Bidding war for Amazon’s second headquarters is underway, here’s who’s on top

The bidding war for Amazon’s second headquarters began on Monday, and several cities have already submitted their proposals. New Jersey has submitted a bid for their city of Newark, offering up what could potentially be the greatest financial incentive for Amazon—$7 billion in tax breaks.

Just last month, Amazon announced a competition to source a location for their second headquarters. Dubbing it “HQ2,” Amazon is looking to spend up to $5 billion building the new hub, which will run in tandem with the Seattle-headquarters. The city lucky enough to land the gig would gain 50,000 jobs with an average salary of $100,000.

On the surface, Newark, NJ would appear to have everything Amazon is looking for. In the suburbs of New York City, Newark benefits from an extensive network of public transportation and even has its own airport. There are 60,000 students studying in six colleges and universities across Newark. This, combined with the proximity to other large metropolises like New York City and Philadelphia, means HQ2 would have an extensive talent network to pool from for future employees. Newark has some prime office space available for development, as well as more affordable housing than New York City or Jersey City.

Monday, New Jersey Governor Chris Christie announced their bid for HQ2. According to Fortune, the proposed $7 billion in tax breaks is broken down between state and city incentives.

The state has estimated that HQ2 could bring a potential $9 billion to the economy. As such, New Jersey is offering $5 billion in tax incentives over the next 10 years, but not before the 50,000 jobs are added. The city of Newark has also proposed a tax incentive, offering $1 billion in local property tax breaks and $1 billion worth of waived wage taxes for Amazon’s HQ2 employees over the next 20 years.

Amazon is allowing cities to submit their proposals through October 19.

Nearby Philadelphia is also reported to be ranked high on Amazon’s list of prospects. The city of brotherly love also proposed a tempting financial incentive, offering 10 years of property tax abatement. However, Fortune stipulates that it is “unclear” what, definitively, Amazon will gain from the plan.

Moody’s Analytics, a subsidiary of Moody’s Corp. providing economic and capital markets analysis, released a shortlist of cities they expect to be at the top of Amazon’s list. Coming in on top was Austin, TX. Austin was followed by Atlanta, Philadelphia, Rochester, Pittsburgh, New York City and the surrounding metro area, Miami, Portland, Boston and Salt Lake City.

The study first evaluated cities based on their adherence to Amazon’s laundry list of requirements for their new location. It also chose cities based on other economic factors. Other factors included: business environment, human capital, cost, quality of life and transportation.

One city that was absent from Moody Analytics’ list was Chicago, who submitted their proposal on Monday. Although Chicago’s announcement of their eligibility on Monday lacked details, Mayor Rahm Emanuel did release a statement.

“Chicago offers unparalleled potential for future growth for businesses of all sizes and is the ideal place for Amazon to build its HQ2,” the mayor’s statement read. “This bid will demonstrate to Amazon that Chicago has the talent, transportation and technology to help the company as it reaches new heights and continues to thrive for generations to come.”

Other cities have proposed to Amazon before submitting a formal bid. Kansas City’s mayor went on a reviewing spree on Amazon products. Georgia offered up a sizable amount of land totaling to a grand 345 acres; they even said they would name the site after the company, giving birth to the new city of Amazon, GA. A company in Tucson sent Amazon a 21-foot saguaro cactus to their Seattle headquarters.

Although amusing, the LA Times points out that such strategies to catch Amazon’s attention probably won’t amount to much. After all, the retail giant’s detailed seven-page request mostly highlighted financial incentives. Such incentives could materialize in the form of land, tax credits, relocation grants, workforce grants and fee reductions. These would be critical for Amazon, considering such incentives would allow the company to build a new “mega-campus” and offset “ongoing operational costs.”

Oh, and that 21-foot saguaro cactus? Amazon tweeted that they couldn’t accept the gift, “even really cool ones.” It was donated to Tucson’s Desert Museum. Better luck next time, Tuscon.

Featured image via Flickr/Robert Scoble

Nike losing teens in footrace with Adidas, analysts say

The investment bank and asset management firm Piper Jaffray released the findings of their latest biannual “Taking Stock with Teens” Survey, MarketWatch reports, and apparently, Nike is losing touch with teenagers. Instead, the demographic seems to be spending more with Adidas and Amazon.

