The Future Of Retail In The Age Of Amazon

27 November 2017

From Fast Company:

The Mall of America’s terrazzo floors, glazed white like doughnut frosting, ribbon out in every direction, creating a vast mirror maze of consumerism with 520 glassy storefronts. Shoppers, who have escaped an endlessly gray Bloomington, Minnesota, sky on a Monday morning in October, drift through the largest mall in the United States like tourists at an Atlantic City buffet. A couple holding hands strolls into a Zales while buttery perfumes emanate from an Auntie Anne’s next door. Kids and some willing parents fling around on the SpongeBob SquarePants Rock Bottom Plunge roller coaster, one of 27 rides at the Nickelodeon-branded amusement park on-site. Distant echoes of saxophone Muzak clash with both elevator whirs and bubbly pop songs. Somewhere in this otherworldly commercial expanse are five Lids stores and four Sunglass Huts.

When the mall opened, in 1992, it represented the pinnacle of retail convenience and a mecca for young people to gather and spend. But the $650 million megamall was always “vaguely unreal . . . exuding the ambience of a monstrous hallucination,” as novelist David Guterson described it in a 1993 Harper’sarticle, calling it “monolithic and imposing.” Two years later, Jeff Bezos launched his online book marketplace, which quickly grew into a new type of Everything Store, one that fundamentally redefined the shopping experience and led some to argue that commercial centers like the Mall of America would become gaudy relics of an antiquated era.

Now, Wall Street analysts say, the retail apocalypse is upon us. Amazon dominates e-commerce and has gobbled up 5% of total U.S. retail sales. Some expect that the company will own half the online market within the next five years, a period during which, Credit Suisse predicts, a quarter of all malls will close. By the end of this year, more than 8,600 stores will have shuttered in 2017, the worst year on record.

But here’s the thing about the Mall of America: It’s fighting back. “I hear all this doom and gloom in the industry,” says the mall’s SVP of business development, Jill Renslow, with an upbeat, Midwestern delivery. “I’m like, ‘Folks! Keep your chin up! There’s so much opportunity!’ ” The mall completed a $325 million expansion in 2015, says Renslow, who started working there as an intern in the mid-1990s and has seen it endure recessions and upheaval before. A new 342-room JW Marriott has opened upstairs, and retailers like Zara and Anthropologie are being lured to the space.

. . . .

“Amazon alone isn’t holding the knife,” says NYU Stern professor of marketing Scott Galloway, who studies the retail industry. Cultural tastes have changed. Malls grew too quickly, at twice the rate of the population, from 1970 to 2015. Many retailers succumbed to quarterly earnings pressures, invested in share buybacks rather than their stores, became saddled with private-equity debt, or failed to keep pace with digital trends. What we’re seeing now, industry executives say, is a rational, albeit painful, course correction.

. . . .

“Retail is under huge pressure, but the death of stores is greatly exaggerated,” says Galloway, who believes that while Amazon will continue to disrupt the market, an increasing number of competitors will discover new ways to respond. “In the age of Amazon, retailers must leverage assets that [Bezos] doesn’t have: When Amazon zigs, retailers must zag.”

. . . .

Target’s digital efforts continue to lag. When Mulligan takes me to the back to show off the redesigned storeroom, I don’t see any floor-roaming robots or automated conveyer belts, despite the fact that Target has stated that it plans to use its more than 1,800 stores as fulfillment centers (80% of the U.S. population lives within 10 miles of a Target). Instead, I find just one store clerk manually taping cardboard boxes for in-store pickup. Later, when I arrive to retrieve a $14.99 Goodfellow Henley shirt I purchased via Target’s app, the cashier asks for my ID because the flagship store’s smartphone scanner is broken. When I test Target’s new curbside-pickup service to buy paper towels, it fails at three consecutive outlets within the Minneapolis area. Ultimately, I give up.

Link to the rest at Fast Company

Inside the Wal-Mart vs. Amazon Battle Over Black Friday

27 November 2017

From The Wall Street Journal:

As more holiday sales shift online, both retailers use new tactics, play to their strengths

Wal-Mart Stores Inc. and Inc. battled to capture spending over the holiday weekend, as the shifts that have upended the retail industry this year were on display: fewer people visited traditional stores on Thanksgiving and Black Friday while online purchases continued to surge.

On Thanksgiving evening, Alex and Yanira Garcia, who say they traditionally buy nearly everything on Amazon, chose to stand in line at a busy Wal-Mart store in Westbury, N.Y., to purchase pajamas, toys, a TV and other gifts that filled two shopping carts.

