Amazon 2014Release date: March 11th, 2014 (208 pages) PDF/Powerpoint format. Price: GBP1,800.00 |
Abstract
Selling online is relatively easy, logistics is what matters & the AmazonFresh future.
Solving logistics, the back end set-up, is becoming increasingly more important in e-commerce, and the pressure is intensifying every day. In e-commerce companies make or lose money on the last mile, the final stage of the journey, which is the biggest cost driver and most difficult step to make more efficient.
This is why Amazon is investing so heavily in the fulfilment centre rollout to get closer to customers and reduce their own shipping costs.
While spending so much money on the back end is a calculated risk, the physical infrastructure build out will in time become a huge competitive advantage over other marketplace operators without such a physical footprint (eBay for example).
Coupled with this huge investment push comes the roll out of AmazonFresh. We believe that the argument about Fresh being introduced solely as a driver of cross shopping behaviour across categories gets it slightly wrong. Sure, in time, the economics of a mix calculation will stack up and increased cross shopping will occur, however, right now, the real driver behind the introduction of Fresh is actually slightly different.
Looking ahead, we believe that Amazon will add $13bn annually to its turnover for the next two years and as a result become a $100.0bn retailer by 2015. This means Amazon will challenge the likes of Tesco, Costco, Carrefour and Kroger for a top 5 position in the rankings of the biggest retailers in the world by 2015 - trailing only Walmart by a significant margin.
As over the last years, Amazon’s sales growth of 21.9% in 2013 once again outpaced its active customer accounts growth of 18.7%, demonstrating that the average basket per customer keeps growing. This also shows how once customers buy into the ecosystem, they start to progressively spend more money with Amazon. The best driver of this behaviour is of course prime, which is due an update in terms of pricing strategy this year.
Table of contents
Executive summary | p20 |
Recent key developments | p27 |
January 2013: record holiday for the 3P marketplace in 2012 | p28 |
February 2013: patent for second hand digital goods marketplace, ReDigi’s court defeat | p29 |
Amazon: Heavy fulfillment centre investments in Germany, regional hubs as launch pads | p30 |
March 2013: Overwhelming dominance of US mobile searches, low conversion | p31 |
May 2013: Amazon coins launched in the US | p32 |
June 2013: the expansion of Amazon Fresh to LA, Amazon Prime Fresh | p33 |
June 2013: India’s marketplace launch | p34 |
June 2013: Brieselang FC to open in Q3 in Germany | p35 |
July 2013: dm ends its online cooperation with Amazon to launch own effort in Austria | p36 |
July 2013: Amazon stops wardrobing in Germany | p37 |
July 2013: free shipping threshold increased in the UK | p38 |
Amazon: Amazon UK launching its own parcel courier service to overcome bottlenecks | p39 |
August 2013: product ads in apps | p40 |
August 2013: Germany Amazon drops price parity clauses | p41 |
Amazon: Federal Cartel office finds in Amazon’s favour in regards to seller sanctions | p42 |
August 2013: Amazon drops price parity clause in UK too | p43 |
August 2013: implications, price leadership threat, pricing as fee hikes counter weight | p44 |
October 2013: Fulfillment centres for the Czech Republic & Poland, turn towards CEE | p45 |
October 2013: raising free shipping thresholds in the US, implications | p46 |
November 2013: expanding selection in Canada | p47 |
November 2013: Grocery private label push | p48 |
November 2013: Sunday delivery in New York and LA | p49 |
December 2013: Drones, holiday delivery issues | p50 |
December 2013: Supreme Court denies Amazon’s appeal on Amazon law | p51 |
December 2013: San Francisco becomes third Fresh market | p52 |
December 2013: launching pantry, another online grocery model | p53 |
December 2013: prime records for the holidays, 1m new members in 1 week | p55 |
December 2013: prime records – limiting sign up | p56 |
December 2013: prime records – more than half of shoppers used mobile devices | p57 |
December 2013: UK fashion sales peak at more than 1.0m units sold per week | p58 |
January 2014: physical manifestation – Amazon kiosks in Las Vegas | p59 |
January 2014: marketplace boom, more than 1.0bn units sold | p60 |
January 2014: 3P records, implications for Amazon volumes | p61 |
January 2014: UK Sunday delivery – using Amazon logistics | p62 |
January 2014: France adopts the loi Anti Amazon | p63 |
