Amazon Crushes It, and Possibly You

A photo of Amazon's website.

Image credit: Evan Lorne / Shutterstock

The Onion recently put out a wonderful parody article that was uncomfortably close to the sad reality of tech business these days. Purported to be written by Jeff Bezos, CEO of Amazon, it was entitled “My Advice To Anyone Starting A Business Is To Remember That Someday I Will Crush You.”

In it, Bezos provides advice for new entrepreneurs that is actually fairly reasonable, but which always ends with the idea that no matter what happens, eventually Amazon will step in and destroy whatever startup that you might hope to build.

The reason this article hits a bit close to home is because of a Gizmodo piece from earlier in July that argues that “At This Point, Amazon Can Crush a Company Just By Filing for a Trademark.” Jones points out that Amazon is such a large company that simply announcing a plan to compete in a specific market is enough to send other company’s stock toppling, citing the unfortunate state of Blue Apron’s IPO after Amazon announced it was filing a “meal-kit trademark that covers prepared food kits composed of meat, poultry, fish, seafood, fruit and/or vegetables . . . ready for cooking and assembly as a meal.”

Partnering with the large company is a not a good option, either. Just ask Nucleus cofounder Morley Ivers, who had received an investment from Amazon through its Alexa Fund to create an intercom that allowed non-Amazon devices to work with Amazon’s Alexa. Nucleus returned the favor by giving Amazon insights into how its system worked and its user behavior, only to find out that Amazon was using that information to create their own Echo Show—a device that completely made theirs obsolete.

The worst thing is that, while they were aware that Amazon was working in the space, they did not know that the new device would make theirs truly obsolete until the product was officially announced.

Ivers warns that other companies that work with Amazon to develop Alexa-related devices should be careful that they don’t make the same mistakes he did, although he doesn’t believe that the company is actually malicious.

But with quotes like, “Be prepared, among other things, for my company to duplicate your product or service and sell it at prices you can never compete with, all the while turning your board members against you one by one and, eventually, buying your company for less than it’s worth just so we can shut it down,” clearly The Onion doesn’t see things the same way.

The Battle of Free Shipping Continues

A wooden crate with the words "free shipping" stamped onto it.

Image credit: Shutterstock

It’s hard to be a big box retailer these days and charge a hefty price for shipping. We keep seeing big-name stores that were once prosperous now closing up shop, and a lot of that has to do with the ease and affordability of online shopping.

For a time, many still chose to shop in-person because that option offered no shipping fees, but that era is slowly coming to an end–and major stores are now battling it out for the best free shipping deal.

This week, Amazon announced that it would be (once again) lowering it’s free shipping minimum for non-Prime members. Shoppers now only need to spend $25 to forgo shipping costsa price that is very reasonable for most people. At the beginning of 2017, the spending minimum was $49, but that changed when Walmart came out with their own two-day, free shipping deal on orders of $35 or more. With the $25 limit, Amazon is now the cheapest place for shipping.

Yet, that could very well change.

Target, which has been offering free shipping at the $25 rate for quite awhile, is planning to run a test program on next-day shipping, starting this summer. As of right now, the pilot program will only be offered in the company’s native Minneapolis (and only to REDcard members), but if it’s successful, the company would most likely branch out to Targets countrywide.

That said, Target plans on charging a “low, flat-fee” for shipping, although executives have yet to determine what that fee will be. If it’s something insignificant (say, $2.95) and you’re ordering a $500 dresser, that fee is worth the next-day shipping. If people are willing to pay a small amount to ensure their items are delivered in a timely manner, it will be one more sting against Amazon–which is exactly what Target wants.

Amazon Has Become a Haven for Counterfeit Products

A photo of a person shopping on Amazon.

Photo credit: ymgerman / Shutterstock

As Amazon continues to expand, they’ve been allowing more and more companies to sell directly to consumers. That’s great for Amazon and is part of what is driving their rapid growth. But unfortunately, that growth comes with some pretty unpleasant side effects. Namely, it’s given rise to a whole market of counterfeit products that are much cheaper than the real thing. These products are cheap knockoffs that are harming the original manufacturers.

Among the most glaring example is the Forearm Forklift, a set of straps used to move furniture. The company that makes them has been losing sales left and right as customers go to Amazon and do what they always do: buy the cheapest one they can find. The problem is, those cheap sales aren’t the real thing; they’re fakes that can’t deliver on their promises.

