Amazon 2020 - the Red Cross for the New Normal?

Amazon 2020 - The Red Cross For The New Normal?


Release date: May 17th, 2020 (120 pages)
PDF/Powerpoint format. Price: GBP989.00

Abstract

• Currently there is a broad consensus that Amazon will emerge as one of the winners of the pandemic, however we believe that the picture is actually much more mixed.
• Covid-19 has undoubtedly been positive for Amazon on a number of issues, of which the most salient could be characterised as a change in public perception, a change in shopping behaviour towards online and a vindication of Amazon’s technological innovations and their future potential.
• In the words of one consultant, Amazon is suddenly perceived as the new Red Cross by the public, as an essential service and real life saver for those in self isolation and quarantine. This better image might help the company to deflect from the recent issues such as using 3P sellers data for its private label business, poor (and perhaps unsafe) working conditions in its warehouses, the US (and EU) oversight investigations and so on. But this remains to be seen.
• What has helped Amazon is changed shopping behaviour from the stay at home society. For how long this trend will last, its strength and maturity, still needs to be seen. There could be second and third waves of the disease, local outbreaks after the easing of the initial lockdowns and restrictions - so Amazon remains an attractive value proposition for stock market investors. It is safe to assume that shoppers will be likely to go out less even when restrictions are lifted. This will mean a greater push for online shopping and especially for online grocery.
• Thirdly, a number of Amazon’s big bets in technological innovations look much better now than just a few months ago. The Amazon Go stores are almost designed for the Covid 19 shopper. The concept of no queues, no touch payments are the ideal store prototype for the Covid-19 era. Moreover, one of the big drawbacks of the Amazon Go solution, namely that every SKU was being packaged in plastic (to be machine readable) suddenly turns into a plus, as plastics are seen as more hygienic and safe than loose produce.
• The same point about the potential of Amazon’s bold tech bets in this new era also hold for drone delivery and push for robotic measures of all types, because these will be ideal for social distancing and guarantee business continuity. We also think that Alexa should benefit from the effects of the pandemic. Touch free, voice activated devices might get a huge push, as sound activation is clearly more hygienic than touch activation. Alexa has also acted as a household help during the crisis as a source of information on the Coronavirus, often in collaboration with local health authorities.
• The pandemic provides a growth impetus for some product categories (such as household cleaning products and grocery or PPE) and especially grocery is the big price Amazon has had its eyes on for decades. That said, other product categories important to Amazon have suffered greatly.
• The pandemic has also led to increased sign ups to prime (mainly for deliveries benefits, but shoppers are also using much more of prime music and video, or twitch). For Amazon, the investment in moving to 1 day deliveries and the physical infrastructure (from new warehouses and sort centres closer to cities to proprietary Amazon Logistics) associated with it really has paid off. This has meant that Amazon has been able to cope better with the sudden peak, than it would have otherwise, even though delivery times in the USA topped 4 days in some instances, showing there is more to do on this front.
• And when prime grows, Amazon grows. The company has stressed that the digital prime benefits really come into their own now (due to increased usage patterns), and the ROI in video and music content and Twitch for that matter is getting better by the minute, as people now engage much more.
• The pandemic should also be good for Amazon advertising, as much agency spend moves to digital ads and away from other media as people stay indoors. (A similar point could be made in respect to AWS, as digitalisation in general gets speeded up, driving uptake of cloud services).
• The pandemic has proved beneficial for acquisitions, such as Amazon’s Deliveroo deal, for which there were serious competition issues to address before the Coronavirus, but which has been waved through against the dire economic background. There is a wider point also, in times of crises there should be lots of distressed, but attractive target companies around in need for cash.
• Another benefit could be lower oil and fuel prices and hence lower shipping costs for Amazon and the potential to hire qualified staff, as many have or are about to find themselves unemployed.
• The shutting of physical retail shops has also meant that recruitment of many new retail partners and sellers to the Amazon marketplace have gone up. Especially smaller independent niche players from the fashion and home sector, whose shops have been closed, now go online on the marketplace platforms eBay and Amazon in an attempt to survive the shutdown. This increases Amazon’s range and makes the platform more attractive by offering unique product. Amazon also generates extra income from these sellers, especially as they are likely to go with FBA and purchase ads from Amazon.
• Lastly, Covid-19 has provided a vindication of the business model (if this really was still needed). This can be demonstrated by the example of France, where French Amazon shoppers can still buy from the company and the business is still up and running, despite the courts shutting down the warehouses, due to health and safety reasons. Marketplace sellers can use their own shipping to reach customers or use Amazon’s global fulfilment and DCs in Germany, Spain or the UK to reach French shoppers.