“I heard that lots of stores are giving you deals so you come in the store,” said Mr. Garcia, a 39-year-old cook at an elementary school. “So here we are.”

The number of people visiting U.S. stores on Thanksgiving and Black Friday fell 4% from last year, according to RetailNext Inc., which analyzes in-store videos to count shoppers. Meanwhile, online sales increased 18% over that period, said software company Adobe Systems Inc., a shift that is forcing traditional retailers to adopt new tactics.

. . . .

Wal-Mart also calibrated the selection of discounted products it offers online versus in stores, U.S. CEO Greg Foran said in an interview.

Online, the retailer offered more electronics and bulky toys that customers want shipped to homes, then stocked stores with additional lower-priced deals like $5 DVDs, pajamas and other items customers prefer buying immediately or are unprofitable to ship, Mr. Foran said.

In stores, “is [Black Friday] the mayhem that it might have been eight or 10 years ago?” Mr. Foran said on Thanksgiving. “I think that world is gone.”

. . . .

Rosa Hilburn, 58, was among the first people inside a Target in Houston on Black Friday morning, but she was in and out in minutes with only a small bag of loot—several shirts and a Garth Brooks album for her husband.

Ms. Hilburn said she was “really shocked” there weren’t more people at the store but attributed it to the changing times. “Most people do it online now like the millennials,” she said. “But I still like to see and touch things.”

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

Temperature check from two US CEOs at Frankfurt 2017

22 November 2017

From veteran publishing consultant Mike Shatzkin:

It is no surprise that the public remarks at Frankfurt by Penguin Random House CEO Markus Dohle and Simon & Schuster CEO Carolyn Reidy contain gems worth pondering. Book publishing has been fortunate to have really smart people leading the biggest companies during our period of digital transition. The apparent collusion over the implementation of agency pricing — which is itself proving to be a mixed blessing — was definitely a collective setback and has to be seen as a very big mistake (that I didn’t see that way at the time.) But, for the most part, book publishers have done very well in a time of great turmoil, certainly better than other publishers of print or any other big media from the 20th century.

Now we have settled into a period of apparent stability. The two big shifts that were big challenges to navigate — from printed books to digital books and from in-store purchase to online purchase of the content — are no longer occurring at a dizzying pace. From the commercial publisher’s perspective, the ebook market is flat or declining and the print book share is holding its own.

. . . .

Dohle’s speech delivered virtually unqualified optimism. He is jubilant about the stability in the market with print holding an 80% share. (He takes a dig at the fact that prognosticators would have predicted that it could be ebooks that would hold the 80% share by now.

. . . .

Dohle points out that his company is now publishing John Green’s follow-up to “The Fault in Our Stars”. I’m sure his marketers will tell him that they’re aiming for lots of adult readers with their efforts, whatever the original intentions of the author were about the audience.

. . . .

Two observations from [Simon & Schuster CEO Carolyn] Reidy seemed extremely important to take on board. One is that self-publishing is taking a growing share of the market. She characterized the self-publishing share in America as “huge, no matter what statistics you use.” And the companion observation should be a wake-up call to publishers. As she was quoted by Michael Cader in Publishers Lunch:

“The romance market, which used to be huge in mass market, has pretty much dried up and gone to digital original. [And] it has put pressure on pricing of all ebooks…. Those are consumers who, if they wanted a book, they used to come to us, and now they go elsewhere.”

. . . .

The other elephant in the room which got no mention, as near as I can see, from either CEO, is Amazon. That growth in print sales that publishers are so happy about was given a huge boost by Amazon shifting promotional dollars from ebook-discounting to print-discounting when Agency forced them to reconsider their strategy.

. . . .

The growth of sales at Amazon presents a number of potential challenges to the big houses. It means that their biggest trading partner will push them for more margin. It means that the channel with the growth is one where big publishers don’t have an automatic advantage because of size. And, if the print sales being boosted in relation to digital is because Amazon’s pricing strategy can whipsaw the consumer in that way, it can also reverse itself if Amazon decides to change its strategy.

Link to the rest at The Shatzkin Files

One additional point PG would add, the biggest elephant in Big Publishing’s room, is that Barnes & Noble is going to disappear.

Whether it continues to disappear slowly (Barnes and Noble has been closing 15-20 bookstores annually in the US for the last ten years) or if it collapses all at once (like Borders did seven years ago when 511 Borders superstores and 175 stores in the Waldenbooks Specialty Retail division closed and, within a few weeks, disappeared into bankruptcy court).