Unfortunately, there’s not much that Forearm Forklift can do about it. If another company were making a similar product for cheaper, that would be one thing. But we’re talking about cheap knockoffs that shamelessly steal images from the actual manufacturer in order to scam customers into thinking that they’re buying the real thing.

Amazon is not doing a good job of dealing with this issue. What they need to do is aggressively track down counterfeiters and other fraudulent sellers. While Amazon has started instituting more policies to prevent them from selling in the first place, it obviously isn’t working.

There are a lot of factors involved in their poor response, from Amazon being a huge company with many layers of management to work through, to the breakneck speed at which digital sales spaces are changing, to the simple fact that those garbage items are still generating revenue for Amazon. But if they don’t do something about this issue, it may eventually catch up with them, and people might decide to take their hard-earned money elsewhere.

Amazon Listing Some Items for Prime Members Only

If you’re reading this, there’s a pretty good chance you’ve also purchased something from Amazon. They’re pretty much the biggest retailer in the world at this point (at least online) and they got that way by selling basically everything under the sun. There’s a smaller chance that you’re a member of Amazon Prime, the companies $99 a year incentive program that nets members free two-day shipping and access to their streaming video service, among other things.

But apparently they’re trying out a new program wherein certain movies and video games are only available from Amazon if you have a Prime membership. So, for example, if you wanted to buy Birdman on Blu-Ray, or you wanted to buy Grand Theft Auto V or Far Cry Primal, you either had to have a Prime account, or buy it somewhere else. True, you could still buy it on Amazon from another seller, but that kind of defeats the point doesn’t it? And those sellers often don’t qualify for free shipping, or ship as quickly, or have Amazon customer service.

So what are they thinking? Prime Membership is supposed to get you access to bonuses or to things that are only available from Amazon (like their streaming shows), not prevent you from buying something that you can buy somewhere else. It doesn’t make a lot of business sense. And the company’s official comment smacks of automated response, maintaining that customers can sign up for a free Prime trial or buy stuff on the marketplace. That’s not a response, that’s them holding their ground while they determine if the benefits of this program outweigh the bad press they’ll be getting.

If Amazon wants to move to a membership system, like Sam’s Club, where you have to have Prime to buy stuff, that’s their prerogative, but that seems like a great way to tank their entire business. There doesn’t seem to be many other justifications for this experiment than testing those specific waters though.

How Costco Fends Off the Beast That is Amazon

One of the U.S.’s largest retailers is being called “Amazon-proof.” Earlier today Costco’s rating was upgraded from hold to buy, and its price target was boosted from $152 to $200, as its potential is “too great to ignore,” according to Business Insider. Most businesses have been affected by internet wonderland Amazon, but Costco seems to be plugging away happily without much damage.

The upgrade comes after Costco’s November announcement that same-store sales were flat, but when gas and foreign exchange were left out of the equation, comparable sales were up 6%.

Costco can keep itself afloat because of its smart membership model and its ability to get people to come into its physical locations. Its membership programs are on the rise in general, especially for things like Amazon Prime and online grocery stores. But Costco offers things people would just rather buy in person, like food and gas, which is a huge part of its business model. And a lucrative one, as gas prices are currently a bit lower than they have been recently.

Deutsche Bank’s Paul Trussell, who is responsible for upgrading Costco, says, “We think that the gas and food offering combined with the in-store treasure hunt experience provide a powerful competitive advantage that can continue to fend off online competitors.” The store is also switching to Costco-branded Visa cards from Amex to help with traffic accrued through their rewards programs.

It also helps that consumers are more willing to participate in a market that offers them “traffic consistency, a steady income stream through membership, and international growth opportunities.” As Costco is likewise becoming popular internationally, its sales are primed to rise high.

“Looking over the next 18 months, there are now too many catalysts to ignore (e.g. organic growth food, higher gas margins, credit card change to Visa, MFI increase),” Deutsche Bank said of Costco’s upgrade.

Thinking Only Quarter to Quarter Stifles Innovation

Profit

IMG: via Shutterstock

For small businesses, thinking only from one quarter to the next is extraordinarily helpful: being able to see changes on the small scale can ensure survival or help correct problems before they become catastrophic.

But for some businesses, thinking in the short-term can be detrimental to innovation and creativity. Successful companies like Google and Amazon have the ability to think ahead—far ahead, in the case of projects like Google’s self-driving car project. Though experimentation won’t work for all companies, it does keep Google and Amazon on the front lines of innovation.

