It’s time for an update on Amazon news from around the globe. The company has been actively making moves on many fronts and it’s always a good idea to keep an eye on the e-commerce elephant in the room. Internet Retailer takes a look at why Amazon is flush with profits – $1.37 billion in the first six months of 2016. Amazon continues investments in major markets including infrastructure in India, the UK, Germany, Spain and Italy as well as logistics including a new Prime Air jet.
The next new Amazon bookstore will open in Chicago, it’s fourth. So is Amazon losing sleep over Walmart’s acquisition of Jet.com? Not likely. Meanwhile, in India, Amazon may have surpassed FlipKart as the largest e-commerce company according to recent sales estimates. Amazon’s Marketplace sellers are making big noise about unwarranted suspensions. Amazon plans a big push into private-label brand fashions in India with the hiring of ex-Myntra creative director Gautam Kotamraju.
Amazon took delivery of a new Boeing 767-300 jet to add its first jet to its Prime Air fleet. Who’s winning in brand sales on Amazon? According to Profitero, San Francisco Coffee is the top-selling grocery brand while Proctor & Gamble leads in beauty products. Amazon is the most popular international marketplace for Chinese sellers with 62% of e-tailers selling on its various sites. It’s an impressive company on so many fronts!
Why Amazon is suddenly swimming in profits
So after years of reporting little to no profit, Amazon is now posting record gains quarter upon quarter. At the same time, its expenses are growing faster—26.4% in the first half of 2016 versus 17.5% in the first half of 2015.
So what’s propelling Amazon into profitability? Let’s look at the numbers.
First, there’s revenue. Amazon’s compound annual growth rate from 2012 to 2015 was 20.5%. Via internetretailer.com
Amazon grows services around the world
E-commerce is nascent in India, but growing fast. Only 19% of Indian consumers shop online and e-commerce accounts for 1.7% of total retail spending, according to Internet Retailer’s just-released Global 1000. However e-retail sales in India grew 129% last year and clock in with a five-year compound annual growth rate of 67%, per Global 1000 data.
Amazon operates 13 country-specific sites, and offered Prime in nine of them before adding India. Those Prime-eligible countries are the United States, United Kingdom, Spain, Japan, Italy, Germany, France, Canada and Austria. Amazon does not say how many Prime members it has but says Prime membership grew 51% in 2015.
Amazon also announced other international investments in recent weeks. It will build its second large-scale fulfillment center in Italy, with the opening planned for fall 2017. The 60,000-square-meter (196,850 square foot) facility will be near Rome. Amazon is spending 150 million euros ($168 million) on the build. Amazon also announced it is opening a new sortation center near Turin, in the northwestern part of the country, to facilitate deliveries in the region. Via internetretailer.com
Amazon confirms Chicago store
Amazon will be opening another bookstore, this time in Chicago. The e-commerce company has confirmed a location in the city’s Lakeview neighborhood.
The store will be located in a former restaurant and bar not far from Wrigley Field. It’s an area occupied by young families and singles, on a street filled with shops and restaurants.
This is Amazon’s fourth location. The first opened in Seattle last fall and two other sites have since been identified in San Diego and Portland, Oregon. Via fierceretail.com
Why Amazon isn’t losing sleep over the Wal-Mart/Jet deal
Wal-Mart’s record-breaking $3.3 billion acquisition of e-commerce upstart Jet is widely viewed as a bold signal that the brick-and-mortar powerhouse is serious about doing something about its lackluster online business — and serious about taking on Amazon.
Jet seemingly fills critical gaps in Wal-Mart’s e-commerce strategy. For starters, Wal-Mart’s online efforts are hamstrung by a customer base that is composed largely of lower-income, suburban shoppers who are less likely to shop on the web; many don’t even have credit cards. Co-opting Jet gives Wal-Mart an opening with the younger, deeper-pocketed, more urban shoppers that Jet itself has been spending wildly to court.
Jet, of course, was also designed to take advantage of a rare opening Amazon left to its competition. Jet essentially allows consumers to trade Amazon’s signature convenience and efficiency for monetary savings: Its dynamic algorithms minimize supply chain, logistics and shipping costs, adjusting merchandise prices on the fly based the number of items in the customer’s cart, their distance from Jet’s distribution centers and other factors. Compare that with Amazon, which spends an estimated $1 billion per year offering free shipping on Prime member purchases. Via retaildive.com
Amazon Marketplace sellers rail against ‘unwarranted’ suspensions
Many sellers at an online merchants gathering in Seattle last week reported being kicked off Amazon’s Marketplace after customer complaints that the sellers say were unwarranted according to Bloomberg.
Sellers say they want fair warning, a chance to defend themselves to an actual Amazon human representative and an overall less arbitrary process, Bloomberg reports. Meanwhile, many vendors are shifting their business to eBay and other sites with less stringent policies. Via retaildive.com
India: Has Flipkart lost No 1 slot to Amazon?
