Inside Amazon - December 19th, 2016

Inside Amazon (Dec 19th, 2016)


AMZN: 766.00 (+1.09%)
The Verge says Amazon’s new update to its Fire TV products “dramatically redesigns the user interface” in a welcome fashion. The old interface with the side menu has been replaced with a more appealing Netflix-like set-up. While only currently available for second-gen Fire boxes, the company confirmed with the Verge that first-gen Fire products will get the update at some point over the next few months. – THE VERGE

Union pilots who fly for Amazon have begun running ads on Facebook and Google that highlight their grievances. The ads warn shoppers that "Amazon customers may want to think twice before ordering last-minute deliveries" during the holidays. The ad campaign redirects to a website called "canamazondeliver.com" paid for by the Teamsters Local 1224. At the heart of the issue are contract negotiations by two airlines that are flying Amazon inventory this year. – CHICAGO TRIBUNE

TechRepublic asks whether Amazon’s “Turker” network of clickworkers is democratized or disempowered by the system. The decade-old Amazon Mechanical Turk (AMT) platform offers small jobs from “requesters” to a network of more than 500,000 contract workers. TechRepublic profiles two “Turkers,” in this case two women who depend on AMT for their livelihood. The jobs are sparse and “Turkers” are rather mysteriously stratified into skill levels that don’t seem intuitively designed. And many big technology groups are using reams of such microwork to educate their AI, with the “Turkers” being “paid pennies.” – TECHREPUBLIC

Forbes speculates that Amazon’s new app, which matches shippers with truck drivers, is evidence of the company’s larger focus on starting a logistics business. The app gets rid of third party brokers, making truck drivers' lives much easier as they line up work. For Amazon, controlling the logistics chain means faster shipments, reduced delivery costs, and potentially an entirely new revenue stream. – FORBES

According to a survey by ForeSee, a computer analytics company, 60 percent of consumers want to see Amazon brick-and-mortar stores. Amazon has toyed with the idea since the first Amazon bookstore opened in Seattle last year, and the company has plans for more bookstores, 100 Amazon speciality stores to sell the company's branded devices, and the buzzed-about Amazon Go grocery stores. – PYMNTS

Amazon.com, as well as the company's mobile and Canadian sites, suffered a technical outage for 30 minutes on Super Saturday. The glitch, which began in the early evening, may have cost the company millions. During the blackout, users complained that any item they added to their cart showed up as "unavailable." Amazon has not responded to questions about the glitch. The company was expected to ring up huge sales on "Super Saturday," one of the year's busiest shopping days. (A 45-minute crash in 2013 cost the company about $4.72 million.) – WWD

The LA Times' Natalie Kitroeff reveals how Amazon's holiday crunch affects the drivers who handle the deliveries. 38-year-old Angel Echevarria, father of two, makes $15 a hour driving for a local courier that delivers for Amazon. Angel starts his day with 260 boxes headed for around 200 addresses across an 80-mile radius in LA. He says he has to hit a home every two minutes to make time, and adds, "If you bring anything back, they basically want to cut your throat off." – LAT

WILLIAM'S CORNER

This week's column is the second of a 3 part series on Amazon and its relationship with China. Here’s a quick outline of what I’ll be covering:

  • Week 1: Amazon selling in China
  • Week 2: Amazon sourcing from China
  • Week 3: Amazon’s “Operation Dragon Boat”

Part 2: Amazon Sourcing from China
 
Amazon started its private label brand, Amazon Basics, in 2009, and currently sells around 800 different products under this brand – most of which are sourced from China. One of the most common Amazon Basics product categories is phone chargers – which they sell for much cheaper than most competitors. But Amazon Basics goes far beyond that. Aggressively, Amazon added 287 new products last year. They seem to go and source the best sellers first. They also try to source products that have very high return rates. Lastly, they source products that are easy to manufacture. If the product is complicated and designed from scratch (Amazon Echo, Amazon phone, Dash buttons) it is not under the Amazon Basics umbrella, even though it is manufactured by Amazon. Amazon Basics is a way for Amazon to capture market shares in niches where there is no brand loyalty.
 
As Amazon continues to grow its Amazon Basics brands, one avenue it should be looking at next is consumables. According to the Wall Street Journal, "The new brands with names like Happy Belly, Wickedly Prime and Mama Bear will include nuts, spices, tea, coffee, baby food and vitamins, as well as household items such as diapers and laundry detergents…” It also plans to establish a group of fashion brands, including its new Buttoned Down brand of private label shirts. Buttoned Down is to be one of the first of its private label clothing brands, to be available only to Prime Members. Amazon knows many don't care about brands in that category, and if it can make itself the first listing when you search these high volume keywords, it knows it can capture a decent percentage of sales because a lot customers will be too lazy to go below the fold. It would be similar if Google made a bunch of niche eCommerce websites and made itself rank number one every time it was searched.
 
What's the future of Amazon Basics? Most likely to source every product possible. Give the customer a choice between name brands, Amazon's brand and nothing else. Third party private label sellers have already done all the work. Amazon now just needs to look at the sales data and combine that with the millions of customer reviews to source and manufacture the best selling products while making sure it produces a product that solves every customer pain point.
 
Amazon sells 817 different Amazon Basic products. How many will there be by the end of 2017?

William Tjernlund is an experienced Amazon seller and consultant. To learn more about him, check out this interview.

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