On Friday, The Wall Street Journal reported that Amazon plans to open its first grocery store in Los Angeles, possibly by year’s end. The Journal reported that Amazon had signed leases for at least two other grocery locations that could open early next year. Sources told The Journal that the company was looking into locations in San Francisco, Seattle, Chicago, Philadelphia and Washington, D.C.
Amazon is also reportedly looking to buy regional grocery chains.
The Journal reported that the new Amazon grocery stores wouldn’t compete directly with Whole Foods stores, and that they would sell a wider selection of products.
Whole Foods, even though owned by Amazon, still doesn’t sell a lot of products that Amazon would sell in a differently oriented mass-oriented grocery chain. Products like Coca-Cola, Kraft American Cheese, personal grooming products that contain all sorts of chemicals, and so on. Amazon.com sells these items, so they have data regarding how popular cases of Cheetos would be.
I was amazed (and pleased) that these kinds of items did not suddenly appear at Whole Foods once Amazon bought them, actually.
The search was largely a success for CEO Jeff Bezos, who can use valuable data from the losing cities to inform Amazon’s business and future expansion. But in at least one respect, Amazon’s Hunger Games-style civic competition backfired: It’s shined a spotlight on how Amazon and companies like it have benefitted enormously from taxpayer funds.
Each year, local politicians spend up to an estimated $90 billion to lure corporations like Amazon to their states, which The Atlantic points out is “more than the federal government spends on housing, education, or infrastructure.” Most companies broker these deals in private.
In the end, Amazon says it will collectively receive $2.2 billion from the three cities where it plans to open offices. In an unusual move, the company disclosed that figure in its own press release. Information about incentives typically comes from government, not the corporations awarded the funds. Others have noted that Amazon might also benefit from existing tax credits, like a New York City program worth up to an additional $900 million, which were not part of the deal.
Over the course of Amazon’s year-long pursuit of new offices, researchers and journalists intensified their examination of not just the money Amazon might receive, but also what it has collected already. The company regularly receives public incentives to open facilities like warehouses and data centers, which Good Jobs First estimates have totaled $1.6 billion. An investigation from the nonprofit New Food Economy found that some Amazon warehouse workers are paid so little that they often qualify for another type of public benefit: food stamps. In some cases, taxpayers may even be subsidizing Amazon’s electricity costs, according to a Bloomberg report from August.
Corporate welfare is certainly a drag on the US economy, but I’m not so sanguine as to think it will end anytime soon. Sad. I would guess that the $90 billion number cited above is a bit low.
Not to mention that $3,100,000,000 is a lot of money for a government to shower on to a rich, successful corporation like Amazon. Money that won’t be spent to improve roads, infrastructure, help with college debt, pay salary of teachers, police, EMT, etc. A lot of taxpayer money thrown at Jeff Bezos so he can have a helipad…
President Trump has personally pushed U.S. Postmaster General Megan Brennan to double the rate the Postal Service charges Amazon.com and other firms to ship packages, according to three people familiar with their conversations, a dramatic move that probably would cost these companies billions of dollars.
Brennan has so far resisted Trump’s demand, explaining in multiple conversations occurring this year and last that these arrangements are bound by contracts and must be reviewed by a regulatory commission, the three people said. She has told the president that the Amazon relationship is beneficial for the Postal Service and gave him a set of slides that showed the variety of companies, in addition to Amazon, that also partner for deliveries.
Despite these presentations, Trump has continued to level criticism at Amazon. And last month, his critiques culminated in the signing of an executive order mandating a government review of the financially strapped Postal Service that could lead to major changes in the way it charges Amazon and others for package delivery.
Few U.S. companies have drawn Trump’s ire as much as Amazon, which has rapidly grown to be the second-largest U.S. company in terms of market capitalization. For more than three years, Trump has fumed publicly and privately about the giant commerce and services company and its founder Jeffrey P. Bezos, who is also the owner of The Washington Post.
Trump’s attacks on Amazon date to 2015, when he accused Bezos of using The Post as a tax shelter to allow Amazon to avoid paying taxes, a false accusation. (Amazon is a publicly traded company, and The Post, wholly owned by Bezos, is private. The companies’ finances are not intermingled. The Post’s editors and Bezos also have declared that he is not involved in any journalistic decisions.)
Bezos responded to Trump’s 2015 attack with a tweet.
“Finally trashed by @realDonaldTrump. Will still reserve him a seat on the Blue Origin rocket. #sendDonaldtospace,” Bezos, who owns a space company, tweeted in December 2015.
This angered Trump, who at the time was fighting for credibility during the GOP primary.