Before you throw out your swoosh-covered sweats and socks, Nike (NKE) still holds court as the top clothing and footwear brand. The survey does relay that the sportswear giant is among the top brands that experienced the largest declines. Other household names that suffered sharp declines include: Ralph Lauren (RL); Steve Madden (SHOO); Ugg, (DECK); Fossil (FOSL); and Michael Kors (KORS).

Under Armour (UAA)  also took a hit from the survey, with teen males ranking it as the No. 1 brand classified as “old.” According to CNBC, Under Armour only got one vote among upper-income females as a brand favorite. Nike vs. Adidas aside, it actually seems as though the entire athleisure trend is beginning to lose favor with the teenage demographic. Only a third of teens chose athletic apparel as their preferred fashion pick, down 40 percent from last year. The overall trend moved towards festival fashion.

Piper Jaffray polled 6,100 teens across 44 states for the survey. The average participant’s age was 16; the average household income was $66,100.

After examining the results, analysts were most surprised by Nike’s decline compared to Adidas’ (ADS) surge in popularity. Adidas “doubled its mindshare,” going from 2 percent to 4 percent. Even with their rise, Adidas didn’t fully offset Nike’s losses.

“Overall, larger brands are ceding share for small brands,” Piper Jaffray analysts noted.

Analysts highlighted brands like Vans (VFC) and Supreme as rising in popularity.

Other familiar names ranked highly in the survey as well. Starbucks’ (SBUX) siren call resounded with teens from upper-income households (average yearly income of $101,000) as their top restaurant; it also ranked first among teens from median income households, those bringing in $55,000. Netflix (NFLX) chilled at the top for daily video consumption. Snapchat was the fan favorite for top social media platform. Turns out that teens don’t diverge much from their grownup counterparts when shopping, picking Amazon (AMZN) as their online retailer of choice.

One reason why Amazon has consistently ranked as teen’s favorite site for the past three years could simply be that the company knows their customer base well. Recognizing the opportunity to turn teen shoppers into lifelong customers, Amazon just announced that teens between 13 and 17 years old can now shop on their site with a personal login. Parents or guardians will receive an email or text with order details. Parents can then either approve the purchase or even set limits on their child’s spending.

Christian Magoon, CEO of Amplify ETFs, pointed out that Amazon’s strategy to capture a younger demographic was good for the company’s longevity, considering entire households can now be raised using Amazon smart home products.

“Younger generations rebel against things that are static,” Magoon highlighted, reasoning that other retailers should take notes from Amazon’s strategy.

“Amazon continues to innovate and grow,” he continued. “We’re not at peak Amazon. People are still excited about what’s next.”

Overall though, teen spending is down 4 percent compared to last year, CNBC reports. Teen spending accounts for 7 percent of the country’s retail sales, amounting to nearly $830 billion yearly.

Google to counter Amazon’s Echo Show with smart screen device, sources say

Google is rumored to have a new smart device in the works, TechCrunch reports. The tabletop smart screen for the home will serve as the competitor for Amazon’s Echo Show, which has been on the market since June 2017. If true, such a device would keep Google in the smart home market race with Amazon and Facebook.

The rumors follow Amazon’s announcement Thursday of a cast of new Echos. The company now has a total of seven Amazon Echo devices to choose from. With Amazon covering all the bases in the home, and essentially ruling the current smart home market, it’s about time Google expanded from Google Home into other smart home products.

TechCrunch gathered their information from two confirmed sources, one of which received the intel from a current Google employee. TechCrunch learned that the new Google smart screen has been dubbed “Manhattan” internally. It is unclear if this will be the final launch name for the device.

As far as size goes, it appears to be measuring up with the Echo Show, with a screen around 7 inches. One source told TechCrunch that Google previously played around with much larger sizes for the smart home screen, some designs as large as television screens. For now, the plans seem to have honed in on the smaller, tabletop screen.

Manhattan will offer Youtube, Google Assistant, Google Photos and video calling. It will also be able to act as your home’s “smart hub,” connecting with other smart home devices like Nest.

The original launch date was planned for mid-year 2018. Sources report that there is “internal pressure” to get the launch date moved up after Amazon’s Echo Show. With October and the end of 2017 just around the corner, it’s probably safe to assume that the release date will remain some time in 2018. As TechCrunch points out, “establishing smart hub partnerships” and “exploring the possibility of service partnerships with Best Buy Geek Squad and Enjoy for home installation,” the many moving parts surrounding the launch for Manhattan seem to ensure a 2018 launch.