If Big Publishing continues to hitch its wagon to hard copy books, it will be relying upon a retail distribution network that becomes more mom and pop with each passing year.

A major marketing push for a new title through Barnes & Noble can be a powerful tool in launching books for big publishers. Doing the same thing through a bunch of  shops run by Fred and Ethel that carry inventories perhaps 20% of the size (at best) of a typical Barnes & Noble is a whole different story.

This Key Metric Means Amazon’s Strategy is Working — For Now

19 November 2017

From The Motley Fool:

Amazon Web Services (AWS) segment continues to grow in importance for Amazon’s overall bottom line. For example, in Amazon’s third quarter, AWS’s operating margin (segment net sales minus operating expenses) came in at $1.17 billion, up from $861 million in the year-ago quarter. Better yet, these results were on total revenues of just $4.58 billion.

Amazon’s North American retail segment, on the other hand, reported revenues of $25.45 billion and operating income of just $112 million (down from Q3 2016’s $255 million).

. . . .

But it’s important for investors to keep in mind that, beyond AWS, Amazon’s segments are extremely low margin. In fact, Amazon’s international division actually lost $936 million in Q3 2017. Until it scores a win with another one of its businesses, Amazon will be dependent on AWS.

. . . .

AWS’ rise over the past 3 years has been meteoric. Formed just ten years ago, it was broken out from the rest of the company’s results in the first quarter of 2015. As part of that report, investors learned that for the previous year (FY 2014), AWS generated operating income of $458 million. Just two years later, in FY 2016, AWS generated a staggering $3.1 billion in operating profits on revenues of $12.22 billion.

. . . .

Compare these results to the part of Amazon we are all familiar with: its domestic retail operation. Its North America segment generated $360 million in profits in 2014 and $2.36 billion in FY 2016. Decent, but nowhere near AWS’s level. Last years results were at $79.79 billion in revenue.

When you buy shares of Amazon you own the whole company, but AWS’s ability to generate billions in operating cash flow remains an increasingly pivotal contributor to the company’s bottom line. The Amazon bull case revolves around the idea that Bezos & Co. will continue to disrupt any business they believe they can compete in. Only when Amazon attains dominant market share and operational scale in a given market will the company consider harvesting profits. Bezos said as much in his first letter to shareholders in 1997.

Link to the rest at The Motley Fool

10 years, 10 books — a look back at Kindle best sellers

19 November 2017

From Amazon Charts:

It was 2007, the year Prince rocked the Super Bowl in the rain, Bob Barker hosted his final episode of The Price Is Right, and Harry Potter and the Deathly Hallowswrapped up the saga of a boy wizard fighting the ultimate evil. It was also the year Kindle was born. Happy 10th birthday to Kindle, which gave us the ability to read countless books instantly and hold an entire bookshelf in the palm of the hand. Here are the Most Sold Kindle books for each year since Kindle was launched:

The Handmaid’s Tale

2017: It’s Margaret Atwood’s year — we’re just living it. The Handmaid’s Tale saw fantastic spikes in sales, and the TV adaptation won eight Emmy Awards. Atwood’s cautionary Tale, in which women are forced into roles as servants, reproductive hosts, or soulless hausfraus, has as much punch today as when it was published in 1985.

. . . .

The Help

2011: Kathryn Stockett hit a nerve with her book about a group of black domestic workers in 1960s Mississippi who contribute to an anonymous tell-all that puts them in unspeakable danger. But while the danger may be unspeakable, the characters find their voices in their secret book, and Stockett found hers in The Help. The book got a boost from the 2011 movie adaptation, which won an Oscar for Octavia Spencer’s performance.

. . . .

The Pillars of the Earth

2007: Ken Follett was already a best-selling suspense author before publishing The Pillars of the Earth in 1989, but that mighty historical novel (more than 1,000 pages!) set in twelfth-century England took him in an entirely new direction. Nearly three decades later he’s just published the third book in his Kingsbridge series, A Column of Fire, which sits high on Amazon Charts’ Most Read fiction list. This one weighs in at 927 pages, which is still tough to carry — unless, y’know, you have a Kindle.

Link to the rest at Amazon Charts

Amazon to Adapt J.R.R. Tolkien’s Globally Renowned Fantasy Novels, The Lord of the Rings

13 November 2017

From the Amazon Press Room:

Amazon today announced it has acquired the global television rights to The Lord of the Rings, based on the celebrated fantasy novels by J.R.R. Tolkien, with a multi-season commitment.

. . . .

