opening furniture stores, home appliances, electronics and more.

Link to the rest at Seeking Alpha

Amazon’s lockers gave me a shameful taste of a world without people

28 March 2017

From The Verge:

There’s an idea going round that we’ll all live like shut-ins in the future. Thanks to a combination of cashier-less shops, same-day deliveries, and work-from-home jobs, we’ll never have to leave the house. When we do, driverless cars will whiz us from location to location, ensuring we never have to actually speak to another human being.

. . . .

Let me put it like this. The other day I had to return a package to Amazon (no, not headphones this time). It was a Saturday and I had a full to-do list to work through. So rather than spend time queueing up at the post office, I decided to use Amazon Locker, the company’s self-service parcel pickup and delivery service.

Amazon places these lockers all over big cities (often in retail stores like 7-Eleven and Spar) and lets you send your packages there or use them for returns. The one I visited in central London was just a room in the basement of an office building, but inside, it felt weirdly calming. I walked in from a crowded, blazingly hot street, into a air-conditioned oasis. It was quiet, calm, and utterly devoid of people.

Inside, I found my designated block of lockers (there were five or six different rows, each comprised of different-sized compartments stacked together like Tetris blocks) and punched in the drop-off code into a waiting touchscreen, while an embedded camera peered up my nostrils. The moment I hit the enter button, a locker the size of my parcel sprang open a little way down the wall, with a satisfying whir. I dropped in my parcel, clicked shut the locker, and walked out. Simple.

. . . .

I didn’t have to waste time, or think too much (I even re-used the packaging Amazon sent me) and, most noticeably, I didn’t have speak to anyone.

Link to the rest at The Verge and thanks to Jan for the tip.

The author of the OP felt guilty about this. Her reasons were not expressed with great clarity, but apparently, there might have been something better about the experience if a minimum-wage clerk had somehow been involved.

Apparently, Amazon will now have to tackle urban anomie to provide complete service.

Amazon Delays Opening of Cashier-Less Store to Work Out Kinks

27 March 2017

From The Wall Street Journal: Inc. is delaying the public opening of its first cashier-less convenience store because of technical complications.

Amazon Go was due to launch to the public by the end of the month, after launching in beta mode to employees in December, according to people familiar with the matter. It is unclear when it will now open, as it works out kinks in the technology to automatically charge customers when they leave, instead of needing to have cash registers, checkouts and lines.

The store in Amazon’s hometown of Seattle uses cameras, sensors and algorithms to watch customers and track what they pick up, according to the people. But Amazon has run into problems tracking more than about 20 people in the store at one time, as well as the difficulty of keeping tabs on an item if it has been moved from its specific spot on the shelf, according to the people.

For now, the technology functions flawlessly only if there are a small number of customers present, or when their movements are slow, the people said. The store will continue to need employees to help ensure the technology is accurately tracking purchases for the near future.

. . . .

The setbacks with Amazon Go highlight the difficulty the online retail giant faces in modernizing brick-and-mortar retail. Amazon is exploring chains of book, convenience and grocery stores to challenge its rivals on all fronts. But it has little experience in anticipating and managing the flow of customers and products in a physical space.

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

The High-Speed Trading Behind Your Amazon Purchase

27 March 2017

From The Wall Street Journal:

I wanted to buy some mini marshmallows recently, so I went on Amazon. Perhaps because of their resemblance to packing material—light, bulky, ubiquitous—I figured they’d be cheap. But when I found the most popular brand, not only did the marshmallows cost twice what I’d pay at my local store, but the price had skyrocketed overnight.

Just beneath the placid surface of a typical product page on Amazon lies an unseen world, a system where third-party vendors can sell products alongside Amazon’s own goods. It’s like a stock market, complete with day traders, code-slinging quants, artificial-intelligence algorithms and, yes, flash crashes.

Amazon gave people and companies the ability to sell on in 2000, and it has since grown into a juggernaut, representing 49% of the goods Amazon ships. Amazon doesn’t break out numbers for the portion of its business driven by independent sellers, but that translates to tens of billions in revenue a year. Out of more than 2 million registered sellers, 100,000 each sold more than $100,000 in goods in the past year, Peter Faricy, Amazon’s vice president in charge of the division that includes outside sellers, said at a conference last week.

It’s clear, after talking to sellers and the software companies that empower them, that the biggest of these vendors are growing into sophisticated retailers in their own right. The top few hundred use pricing algorithms to battle with one another for the coveted “Buy Box,” which designates the default seller of an item. It’s the Amazon equivalent of a No. 1 ranking on Google search, and a tremendous driver of sales.

. . . .

The vendor of the marshmallows I wanted told me his high price was an attempt to bait competitors into raising their own asking prices for the item. This works because sellers of commodity items on Amazon are constantly monitoring and updating their prices, sometimes hundreds of thousands of times a day across thousands of items, says Mr. Kaziukėnas. Most use “rules-based” pricing systems, which simply seek to match competitors’ prices or beat them by some small fraction. If those systems get into bidding wars, items offered by only a few sellers can suffer sudden price collapses—“flash crashes.”

