The Fascinating World of Amazon Logistics

Jeff Bezos

Jeff Bezos

Word’s out that Amazon is planning on opening its first brick and mortar shop. With such news the retail world is now buzzing with questions:

Is Amazon really going head to head with mainly brick-and-mortar retailers? Should the likes of Walmart be paying attention to such tactics? Could this mean a new way of doing business for Amazon?

The answer is no.

First of all Amazon is not opening actual stores. It’s opening pop-up stores. The big difference is pop-up stores are available for just a limited amount of time. They pop-up and then they pop-off. For example the two stores Amazon is now opening will be in San Francisco and Sacramento and will be open just for the holidays.

Amazon will use these stores to showcase its proprietary mobile devices (tablets, ebook readers, the smartphone). Once the holidays are over – puff – they disappear.

There is, however, one report from the Wall Street Journal, not yet confirmed by Amazon, saying the company would actually be looking for more. This report points to a New York location in Midtown Manhattan that would serve as a permanent physical presence. Again, this won’t be your typical store but rather a location designed to respond to specific Amazon needs.

Such needs would include testing Amazon products, order pick-up, returns and local delivery. Maybe even a drone helipad. Who knows?

Seriously now – with the store working as a mini-warehouse, the company could easily offer same-day delivery to near-by customers. That’s a great way to compete with Google’s same day delivery. These type of operations (pop-up shops and drop-shops) could become mainstream in the future as retailers need to bridge the gap in omnichannel retail AND provide faster shipping.

However, Amazon’s offline presence should be scanned from a different perspective:

Amazon is not moving offline. It is already there.

There are no Amazon stores just yet. Except for a few Amazon lockers and the occasional pop-up stores, the largest online retailer remains a pretty digital presence.

Except for its logistics.

Beneath the magic of Amazon’s online retail presence lays an well-oiled logistics machine. Amazon combines advanced IT systems, human operations, robots, huge warehouses and a complex shipping operation to fulfill its daily orders. And some underpaid workers but that’s another thing.

Inside one of Amazon's Warehouses. Source: Wired

Inside one of Amazon’s Warehouses. Source: Wired

How many products does Amazon ship? Billions.

In 2012 Amazon sold and shipped more than 10 million products each day. The total number of products shipped in the last quarter of 2012 was 1.05 billion. Yes, that is a Billion with a B and it is reportedly the first time in the company’s history when it sold more than 1 billion products in just one quarter.

The number of listed products is also huge. Its top 5 markets all list more than 100 million products, with the US totaling a whooping 253 millions, as reported by Export-X:

The total number of products listed on Amazon's top markets. See more here.

The total number of products listed on Amazon’s top markets. See more here.

Amazon Fulfillment: 83 million square feet of storage and fulfillment centers

You’ve probably guessed that shipping 1 billion products per quarter to more than 200 million customers worldwide requires a bit of work. What you probably don’t know is that such a large-scale operation uses 50 million square feet of storage in the US and 33 million square feet of storage outside US (source).

There is no other ecommerce competitor with such storage and fulfillment potential. Its dominant position allowed for two interesting business models to evolve: The Amazon Marketplace and Fulfillment by Amazon.

To reach sales as those shown above, Amazon lists and sells both its own products and those from 3P (Third Party) merchants. Merchants can join its Fulfillment By Amazon program, ship the product to Amazon’s Fulfillment centers and than leverage Amazon’s Logistics.

This means the company can count on its sales AND influence to shape the future of retail. Its logistics are probably the most useful and under rated tool in expanding globally. While everyone wonders if Amazon will set foot in the offline world, the company has already laid the foundations to what will probably be the future of retail.

Of course, the numbers listed above can only show a small bit of what is required to keep Amazon moving and growing. The operational tools Amazon employs and the processes behind this amazing machine will be uncovered in an upcoming ebook. Until then – check out “Understanding Omnichannel Retail” – a comprehensive report on how online and offline sales are now connecting.

Ebay and PayPal Splitting. Why is This a Good Thing?