For many small businesses, looking only quarter-to-quarter seems like all that’s possible, but as companies become more successful, they have more room—and more budget—to experiment. However, because shareholders are not forgiving of the trial-and-error process, not every company should experiment with their capabilities, and certainly not before they go public, according to KKR’s Henry Kravis. Even established Wall Street firm KKR, which has begun to branch into venture capitalist investments, understands that experimentation is a delicate process that needs a lot of research and attention.

But larger companies that can afford to experiment with their innovations and company trajectory certainly make some interesting things happen. Google X, the somewhat-secret facility run by the Internet giant, encompasses a lot of projects, some of which are known, some of which are moving into becoming projects, and some of which we may not have even heard of. One of Google’s most innovative projects is its intent to create cars that drive themselves, which has recently moved from an idea stage to actual experimentation involving prototypes.

Like Google, Amazon is also working on some creative projects that could significantly change the way mail is delivered. Amazon Prime Air, so far still in its embryonic stages, is a service that will deliver mail and packages by drone. The project is innovative and would likely be efficient, but it faces the stern countenance of public opinion on the drones, which could be hazardous if not engineered correctly.

There is no guarantee that the program, or Google’s self-driving car initiative, will work: both projects carry the heavy risk of failure, but they are potential failures big companies like these are likely to withstand. Even if shareholders can hold a grudge, they are more willing to take chances on large companies than they are on small ones.

Shareholders of Google and Amazon will probably still see profit even if these ambitious projects tank. But they have a long and sturdy record of measurable progress, so their futures are relatively secure, or at least secure enough that their scopes are not limited to quarter-to-quarter activity.

It’s hard for small businesses who lack the kind of revenue garnered by Google or Amazon to think years into their futures or to tackle ambitious progress where success is not guaranteed. Thinking only from one quarter to the next has its own benefits, of course, but for the larger companies that have the resources, being able to think ahead for the long-term might yield some truly astounding innovations.

Drawing up the Future of Drones

Drone

Amazon has submitted a patent for aerial delivery drones that are able to track the recipient by their smartphone’s GPS. Already news outlets are hypothesizing how creepy this will be, with a horde of drones stalking customers to deliver them their box set of Game of Thrones.

Right now, Google and Amazon are the two companies primarily staking out drone us in the US, but inevitably the law will catch up as more smaller companies take to the skies. Here are a few problems that will have to be solved, and such solutions provide a possibility for entrepreneurs.

Drone Insurance

It seems obvious, and already companies are jumping to expand their businesses to include specialized insurance for aerial unmanned vehicles. Just Google “Aerial Drone Insurance.” The business will inevitably changes as cities and states begin to enact their own requirements for drone insurance—insurance for civilians and property injured or damaged by drones, and possibly insurance for damaging other drones. There are opportunities for businesses to offer drone insurance as well as for lawyers to specialize in relevant laws, existing and future.

Drone Zoning

In major metropolitan areas, drone traffic could increase to a point where cities enact regulations on how many drones can be present, what hours drones can operate, and possibly restrictions on where drones can operate. In large enough cities, one can imagine concerns about a mini Kessler Effect where the skies are too crowded with drones with many concerns about mid-air drone collisions. (There can’t be an actual Kessler Effect because debris doesn’t float this close to earth, it falls.) This leaves room for law firms to help have a guiding hand in crafting legislation that strikes a balance between private and public interests.

Additional Drone Services

Drones are ideal for delivering all manner of products, not just those sold by Amazon and Google. With apps like Eat24 and Grubhub popular, it makes sense that such apps could make use of drones—they could either develop their own or outsource their drones to a third party.

Moreover, computers aren’t always the best at plotting routes or dealing with unstable conditions. There’s a market space for companies that have actual humans manning drones, for areas that have regular bouts of inclement but navigable weather or for cargoes that are time sensitive or have a very particular place they need to be delivered (such as drones carrying urgent medical supplies, to hospitals or emergency areas).

Not only will drones drastically affect the legal landscape, but they will also change the landscape of what we expect from companies and our skies. If the internet was the Wild West of the 90s, we’re now entering the Wild West of the skies. For better or for worse, the skies will be tamed and legislated, so it’s better to become involved in that process earlier rather than later.

Is Twitch The Next ESPN? Examining Amazon’s $1.1 Billion Purchase

On Monday August 25th, Amazon inked a $1.1 billion deal to acquire Twitch, the most popular website for watching popular video game streamers. In the following weeks, some have wondered about the potential of Twitch and whether it was worth the hefty price tag. Analysts appear to think Twitch will live up to the hype, some going as far as to draw comparisons between Twitch and popular sports network ESPN.