“The Lord of the Rings is a cultural phenomenon that has captured the imagination of generations of fans through literature and the big screen,” said Sharon Tal Yguado, Head of Scripted Series, Amazon Studios. “We are honored to be working with the Tolkien Estate and Trust, HarperCollins and New Line on this exciting collaboration for television and are thrilled to be taking The Lord of the Rings fans on a new epic journey in Middle Earth.”

. . . .

The upcoming Amazon Prime Original will be available for Prime members to stream and enjoy using the Amazon Prime Video app for TVs.

Link to the rest at Amazon Press Room

Amazon’s Kindle turns 10: have ebooks clicked with you yet?

13 November 2017

From The Guardian:

George W Bush was in the White House, Chris Brown was topping the Billboard chart and Jeff Bezos … well, on 19 November 2007, Jeff Bezos was doing “the most important thing we’ve ever done” and launching the Amazon Kindle.

The first Kindles were chunky things about the same size as a paperback, weighing a smidgeon less than 300g. They had wonky little keyboards and a little wheel for scrolling up and down a grey and black screen. But Bezos was never aiming for a flashy design. Speaking at the launch in New York, he said that all he wanted was a device that could “disappear”.

“All of us readers know that flow state when we read,” Bezos explained. “We don’t think about the glue, the paper, the stitching – all of that goes away. All that remains is the author’s world, and we flow right into that.”

. . . .

“Instead of shopping on your PC,” Bezos explained, “you shop on the device … And guess what? [Books] are all $9.99. And guess what? They all get delivered wirelessly in less than minute.”

. . . .

But the Kindle was never only a portable bookshop, it was also a publishing house. Strip away the expensive business of jackets, paper and physical distribution, and the words of a Booker winner or a Nobel laureate appear much like those of anyone else.

Link to the rest at The Guardian

Now Featured on Wal-Mart’s Website: Higher Prices

13 November 2017

From The Wall Street Journal:

Wal-Mart Stores Inc. wants to charge more to buy some products online than in stores, part of the company’s efforts to boost profits and drive store traffic as it competes with Inc.

The world’s biggest retailer has quietly raised prices for some food and household items sold on its U.S. website, including boxes of Kraft Macaroni & Cheese, Colgate toothbrushes and bags of Purina dog food, according to people familiar with the matter and comparisons between online and in-store prices.

Some big-box retailers charge more for online purchases, including Costco Wholesale Corp. , but the move is unusual for Wal-Mart, which has long honed an “everyday low price” message and has worked to keep online prices at least as low as shoppers find in its 4,700 U.S. stores.

. . . .

In some cases, product listings on show an “online” and “in the store” price. Often the online price matches Amazon.

“We always work to offer the best price online relative to other sites,” a Wal-Mart spokeswoman said. “It simply costs less to sell some items in stores. Customers can access those store prices online when they choose to pick up the item in store.”

. . . .

The higher online prices are part of Wal-Mart’s efforts to nudge more customers into stores as well as raise its e-commerce margins. Wal-Mart is investing billions to boost e-commerce sales, which rose 60% in the U.S. in the most recent quarter, but some shareholders worry the effort could drag on profits.

Marc Lore, head of Wal-Mart’s U.S. e-commerce unit, told investors in October that “this year should be the largest loss in e-commerce, and we’ll see slight improvement next year.”

. . . .

For inexpensive items, “there’s no cheaper way to get these products to consumers than have them come in the store and pick it off the shelf themselves,” Mr. Lore said at last month’s investor conference. He said he hopes shoppers will come to stores for the best price and place larger orders online to offset the cost of shipment.

Link to the rest at The Wall Street Journal

PG always becomes a bit uneasy when a large organization talks of “driving” its customers here or there to increase profits.

This “strategy” assumes a degree of control over customer behavior that can disappear very quickly. It can also backfire if customers feel they’re being manipulated.

PG never assumes that others will have the same attitudes as he does, but dealing with Amazon (or a good ecommerce site from Walmart or somebody else) is almost always better than going to a Walmart store.

When Walmart founder Sam Walton (“Mr. Sam”) was alive, he was insistently obsessive about both low prices every day and store cleanliness. And he staffed his stores accordingly.

Mr. Sam has been in his grave for awhile and Walmart has changed.

From The New York Times:

Walmart, the nation’s largest retailer and grocer, has cut so many employees that it no longer has enough workers to stock its shelves properly, according to some employees and industry analysts. Internal notes from a March meeting of top Walmart managers show the company grappling with low customer confidence in its produce and poor quality. “Lose Trust,” reads one note, “Don’t have items they are looking for — can’t find it.”