Ebay and PayPal have been together since 2002, when Ebay decided to acquire PayPal for $1.5 billion. At that moment both companies were heavy weights in their respective fields and growth was booming. Ebay struggled with a previous solution, called Billpoint, until deciding to give in and purchase PayPal.

eBay-and-PayPalSince then, both gained a lot from the other. Ebay benefited from PayPal’s ease of use and helped its customers send money to one another. This helped streamline and secure the purchase process, thus increasing transactions. PayPal, one the other hand, piggy backed on Ebay’s massive user base and international exposure. Its revenue increased by the year and in the second quarter of 2014, it amounted to 45% of Ebay Inc’s total revenue.

The fast growth of PayPal, as well the whole “payments revolution” potential lead Carl Icahn to propose a split between Ebay and PayPal this year. Icahn’s proposal / attack was then fended off by Ebay CEO John Donahoe and PayPal ex-leader David Marcus. Since february 2014, a lot of things happened. David Marcus left the company to join Facebook and biggest of the biggest, tech mammoth Apple launched the Apple Pay. What seemed like a closed case soon turned into a huge split between the companies.

Now – John Donahoe will still run Ebay Inc until the split is official. As of that moment he will step down as CEO and Ebay will be lead by Devin Wenig, now president of eBay Marketplaces. PayPal will split into a new company, directed by Dan Schulman, now president at American Express, Enterprise Growth Group.

PayPal benefits from Ebay Inc. spliting. The split means that PayPal will be able to roam free, grow and develop independently. On the other hand Ebay will be able to … well … do everything it was doing before. The marketplace division is not gaining much from the split. It loses a revenue stream, its shares will drop and it will have to find a new way to keep up with its growth in the future.

However PayPal needs independence to keep up with increasing competition in the omnichannel payments landscape. It needs to innovate, it has to connect online and offline and it has to do a bit better on mobile devices. The split will help the company evolve and here are three reasons why:

1. PayPal can mean more than just payments

Banking as we know is shifting from an old, rigid system to a new way of doing business. That means more than wiring money. It means deposits, it means financing, it means Peer 2 Peer Lending and more. Under Ebay, PayPal was bound to stick to payments and money transfers. Now that Ebay is no longer the umbrella that fosters PayPal innovation, we may soon see more financial goodies from PayPal.

2. PayPal should be more than an accessory to Ebay

Elon Musk explained best why Ebay should not hold PayPal back: “It doesn’t make sense that a global payment system is a subsidiary of an auction website… It’s as if Target owned Visa or something”.

The fact is PayPal outgrows Ebay. It can and should be a global financial company, a field that’s obviously larger than Ebay’s marketplaces can ever be.

3. PayPal could grow even faster as a separately traded company

It’s no secret that Ebay has already done what it could to help PayPal. Now it’s just living off PayPal’s growth. As a separately traded company PayPal can become a larger company, more attractive to investors, which in turn can help the company finance its expansion, growth and fight against Apple, Google, Amazon and even AliBaba.

But …

Carl Icahn is known as a corporate raider and maybe there’s more to this story than meets the eye. There is a possibility that he and others are just splitting the company to later organize a take over from companies such as Visa, MasterCard or one of the larger banks. What could be a profitable short-term strategy could hurt PayPal in the long run and kill one of the most promising financial companies in the world.

World’s Top 7 Best Auto Sellers and the Strategy they follow

Currently, we find many competitors in the motor-vehicle manufacturing industry. The industry is however dominated by just a handful of companies. What separates this handful from the rest? Well, let’s take a look at the top seven auto companies by sales and the strategies they employ to increase sales.

Toyota

toyota-logoJapan’s Toyota Motors was the world’s best-selling brand in 2012 and 2013. In 2013, Toyota sold over 9.98 million new cars and trucks alone. The company’s bestselling model was the Toyota Corolla.

Toyota has continued to target specific market segments using innovative specific products ranging from two-seater cars to luxury SUV’s. Their current emphasis is on increasing their presence in North America, while maintaining existing markets.