It isn’t that Amazon irks Trump, it is that the Washington Post is reporting on Trump’s (mal)administration, and by the transitive property, since Jeff Bezos owns the Washington Post, and is a majority owner/founder of Amazon, Trump is angry at Amazon.
Bezos is no saint, the USPS certainly has issues, the Washington Post has published plenty of ignorant or misleading articles over the years, but there is no reason Trump should be foaming at the mouth like this towards a corporation, much less a journalistic institution like the Washington Post.
President Trump escalated his assault on Amazon.com on Saturday, accusing the online retail giant of a “Post Office scam” and falsely stating that The Washington Post operates as a lobbyist for Amazon.
In a pair of morning tweets sent during his drive from his Mar-a-Lago estate to the nearby Trump International Golf Club, the president argued that Amazon costs the U.S. Postal Service billions of dollars in potential revenue.
Trump has repeatedly advanced this theory, even though officials have explained to him that Amazon’s contracts with the Postal Service are profitable for the agency.
The president also incorrectly conflated Amazon with The Post and made clear that his attacks on the retailer were inspired by his disdain for the newspaper’s coverage. He labeled the newspaper “the Fake Washington Post” and demanded that it register as a lobbyist for Amazon. The Post is personally owned by Jeffrey P. Bezos, the founder and chief executive of Amazon, and operates independently of Amazon.
Trump is typically motivated to lash out at Amazon because of The Post’s coverage of him, officials have said. One person who has discussed the matter repeatedly with the president explained that a negative story in The Post is almost always the catalyst for one of his Amazon rants.
The Post on Friday afternoon published online an exhaustive account of the Trump Organization’s finances being “under unprecedented assault” because of three different legal inquiries: special counsel Robert S. Mueller III’s Russia investigation; a $130,000 payment allegedly to secure the silence of adult-film actress Stormy Daniels over a sexual encounter she says she had with Trump; and lawsuits alleging that Trump is improperly accepting gifts, or “emoluments,” from foreign or state governments through his businesses.
[From Mueller to Stormy to ‘emoluments,’ Trump’s business is under siege]
Trump is known to react especially sensitively to news stories about his personal and business affairs.
Amazon stock fell drastically. If I was a securities lawyer, I might consider filing a class-action lawsuit against the Tiny Fingered Cheeto: smarter men than him have been sanctioned for attempting to manipulate stock prices.
Whole Foods, Amazon and The Pope
Gabriel Sherman of Vanity Fair writes:
Now, according to four sources close to the White House, Trump is discussing ways to escalate his Twitter attacks on Amazon to further damage the company. “He’s off the hook on this. It’s war,” one source told me. “He gets obsessed with something, and now he’s obsessed with Bezos,” said another source. “Trump is like, how can I fuck with him?”
According to sources, Trump wants the Post Office to increase Amazon’s shipping costs. When Trump previously discussed the idea inside the White Hose, Gary Cohn had explained that Amazon is a benefit to the Postal Service, which has seen mail volume plummet in the age of e-mail. “Trump doesn’t have Gary Cohn breathing down his neck saying you can’t do the Post Office shit,” a Republican close to the White House said. “He really wants the Post Office deal renegotiated. He thinks Amazon’s getting a huge fucking deal on shipping.”
Advisers are also encouraging Trump to cancel Amazon’s multi-billion contract with the Pentagon to provide cloud computing services, sources say. Another line of attack would be to encourage attorneys general in red states to open investigations into Amazon’s business practices. Sources say Trump is open to the ideas. (The White House did not respond to a request for comment.)
Even Trump’s allies acknowledge that much of what’s fueling Trump’s rage toward Amazon is that Amazon C.E.O. Jeff Bezos owns The Washington Post, sources said. “Trump doesn’t like The New York Times, but he reveres it because it’s his hometown paper. The Washington Post, he has zero respect for,” the Republican close to the White House said. While the Post says that Bezos has no involvement in newsroom decisions, Trump has told advisers he believes Bezos uses the paper as a political weapon. One former White House official said Trump looks at the Post the same way he looks at the National Enquirer. “When Bezos says he has no involvement, Trump doesn’t believe him. His experience is with the David Peckers of the world. Whether it’s right or wrong, he knows it can be done.”
One notable thing that people seldom discuss is that with a mix of constant growth, cultivation of market confidence and restraint Amazon has managed to be one of the most successful businesses in American history and pay close to no federal taxes for the simple reason that it’s careful to always operate at a more or less a break-even P&L. In other words, on many fronts Amazon creates huge negative externalities which society at large is subsidizing.