2016: Flipkart seems poised to lose its cherished status as India’s largest e-commerce firm to arch-rival and role model Amazon.com Inc.’s Indian unit after losing its lead in July—a potential watershed moment in the country’s fledgling Internet business. Barely three years after launching in India, Amazon (Amazon Seller Services Pvt. Ltd) likely exceeded Flipkart in terms of gross sales in July. Flipkart reported gross sales or gross merchandise value (GMV) of less than Rs.2,000 crore in July, while Amazon’s gross sales crept up above Rs.2,000 crore (US$298m), according to five people familiar with the company’s numbers. Via dealstreetasia.com
Amazon India to expand private-label brands in fashion
Online marketplace Amazon India plans to create its own private brands in fashion and expand its existing private label offering in electronic accessories and related products, two people familiar with the matter said.
The company, which operates the Amazon Now grocery ordering app, is also considering launching private labels in groceries and has hired legal consultants to help it figure out structures that comply with regulations, the two people said on condition of anonymity.
Amazon has hired former Myntra chief creative officer Gautam Kotamraju to lead its push into private brands in fashion. Kotamraju, who has worked 18 years in the fashion business, helped create Myntra’s large private brands business, which generated more than 20% of Myntra’s gross sales within two years of its launch. Now, brands such as Roadster, Mast & Harbour and Dressberry account for nearly 25% of Myntra’s sales. Roadster is one of the top five brands on its platform. Via dealstreetasia.com
Amazon’s first ‘Prime Air’ cargo plane aims for faster deliveries
With “Prime Air” emblazoned on the sides, “Amazon” painted on the belly, and its “smile” logo on the tail, the company’s first-ever branded cargo plane – a Boeing 767-300 aircraft – will take to the skies for the first time on Friday, performing a flyover for aviation fans attending the Seafair Air Show in the company’s home city of Seattle.
The new plane, operated by Amazon’s air cargo providers Atlas Air and ATSG, will join 11 others currently criss-crossing the U.S. for the web giant. Another 30 are set to join the fleet over time, enabling the company to rely less heavily on partners such as FedEx and UPS, and reducing costs in the process.
“Creating an air transportation network is expanding our capacity to ensure great delivery speeds for our Prime members for years to come,” Dave Clark, Amazon’s senior vice president of worldwide operations, said in a release. Via digitaltrends.com
Part 2: Who’s Winning on Amazon? Profitero Ranks the Best-Selling Brands in 2016
In Part 2, we address the importance of customer advocacy at the digital shelf, and we reveal which beauty brand manufacturer is winning on Amazon.
In the Amazon.com Grocery category, San Francisco Bay Coffee was the #2 best-selling brand at Amazon between January-May 2016 with a staggering 23,696 reviews on average – evidence that in addition to search, ‘social proof’ is also key to winning the digital shelf.
As Darcy Reifenberger of BzzAgent discusses in a recent Profitero podcast, customer advocacy is pivotal to success in the online channel. “Consumers regularly trust opinions posted online, to guide their own decisions. At the digital shelf, when your family and friends might not be sitting right next to you, it’s really those opinions that are published on the product page that are going to be the online peer group of influences for shoppers. Bazaar voice has noted that there’s about a sweet spot of a 30% conversion lift when you go from having 0 product reviews on a page, to about 50.” Via profitero.com
Amazon is the top cross-border marketplace for Chinese sellers
Online marketplaces are gateways for Chinese retailers and brands to reach international customers. And as Amazon is the top marketplace choice for many Chinese sellers, this may mean more competition for North American retailers selling on the marketplace.
62% of e-retailers in China sell goods on marketplaces operated by Amazon.com Inc., the most popular among other international shopping portals, such as eBay Inc. and Etsy Inc. That’s according to a new study released by Payoneer Inc., a business-to-business payment services company. Survey results are based on the responses of 900 e-commerce sellers throughout China and Hong Kong between January and March.
Of the 62% of respondents selling on Amazon, 91% sell on Amazon.com in the United States. Among the Chinese merchants who don’t currently sell through Amazon, many plan to join. 26% say they want to sell on Amazon.com, the site for U.S. consumers; 23% wish to join Amazon’s European sites and 12% want to sell through Amazon.co.uk, Amazon’s U.K. site. Other marketplaces Chinese retailers and brands seeking to sell on include: Wish.com (8%), Lazada (6%), eBay (5%), AliExpress (4%), Etsy (3%), JD.com (3%) and Rakuten (3%). Via internetretailer.com
Amazon vs Etsy by Category
A recent report from Wall Street firm Citi Research about Etsy’s business model took a look and concluded that competition from Amazon and others “hasn’t been meaningful.” One interesting feature of the report is the comparison between Etsy and Amazon by category (as of July 2016).
Citi analyst Mark Kelley estimated Etsy had over 45 million listings compared to Amazon’s estimated 500,000 handmade listings.Citi estimates Amazon Handmade’s largest category is “Home & Kitchen” with 264,233 listings compared to 16.4 million in the same category on Etsy. Via ecommercebytes.com
Amazon dominates while competitors scramble
Amazon dominates in most markets in which it operates. The e-commerce elephant quickly becomes a huge factor in countries and when it opens in new niches such as fashion, arts and crafts, automotive, office products and many new categories. We’ll keep you up to speed on Amazon news regularly, so stay tuned.