General Motors

  • gm-logoAmerica’s General Motors sold 9.71 million units in 2013, with its popular Chevrolet brand selling just over five million units.
  • General Motors aims to target emerging markets as the new frontier for sales.

Volkswagen Group

  • volkswagen-groupSales of 9.7 million units in 2013 places the German corporation at third position.
  • It has been touted to surpass GM and Toyota as the world’s number one car-maker by 2018.
  • The firm has continued with its focus on the traditional European market while not forgetting emerging markets like Brazil, India and China (which is its largest market). Volkswagen sold over 3.2 million units to China in 2013.
  • The firm also hopes to introduce new products. It markets the products on the platform of quality.

Renault-Nissan Group

nissan-renaultThis alliance between Renault from France and Nissan from Japan sold more than 8.2 million units in 2013. The alliance between Nissan and Renault is strategic given their geographical locations and key markets they each control.

Renault hopes to ride on Nissan’s hold of markets in Asia, China and Africa while Nissan hopes to penetrate the European market by benefiting from Renault’s existing structures.

Hyundai-KIA

  • hyundai-kia-logo1The Korean auto company sold more than 7.5 million units in 2013. Their top selling model was the compact Electra/Avanti which sold 866,000 units, making it the fourth most sold unit worldwide last year.
  • The firm is trying to avoid a situation where the Hyundai and Kia brands, which are mostly mechanically similar, compete for the same markets.
  • The firm also aims to focus on the European market, where its sales have doubled over the last five years.

Ford Motor Company

  • Ford-Motor-Company-logoThe American car-maker sold over 6.3 million units in 2013, an 11% increase compared to the previous year.
  • Ford has continued with its focus on the North American market, which is its biggest market. The F-series pickup was Ford’s best-selling vehicle in Canada last year.
  • It has also announced a plan to expand into the Middle-East, Latin America and other emerging economies in Africa.
  • Ford also aims to continue making popular models, given that its compact focus was the world’s bestselling vehicle in 2013.

Fiat-Chrysler

  • fiat-chryslerThe merger between Italy’s Fiat and America’s Chrysler resulted in the sale of more than 4.3 million new units in 3013. Much of the firm’s growth came from Chrysler’s 14% increase in US sales.
  • The car-maker plans to improve existing brands while also introducing new ones. The company also aims to boost sales by 60% over five years, mainly by expanding into emerging markets, with particular focus on India and China.

Author Bio:

Stacy Eva lives in Birmingham, UK and is an avid reader and blogger. Since her early years she had a passion for writing. Her articles have been published in leading UK newspapers. Her areas of interest are Culture and Tradition, Food and Travel, Fashion and Lifestyle. As of now she is working as a freelance content manager for dsa practical test.

Using the Mobile Revolution for Marketing

We’re reaching that point in the world where technology has evolved to a micro-level. Computers that used to be the size of large walls are now as sleek and light as a stack of papers, and what was once a brick-sized mobile phone has become the size of a small child’s palm. By now, computers are practically mobile phones.

US teens mobile usage. Source: Nielsen

US teens mobile usage. Source: Nielsen

More people in America use and own mobile phones than toothbrushes. Fifty-four percent of these phones are smartphones, and by 2017, there will be over 10 billion mobile devices. As mobile traffic rises, so too does the need for mobile apps. With 90% of Tweets and 40% of Google searches coming from mobile phones, the way to get and spread day is becoming handheld. While two years ago most of this traffic was coming from teens with cell phones (teens increased mobile consumption in 2012 by 256%, with the standard teen sending an average of 3339 texts per month), mobile usage has extended far beyond teens. Most recently, with the continual creation of mobile apps reaching out to various targeted consumers, many companies have begun a new form of marketing for the mobile online shopper.