It is equally clear that low wage warehouse jobs, upending of retail businesses, disintermediation of publishers or tax avoidance are not things Donald Trump cares anything about. Indeed, the one thing he really focuses on with Amazon – Amazon ripping off the Post Office – seems pretty clearly not to be true. Amazon is Trump’s target because of The Washington Post.
Amazon doesn’t own The Washington Post. But it is owned by Amazon’s founder and CEO Jeff Bezos. So close enough. President Trump’s attacks on Amazon are entirely part of his attacks on independent and even mildly critical media.
plus, from Raw Story, we learn the WSJ isn’t pleased by this attack1:
The conservative editorial board of the Wall Street Journal took President Donald Trump to task for his bizarre Thursday tweet attacking Amazon.com, saying the assault on the popular company appeared to be political in nature and that he could face impeachment should he decide to sic government agencies on the company.
In the piece published on Friday morning, the WSJ board noted that Trump appears to be going after Amazon because it was founded by billionaire Jeff Bezos, who owns the Washington Post, which has been highly critical of the Trump administration.
The Journal noted that Trump got his facts wrong about the relationship between Amazon and the U.S. Post Office writing, “Mr. Trump’s other big gripe is that taxpayers are on the losing end of Amazon’s deal with the U.S. Postal Service. But that story is also more complicated. The Post Office has often operated at a net loss, but package volumes grew in fiscal 2017 by more than 11%, making it a rare growth market. Many of the additional 589 million boxes delivered last year came from Amazon.”
“Though imperfect, the deal is mutually beneficial,” the editorial continued. “The Post Office arguably needs Amazon more than Amazon needs the Post Office. The Post Office could drop Amazon as a delivery partner, but it would likely have to raise prices elsewhere or endure higher losses. Would Mr. Trump take credit for that?”
As for the possibility that Trump might try to compel officials in his administration to inflict damage on the company, the Journal warned Trump he might be flirting with disaster and impeachment.
“Mr. Trump could try to unleash the Internal Revenue Service, though that would be a scandal that could be an impeachable offense,” the editorial cautioned. “The press and prosecutors would not give the Trump IRS the pass they gave Lois Lerner during the Obama years for targeting conservative nonprofits with extra scrutiny.”
Daniela Galarza reports on one very disappointing change that Amazon has made to Whole Foods, the pending removal of local products from Whole Foods shelves:
For years, Whole Foods employed staffers called foragers who went out into their neighborhoods in search of local artisans at farmers markets or state fairs. There, they found home-made jams and mustards and dressings that they’d buy in bulk.
For mom and pop preservers and picklers, selling their wares at Whole Foods was a boon, and over the past decade, thousands of small brands — many of which still put each label on each jar or package by hand — have come to depend on Whole Foods for the bulk of their business. As part of each store’s local sourcing program, the maker was responsible for stocking their items on Whole Foods’ shelves and could pick a few weekends to set up a table and offer customers a sample. Makers said they were far more likely to sell their items when they were present in the store, answering questions about a product and forging a personal connection while making that sale.
“Whole Foods was always an advocate for the small business. They always wanted to support local artisans,” says Erika Kerekes, founder and owner of Not Ketchup condiments. Not Ketchup was sold at Whole Foods locations in Southern California, near where Kerekes lives, for several years, up until six months ago. (Now it’s sold via its website and on Amazon.)
According to the Journal, this year, Whole Foods started charging local makers to offer samples in store. They’re also requiring makers who sell over a certain threshold to pay a percentage fee to the store. “To suddenly not to be able to sell at Whole Foods, or to have to go through the same vetting process as the bigger names,” Kerekes says, “is a challenge, to say the least.” More often than not, small purveyors don’t have the marketing budget to fly out to Whole Foods’ headquarters in Austin, Texas, to present their product for a tasting.
“One of the things they want,” Kerekes says about presenting at the corporate level, “is for you to have a marketing plan for at least the next 12 months. They want to know how much money you’re putting into marketing, merchandising, trade shows, online and television advertising… they want to know how often your item is going to be on sale. But unless they have an investor behind them, small, local brands in their early stages of development just don’t always have this mapped out.”
From my perspective, as a long time Whole Foods customer (since 1982, actually), I’m very discouraged by this change. Whole Foods is lumbering towards simply being another corporate grocery chain without much character. Why not retain a little local flavor? Stock mustard by Local Food Folks, carry tomatoes from Mighty Vine, don’t become Kroger (Mariano’s) or Albertsons (Jewel-Osco), don’t morph into yet another giant warehouse of packaged, processed food made by behemoth corporations, the kind of generic store that is exactly the same no matter where you go. Rick Bayless saw the trend lines, and sold his Frontera Foods to ConAgra, but there should be room for small food businesses to flourish.