But what is Twitch and how does it really work? Twitch.tv is the world’s most popular website where visitors watch other users – called streamers – play popular video games. A typical Twitch video will include a real-time screen capture of a streamer’s screen while playing a game, as well as a video feed on the gamer’s face and a text window where streamers and viewers can communicate.

The site is monetized through subscriptions and advertising revenue. Users can purchase subscriptions to certain streams to watch their favorite gamers, which provide some revenue to streamers. Additionally, some streamers gain ad revenue from hosting their streams on Twitch—some make more than a living wage just from ad revenue.

There is a wide range of variety of the content on Twitch; some streamers are average gamers cracking jokes and enjoying their favorite video game; others are professional video gamers who rake in million dollar prizes at e-Sports competitions.

Twitch owes some of its success to the rise in popularity of e-Sports, the popular term for professional gaming. Some of Twitch’s most popular events involve live broadcasts of highly popular games like League of Legends and DOTA 2, bringing in views in number similar to that of traditional sporting events. These gamers also offer streams of their practices and invite spectators to ask questions about gaming techniques and strategy—think going to an open practice for a professional sports team, except more involved.

Twitch’s data might help many understand why Amazon was willing to open its wallet to purchase the website. During the month of July, there were more than 55 million unique visitors to the site. In October 2013, Twitch broadcasted a championship tournament for League of Legends and its viewership peaked at 8.5 million simultaneous viewers.

What’s even more impressive is that Twitch has achieved such greatness is such a small amount of time—Twitch launched in June 2011, a mere three years ago. However, it remains to be seen whether Twitch’s wild success will continue and whether it will make Amazon happy with its purchase in the long-term.

What do you think about this purchase? Would you watch an e-Sports competition?

Google Using Big Plan to beat Amazon in Delivery

Google Vs. Amazon

Google Vs. Amazon

Though over the years Google has experimented with letting consumers buy goods with services like Google Wallet or Google Checkout, it has now accelerated this strategy with Shopping Express. The new service allows shoppers to buy things from local retail stores through Google, and then delivers them from the physical retail store on the same or next day.

Google executives have set aside as much as $500 million to expand the service nationwide. “You can very much expect that we are putting a lot of money into this and we’re excited and willing to sustain that investment over time as this gets going,” said Tom Fallows, head of Google Shopping Express.

It’s not hard to see why grocery chains may be more enthusiastic to get on board with Google than with Amazon. Amazon Fresh does deliver from some local stores, but its core produce comes from Amazon’s own warehouses. Google Shopping Express, however, sources all its groceries from local stores, allowing shoppers to support their local stores while enjoying the convenience of online shopping. By going local, Google Shopping Express has become a much more appealing partner than Amazon for every local supermarket chain in the country.

“We think that helping close the loop on locally available items is a really important part of making sure Google is the best place to shop,” Fallows said, suggesting that Google may one day show notifications to users searching for a product that is available on Express Shopping with same-day delivery.

Amazon Offers LA and NY Sunday Delivery This Month

Amazon Offers Sunday Shipping in LA and NYMaking purchasing online even easier, Amazon will start offering Sunday shipping in New York and Los Angeles starting November 17th via the Post Office. Why they aren’t offering it in Seattle where the company is based it beyond me, but I guess LA and NY are the only lucky cities.

The program will be available at no additional cost to members. Amazon plans to expand this program to other big cities next year.

Kelly Cheesenan, a spokeswoman for Amazon, said that the partnership happened because the company is looking for new ways to make deliveries more convenient. “We know our customers definitely wanted Sunday delivery,” she told ABC News. “And the U.S. Postal Service has been delivering to households for more than 200 years.”

“As online shopping continues to increase, the Postal Service is very happy to offer shippers like Amazon the option of having packages delivered on Sunday,” said Patrick R. Donahoe, Postmaster General and CEO. “With this new service, the Postal Service is now delivering packages seven days a week in select cities. Customers can expect the same reliable and valued service that the Postal Service currently provides.”

According to a report, The USPS isn’t planning on hiring more workers for Sunday delivery. The Wall Street Journal reported that Sunday shipping is “a little-known offering available to any shipper,” but Amazon is the first retailer to use this perk on such a large scale.

It seems that this Sunday shipping was introduced just in time for the holidays, hopefully they will introduce this to even more cities in the next couple of months.

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