Amazon.com Inc., No. 1 in the 2019 Digital Commerce 360 Top 1000, isn’t content to rest on its laurels as one of the most valuable companies in the world. It is relentlessly focused on finding ways to get an edge and cement its place atop the retail hierarchy.
“As a company grows, everything needs to scale, including the size of your failed experiments,” wrote CEO Jeff Bezos in his annual letter to shareholders in April. “If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures. Of course, we won’t undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out. This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society.”
Amazon experimented in many ways throughout 2019. And the fruits of those experiments bore out in a number of directions from the retailer cutting the time it takes to deliver packages to members of its Prime loyalty program in half, to adding 12 hours to its Prime Day sales event, to quietly working to open dozens of grocery stores under a new brand, to rapidly growing its advertising business.
Here’s a recap of some of Amazon’s most notable developments over the past 12 months:
Via https://newsapi.org online business online marketing online business opportunities 1-day shipping
Amazon’s April announcement that it planned to spend $800 million to offer members of its Prime loyalty program free 1-day shipping forced much of the ecommerce industry to catch up. Walmart, for example, in May began rolling out free 1-day shipping in a few markets and Target rapidly increased its push to offer multiple same-day fulfillment options.
Despite several competitors matching its offer, Amazon’s 1-day delivery did help drive consumers to buy more on Amazon. Its second-quarter sales jumped nearly 20%, and its third quarter sales increased 24%. However, those revenue gains carried a significant cost. For example, Amazon’s shipping costs rose roughly 46% during the third quarter, which contributed to the retailer’s first quarterly profit decline in more than two years.
Those investments were a “short-term pain for long-term gain” and were necessary to help the retailer better compete with retailers that operate physical stores, says Charlie O’Shea, a Moody’s analyst who covers Amazon.
Amazon’s investments to speed up fulfillment are in line with its long-term approach. The retailer has long spent heavily on shipping and fulfillment; it spent $27.70 billion on the direct cost of shipping items to consumers last year, up 27.6% from 2017. That total doesn’t include the expenses Amazon incurs from its extensive fulfillment network or staffing those facilities; those expenses totaled $34.03 billion last year, up 34.8% compared with the previous year. Combined, Amazon spent $61.73 billion on shipping and fulfillment expenses last year, which was 28% of its total operating expenses.
Via https://newsapi.org online business online marketing online business opportunities 12 more hours of Prime Day
Amazon held the fifth iteration of its mid-summer Prime Day sale on July 15 and 16, 2019, adding 12 additional hours to the sale period from its 36-hour sale in July 2018.
The additional time, as well as a host of other factors—including the retailer hosting the sale in 18 countries, one more than a year earlier—helped Amazon generate a Digital Commerce 360-estimated $7.16 billion in online sales for Amazon. That was a 71% jump compared with the previous year’s event.
While Amazon was coy about its sales during the two-day event, it noted that sales surpassed those of the Black Friday and Cyber Monday 2018 combined. Prime members across 18 countries purchased more than 175 million items, including purchases from third-party sellers on the Amazon marketplaces around the world, the retailer said. Prime Day sales for marketplace sellers “far exceeded” $2 billion, Amazon says.
Several factors played into Amazon’s strong Prime Day sale growth. In addition to the longer sale window, there also weren’t any major technical issues with Amazon’s site as there were on Prime Day 2017. In addition, there were 10 million more U.S. Prime members this year than last year, according to CIRP’s estimates. Perhaps more crucially for Amazon’s long-term strategy is that the retailer signed up more new Prime members on the first day of the Prime Day sale than on any previous day and nearly matched that record on the following day, July 16. Those two days were the biggest days ever for Prime member signups, the retailer says.
Prime Day also produced a halo effect for competitors, as a slew of retailers sought to counter Amazon’s sales holiday with their own events around the time of Prime Day. For example, Walmart promoted “huge savings with ultimate summer specials,” and noted its customers didn’t need to pay a membership fee to get free two-day shipping. Nike hosted a two-day “flash sale” offering 30% off select styles, and eBay launched a series of events throughout July. That included a “crash” sale, which eBay archly noted was so named in case “history repeats itself and Amazon.com goes down that day.”
Those sales drove significant results for a number of merchants. For example, Walmart.com’s transactions during the July 15-16 period increased nearly 43% compared with Prime Day 2018, and Nike.com’s transaction increased 153% in 2019 over 2018, according to Jumpshot, which bases its analysis on a review of more than 160 billion clicks on ecommerce sites made monthly by 100 million consumers globally. (U.S. consumers comprise a significant portion of its panel.) Jumpshot tracks the click-stream of consumers to track on-site searches, product page views and online conversion points. The conversion rates include mobile and desktop but exclude apps.
Via https://newsapi.org online business online marketing online business opportunities A new grocery chain
Amazon in November posted information that suggests it may soon launch a new grocery store chain.