Table of contents

Executive summary: Amazon 2020 p7
Recent key developments p14
Amazon to close all of its 87 pop-up stores in the US beginning in April 2019 p15
AmazonFresh introduces ‘sponsored products’ p16
Amazon suppliers panic amid purge aimed at boosting profits p17
Amazon blocks ads for unprofitable products p18
Amazon removes promotional spots that gave special treatment to its own products p19
Feneberg stops Amazon grocery cooperation in Germany p20
Amazon goes small in New York, Vertical operations and more robots signal the future p21
Amazon’s first Alexa wearable p22
Amazon shipping now delivering nationally from NYC, LA, and Chicago p23
Amazon adds to physical retail footprint with latest Go store in San Francisco p24
Amazon acquires autonomous warehouse robotics startup Canvas Technology p25
Amazon to launch ad-supported music offering p26
Amazon's digital freight brokerage platform goes live p27
Slow growth for Amazon in-store sales, but online delivery is up in Q1 p28
Amazon can already ship to 72% of US population within a day p29
Amazon will reportedly fall under antitrust oversight from the FTC p30
Amazon unveils Xanthus and Pegasus fulfillment robots p31
Amazon is now its own biggest shipper p32
Amazon seeks to revive its faltering loans business p33
Amazon to begin delivering packages by drone ‘within months’ p35
Amazon applies for waiver with FAA to allow drone delivery p36
DHL leaves Amazon Fresh cooperation in Germany p37
Amazon Prime Day 2019 sales cross $7.0bn p38
Morrisons expands super-fast Amazon delivery deal in UK p39
Amazon music streaming goes live… p40
…and becomes fastest growing streaming service p41
Amazon tactic pushes shoppers to consider own brand p42
Amazon squeezes sellers that offer better prices on Walmart p43
Amazon tests Whole Foods payment system that uses hands as ID p45
Amazon probed by U.S. Antitrust officials over marketplace p46
Amazon introduces computer vision into warehouses p47
Amazon's inventory value up 25% as it begins next-day shipping p49
Amazon starts hiring own drivers in German last-mile delivery push p50
Amazon Fresh drops membership fees in the UK p51
Amazon Shipping starts in the UK p52
Amazon floods the market with Alexa devices p53
Amazon Search advertising is growing p54
Amazon offers Fresh free to US Prime-members p55
Amazon prepares market entry into the Netherlands p56
Amazon will launch new grocery store as alternative to Whole Foods p57
Ikea ends Amazon experiment in the USA p58
Amazon uses aggregated seller data to help business, it tells lawmakers p59
Amazon reports Q3 dip in physical store sales p60
Amazon is planning to open cashierless supermarkets in 2020 p61
Storefronts next for AmazonFresh? p62
Alexa change could see Amazon’s assistant spread everywhere p63
Alexa can now order prescription refills and remind people to take their medicine p64
Amazon blames holiday delivery delays on winter storms and high demand p65
Amazon is already delivering half of its packages p66
Christmas 2019: Amazon reports record holiday season p67
Amazon to open new ‘themed’ pop-up store at Seattle HQ in latest physical retail expansion p68
Chinese companies overtake US retailers as Amazon Top Sellers p69
Amazon's grocery deliveries are spiking - Q4 p70
Amazon opens a cashierless supermarket – Go Grocery in Seattle p71
Amazon-Dematic partnership ‘validates MFC model’ p72
Amazon adds warehouse network closer to cities to speed up same-day delivery p73
Amazon launches business selling automated checkout to retailers p74