And what about local spirits and beers? Texas doesn’t allow whiskey or other spirits to be sold in grocery stores, but Illinois does. Will Koval and the myriad of other regional craft distillers currently stocked in Illinois stores lose their distribution because Whole Foods corporate can’t be bothered?
The nearly always empty shelves is another problem, an inventory issue that can be fixed, at least theoretically. Removal of small food brands is a corporate decision made by Amazon, and quite disheartening.
Whole Foods Empty Produce Shelves
No bread for you! at Whole Foods
Slightly more detail from the Washington Post’s Abha Bhattarai:
Whole Foods Markets is placing new limits on how products are sold in its stores and asking suppliers to help pay for the changes, riling some mom-and-pop vendors that have long depended on the grocer for visibility and shelf space.
The changes, outlined in an email recently sent to the company’s suppliers, are intended to save on costs and centralize operations.
Previously, Whole Foods allowed suppliers such as Gray to oversee their own merchandise or hire local firms to do so. But under the new rules, Whole Foods is requiring suppliers to work exclusively with Daymon, a Stamford, Conn.-based retail strategy firm, and its subsidiary, SAS Retail Services, to schedule in-store tastings, check inventory on shelves and create displays on their behalf.
Suppliers that sell more than $300,000 of goods annually to Whole Foods will be required to discount their products by 3 percent (for groceries) or 5 percent (for health and beauty products) to fund the new program. Local suppliers will also have to pay $110 for each four-hour product demonstration by Daymon, while national suppliers will have to pay $165. (Vendors can also continue to host demonstrations themselves, as long as they pay a scheduling fee of between $10 and $30.) Daymon did not respond to requests for comment.
Like so many other tech-centric new businesses, online grocery is a major topic, and yet it seems few people actually use the service.
While Wal-Mart and other retailers, including Ahold USA and Meijer Inc., are pouring money into ramping up online sales, the grocers are also buckling down on the basics of the produce department. That’s because high-quality fruits, vegetables and other fresh foods are emerging as a physical store’s best defense against growing competition from Amazon.com Inc.
Many customers decide where to shop based on the quality of the produce, and—for now—most shoppers want to pick their own ripe tomatoes or perfectly green heads of lettuce, say grocers and industry researchers. Shoppers who don’t buy groceries online most often cite the desire to pick their own produce as the reason, according to an online survey from Morgan Stanley earlier this year.
Online food and beverage sales are growing fast, up 20% since 2013, but still make up a tiny 0.16% of the $670 billion food and beverage market, according to Commerce Department figures. Only 4% of consumers said they purchased some produce through online grocers in the past year, a 2015 Nielsen survey found.
Produce also is often part of “fill-in” trips, those moments a shopper dashes to the store for a last-minute ingredient and might not wait for an online order. Produce itself isn’t usually a big moneymaker, but it draws people to stores to buy higher-margin packaged food, apparel, electronics and other items—products customers increasingly are buying online. Even Amazon wants part of the valuable market. It plans to build small stores that sell perishable foods and allow shoppers to order shelf-stable items for same-day delivery, say people familiar with the matter.
Improving Wal-Mart’s fresh food is “a huge priority for us because it’s a big traffic driver,” says Steve Bratspies, chief merchandising officer for Wal-Mart U.S. in a March call with investors.
Speaking strictly for myself, I’ve tried ordering from Instacart twice. The first time, everything came as if I had picked it myself, but the second time, the produce was sub-par. All of it. Brown spots on lettuce, bruised avocados, moldy tomatoes, mushy cucumbers, etc. So I’ve never ordered from them again, and probably never will. When it comes to grocery delivery, if it isn’t perfect, forget it. I have less than zero tolerance for mistakes. A few years prior, I had an account with a local company that delivered farmers market produce, but again, after a few bad deliveries, I cancelled my service, and have not ordered from them again. In the winter months, I sometimes use Peapod, but I tend to only buy staples like pasta, paper towels, cat litter, and bottles of wine, and don’t purchase much produce because items that are delivered are often less than ideal.
A fan of Peapod
Time willing, I would much rather go to a farmers market or a local grocery store and carefully pick my own vegetables and fruits.
Indeed, many of the reasons Amazon may be interested in brick-and-mortar stores have little to do with books, specifically. Shipping from a store instead of a warehouse or giving customers the ability to buy online and pick up in store or return items to a store could help Amazon trim its fulfillment costs, which amounted to 13% of sales in 2015 versus 12% in 2014.