Sources told TechCrunch that Manhattan will run on a version of Android. This will ensure flexibility for third-parties to build apps for it.

What remains unclear is the final price for such a device or even the final look. As the Amazon Echo Show retails for $230, it’s possible Google’s competing device will come out at a similar price range.

Earlier this week Google removed Youtube from Amazon’s Echo Show without any warnings for current Echo Show owners. Critics claim the removal was strategic, as Youtube will be available on Manhattan. With Youtube capabilities on offer, Manhattan owners would be able to stream music videos from Youtube or watch live cable channels on Youtube TV.

It’s too soon to tell if this would give Manhattan enough of an edge to topple the Echo Show. Many disagree with such a prospect. Fast Company has said that once the mystery device finally arrives on the market, assuming it will, “Amazon will already be a step ahead with its second-generation Echo speaker and new devices like the Echo Spot.”

With a biting finish, Fast Company challenges Google’s ingenuity, claiming that Google should stop “lifting ideas” from Amazon and start bringing to market fresh perspectives of their own making.

Uber’s success in food delivery sector is a “wonderful surprise,” CEO says

As Uber’s new CEO, Dara Khosrowshahi looks to guide the company back to stability after a flurry of corporate upheaval and operational stumbling blocks. Khosrowshahi says the success of the company’s food delivery arm, UberEats, has been a “wonderful surprise,” The New York Times reports.

According to the Times, Uber’s aid UberEats generates more revenue than its ride-hailing operations in certain markets, including Tokyo; Taipei, Taiwan; and Seoul, South Korea. Average daily deliveries grew by a factor of 24 from March 2016 to March 2017.

Uber’s first forays into the food delivery market came in 2014, when UberEats’ predecessor, UberFresh, launched in Los Angeles. Food quality issues born as a result of the way drivers transported the food, along with the limited selection of available restaurants, checked the success of that operation.

In December 2015, UberEverything, the division that handles food delivery and a number of other projects for the company, launched the UberEats app in Toronto. As the service succeeded, it expanded its sales force, partnered with more restaurants and made inroads in additional locations.

Today, UberEats is available in 120 markets. Uber declined to disclose the amount of revenue the service has generated, but the Times says top executives at the company are excited about growth potential in the food delivery sphere.

Several other companies beat Uber to that market, which is worth $100 billion today. Postmates, a delivery service that launched in 2011, employs more than 100,000 drivers, performs 2.5 million deliveries every month, and has raised over $250 million, according to the Times.

GrubHub, another giant in the food delivery sector, has been operational for 13 years, and reported over $3 billion in “gross food sales” in 2016, the Times says. The company serves 8.17 million customers.

GrubHub’s founder and CEO, Matt Maloney, said Uber has spread itself too thin to pose any real threat to his and other established companies within the food delivery sector.

“Uber has built a great company focused on black car service and human transportation, but succeeding in food delivery is a different game,” Maloney said in a statement, per the Times. “We are known for one thing only — takeout ordering — and we have engineered our entire product around this purpose.”

But Uber believes its experience in ride-hailing can translate into a competitive advantage over single-focus companies like GrubHub.

Uber already employs about two million drivers worldwide, the Times says. As UberEats continues to grow, that network will grow as well. As the Times notes, the potential labor pool from which UberEats can pull its employees is wider than that which is available to the company’s ride-hailing business.

While Uber vehicles that carry passengers must meet a laundry list of regulative criteria, guidelines governing the transport of food are more relaxed. In fact, UberEats delivery people are not required to own a car. Many make their deliveries on bikes via a service called UberBike.

Moreover, Uber has spent the last decade or so identifying the most efficient routes from point A to point B in cities all around the world. The company believes it can harness that knowledge to shorten delivery times.

“What Uber has are the last-mile logistics, and that’s crucial,” James Cakmak, an analyst at the equity research firm Monness, Crespi, Hardt & Company who follows the food delivery space, said per the Times.

UberEats has turned to partnerships to further expand its network of available restaurants. In May, the company inked a deal that allowed it to deliver food from over 1,000 McDonald’s locations, the Times says. Lucy Brady, a McDonald’s executive, said in July that the fast-food chain was pleased with the fruits of the alliance so far.