January 2014: France’s cultural coverage, books as special public good | p64 |
January 2014: Is Amazon really reducing cultural diversity? | p65 |
January 2014: patent showing delivery revolution intentions | p66 |
January 2014: Anticipatory shipping | p67 |
January 2014: Amazon TV on the cards? | p69 |
Financials, KPIs, Benchmarks | p70 |
Amazon: Net Sales, Net Income, Growth, Margin 2008-2013, adding $13bn a year | p71 |
Amazon: $13bn added every year, a $100bn retailer in two years | p72 |
Amazon: US Sales, growth, international sales, in $m, % split 2008-2013 | p73 |
Amazon: Sales by segments 2008-2013 in $m, growth | p74 |
Amazon: AWS, transposing the marketplace model from physical to digital | p75 |
Amazon: A couple of words on margins, what is the impact of 3P’s rapid growth? | p76 |
Amazon: The “Key” Key Performance Indicator | p77 |
Amazon: inventories and cash flow, marketplace as the core of the model | p80 |
International expansion strategy | p81 |
Amazon: International expansion strategy, 3 core factors, online is global | p82 |
Amazon: The platform, incrementalism, the threat from copy cats, Amazon’s dilemma | p83 |
Financials, KPIs, Benchmarks in Amazon geographies | p84 |
Amazon: International sales per country in €m 2008-13, Germany, Japan, UK, France | p85 |
Amazon: Int’l sales per country in €m, China, Italy, Spain, India, Brazil, Australia, Mexico | p86 |
Amazon: International sales per country in local currencies 2011-13, Japan, UK | p87 |
Active customer accounts per Amazon geography and annual basket spend | p88 |
Amazon: Active Customer accounts 2009 – 13 in m, USA, Germany, Japan, UK, France | p89 |
Amazon: Active Customer accounts 2009 - 13, Analysis | p90 |
Amazon: Sales grow faster that active customers, basket growth, category cross shopping | p91 |
Amazon: Average annual spend 11 – 13, USA, DE, Japan, UK, France in local currency | p92 |
Amazon: 1P Sales by geography in $m, average price, total units, customers, frequency | p93 |
Prime – the loyalty scheme par excellence | p94 |
Prime: Prime Customer accounts 2009 – 13 in m, USA, Germany, Japan, UK, France | p95 |
Prime: Prime Customer accounts 2009 – 13, Analysis USA, Germany, Japan, UK, France | p96 |
Prime: The jewel in the loyalty crown, past strategy: stable price - more content | p97 |
Prime: focus on most loyal shopper to drive sales and profits | p98 |
Prime: Most successful tool to get buy-in to new categories, net costs, uplifts | p99 |
Prime: the 7 key prime benefits to Amazon (I) | p100 |
Prime: the 7 key prime benefits to Amazon (II) | p101 |
Prime – the future, price rises | p102 |
Prime: Monthly prime memberships trial in 2012, lowering barriers, not a success | p103 |
Prime: prime questions – the price increase to come in 2014? | p104 |
Prime: prime questions – retention, two different scenarios | p105 |
Prime: prime questions – impact on 3P sellers, FBA and non FBA | p106 |
Prime: prime questions – how will Amazon go about raising prices? To tier or not to tier? | p107 |
Prime: prime questions – leveraging video subscription in the EU | p108 |
Fulfillment centre rollout – the logistics strategy explained | p109 |
Amazon: strategy behind the fulfillment centre roll out | p110 |
Amazon: comprehensive back end strategy, linking up marketplaces, FBA as profit driver | p111 |
Amazon: Shipping revenue and costs 2010 – 13 in $m, towards a fixed cost, FBA | p112 |
Amazon: Getting it all to work together, vendor flex, Amazon logistics, same day, kiva | p113 |
Amazon: The strategy explained, Fresh needs to work, looking ahead to take-aways | p114 |
Amazon Fulfillment centres – footprint, locations, sq footage | p115 |
Amazon: Fulfillment centre footprint, USA, location, size in sq ft | p116 |
Amazon: Fulfillment centre footprint, Germany, Japan, UK, location, size in sq ft | p118 |
Amazon: Fulfillment centre footprint, France, Italy, Spain, location, size in sq ft | p119 |
Amazon: Fulfillment centre footprint, China, Canada and India, location, size in sq ft | p120 |
Amazon Fulfillment centres – from the inside | p121 |
Amazon: fulfillment centres – the improvement in space optimisation and sortation | p122 |
Amazon: Amazon fulfillment engines, KIVA integration to follow | p123 |
Amazon: The Kiva acquisition, a sign post of same day delivery intentions | p124 |
Amazon: DCs as building up unassailable competitive advantage or massive risk? | p125 |
Amazon Fulfillment centres Germany | p126 |
Amazon: Heavy fulfillment centre investments in Germany, regional hubs as launch pads | p127 |
Amazon: the strategy behind the logistics set up, range specialisation | p128 |
Amazon: trade off between inventory costs and same day delivery, de – centralising | p129 |