In fact, four out of five consumers use their smartphones to shop, and the majority claim that shopping from their phones is more enjoyable than shopping in person. No more long lines, parking tickets, unnecessary purchases, or exhausting traffic jams – consumers can buy what they want, when they want, how they want. And it gets shipped straight to their homes. 56% of consumers use their smartphones to search for a store’s location and directions, 51% to look up product information, 59% to do price comparisons on products, 45% to write up product reviews, and 41% to search for coupons. Smartphones make shopping easy and reliable, even more so than shopping in person. With many stores creating apps or green “Buy Now” buttons, shopping no longer requires physical salesmen.

Not only do mobile apps make shopping easy, but it also allows for information about products to be spread more reliably. 78 – 84% of consumers rely on social networks when researching new products. By 2015, it’s predicted that the amount of goods and services consumers purchase through their mobile phones will total roughly $119 billion. Mobile coupon usage is expected to rise to 53.2 million, and retailers say that 67% see a greater value in having their customers use mobile apps to shop rather than shopping in person. Overall, mobile apps bring five times more engagement – both in the product being sold and in the dialogue between targeted consumers.

Ivan Serrano is a web journalist and infographic extraordinaire from Northwest California. He particularly likes to write about the technology world, social media and global business. 

What does Apple Pay mean for Retailers?

Apple announced its newest products and everybody focused on the much awaited iWatch or the iPhone 6 and 6 Plus. The real news, however, both business-wise and from a consumer point of view is the launch of Apple Pay, an NFC (Near Field Communications) ready payment system. Simply put, Apple’s payment system allows customers to store credit card data on their iPhones and when the time comes, just tap to pay.

apple-paymentThe product launch was not unexpected. With the previous operating system launch, Apple packed several features that would allow for better mobile commerce. The iCloud Keychain was introduced to Safari in order to allow both faster logins to known websites as well as, in the future, a faster checkout.

With Apple Pay, the Cupertino company joins the omnichannel payment war as was predicted in this previous post. Google, Amazon, Ebay (through PayPal), AliBaba and even Facebook are trying to get a piece of the $15 trillion payments market. As banks and established financial institutions have failed to meet customer expectations in mobile payments, the gap between needs and available options will probably be filled by one of the tech titans.

Google tried its luck with the Google Wallet, Ebay’s PayPal is now crossing the bridge into offline teritorry and Facebook recruited Paypal’s former CEO David Marcus.  Marcus is the man that helped Paypal grow from $750 million in 2010 to $27 billion in 2013, so one can only assume Facebook is also serious about payments.

To help the product take off, Apple signed 220 000 merchants onboard its Apple Pay project. Among them: Mc Donald’s, Babies R Us, Macy’s, Staples, Sephora and of course, all Apple retail stores. The 220 k merchants are just 2.4% of the total 7 to 9 million merchants in the US but it is a great start given the fact that Apple has a habit on pulling seemingly impossible feats, starting with close to nothing.

For example the iTunes Store launched with not more than 200 000 songs and only Mac Users could move the purchased songs to their iPods By September 2012, it was home to more than 37 million songs, 700,000 apps, 190,000 TV episodes and 45,000 films. By February 2013, the iTunes store had sold more than 25 billion songs worldwide.

So yes, there is a pattern here and there is probably a whole lot of room for improvement in the payments area.

Apple Pay’s security

Although recent iCloud security issues clouded the product launch, the security behind the payment technology looks great. First of all it allows customers to save credit card data on their phone without exposing sensible details to potential hackers. It also features the Touch ID identification technique where users sign payments with their biometric input (the fingerprint).

The credit card information is not beemed online but rather stored in a special chip, on the iPhone, a hardware – software combination that Apple named Secure Element. When a transaction is processed, credit card details are not sent to Apple’s servers and the retailer can’t see the data. Instead, a proxy account number is issued that the retailers charges. Each transaction is secured by an unique security code that authenticates it. Apple has laid more layers of security then we came to expect and that should work just great. But take it with a pinch of salt because everything is secure untill it is not anymore.

The company states that it does not store transaction data regarding location, products purchased or the amount the customer has spent. That certainly leaves room to question why exactly would Apple choose not to store these valuable data. The answer lies with data from Bloomberg sources. According to these anonymous sources, Apple has partnered with banks in the system to receive a percentage from each transaction.

