Amazon's Margin Myth: Sleight Of Hand
Paulo Santos • 108 Comments
Paulo Santos • 108 Comments
Amazon's Margin Myth: Sleight Of Hand
Paulo Santos • 108 Comments
Paulo Santos • 108 Comments
Dec. 26, 2013, 3:35 AM
- A last-minute surge in online shopping and bad weather left major retailers such as Amazon (AMZN), Kohl's (KSS) and Wal-Mart (WMT) unable to fulfill guarantees to deliver packages in time for Christmas. IBM estimates that Internet sales jumped 37% on year over the pre-Christmas weekend.
- UPS (UPS) was particularly caught out. "The volume of air packages in the UPS system did exceed capacity as demand was much greater than our forecast," a UPS spokeswoman said. FedEx (FDX) was also affected, although the company said that it wasn't suffering significant delays.
- Amazon is refunding shipping charges to affected customers and providing a $20 gift card, while Kohl's will pay the full cost of all goods that arrive late.
Dec. 23, 2013, 3:36 PM
- Wells Fargo bangs the same drum as other firms on the promotional fervor being seen in retail with its warning today that Q4 margins may disappoint.
- Analysts with the investment firm cite data showing mall traffic was off 9% for the first two weeks of December and think that even a late-month pickup in sales won't be enough to rescue the quarter.
- The consistent read on the sector has been that discounters (DG, FIVE, DLTR, FDO), e-commerce retailers (AMZN, OSTK, EBAY, NILE, BIDZ, SFLY), and membership warehouses (COST, PSMT, WMT) may have held up the best as consumers either traded down or shopped via devices.
Dec. 23, 2013, 5:16 AM
- There's a little known secret amid the strong growth in online sales: up to a third of all purchase are returned, as estimated by retail consultancy Kurt Salmon. With customers not having to pay to send products back, UPS forecasts that returns will climb 15% this holiday season compared with last year.
- The trend, which can be very costly for firms, has prompted them to act. Clothing sizes are the biggest reason why shoppers return purchased goods, so companies have been using past transactions to give consumers gentle reminders about which size fits them the best. Macy's (M) and Nordstrom (JWN) are among the those who use data to ensure that shoppers choose what will hopefully be the right fit.
- Meanwhile, Amazon (AMZN) and other retailers offer customers "appeasements" such as gift cards or small discounts to persuade them to not return their acquisitions.
Dec. 20, 2013, 7:06 AM
- In a note to clients yesterday, Wedbush analyst Michael Pachter forecast more accessories sales shifted to Amazon (AMZN) this holiday season with Amazon Prime growing to an estimated membership count of 15M-17M.
- Directly in the line of fire is Best Buy (BBY). The investment firm expects Best Buy to deliver a holiday period sales comp of 1.5% which includes a significant boost from the wave of new gaming consoles.
- Wedbush still rates BBY at Underperform, but has taken the edge of its previous dire outlook. The 12-month price target on BBY is doubled to $18.
Dec. 19, 2013, 6:37 PM
- A year after Google (GOOG) began charging companies for Google Shopping product listings, the listings (i.e. PLAs) are providing a boost to Google's search ad sales, and also aiding its battle against Amazon (AMZN) for e-commerce traffic.
- On both PCs and mobile devices, PLAs, which are accompanied by images and placed in a separate box, appear at the top of Google search result pages for product queries. Adobe's ad research arm estimates the ads are clicked on 34% more often than text search ads, and ad services firm Kenshoo estimates each dollar spent on PLAs produces $9 in sales.
- The number of U.S. PLAs tracked by Jefferies has risen 99% Y/Y to 236K, and the number of advertisers using them 55% to 8.7K. Those figures exclude a mobile PLA product that was recently launched. Also: ChannelAdvisor reports seeing triple-digit Y/Y growth in holiday PLA spend by clients.
- Though Amazon spends a healthy amount on Google search ads (inc. PLAs), the fact consumers are more prone to visit Amazon directly and bypass Google search has made the share-gaining e-commerce giant an indirect threat to Google's ad sales. In addition, Amazon's own e-commerce ad ambitions have been growing.