Counterintuitively, having physical stores could help Amazon become more profitable. Shipping costs are variable costs for e-commerce players, meaning they rise along with sales. Brick-and-mortar stores, on the other hand, have fixed costs such as labor, rent and utilities and can gain leverage by boosting sales on top of them.
One wonders if the timing of this rumor at all coincides with Amazon.com reporting quarterly results not in line with Wall Street estimates…
Amazon recorded it largest ever quarterly profit over the holiday quarter but missed Wall Street’s estimates by a wide margin, sending its share price into a tailspin.
Shares in the world’s largest online retailer plunged 12% on Thursday after it announced a net profit of $482m for the three months ending 31 December – up from $214m a year earlier. The company notched up $35.75bn in sales in last year’s final three months.
It was the first time Amazon has reported three consecutive profitable quarters since 2012, but the gain was less than analysts had been expecting. Analysts, however, were expecting $36bn in sales and net income of $754m.
A rumor, but a rumor from a well-placed source. Would you go to a bookstore run by Amazon? I could see picking up a package perhaps (a drop-ship location for when you are not available at your home, or whatever).
After dipping its toes into brick-and-mortar retail last year by opening its first physical bookstore, Amazon.com Inc. could be diving into the deep end.
The Seattle company plans as many as 400 bookstores, Sandeep Mathrani, chief executive of large mall operator General Growth Properties Inc., said on an earnings call with analysts Tuesday.
“You’ve got Amazon opening brick-and-mortar bookstores and their goal is to open, as I understand, 300 to 400,” said Mr. Mathrani in response to a question about mall traffic.
That compares to the 640 stores Barnes & Noble Inc. operates and the 255 locations Books-A-Million Inc. said it had as of last summer. Both companies spent years building out their retail operations. In addition to its one bookstore, Amazon already has a presence in Westfield Corp. malls, where it has set up permanent kiosks selling devices, cases and branded apparel.
It wasn’t immediately clear how Mr. Mathrani got Amazon’s figure, but he could have potentially spoken with Amazon’s real-estate executives about their plans. A spokesman for Amazon declined to comment and a GGP spokesman had no immediate comment.
As part of our continuing effort to improve the Associates program’s products and services, we are making some changes to our technology platform. This platform change will require you to replace some older product links, banners, and widgets you currently have hosted on your website as they will no longer be supported after July 31, 2015. Text links are not impacted by this deprecation.
Action Required We ask that you replace or update the impacted ad units prior to July 31, 2015. The links require the following update that can be facilitated through your CMS (content management system). You may make these replacements at whatever scale you are comfortable with. – Find and replace ws.amazon.com with ws-na.amazon-adsystem.com – Find and replace rcm.amazon.com with rcm-na.amazon-adsystem.com
Keep in mind that starting August 1, 2015, any remaining legacy product links (text + image, image-only), banners, and widgets will be served with non-clickable public service announcements that will not send traffic to Amazon, impacting your referring traffic and potential earnings, if not addressed. On September 1, 2015, these legacy ad units will no longer render, thereby creating a broken link on your website.
The thing is, I probably won’t bother. When Amazon decided to kill off the Illiniois affiliates program rather than give the state a taste of the tax revenues, as we’ve discussed previously, I stopped posting as many reviews of Things I Discovered That You Might Like Too. Coincidentally, this was also around the time I became a half-hearted blogger, posting less frequently and decidedly less enthusiasm. My daily traffic plummeted, probably because there are now many alternative blog-like media outlets, places like Gawker and Deadspin and Curbed, and so on – not written by hobbyists and part-timers like myself, but paid writers1.
After a couple of years, Amazon decided that paying taxes to all the state governments was not as big a deal as they had once complained about, and reinstalled the Affiliate program. However, they wouldn’t give me my old affiliate link back, nor would they merge the two accounts I had, so basically I stopped using Amazon links much.
I don’t think I’m going to go back through the thousands of posts I’ve made to correct the Amazon links, they will just become dead links, and I no longer will get a 3% bonus from Amazon if you clicked through one of this blog’s links and purchased something. Possibly, I’ll fix a few, if I happen to run across the post for other reasons; I doubt I’ll create replacements on a global level. I stand to lose dozens or more cents, but there are more important items on my agenda.
or whatever it is that the Huffington Post model is of exploitation, a model followed by some other sites [↩]
Good for Microsoft, and good for the tech industry to rally behind Microsoft1
A broad array of organizations in technology, media and other fields rallied on Monday behind Microsoft’s effort to block American authorities from seizing a customer’s emails stored in Ireland.