The already-crowded food delivery sector is preparing for the arrival of Amazon, which acquired Whole Foods earlier this year. Many of Whole Foods’ 460 locations already offer a cafeteria-like buffet stocked with freshly prepared food, and Amazon could hire drivers to deliver that food, the Times points out.

Cakmak adds that Amazon, whose business model is based largely on offering the lowest possible prices, has the resources to match or undercut the prices of competitors in the food delivery sphere.

“The number-one concern for all of these delivery companies is Amazon,” he said, per the Times.  “How could Amazon use its network to crush our business? They have the logistical network and the balance sheet to be able to compete on the price side with all of these players.”

Khosrowshahi plans to take Uber public within the next 18 to 36 months.

Featured image via Flickr/Guillermo Fernandes

Amazon glitch gives customers big news

Amazon sent several customers e-mail alerts Tuesday notifying them that items on their baby registries had been purchased and were on the way, MarketWatch reports.

But, many who received the e-mails did not have registries and were not expecting babies. Some such customers assumed the messages were spam and did not click the link provided. Those who followed the link were directed to a broken page, according to MarketWatch.

An informal poll conducted in the Fortune office indicated that most people who received the e-mail did have registries via Amazon. MarketWatch says such customers clicked the link to find that nothing on their registries had in fact been purchased.

“A technical glitch caused us to inadvertently send a gift alert e-mail earlier today,” Amazon said in an e-mail to affected customers. “We apologize for any confusion this may have caused.”

Customers who received the e-mail in error took to social media. All were baffled. Some were amused. Others were offended.

Several hoped their non-existent babies had received alcoholic beverages.

“It better be wine cause I’m definitely not pregnant,” one woman tweeted.

A man who received the email expressed a similar wish. “Amazon notified me that someone bought a gift from my baby registry. Shocked to learn I’m a father; hope his wishlist was mostly bourbon,” he wrote.

Washington Post reporter Karen Tumulty, who also received the e-mail in error, tweeted: “My baby is 21, and hopes it’s a keg.”

Some took sheer delight in Amazon’s miscue. In a tweet directed at the company, one woman wrote: “Please don’t fire the person who accidentally sent all those baby registry emails, it was really funny and made my day.”

Of course, Amazon’s statement implies the culprit was not a person but a misguided piece of software.

Some have joked that Amazon’s software, which collects extensive data on customers, perhaps knew users were pregnant before users themselves did.

One woman tweeted: “Me: *opens email* Amazon baby registry gift? But I’m not pregnant. Amazon’s new AI program: that’s what you think.”

Some women who are infertile or have miscarried took offense at the blunder.

“Pro tip @amazon & @amazonregistry,” one woman wrote. “Don’t send infertile women who’ve miscarried notices for gifts for a baby registry they don’t have.” The woman asked for an apology and an explanation from Amazon.

Glitches are rare for Amazon but do happen. In mid-July, on Prime Day, a 30-hour sales event during which Amazon offers promotions to members of its benefits program, the company’s website fell victim to slowdowns and other quirks.

Some customers saw error messages when they tried to add items to their digital “carts.” Others reported getting multiple “Prime Savings” discounts on a single item.

Amazon’s system unintentionally discounted several video games. Some PlayStation 4 games were listed for as little as $12.

The sale is among Amazon’s busiest events of the year. Mehdi Daoudi, CEO of Catchpoint, a firm that collects traffic and speed data for websites, said that, overall, Amazon, which is renowned for its ability to accommodate spikes in site traffic, managed the frenzy well.

“As usual, Amazon is handling the extra load very well, despite the fact that their web pages got heavier than usual with all the Prime Day product images,” he said per Digital Commerce 360.

While Tuesday’s Amazon glitch concerned the gift of new life, a blunder by Facebook last November involved the other end of the life cycle. The social media giant erroneously flagged some profiles with messages saying their owners were dead.

The bug even killed off Facebook founder Mark Zuckerberg, Engadget notes. A banner on his profile read: “We hope people who love Mark will find comfort in the things others share to remember and celebrate his life.”

Here in the 21st century, of course, we live and die by technology.