Dec. 18, 2013, 12:05 PM
- Amazon Web Services (AMZN -0.2%) will launch a "limited preview" for a new China region for its cloud infrastructure (IaaS) services in early 2014, ahead of a broader service launch. Select Chinese companies, along with multinationals with Chinese ops, will take part. (PR)
- China will represent the fourth Asia-Pac region AWS has set up shop in, and the tenth globally. A number of major Chinese tech/electronics companies, including Qihoo, Xiaomi, NQ Mobile, and TCL, are already AWS clients.
- Competition will be provided by Microsoft's Window Azure, which launched in China earlier this year., and by Alibaba, whose AliCloud IaaS platform (launched in '09) has reeled in many clients.
- Synergy Research has estimated AWS had a 35% Q3 IaaS share, 5x that of #2 IBM.
Dec. 17, 2013, 2:38 PM
- ShopperTrak reports retail sales fell 0.8% Y/Y last week on traffic that was almost 20% thinner as the shoppers that did venture out were all business.
- The retail-watching group says the wintry weather mix was a big factor and predicts a decent snap back in traffic this week.
- The opposite effect could be in play with Amazon (AMZN) and eBay (EBAY -0.9%). The e-commerce tracking data for the two companies continues to dazzle as the typical post-Cyber Monday lull has been avoided. If there is a minor dip, analysts think it could be this week with decelerating Y/Y sales growth from the pair's dizzying pace.
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Dec. 17, 2013, 11:54 AM
- Amazon (AMZN -0.3%) has acquired Gopago, a startup that has developed a smartphone/tablet-based point-of-sale platform for retailers. Among other things, the platform allows consumers to pre-pay for goods via Android/iOS apps.
- TechCrunch notes media reports don't make it clear if Gopago's team will be joining Amazon. On the other hand, a co-founder does say Amazon will use Gopago's technology for an "ambitious" new project.
- Plenty of companies are already targeting the mobile POS software/services market. While mobile payments juggernaut Square (reportedly eying a 2014 IPO) has seen the most success, PayPal (EBAY +0.1%) is also moving aggressively in this space, and recently added support for swipe-free Bluetooth payments. Other players include Intuit, Groupon, and VeriFone.
- Amazon's online/mobile payments ambitions appear to be expanding: Two months ago, the company launched a fully-fledged PayPal rival that's available to anyone with an Amazon account. PayPal, meanwhile, recently bought rival Braintree.
Dec. 17, 2013, 9:18 AM
- Credit Suisse has some big expectations for Amazon Fresh on its view that the delivery service will attempt to reach close to 33% of the population over the next five years in a broad roll-out that will try to establish the brand as a potential Wal-Mart or Target alternative for consumers.
- The investment firm increases its price target on Amazon (AMZN) to $449 and bumps up 2015 profit estimates due in part to the impact of Fresh.
- Previous on AmazonFresh
- AMZN +0.8% premarket to $392.10.
Dec. 17, 2013, 3:34 AM
- Looking to limit costs, improve performance, and guarantee capacity and performance, Google (GOOG), Facebook (FB) and other tech giants have been investing much time and money in Internet infrastructure.
- This includes helping to fund submarine and underground cables, leasing "dark fiber" (unused optical fiber), and building their own networking hardware.
- Google now controls over 100,000 miles of cable around the world, well above Sprint's network of under 40,000 miles.
- Amazon (AMZN) and Microsoft (MSFT) have also been investing heavily in Internet infrastructure as they look to support their cloud-computing services.
- However, the telecom carriers aren't happy, fearing that they'll be reduced to providing "dumb pipes" and being, in the words of Windstream (WIN) CEO Jeff Gardner, "just a construction company."
Dec. 16, 2013, 9:19 AM
- Analysts don't expect the fierce winter snowstorm that struck a wide swath of the Northeast and Midwest to significantly impact overall holiday sales, although a pickup in e-commerce channels could be seen. The trend sets up well for Amazon (AMZN), eBay (EBAY), FedEx (FDX), and UPS (UPS).