. . . .

“In its larger supercenter stores, Walmart can’t keep the shelves stocked, and that is driving customers away,” said Terrie Ellerbee, associate editor at the grocery industry publication The Shelby Report, in an e-mail.

She traced the problem to 2010, after Walmart reduced the range of merchandise it carried in an attempt to make stores less cluttered. Customers did not like the change, and Walmart added merchandise back, but with declining sales then, it did not add back employees, she said. “Without enough labor hours to get those items back, not to mention to do routine stocking, shelves were left bare,” Ms. Ellerbee said.

Link to the rest at The New York Times (Article from 2013, but from PG’s experience, nothing has changed since then.)

Amazon continues to make everybody crazy.

Local Bookstores Take Aim at Amazon

11 November 2017

From Seven Days:

It should come as no surprise that independent bookstores are more than a little miffed at online monolith Amazon. But mom-and-pop book shops aren’t the only businesses affected by the retail giant’s ever-expanding reach and dominance. The massive corporation captures one of every two American dollars spent online. That’s according to a 2016 report published by Stacy Mitchell and Olivia LaVecchia of the nonprofit advocacy group Institute for Local Self-Reliance.

But two Vermont bookstores are fighting back — or at least, talking about fighting back. Phoenix Books, Northshire Bookstore and local news website VTDigger present a pair of public discussions this week with Mitchell as the featured speaker. The idea: Present listeners with enough info to arm them for the coming retail war — or, more likely (and less dramatically), the long, slow, uphill trudge.

. . . .

Mitchell’s and LaVecchia’s report is frightening, at least to store owners. The writers describe Amazon not just as a massive retailer but as a many-tentacled monster — seriously, the word “tentacle” is repeated often — that is slowly taking over the publishing, television, movie and food industries. According to Mitchell and LaVecchia, Amazon even has a partnership with the Central Intelligence Agency.

But the two view Amazon as more than than just an overgrown bully to local booksellers. They see the company as a fundamental threat to the fabric of society itself.

“Amazon’s increasing dominance comes with high costs,” reads the report’s introduction.  “It’s eroding opportunity and fueling inequality, and it’s concentrating power in ways that endanger competition, community life and democracy. And yet these consequences have gone largely unnoticed thanks to Amazon’s remarkable invisibility and the way its tentacles have quietly extended their reach.”

Link to the rest at Seven Days and thanks to Dave for the tip.

PG suggests that being one of the most admired companies in the United States (and probably much of the world) is a bit inconsistent with the “remarkable invisibility” of Amazon.  Additionally, the word, “tentacles” appearing in any document not related to biology is a pretty reliable indicator of propaganda of one sort or another in PG’s reading experience.

PG checked out the website for The Institute for Self Reliance, the organization that sponsored the report described in the OP. The ISR appears to be against Amazon, Walmart and large utility companies and in favor of below-market rents for small businesses, regulated advertising, food scrap recovery policies and bans on non-refillable bottles.

Amazon Key won’t get online retailers through the front door

8 November 2017

From recode:

On Wednesday, in 37 U.S. cities, Amazon will begin piloting a new service that enables delivery people to enter your home while you’re not there using a camera-assisted, remote-operated lock. Given the collective shudder that greeted the announcement of Amazon Key, Americans aren’t exactly comfortable with the idea of an Internet giant letting “a random human” (or worse) range freely in their homes.

Whether you see it as a well-meaning extension of the company’s commitment to convenience or its latest attempt to invade and commercialize our most private spaces, Amazon Key is emblematic of the broader e-commerce industry’s quest to enter our homes. Having battled over the last mile of distribution, online retailers are now focused on the last meter of fulfillment, begging the question: Will delivery make it past the front door?

I believe the answer is unequivocally yes. As CEO of Hello Alfred, the only company in the market that has earned the privilege of entering people’s homes to deliver goods and services — logging more than one million visits across five cities in three years — I believe deeply in the premise that the future of retail is in the home. And I believe more and more households will regard in-home commerce not as an unwelcome incursion but an organically integrated amenity that ensures that groceries go directly into the fridge, dry cleaning into the closet and toiletries are replenished without having to think about them. It’s already happening.

. . . .

[T]here was a time when the Amazon smile, the iconic Apple and Google’s quartet of primary colors inspired loyalty and engendered a sense of trust. As we happily traded away the hours in the day for more screen time and personal data for more convenience, we welcomed tech companies to claim more and more surface area in our lives. But it becomes clearer every day that these companies’ sense of stewardship and accountability did not scale up with their market caps.

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

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