More sophisticated systems for pricing are offered by companies like New York City-based Feedvisor, which claims to use artificial intelligence to learn the market dynamics behind every item in a catalog. This system is “set it and forget it,” says Barry Lampert, one of Feedvisor’s customers and a top-500 seller on Amazon. The algorithm will often raise the price on items in a seller’s catalog, to see if other sellers will follow suit. The goal is to maximize sales while avoiding bidding wars that can be a race to the bottom.

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

Consumer Watchdog complains to California over Amazon ad prices

26 March 2017

From The San Francisco Chronicle:

A consumer interest group has taken complaints about Amazon’s advertised prices to California Attorney General Xavier Becerra, demanding an investigation and saying the company is “ripping consumers off.”

Consumer Watchdog argued that “list” or “was” prices, displayed near the current price and showing the putative savings by the buyer, are often bogus and much higher than what most other retailers are charging.

“Consumer Watchdog believes Amazon and its executives are cynically flouting the law to increase sales and profits,” wrote John Simpson of Consumer Watchdog in a petition to Becerra. “A company cannot claim it’s discounting something from a certain price when virtually nobody charges that amount.”

. . . .

Amazon said the recent Consumer Watchdog complaints are “misleading.”

“We validate list prices against actual prices recently found across Amazon and other retailers,” the company said in an email. “We eliminate List Price when we believe it isn’t relevant to our customers.”

Amazon Canada was hit in January with fines of more than $750,000 from that country’s Competition Bureau over misleading prices.

In that case, the Canadian investigation found that Amazon had failed to confirm the accuracy of prices from its suppliers. Amazon made changes to the way it shows prices after the settlement, changes that went into effect at all Amazon sites, the Competition Bureau said in January.

Amazon dropped list pricing last year in some categories like groceries, and a July study by comparison-shopping site Rout found that only about 30 percent of products showed list prices, down dramatically from May, when more than 70 percent featured them.

Link to the rest at The San Francisco Chronicle

Amazon’s Ambitions Unboxed: Stores for Furniture, Appliances and More

25 March 2017

From The New York Times:

 For years, retailers have been haunted by the thought of Amazon using its technological prowess to squeeze them into powder. That battle has mostly played out on Amazon’s home turf, the world of online shopping.

Now the fight is coming directly to retailers on actual streets around the globe, where Amazon is slowly building a fleet of physical stores. And while most of the attention has been focused on Amazon’s grocery store dreams, the company has a more ambitious collection of experiments underway.

If those experiments work — and there is no guarantee of that — they could have a profound influence on how other stores operate. Over time, they could also introduce new forms of automation, putting traditional retail jobs in jeopardy. At the same time, locating those stores close to customers’ homes could also help Amazon further its ambitions of delivering internet orders within hours.

. . . .

The company is exploring the idea of creating stores to sell furniture and home appliances, like refrigerators — the kinds of products that shoppers are reluctant to buy over the internet sight unseen, said one of several people with knowledge of the discussions who, in conversations with The New York Times, spoke on condition of anonymity because the plans were confidential. The stores would serve as showcases where people could view the items in person, with orders being delivered to their homes.

These would not be your average Home Depots: Amazon has considered using forms of augmented or virtual reality to allow people to see how couches, stoves and credenzas will look in their homes, the person briefed on the discussions said.

Amazon is also kicking around an electronics-store concept similar to Apple’s retail emporiums, according to two of the people familiar with the discussions. These shops would have a heavy emphasis on Amazon devices and services such as the company’s Echo smart home speaker and Prime Video streaming service.

And in groceries — a giant category in which Amazon has struggled — the company has opened a convenience store that does not need cashiers, and it is close to opening two stores where drivers can quickly pick up groceries without leaving their cars, all in Seattle. It has explored another grocery store concept that could serve walk-in customers and act as a hub for home deliveries.

Overseas, Amazon is quietly targeting India for new brick-and-mortar grocery stores. It is a vast market, and one still largely dominated by traditional street bazaars where shoppers must wander from stall to stall haggling over prices and deliberating over unrefrigerated meat sitting in the dusty open air. Amazon’s internal code name for its India grocery ambitions: Project Everest.

. . . .

Despite Amazon’s internet retailing success, over time it has become clear that there is a lot of shopping that people prefer to do in person. The most glaring example is groceries — the mother of all shopping categories, with about $770 billion for the supermarkets represented by the Food Marketing Institute, a nonprofit group that includes the majority of such stores in the United States.

After pouring resources into an online grocery service, AmazonFresh, for almost a decade, the company has made only modest progress. According to people familiar with the workings of the company’s grocery business, it has struggled to operate it profitably, leading to a slow rollout of the service in new locations.

. . . .

Online grocery delivery accounts for only about 3 percent of the market in the United States, though it is closer to 10 percent in Britain, said Randy Burt, a partner in the food and beverage practice of A. T. Kearney, a strategy and management consulting firm. Mr. Burt said Amazon’s growing interest in stores mirrored the conclusion that other online merchants with physical stores — the apparel seller Bonobos and the eyewear seller Warby Parker — had come to.