- Retailers focused on winter gear and machinery such as Dick's Sporting Goods (DKS), Tractor Supply (TSCO), Home Depot (HD), and Lowe's (LOW) could also see some extra snow-related sales, note analysts.
Dec. 13, 2013, 12:55 PM
- New polling from Harris Interactive confirms that consumers streaming video content prefer the practice of binge viewing.
- The news isn't a shocker to Netflix (NFLX -0.2%) and Amazon (AMZN +1.3%) which have been pointing toward their own viewing data for quite a while.
- Redbox Instant (VZ, OUTR) could be the next streaming service to bring on TV shows for binge viewing, according to media buzz.
- The read-through for broadcasters (CBS, AMCX, FOXA, DIS, CMCSA) is mixed. Advertising rates could suffer if more viewers are willing to wait until series are available for streaming, but the payoffs for quality content are getting higher and higher. Just this week, CBS CEO Les Moonves tipped off that Amazon paid $700K per episode for streaming rights to Under the Dome - while AMC Networks knows full well that without Netflix hit show Breaking Bad would have broken down.
Dec. 13, 2013, 9:38 AM
- Amazon (AMZN +1.3%) has been upgraded to Strong Buy by ISI.
- Stratasys (SSYS +2.5%) has been started at Overweight by Stephens.
- Ciena (CIEN +1.5%) has been upgraded to Outperform by BMO a day after posting mixed FQ4 results and slightly disappointing FQ1 revenue guidance (midpoint below consensus).
- Ubiquiti (UBNT +1.1%) has been started at Outperform by Wells Fargo.
- Procera (PKT +2.1%) has been started at Buy by D.A. Davidson.
- China Mobile Games (CMGE +3%) has been started at Buy by Brean.
Dec. 12, 2013, 5:00 PM
- USA Today reports Amazon (AMZN) is prepping a service that will allow Prime subscribers to place as many consumer goods items as they wish into a set-sized box, provided a weight limit isn't exceeded.
- Sources state the service, called Pantry, will launch next year, feature a small shipping fee, and initially support ~2K items "typically found in the center of grocery stores." It would act as new competition for bulk consumer goods sellers such as Costco (COST) and Sam's Club (WMT).
- Amazon appears intent on grabbing a larger share of grocery and consumer packaged goods spending. The company is in the midst of rolling out its AmazonFresh same-day/grocery delivery service in major U.S. metro areas, and its Quidsi unit has rapidly expanded into many consumer/household goods markets.
Dec. 11, 2013, 12:35 PM
- As rumored, the AmazonFresh (AMZN -0.7%) same-day/grocery delivery service is launching in San Francisco. The $299/year service, which launched in L.A. in June and has been in Amazon's hometown of Seattle for some time, promises same-day or early morning delivery for 500K+ items for $35+ orders.
- With high population density and per capita income levels, and a very tech-savvy customer base, S.F. is a logical expansion market for AmazonFresh, which has been dubbed a "Trojan horse" meant to underpin Amazon's same-day delivery efforts. An NYC launch might happen in 2014.
- Google and eBay have already launched same-day services in S.F. Unlike Amazon, both companies are relying on partnerships with retail chains.
Dec. 11, 2013, 11:44 AM
- Deutsche Post's DHL successfully tested drone delivery of one of its packages at a facility in Germany, according to Slashdot.
- Though Amazon (AMZN -0.2%) started a little bit of a firestorm when CEO Jeff Bezos brazenly predicted drone delivery within four or five years, the approach of the delivery giants (FDX, UPS) has been more tempered and pivots on using them at distribution centers or on campuses as a cost-cutter - instead of dropping deliveries at doors.
- Analysts can't quite figure out where Bezos' head is on the drone issue (FAA, privacy, terrorism, scale vs trucks) other than thinking every billionaire is allowed a pet project or two.
Amazon.com, Inc. provides online retail shopping services. It provides services to four primary customer sets: consumers, sellers, enterprises, and content creators. The company also provides other marketing and promotional services, such as online advertising and co-branded credit card... More
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