The organizations filing supporting briefs in the Microsoft case included Apple, Amazon, Verizon, Fox News, National Public Radio, The Washington Post, CNN and almost two dozen other technology and media companies. A cross-section of trade associations and advocacy groups, from the American Civil Liberties Union to the United States Chamber of Commerce, and 35 computer scientists also signed briefs in the case, which is being considered in New York by the United States Court of Appeals for the Second Circuit.
“Seldom do you see the breadth and depth of legal involvement that we’re seeing today for a case that’s below the Supreme Court,” Bradford L. Smith, Microsoft’s general counsel, said in an interview.
The case involves a decision by Microsoft to defy a domestic search warrant seeking emails stored in a Microsoft data center in Dublin. Microsoft has argued that the search warrant could provide a dangerous precedent that is already leading to privacy concerns among customers. The case is especially relevant, the company says, to customers who are considering conducting more of their electronic business in the cloud.
Today represents an important milestone in our litigation concerning the U.S. Government’s attempt to use a search warrant to compel Microsoft to obtain and turn over email of a customer stored in Ireland. That’s because 10 groups are filing their “friend of the court” briefs in New York today.
Seldom has a case below the Supreme Court attracted the breadth and depth of legal involvement we’re seeing today. Today’s ten briefs are signed by 28 leading technology and media companies, 35 leading computer scientists, and 23 trade associations and advocacy organizations that together represent millions of members on both sides of the Atlantic.
We believe that when one government wants to obtain email that is stored in another country, it needs to do so in a manner that respects existing domestic and international laws. In contrast, the U.S. Government’s unilateral use of a search warrant to reach email in another country puts both fundamental privacy rights and cordial international relations at risk. And as today’s briefs demonstrate, the impacts of this step are far-reaching.
Today’s briefs come from:
Leading technology companies such as Verizon, Apple, Amazon, Cisco, Salesforce, HP, eBay, Infor, AT&T, and Rackspace. They’re joined by five major technology trade associations that collectively represent most of the country’s technology sector, including the BSA | The Software Alliance and the Application Developers Alliance. These groups raise a range of concerns about the significant impact this case could have both on the willingness of foreign customers to trust American technology and on the privacy rights of their customers, including U.S. customers if other governments adopt the approach to U.S. datacenters that the U.S. Government is advocating here.
Seventeen major and diverse news and media companies, including CNN, ABC, Fox News, Forbes, the Guardian, Gannett, McClatchy, the Washington Post, the New York Daily News, and The Seattle Times. They’re joined by ten news and media associations that collectively represent thousands of publications and journalists. These include the Newspaper Association of America, the National Press Club, the European Publishers Council, and the Reporters Committee for Freedom of the Press. These organizations are concerned that the lower court’s decision, if upheld, will erode the legal protections that have long restricted the government’s ability to search reporters’ email for information without the knowledge of news organizations.
It’s extremely hard for me to understand Amazon’s consumer hardware strategy. Usually, when a company has a strategy I don’t understand, I can look deeper, ask employees, or analyze the greater market to get a faint idea of what is driving the company’s behavior. But with Amazon, I can’t. There is simply no rational explanation for its products. The only thing I can come up with is this: Amazon continues to make hardware because it doesn’t know that it sucks, and it has a fundamentally flawed understanding of media. With Amazon.com, it can heavily and successfully promote and sell its products, giving it false indicators of success.
It’s an echo chamber. They make a product, they market the product on Amazon.com, they sell the product to Amazon.com customers, they get a false sense of success, the customer puts the product in a drawer and never uses it, and then Amazon moves on to the next product. Finally, with the Fire Phone, customers have been pushing back. You can’t buy a phone and put it in a lonely drawer, never to use it again, like you would with a Fire Tablet. You can’t dupe your customers by selling them a shitty phone, because a phone becomes a part of its user’s identity.
Amazon’s retail strategy of being allergic to profit does not translate well into hardware manufacturing. People buy hardware that fits into their lives, and becomes part of how they identify themselves to the world. If you want to sell hardware, you have to be in fashion, like Samsung was two years ago, or like Apple has always been. Amazon is incapable of understanding fashion, because it has no taste, and its hardware is completely unfashionable and tasteless.
Amazon is slowly destroying itself from the inside out, through its own echo chamber, by focusing on a strategy that will never work and does not even make sense.