Amazon: warehouse visit – Koblenz, Germany | p130 |
Amazon: warehouse visit – internal processes, scanner as GPS, accident prevention | p131 |
Amazon: warehouse visit – range specialisation, productivity, efficiencies | p132 |
Same day delivery – the next step in the revolution | p133 |
Amazon: it’s all about the supply chain, same day delivery, loads utilisation | p134 |
Amazon: Collaboration, lockers roll out and next stage of online evolution | p135 |
Amazon: Fulfillment centre rollout, load factors, prime | p136 |
Amazon: the cost of doing business, shoprunner delivering from the store estate | p137 |
Amazon: same day delivery – the conversion and take up results from the first tests | p138 |
Amazon: split cases, customer centric supply chain | p139 |
Amazon: Locker roll out as precursor to full on assault on online grocery in the US | p140 |
Amazon: same day delivery – reaching 50% of the US population? | p141 |
Amazon: same day delivery – Fresh asks for a completely different set up due to chilled | p142 |
Amazon: Fresh’s roll out, city by city – the cost implications of number of DCs in the USA | p143 |
Amazon: same day delivery’s share of all Amazon orders versus total sector | p144 |
Logistics by Amazon – beyond carrier management | p145 |
Amazon: the strategy for FBA, link ups, European Fulfillment Network, logistics potential | p146 |
Amazon: link ups, European Fulfillment Network, Multi Country Inventory | p147 |
Amazon: Logistics partners and providers in Europe | p148 |
Amazon: Logistics partners and providers in the USA | p149 |
Amazon: Amazon’s parcel service in Germany, the EU strategy | p150 |
Amazon: Germany, enforcing €2 per parcel, but charging shoppers €3, challenges | p151 |
Amazon: Amazon Logistics, UK parcel service, 7 warehouses, £1bn investment | p152 |
Vendor flex – an innovation gaining traction | p153 |
Vendor Flex: Yet another innovation and penultimate component of the logistics strategy | p154 |
Vendor flex: Cooperation benefits both parties, supplier and e-retailer | p155 |
Vendor flex: suppliers and key takeaway | p156 |
Vendor flex: Germany, looking to expand the programme | p157 |
Vendor flex: strategy – the view from a CPG supplier standpoint | p158 |
AmazonFresh – tying the strategy together, the attack on Walmart | p160 |
AmazonFresh: The strategy explained, Fresh needs to work, looking ahead to take-aways | p161 |
AmazonFresh: Grocery in USA, Seattle’s AmazonFresh, proprietary delivery network | p162 |
AmazonFresh: late cut off points, challenges require major rethink | p163 |
AmazonFresh: Seattle spotlight, grocery marketplace version 2.0, heading to California | p164 |
AmazonFresh: Data, key customer statistics, uplifts, basket sizes, the reasons behind Fresh | p165 |
Amazon: The online grocery opportunity in the US, Amazon shopper data | p166 |
AmazonFresh: June 2013, the expansion of Amazon Fresh to LA, Amazon Prime Fresh | p167 |
AmazonFresh: Fresh as mix calculation and loss leader? Fresh as ecosystem? | p168 |
AmazonFresh: Fresh category size, handling problems, roll out of same day delivery network | p169 |
AmazonFresh: Fresh – frozen bottled water as chiller element – real green innovation | p170 |
AmazonFresh: where is Fresh going? Importance of 3P for Fresh, Spotlight expansion | p171 |
AmazonFresh: Fresh rolled out to Germany first? Hard Discounter reaction? | p172 |
AmazonFresh: Fresh facing tough competition in the UK from Tesco et al | p173 |
Grocery – AmazonFresh coming to Germany? | p174 |
Amazon: Germany most important foreign market, taking a quarter of DE ecommerce | p175 |
Amazon: the two part structure in Germany, one of the toughest grocery markets | p176 |
Germany: 1P and 3P delivery issues | p177 |
Recent developments: Migros private label on Amazon.de | p178 |
Amazon: dm ending its online cooperation with Amazon to launch own effort in Austria | p179 |
Amazon: dm and the online opportunity in Germany | p180 |
Amazon: Amazon PL grocery product in Germany, first market launch | p181 |
Recommendations – the fall out from the AmazonFresh launch | p182 |
Recommendations: FMCG partners, what to consider, pantry vs Fresh vs .com | p183 |
Recommendations: model out profitability for the next ten years on line by line basis | p184 |
Recommendations: how Fresh will roll out in Europe, leveraging 3P | p185 |
Recommendations: Omnichannel players, launching a 3P operation | p186 |
Recommendations: Omnichannel players, make store estate and infrastructure count | p187 |
Outlook & forecast – the risks going forward | p188 |
Outlook: cloud services, data security in the wake of Snowden | p189 |
Outlook: internet balkanisation? Storing data where consumers are? | p190 |