“I think they are recognizing, for certain things you can’t digitize and replicate online all the experience one has in a store,” Mr. Burt said. “The ability to create experiences is going to be critical for them to continue to get share.”

Joe Thompson, a former general manager in Amazon’s retail business, sees physical retail as key to Mr. Bezos’s outsize ambitions for the company. “I can’t help but feel that, in Bezos’s mind, he wants to be the first trillion-dollar valuation company,” said Mr. Thompson, who is now an executive at BuildDirect, an online home improvement store. To do that, he said, Amazon would have to “crack” a couple of “completely underpenetrated markets online.”

Link to the rest at The New York Times and thanks to Jan for the tip.

Amazon will collect state sales taxes nationwide April 1st

25 March 2017

From CNBC:

Amazon, the online merchandise juggernaut, will collect sales taxes from all states with a sales tax starting April 1.

Tax-free shopping will be over as of next month in Hawaii, Idaho, Maine and New Mexico, the four remaining holdouts.

Since the beginning of this year, Amazon has added a number of states to its roster of jurisdictions where it collects sales taxes.

. . . .

How states treat sales taxes for web and catalog purchases is tied to a 1992 Supreme Court case, Quill Corp. v. North Dakota.

The court ruled that states couldn’t require retailers to collect sales taxes unless they had a physical presence in the same place where the buyer is located.

Major online retailers — namely, Amazon — more and more fall under that rule by building data centers, warehouses and other facilities in multiple locations.

Link to the rest at CNBC and thanks to Joshua for the tip.

While sales tax on books, particularly indie author books, is small, PG expects this Amazon move will give a boost to some of its competitors, particularly with more expensive purchases.

New York City has long been a leading location for the sale of expensive camera equipment online and, before that, via mail order. Large New York camera stores have often competed on price, including prominent mention of the lack of sales tax for purchasers from outside the state of New York.

Savings for purchasers outside of New York who forget to file use tax reports on expensive camera equipment can be substantial, several hundred dollars or more. See this Nikon lens or this Canon lens, often used by professional sports photographers, for example.

When PG checked Amazon’s prices for a nice Nikon camera today, he found that, if sold by Amazon, per an earlier agreement with PG’s state, sales tax was added. If sold by a third party outside of PG’s state and fulfilled by Amazon, no sales tax was added. If sold and fulfilled by a third party, per the 1992 Quill v. North Dakota case, no sales tax was added.

Of course, the full switchover to Amazon sales tax collection nationwide won’t take place until April 1, but PG will be interested to see if third-party sellers on Amazon are included or excluded from Amazon’s sales tax collection policy.

Now There Is Business Income Insurance for Vendors Booted Off Amazon

24 March 2017

From Insurance Journal:

Like many people who make their living selling stuff on Inc., Rob Griffin is terrified of getting kicked off the site. Two years ago the Atlanta resident was suspended for selling a banned health supplement and wound up living off his credit cards for a few weeks. Amazon reinstated Griffin, but the memory lingers.

So when an insurance agent offered to sell Griffin a $1,200 policy covering up to $1 million of income lost during an Amazon suspension, he didn’t hesitate. “It was an easy decision,” says Griffin, who supports a family of five selling cats claw, garlic capsules and more. “I wanted some protection.”

In recent years, an entire cottage industry has emerged in the shadow of the world’s largest online retailer. There are consulting firms pledging to help make Amazon merchants rich. Temporary staffing agencies find workers to staff Amazon warehouses during the holiday shopping season. Now the insurance industry has found a niche, thanks to an enterprising Amazon merchant from Kentucky who sells custom bedding.

Her name is Lori Jurans, and she got the idea two years ago at an annual conference in Kentucky, where sellers like her share tips and secrets about selling goods on Amazon. During the gathering, Jurans heard one tale after another from merchants who’d been suspended.

In some cases, they’d violated Amazon’s terms by selling expired, damaged or counterfeit goods. But sellers told Jurans they were also kicked off for things beyond their control—for a late delivery from a courier, say, or because customers seeking a refund complained even if the product was fine.

. . . .

“You’re guilty until proven innocent, and that did not sit well with me,” Jurans says. So when she was renewing a general liability policy, she asked the agent if it covered income lost after getting kicked off Amazon. It didn’t.

So Jurans and two Kentucky insurance agents set up a company called Well Insurance. For advice, they turned to InsuraTech, an Indiana firm whose chief executive Tim Craig has cultivated a strong relationship with Lloyd’s of London. The storied marketplace has long underwritten unusual niches, including policies covering Bruce Springsteen’s voice, America Ferrera’s smile and alien abductions.

. . . .

He hawked the Amazon policy to Lloyd’s specialty underwriters, who agreed to take it on despite the fact that Amazon provides little visibility into suspension rates or reinstatement terms. Insurance carriers are increasingly offering niche policies that protect customers against unusual risks—including guarding against such technology threats as cyber-attacks.

. . . .

The Amazon policies were rolled out earlier this month. Craig anticipates selling at least 20,000 of them this year.

Link to the rest at Insurance Journal

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