Amazon and Rural Deliveries – the Story Behind the Story

Amazon recently revealed that it was planning to undertake more rural and super-rural deliveries, replacing USPS and UPS with its own service. The cutely named “Wagon Wheel” project is on the surface completely ridiculous. It makes no real sense for Amazon to compete in precisely the places that are most expensive and least profitable. Indeed, to date it has avoided those routes like the plague.

So what’s going on?

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About that COVID-related “productivity drag” at Amazon

Amazon’s CFO recently explained that about $4 billion quarterly in additional costs during the third quarter were driven by unspecified “productivity drags” related to COVID-19 had cost the company $4 billion in the third quarter of 2020. What does that mean?

As usual, Amazon  conceals more than it reveals. Maybe it’s all about clusters of sick people in the warehouses desperately moving packages around until they collapse and die. Fortunately (for them and us), the reality is different. Continue reading “About that COVID-related “productivity drag” at Amazon”

Antitrust and private labels at Amazon: wrong solution to the wrong problem

Amazon recently got a ton of bad press about its private label brands at the recent House Subcommittee hearing. It was blasted for using sellers’ data to cherry-pick products that it could then directly source (sometimes from the same manufacturers), using its size to brush smaller competitors aside. There were further complaints that it tilts the playing field to force sellers to use Amazon fulfillment, or to tweak the Buy Box in Amazon’s favor.

This is a mishmash of complaints, and the private label arguments are basically ridiculous. Continue reading “Antitrust and private labels at Amazon: wrong solution to the wrong problem”

Unpacking Amazon’s free curbside pickup

Obviously, someone at Amazon has noticed that Walmart and Target are getting traction with curbside pickup. Hence Amazon’s announcement that it will provide free one hour pickup from Whole Foods for orders of $35 or move (and who leaves Whole Foods without spending at least that much). So on one level, this just reflects me-too insurance, so if curbside really takes off Amazon won’t be blindsided.

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Amazon’s cash gusher – compulsory advertising on Marketplace

According to Pacvue, an ad management platform for Amazon, the cost per click of advertising on Amazon was up 23% on Prime Day, year-over-year. This is a very big deal for several reasons. Most obviously, it means that more advertisers are competing for good slots. That’s good news for Amazon, which has dramatically increased ad inventory in the past 4-5 years, but this means that much more inventory hasn’t even kept up with demand. Continue reading “Amazon’s cash gusher – compulsory advertising on Marketplace”

Amazon and the Long Term

Jeff Bezos made waves this week that investors should “take a seat” and that Amazon would be ploughing all its profits into the business to address COVID-19. Cue investors fainting, an immediate 5% stock price downturn. But Amazon’s approach is entirely to be expected: in what universe would Amazon NOT invest to meet a new opportunity?

In the first Bezos letter to shareholders in 1997, Bezos said: “We believe that a fundamental measure of our success will be the shareholder value we create over the long term… We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions… We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages.”

And Amazon executed. It effectively spent all of its profits between 2002 and 2018 on investments mostly on its unmatched logistics network, transforming it from this:

To this:

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