Outlook: the changes in taxation to come, Luxembourg | p191 |
Outlook: the changes in taxation to come, domestically and abroad | p192 |
Outlook: global harmonisation, OECD leads the charge | p193 |
Outlook: Regulatory threats, marketplace failures, logistics failures | p194 |
Outlook: Long term, Bezos succession? | p195 |
Outlook: the fresh opportunity going forward | p196 |
Outlook: Fresh as the category killer growth opportunity, but, also, it simply has to work | p197 |
Outlook: Fresh as a logistics investment; more warehouses, more stock, higher op costs | p198 |
Outlook: Fresh customer spend versus Amazon customer spend, the big attraction | p199 |
Amazon: Outlook | p200 |
Outlook: taking its foot off the investment accelerator | p201 |
Outlook: kindle as payment tablet, mobile wallet, getting into all customer transactions | p202 |
Outlook: Cash flow versus margin, high margin potential in digital | p203 |
Outlook: Even higher potential in marketplace, linking up international 3P | p204 |
Outlook: profit driver par excellence, inventory cycle, same day delivery | p205 |
Outlook: Advertising and AWS, logistics, smartphone, drones, 3D printers | p206 |
Table 1: Net Sales, Net Income, Growth, Margin 2008-2013, adding $13bn a year | p71 |
Table 2: US Sales, growth, international sales, in $m, % split 2008-2013 | p73 |
Table 3: Sales by segments 2008-2013 in $m, growth | p74 |
Table 4: International sales per country in €m 2008-13, Germany, Japan, UK, France | p85 |
Table 5: Int’l sales per country in €m, China, Italy, Spain, India, Brazil, Australia, Mexico | p86 |
Table 6: International sales per country in local currencies 2011-13, Japan, UK | p87 |
Table 7: Active Customer accounts 2009 – 13 in m, USA, Germany, Japan, UK, France | p89 |
Table 8: Average annual spend 11 – 13, USA, DE, Japan, UK, France in local currency | p92 |
Table 9: 1P Sales by geography in $m, average price, total units, customers, frequency | p93 |
Table 10: Prime Customer accounts 2009 – 13 in m, USA, Germany, Japan, UK, France | p95 |
Table 11: Shipping revenue and costs 2010 – 13 in $m, towards a fixed cost, FBA | p112 |
Table 12 & 13: Fulfillment centre footprint, USA, location, size in sq ft | p116 |
Table 14: Fulfillment centre footprint, USA, location, size in sq ft (II) | p117 |
Table 15 & 16 & 17: Fulfillment centre footprint, Germany, Japan, UK location, size in sq ft | p118 |
Table 18 & 19: Fulfillment centre footprint, France, Italy, Spain, location, size in sq ft | p119 |
Table 20 & 21: Fulfillment centre footprint, China, Canada and India location, size in sq ft | p120 |
Table 22: Logistics partners and providers in Europe | p148 |
Table 23: Logistics partners and providers in the USA | p149 |
Chart 1: Data, key customer statistics, uplifts, basket sizes, the reasons behind Fresh | p165 |
Chart 2: The online grocery opportunity in the US, Amazon shopper data | p166 |
Table 1: Net Sales, Net Income, Growth, Margin 2008-2013, adding $13bn a year | p71 |
Table 2: US Sales, growth, international sales, in $m, % split 2008-2013 | p73 |
Table 3: Sales by segments 2008-2013 in $m, growth | p74 |
Table 4: International sales per country in €m 2008-13, Germany, Japan, UK, France | p85 |
Table 5: Int’l sales per country in €m, China, Italy, Spain, India, Brazil, Australia, Mexico | p86 |
Table 6: International sales per country in local currencies 2011-13, Japan, UK | p87 |
Table 7: Active Customer accounts 2009 – 13 in m, USA, Germany, Japan, UK, France | p89 |
Table 8: Average annual spend 11 – 13, USA, DE, Japan, UK, France in local currency | p92 |
Table 9: 1P Sales by geography in $m, average price, total units, customers, frequency | p93 |
Table 10: Prime Customer accounts 2009 – 13 in m, USA, Germany, Japan, UK, France | p95 |
Table 11: Shipping revenue and costs 2010 – 13 in $m, towards a fixed cost, FBA | p112 |
Table 12 & 13: Fulfillment centre footprint, USA, location, size in sq ft | p116 |
Table 14: Fulfillment centre footprint, USA, location, size in sq ft (II) | p117 |
Table 15 & 16 & 17: Fulfillment centre footprint, Germany, Japan, UK location, size in sq ft | p118 |
Table 18 & 19: Fulfillment centre footprint, France, Italy, Spain, location, size in sq ft | p119 |
Table 20 & 21: Fulfillment centre footprint, China, Canada and India location, size in sq ft | p120 |
Table 22: Logistics partners and providers in Europe | p148 |
Table 23: Logistics partners and providers in the USA | p149 |
Chart 1: Data, key customer statistics, uplifts, basket sizes, the reasons behind Fresh | p165 |
Chart 2: The online grocery opportunity in the US, Amazon shopper data | p166 |