Amazon began advertising for employees to run a new grocery store in the Woodland Hills neighborhood of Los Angeles. On its hiring website, Amazon refers to the new store—so far unnamed—as its “first grocery store,” which suggests there may be more stores to come. The recruiting website featured a listing for a grocery district manager to work from a “virtual location” in California. Also related to “Amazon’s first grocery store” are Seattle-based positions, including a learning experience designer—grocery physical stores and an instructional designer—grocery physical stores. All of those jobs could be related to the single store in Woodland Hills—or part of a plan to staff several new grocery stores in 2020.
Amazon declined to say how many or what kinds of grocery stores it plans to open next year. However, it told CNET.com that the new grocery store will be distinct from Whole Foods Market, which the retailer bought in 2017 for $13.7 billion. Amazon also said the new store will use conventional checkout technology—and not the cashier-free system the retail giant uses in its small chain of Amazon Go convenience stores.
Amazon officials have stressed that opening its Woodland Hills store does not indicate a pull-back from investments in Whole Foods. Amazon opened 17 additional stores this year and plans to open more. Instead, Amazon says the new store will operate as an alternative to Whole Foods, and analysts believe it will offer lower prices than those of the upscale Whole Foods chain.
Opening a more mainstream grocery store makes sense because it would offer Amazon a more significant foothold in a $1 trillion-plus grocery market, says Brian Yarbrough, senior analyst for equity research at investment firm Edward Jones. Moreover, even though grocery retailing is typically a low-margin business, grocery stores would offer Amazon more opportunities to interact with consumers.
Via https://newsapi.org online business online marketing online business opportunities A significant advertising business
While Alphabet Inc.’s Google and Facebook Inc. have long dominated digital advertising, Amazon Advertising is quickly emerging as a significant rival.
Amazon is expected to generate $9.85 billion in U.S. ad revenue this year, which represents almost 7.6% of the U.S. digital ad market, according to eMarketer Inc. estimates. Next year, its U.S. ad revenue is expected to grow 32.6% to $13.06 billion, which would be an 8.6% share of the U.S. digital ad market.
Key to that growth has been the retailer dramatically increasing its ad inventory, as well as its push to drive brands to sell on its marketplace. For example, Sponsored Brands (formerly known as Headline Search Ads)—the keyword-targeted, cost-per-click search ads that aim to help advertisers build brand recognition—previously only appeared at the top of search results. But in August 2018 the retailer began allowing companies to place Sponsored Brands on the website’s left rail and along the bottom of search results, providing more real estate for those ads.
More inventory has resulted in significantly more impressions; in the second quarter, for example, those left rail and bottom-of-the-page placements accounted for 57% of Sponsored Brands impressions among retail clients of Merkle. The digital marketing firm bases its findings on its clients that have worked with the digital marketing vendor for at least 19 months and have not significantly changed their strategic objective or product offerings. With those ads more prominent on Amazon, shoppers are clicking on them more often and making more purchases from those ads. Sales from Sponsored Brands ads rose 57% in the third quarter.
Sales also increased from Sponsored Products—the keyword-targeted, cost-per-click ads that can either appear on the right-hand side or bottom of search results and product detail pages on desktop and mobile devices. Sales from Sponsored Product ads increased 69% in the third quarter. Sponsored Product ads are the dominant ad format on Amazon, accounting for 85% of all Amazon Marketing Services spending in the third quarter.
Not surprisingly, retailers that sell on the retailer’s online marketplace significantly increased their spending on ads that appear on Amazon during the retailer’s Prime Day sales event. And, based on data from multiple vendors that help facilitate those ad buys, that money was well spent. For example, 61% of retailers that advertised on Amazon during Prime Day last year and this year increased their spending, according to Seller Labs, a technology provider that sells software to help merchants sell on Amazon and bases its results on merchants that use its tools. On average, they spent 119% more than they did last year.
Digital marketing firm Kenshoo reported similar activity among its retailer clients; Kenshoo clients that advertised on Prime Day last year and this year, on average, roughly doubled their spending year over year on Monday, the first day of the sales event. And merchants in some categories were even more aggressive. For example, toys and games brands spent 6.3 times more year over year, health and beauty brands spent 3.1 times more, and computer and electronics brands spent 2.0 times more.
Via https://newsapi.org online business online marketing online business opportunities Tensions with FedEx
FedEx in August announced it wouldn’t renew its ground-delivery contract with Amazon when it expired at the end of the month.
The move came as Amazon has steadily reduced its dependence on Amazon as it builds out a logistics network with hundreds of fulfillment centers and adds next-day air capacity with leased jets. Amazon is also starting a home-delivery service modeled after the contractor-based ground unit at FedEx, which flagged the competitive risk in its latest annual report to U.S. regulators.
The severing of the relationship with Amazon had a significant impact on FedEx’s fiscal second quarter earnings. Moreover, FedEx’s struggles to delivery consumers’ items on time during the holiday season—at least compared to its competition—drove Amazon in mid-December to ban third-party merchants from using its services. FedEx, in an emailed statement, said Amazon’s “decision affects a very small number of shippers, it limits the options for those small businesses on some of the highest demand shipping days in history and may compromise their ability to meet customer demands and manage their businesses.”
“There’s a lot of bad blood between the two organizations,” says John Haber, who runs Spend Management Experts, an Atlanta consulting firm. He said the feud will benefit UPS, which will have more bargaining power with Amazon.