Featured image via Pixabay

Best Buy is quietly thriving in an Amazon world

In an eCommerce age in which every brick-and-mortar enterprise is expected to roll over and die, Best Buy is adapting to the changing market. Under the guidance of CEO Hubert Joly, Best Buy is engineering an impressive turnaround, the New York Times reports.

According to the Times, Best Buy’s revenue has exceeded analysts’ expectations in six of the last seven quarters. The company’s stock has climbed more than 50 percent over the last 12 months.

Joly took the reins at Best Buy in 2012, as Amazon was capturing an increasing share of the retail market, and the iconic brick-and-mortar chain was struggling to keep up. The practice of “showrooming,” which involves customers testing and trying a product in a physical store, then buying it at a lower price online, was increasingly cutting into Best Buy’s sales.

So, the Times says, Joly instituted a price-matching guarantee so that customers who came in to check out a given product could feel comfortable buying it in-store.

“Until I match Amazon’s prices, the customers are ours to lose,” Mr. Joly said.

In order to slash prices, of course, one must cut costs. In fact, as the Times says, cutting costs is integral to the recovery of almost any struggling business. But, rather than induce a huge, public wave of layoffs, which would have crippled morale amongst employees and given shareholders the impression that the company was on thin ice, Joly quietly let go of extraneous employees at the middle management level. Rather than closing a massive number of stores, he waited for leases to run out at unprofitable locations.

Joly eliminated 400 Geek Squad positions that involved assisting customers remotely, via phone or internet chat. Rather than firing the employees who filled those positions, though, he offered them reassignment within the company.

“Taking people out is the last resort,” said Joly in 2015, according to the Times. “Because you need to capture the hearts and minds of the employees.”

One measure he took to recapture those hearts and minds was to reinstate an employee discount, the Times says.

Joly knows that Best Buy’s employees—and their ability to provide human interaction at the point of sale—give the company a competitive advantage over Amazon. Best Buy representatives serve as approachable, flesh-and-blood intermediaries between customers and the often-intimidating world of consumer electronics.

In an effort to double down on customer service, Joly retrained employees to improve their knowledge of cutting-edge devices like smart home appliances and virtual reality headsets. He expanded the Geek Squad overall, reassigning many of the aforementioned remote employees to roles in which they provide in-home consultations to customers, recommending products and installation techniques.

Best Buy tested the in-home program in select locales last year; now, it is going nationwide.

The company has also revamped its eCommerce operations, making shipping more efficient. Before Joly stepped in as CEO, Best Buy shipped all items ordered online from centralized warehouses. Joly gave stores themselves the means to ship products. Effectually, Best Buy stores are now also miniature shipping warehouses.

When a customer orders a product online, it is shipped from whichever location will provide the fastest delivery, whether that location is a nearby store or a traditional warehouse.

In an effort to turn the “showrooming” phenomenon to his advantage, Joly reimagined the manner in which items were displayed in his stores. He gave iconic electronics manufacturers like Apple, Microsoft and even Amazon their own kiosks in Best Buy stores. High-demand items are prominently displayed, and customers are excited about browsing the store.

Many factors beyond the company’s control have further spurred its revival. With competitors including Circuit City, Radio Shack, and HH Gregg having gone bankrupt or closing their doors, Best Buy is among the only brick-and-mortar electronics retailers left, the Times notes.

Many people remain reluctant to make big-ticket purchases online, so Best Buy’s highest-priced products are still in demand.

The company depends on manufacturers to continue to make products that create a buzz amongst customers. As Joly implied on the August earnings call, that dependence means Best Buy’s performance will ebb and flow with the popularity of new gadgets.

“They’re at the mercy of the product cycles,” said Stephen Baker, a tech industry analyst at NPD Group, per the Times. “If people stop buying PCs or they don’t care about big-screen TVs anymore, they have a challenge.”

Featured image via Flickr/Mike Mozart

Amazon is taking applications to determine the location of its second headquarters

Amazon announced Thursday that it intends to build a second headquarters facility in North America, The Washington Post reports.

The new location will be “a full equal” to the company’s existing Seattle hub, CEO Jeff Bezos said in the announcement. Amazon will spend more than $5 billion on its new home, which will employ more than 50,000 people making an average salary of $100,000 per year. In addition to the 50,000 long-term jobs, Amazon’s new facility will create “tens of thousands” of ancillary, temporary gigs, the company says.