The set up to this story is a breakfast meeting between Matt Rutledge, the founder of Woot.com ((Wikipedia page, not actual website)) and the purchaser of Woot.com, Jeff Bezos, and Bezos’ shadow CEO:
So there sat Bezos at the breakfast table, faced with a question for which he was apparently unprepared. Many painful seconds passed without an answer. Rutledge let the pause lengthen as long as he could bear it and was just about to tell his host to forget it, when Bezos finally spoke.
He looked down at his plate. Bezos had ordered a dish called Tom’s Big Breakfast, a preparation of Mediterranean octopus that includes potatoes, bacon, green garlic yogurt, and a poached egg. “You’re the octopus that I’m having for breakfast,” Rutledge remembers Bezos saying. “When I look at the menu, you’re the thing I don’t understand, the thing I’ve never had. I must have the breakfast octopus.”
Not until Rutledge had returned to Dallas and related the story to his anxious employees—now Amazon’s employees—did he realize just how absurd that explanation sounded. Before it can be eaten, generally, the breakfast octopus must be killed.
And I love Matt Rutledge’s new company name, Mediocre Corporation, and his spirit about entrepreneurship.
Roughly two months prior to the planned late-June launch of his next big thing, Rutledge, wearing jeans and a t-shirt of obscure design, leads a tour of the standard-issue gray cubicles in his new office near Addison Airport, just a few miles from where Woot still has its headquarters. Within a year of his departure from Amazon, five other senior Wooters jumped ship to join him. All told, he has 35 employees now. He’s financing the business with his own money and jokes about his burn rate. The office space and the attached warehouse were once occupied by Heelys, the briefly red-hot company that made the shoe with the wheel in its heel. Remember it? No? Perfect closeout item for Meh.com.
Yes. It’s called Meh. The opposite of Woot. Hang on a second. We’ll get to that. First: Rutledge’s Mediocre Corporation operates Mediocre Laboratories, which will conduct a series of what he calls e-commerce experiments. The first one, concluded late last year, was called the Seligman Experiment. If you’re curious about the name “Seligman,” you are encouraged, in keeping with Woot’s founding concept of customer service, to Google it. For Mediocre, here’s how it worked:
Amazon.com continues its losing war against book publishers, especially in the PR battlefield. When authors as well known as Salman Rushdie, V. S. Naipaul, Ursula K. Le Guin, Philip Roth, and Milan Kundera side against you, it might be time to start dialing back the rhetoric.
Last spring, when Amazon began discouraging customers from buying books published by Hachette, the writers grumbled that they were pawns in the retailer’s contract negotiations over e-book prices. During the summer, they banded together and publicly protested Amazon’s actions.
Now, hundreds of other writers, including some of the world’s most distinguished, are joining the coalition. Few if any are published by Hachette. And they have goals far broader than freeing up the Hachette titles. They want the Justice Department to investigate Amazon for illegal monopoly tactics.
Why does it even matter to you, oh book consumer? For instance, since Jeff Bezos is clearly on the political right, or at best, Libertarian in his outlook, when he favors Paul Ryan’s book over an exposé of the Koch Brothers, we should pay attention.
“Sons of Wichita” by Daniel Schulman, a writer for Mother Jones magazine, came out in May. Amazon initially discounted the book, a well-received biography of the conservative Koch brothers, by 10 percent, according to a price-tracking service. Now it does not discount it at all. It takes as long as three weeks to ship.
“The Way Forward: Renewing the American Idea” by Representative Paul Ryan has no such constraints, an unusual position these days for a new Hachette book.
Amazon refused to take advance orders for “The Way Forward,” as it does with all new Hachette titles. But once the book was on sale, it was consistently discounted by about 25 percent. There is no shipping delay. Not surprisingly, it has a much higher sales ranking on Amazon than “Sons of Wichita.”
An Amazon spokesman declined to explain why “The Way Forward” was getting special treatment.
Not Barnes and Noble
Book sellers have always made decisions about what books to stock, but Amazon was supposed to be the largest bookseller on the planet, where you can get any book you want. Seems as if Jeff Bezos’ company is starting to reflect his anti-tax, anti-small business, anti-regulation views.
As Ms. Ursula K. Le Guin puts it:
“We’re talking about censorship: deliberately making a book hard or impossible to get, ‘disappearing’ an author,” Ms. Le Guin wrote in an email. “Governments use censorship for moral and political ends, justifiable or not. Amazon is using censorship to gain total market control so they can dictate to publishers what they can publish, to authors what they can write, to readers what they can buy. This is more than unjustifiable, it is intolerable.”
