Amazon 2014

Amazon 2014


Release 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