The banks involved are JP Morgan Chase & Co, Bank of America and Citigroup Inc. They agreed to integrate their cards into the system and alongside came three of the biggest card networks – Visa Inc., Mastercard Inc. And American Express Co.

So we have a great lineup for Apply Pay and although NFC payments where slow to take off, it seems that Apple’s incredible effort to bring every important player on board will be the push mobile payments needs right now.

As the company promissed it won’t charge users, merchants or developers, one of the biggest issues (the cost issue) seems to be out of the way. With customers using their mobiles more and more, retailers will be forced to adopt some form of omnichannel payment system.

How does Apple Pay benefit retailers?

Retailers and merchants in general receive several incentives to adopt NFC payment compliant technology.

First of all, the Apple Pay system allows a greater connectivity between online and offline sales channels. Customers can order products on the web store, in the brick and mortar stores or within a mobile app. The security and speed allow for greater ease of use.

The second big advantage is payment speed. By just tapping the phone, customers can pay within a 10 second timeframe, improving sales speed. This allows merchants to move customers through almost instantly.

Third big advantage Apple brings is an improvement in mobile purchases and payments. Although customers are so far browsing for products, they rather pay on the web store or order and pick up in a physical store. The biggest bottleneck is the mobile payment experience, one that is just awful for most retailers.

Famously Amazon has solved this issue with its One-Click Payments, where registered customers can use previously stored credit card data to move as fast as possible through the checkout process. Amazon’s patent sits at the heart of Apple’s payment system within iTunes, an extraordinarely usable example of mobile payments.

Actually that’s one of Apple’s strong points when implementing Apple Pay. The company will leverage almost 800 million iTunes accounts, most of them having their cards linked to the account. The magic of paying with a tap will now probably become mainstream.

Is Mobile Commerce Taking Over Ecommerce?

A chart based on US Census Bureau and Comscore data was published by Business Insider. It shows Mobile Commerce growing three times faster than Ecommerce overall.

Is Mobile Commerce taking on "classic" Ecommerce?

Is Mobile Commerce taking on “classic” Ecommerce? Source.

The numbers behind it are very interesting:

  1. mobile commerce is on the rise and has registered a 48% YoY growth, in the second quarter. It now accounts for $8 billion in online spending.
  2. overall ecommerce (including mobile commerce) grew “only” 15.9% year over year in the second quarter and totals $70.1 billion in online sales.

However…

Stop betting on (just) mobile. We’re not there yet.

Smartphones and tablets have brought forth a revolution in computing and social interaction. Unfortunately for overenthusiastic mobile-only fans, mcommerce usage is lagging behind mobile device adoption.

If you look at the chart above you’ll see there’s a  linear growth in mobile commerce. Not a hockey puck growth. Not even an accelerated growth.

Even more – ecommerce accounts for only 5.9% of all retail. Mobile commerce itself is just 11.4% of ecommerce. This means mobile commerce, however ambitious is pretty much insignifiant. It accounts for just 0.67% of total US retail.

Smartphones and tablets are extremely popular. Mobile commerce – not so much.

And hey – it’s not the fact that people don’t like smartphones. Oh no. People love smartphones:

Growth in smartphone penetration in the US.

Growth in smartphone penetration in the US. Source.

 

 

They also love tablets. Almost 42% of all US adults own at least a tablet. Remember – this is a product that went on sale only 4 years ago, when Apple introduced the iPad. In just 4 short years, the tablet has become a virtually ubiquitous computing item for US adults.

Tablet penetration among US adults. Source.

Tablet penetration among US adults. Source.

So – people are buying mobile devices like crazy. PC sales are dropping yet the mobile commerce is just 0.67% .Why?

The short answer - there is no mobile commerce. 

Mobile is the bridge. It helps connect the physical world to the virtual world. The act of purchasing happens on multiple channels. Mobile is not “the future”. It is the present yet the present comes in a form we have not met before – a bridge across channels.