Jeff Bezos introduced the latest Amazon hardware device yesterday, the Fire, an entry into the smartphone category. I’m only half finished reading Brad Stone’s biography of Bezos, The Everything Store, but one thing has been made clear: Jeff Bezos is a long-term thinker who makes no small plans.
And so what seems to be Amazon’s long term goal here? Basically, to sell more items at Amazon.com. The Fire is a hand-held cash register customized to selling you more things. Uhh, yay? Are there people out there who are irritated that it takes 10 seconds to order replacement razor blades at Amazon.com? Not to mention there already is an iOS Amazon app that scans either a bar code or the text on a package. I’ve found it occasionally useful, but frequently the scan yields zero results.
The Fire is not really a phone, per say:
Although he did not show the feature onstage, Mr. Bezos confirmed that his expensive new phone does makes calls. “I haven’t made a phone call on my phone in a long time,” he said. “But I know people still make phone calls.”
and my second, nearly immediate thought about the Amazon Fire – it seems like an NSA dream! So while the Fire encourages you to purchase more consumer goods, it will allow Amazon.com to collect more meta data about your house, your office, your car, your friends, your neighbors, and so on.
The WSJ notes:
Amazon squeezed a number of new technologies into the Fire, but it seems its biggest innovation may be new uses it found for an old technology: cameras. The Fire doesn’t just take nice photos–it watches you, and what’s around you, to customize what you see and how you interact with the world.
John Koetsier agrees with me that this sounds a bit creepy, and writes:
How do you think it recognizes those things, including text on images, which Amazon says it will offer language translation features for later this year?
Well, the Firefly button and the camera button are one and the same. Meaning that whenever you use the camera, you’re using Firefly. And whenever you’re using Firefly, you’re using the camera. Plus, of course, you’re turning on audio sensors that capture ambient sound.
And then you’re transmitting all those pictures and sound files to the grandaddy and still global leader in connected cloud technology, the company that pretty much invented what we now call big data analytics for customer insights, and the largest online retailer in the wild wild west.
Amazon.com, of course.
All of those pictures require processing, analysis, and matching, presumably at a level — if they can identify 100 million objects — that can only be done in the cloud, and not on a small handheld device with 2 GB of RAM and 32 GB of on-board storage.
Fortunately for you, dear consumer, Amazon has kindly consented to storing all your photos, forever, in its vast cloudy server farms. How gracious Amazon is, providing that massive service for free! How lucky are you, getting all that for free!
From an email sent early this morning, Amazon is raising the Prime fee to $100, an increase of around 25%.
We are writing to provide you advance notice that the price of your Prime membership will be increasing in 2015. Your 2014 annual renewal will remain at the original price of $79. On October 5, 2015, your membership will renew at $99/year.
Even as fuel and transportation costs have increased, the price of Prime has remained the same for nine years. Since 2005, the number of items eligible for unlimited free Two-Day Shipping has grown from one million to over 20 million. We also added unlimited access to over 40,000 movies and TV episodes with Prime Instant Video and a selection of over 500,000 books to borrow from the Kindle Owners’ Lending Library.
In general, I’ve been happy with the Amazon Prime shipping deal – though it does obviously have benefits for Amazon.com as well. I purchase lots of office supplies, tools, and what-not from Amazon that I used to get elsewhere simply because it’s more “frictionless” to just click through to Amazon. That said, I’m not sure that $8.33 a month is the deal it used to be. Amazon needs to add more perks to the Prime membership to keep it compelling. I don’t use the video streaming, ever, why should I pay extra for it?
I guess I’m not alone in demanding more in exchange for this price hike:
While the moves are generally seen as a revenue booster with minimal cost effects, some have warned that the Prime increases could carry negative impacts.
Amazon—known for robust sales, thin profit margins and big spending—posted a large revenue increase for the fourth quarter, but its profit and outlook fell below expectations.
The company has been pursuing potential deals under which it would post product listings with links to certain traditionally brick-and-mortar retailers’ websites, The Wall Street Journal reported last month.
because there is a point at which free second day shipping is not worth the pre-paid cash, especially when the second day guarantee is more of an aspiration rather than an absolute…
“CIRP also checked the renewal intent at the proposed $99 and $119 prices, and found dramatically different results,” said Mike Levin, Partner and Co-Founder of CIRP. “At $99, under half of subjects think will either definitely or probably renew. And at $119, 40% of subjects say they will definitely not renew their membership.”
Those numbers tally pretty closely with a poll the WSJ’s Digits blog ran on January 31, in the wake of Amazon raising the possibility of a price hike in its conference call. In that poll, 47% of the 2,889 respondents said they were not willing to pay any more for the service