Amazon’s cashierless checkout technology coming to Newark Airport p75
‘The new Red Cross’ in Covid-19 crisis? p76
Amazon sales of 'non-essentials' hit by French court ruling p79
Amazon to reap $11,000-a-second coronavirus lockdown bonanza? p80
Amazon allows sellers to start shipping nonessential items again p81
Data p82
Data and KPIs: Net Sales & Income, Margin 2009-19, adding $47.6bn in 2019 p83
Data and KPIs: Net Sales & Income, Margin 2009-19, Analysis p84
Data and KPIs: US, international, AWS sales, in $m, % split, growth, 2013-2019 p85
Data and KPIs: US, international, AWS sales, Analysis p86
Revenues, Financials, KPIs, Benchmarks in Amazon geographies p87
Data and KPIs: International sales by country, in $m, % split, growth, 2008-2018 p88
Data and KPIs: new markets United Arab Emirates, Singapore p92
Active customer accounts per Amazon geography and annual basket spend p93
Data and KPIs: Active customer accounts in m, by country 2009-19, growth p94
Data and KPIs: Active customer accounts, Analysis p95
Data and KPIs: Average annual spend per country 2011-19 in local currency p96
Data and KPIs: Average annual spend 2011 – 19e on AMZN 1P, Analysis p97
Marketplace p98
Data: net sales by geography, average price, total units, customers, frequency 2019 p99
Data: average price, total units, customers, frequency per country, Analysis p100
Data: 3P share of GMV in % 1999-2018 p101
Data: 1P sales in US$m, 3P sales, % splits, GMV 2014-2019 p102
Data: Amazon GMV in 2019, Analysis p103
Prime p104
Data and KPIs: The Prime Universe p105
Data and KPIs: Prime account holders in m per country 2009-19 p106
Prime: the all-you-can-eat, physical-digital hybrid p107
Prime: Prime: more successful at getting customers to cross shop than any other initiative p108
Prime: Most successful tool to get buy-in to new categories, net costs, uplifts p109
Prime: the 7 key prime benefits to Amazon p110
Prime: Prime fee income 2019 in US$m, USA, Germany, Japan, UK, France, other p111
Prime: Reconciliation Prime fee income 2015-19 with reported AMZN stats p112
Outlook p113
Outlook: Covid-19, Past no longer the best guide for future, category shocks p114
Outlook: challenges to overcome on and offline, robots on overdrive p115
Sources p116
A bit more on ResearchFarm p118
Charts Chart 1: Data: 3P share of GMV in % 1999-2018 p101
Chart 2: The Prime Universe p105
Tables Table 1: Data and KPIs: Net Sales & Income, Margin 2009-19, adding $47.6bn in 2019 p83
Table 2: Data and KPIs: US, international, AWS sales, in $m, % split, growth, 2013-2019 p85
Table 3: Data and KPIs: International sales by country, in $m, % split, growth, 2009-2019 (I) p88
Table 4: Data and KPIs: International sales by country, in $m, % split, growth, 2009-2019 (II) p89
Table 5: Data and KPIs: International sales by country, in $m, % split, growth, 2009-2019 (III) p90
Table 6: Data and KPIs: International sales by country, in $m, % split, growth, 2009-2019 (IV) p91
Table 7: Data and KPIs: Active customer accounts in m, by country 2009-19, growth p94
Table 8: Data and KPIs: Average annual spend per country 2011-19 in local currency p96
Table 9: Data: net sales by geography, average price, total units, customers, frequency 2019 p99
Table 10: Data: 1P sales in US$m, 3P sales, % splits, GMV 2014-2018 p102
Table 11: Data and KPIs: Prime account holders in m per country 2009-19 p106
Table 12: Prime: Prime fee income 2019 in US$m, USA, Germany, Japan, UK, France, other p111
Table 13: Reconciliation Prime fee income 2015-19 with reported AMZN stats p112