If we take the time to see matters from the consumer’s point of view things are not as black and white as we expect them to be. Few if any consumers think in terms of mobile OR desktop OR brick and mortar. The consumer will spend time in a B&M store, browse the web to search for the right products, do a little showrooming to find the be best pricing. In the end, the whole purchasing experience stretches across channels and some are more popular than others.

But the customer has only one perspective where channels blend in. The omnichannel perspective. To provide the ecosystem for this perspective, the new retailers will try to understand and implement omnichannel retail because mobile, however massive, is just a piece of the puzzle.

Online Grocery Market is about explode. Uber wants in.

Top 5 groceries markets in the world. Source.

Top 5 groceries markets in the world. Source.

Quickly – think of one market you know is a sure bet for growth. If you guessed the groceries market, awesome! You’ve spotted the subtle hint in the title. The groceries market in the US is expected to reach $1.1 trillion in 2016. China, the largest groceries market, is expected to peak at almost $1.6 trillion in 2016. India, Brazil and Russia are growing at a fast pace and are expected to overtake Japan within the same threshold.

All in all – the US and BRIC states groceries market is expected to total $4.2 trillion within the next two years.

That’s a big market. Obviously, some of those groceries will be purchased online. For the online groceries market to take off, some disruption has to happen. Although not yet mainstream, we can see signs that consumers will be purchasing at least some of their groceries online.

Amazon is going Fresh

If there is one thing that online retailers need to get right in the groceries market – that is the logistics. From a consumer point of view, a reliable fulfillment and a guaranteed product freshness is a must. To do that, online and omnichannel retailers need to set new logistics policies to allow for a quick order delivery, without loss in product quality. Do we know a company that is really good at online retailing logistics? Of course we do:

Amazon is clearly the leader in online retailing so it was expected to move into this market. It did so 5 years ago. Its Amazon Fresh grocery service was first tested in Seattle. Now the company unleashed the grocery service in San Diego. Customers in Northern and Southern California can pick from 500.000 products, ranging from vegetables and milk to batteries and hair care products.

Jeff Bezos previously mentioned that in order to become a $200 billion company, Amazon has to learn to sell food and clothes. The obvious target was Walmart, a company with revenue north of $475 billion.

To do so, the company will continue to improve its service and increase the number of cities Amazon Fresh is available in. “We’ll continue our methodical approach – measuring and refining AmazonFresh – with the goal of bringing this incredible service to more cities over time” mentioned Bezos, addressing Amazon’s shareholders.

The methodical approach Jeff Bezos is talking about might reach New York soon enough. Re/Code mentioned the company has already prepared an warehouse in the area, instructed suppliers to ship frozen products to it and is hiring workforce for the service.

In New York, Amazon will have to face competition from online groceries retailers such as FreshDirect or popular startup Instacart.

Online Groceries in Europe are growing fast

It’s not just the US, though. Online supermarket Ocado now covers 73% of UK’s population, more than any other supermarket chain. It’s plans are outrageously ambitious: take the world by storm through a global marketplace, similar to Amazon’s. Only for groceries.

Whatever it is they’re doing – it must be right because the company jumped from being evaluated at less than £300 million to a £2.3bn valuation in less than 13 months.

Uber rides into ecommerce, brings groceries

Uber's Groceries Order interface

Uber’s Groceries Order interface

You’ve probably heard a bit about Uber. It’s that company that’s turning the cab industry on its head, enraging french cab drivers and linking riders with drivers.

Now it’s testing a new service, called Corner Store, in Washington. Customers can order from a limited inventory right now, 100 products only, ranging from “drinks” to “feminine care” to “first aid”. Not in that particular order.

And it’s not just Uber. Just like with omnichannel payments, it seems all the big boys want in. Google carefully nurtures Shopping Express, Ebay promises 1-2 hours delivery from local shops with Ebay Now and Walmart has Walmart ToGo ready for orders.

Now if anyone can actually make online groceries profitable …