The company has yet to pick an exact location for the new campus and is allowing state and local governments to apply to host the new site. The application period will run through October 19, and Amazon will announce its decision next year.

The application process is open to any metropolis in North America. Chicago, Philadelphia, Toronto and other cities have already indicated intentions to apply, according to the Post. Amazon did not explicitly comment on how willing it would be to move to Canada or Mexico but did use the word “province” several times in the statement, Jed Kolko, the chief economist at indeed.com, notes per the Post.

In addition to offering jobs, the $474 billion tech giant intends to make investments in the surrounding community. The company says its investments in Seattle boosted the city’s economy by $38 billion from 2010 to 2016.

With the potential benefit to the local economy of housing an Amazon headquarters so high, the company will seek tax breaks and other incentives. The Post cites data collected by Good Jobs First showing that Amazon received $241 million in subsidies to support the building of new facilities in 29 U.S. cities in 2015 and 2016.

Many analysts believe that by initiating an application process, Bezos intends to spur a bidding war between governments throughout the continent.

“This was like an open letter to city leaders saying, ‘Who wants Amazon and all our jobs?’” Brad Badertscher, an accounting professor at the University of Notre Dame, told the Post. “This is Jeff Bezos doing what he does best: adding shareholder value and getting the most bang for the buck.”

Amazon said it is taking applications because it “wants to build the new headquarters in “a city that is excited to work with us and where our customers, employees, and the community can all benefit.”

Though plenty of cities appear to be “excited to work with” Amazon, the Post points out that Amazon’s presence in a given locale is not without drawbacks. Though the company has contributed tens of billions of dollars to Seattle’s economy, the giant’s rise has also precipitated gentrification in the area. The Post cites The Seattle Times as noting that the median home price in the Seattle area has jumped from $605,900 to $730,000 in the past 12 months—a 17 percent increase.

Moreover, traffic problems have surfaced and some say Amazon’s presence has compromised Seattle’s culture and “changed the city for the worse.”

Rita McGrath, a professor at the Columbia Business School in New York, points out, per the Post, that Amazon may choose to build its second home in an area where the cost of living is more moderate than it is in Seattle.

“It’s hard to attract people [i.e., potential employees] if they can’t afford the housing available locally,” she said.

Amazon has said it wants the new facility to be near a metropolitan area with a population of at least one million and a thriving tech industry from which the company can pull talent. The new digs will need to be within 45 minutes of an international airport, with direct access to mass transit.

Kolko notes that an east coast location would balance Amazon’s presence throughout the continent and put the company closer to its European operations.

Amazon also seeks at least eight million square feet (183.65 acres) worth of land—it plans to expand the new facility over the next decade. The Seattle campus spans 8.1 million square feet (185.95 acres).

The company needs the room, the Post notes. It plans to add 100,000 employees by the middle of next year and already employs 380,000 people worldwide. New Amazon packing and shipping facilities are coming to New York, Ohio and Oregon. And, the company just bought Whole Foods—and its 465 stores—for almost $14 billion (Whole Foods’ headquarters could not accommodate Amazon, the Post says.)

Featured Image via Max Pixel

Best Buy shares plummet despite strong earnings report

Best Buy’s quarter two earnings report, released Tuesday, shattered analyst expectations, Bloomberg reports. But, the company’s stock has plummeted on CEO Hubert Joly’s warning that the sales growth may not be sustainable.

Joly cautioned on the earnings call, per Bloomberg, that investors should not expect comparable sales growth to continue at its second-quarter rate.

As of 12 pm ET Tuesday, Best Buy shares are down 11 percent since the market closed Monday.

For quarter two, the company reported comparable sales growth of 5.4 percent, more than twice analysts’ expectations of 2.1 percent. Quarter two marks the chain’s best comparable sales growth since quarter four of fiscal 2010, Bloomberg reports.

Non-GAAP diluted earnings per share jumped from $0.57 to $0.69 year over year, an increase of more than 21 percent. Sales revenue rose almost five percent year-over-year, from $8.53 billion to $8.94 billion, and came in 3.2 percent above analysts’ expectations of $8.66 billion.

Despite Joly’s warning, Best Buy has revised its full-year comparable sales growth target from 4.5 percent to 5.5 pecent and raised Non-GAAP diluted EPS targets to $0.80/share from $0.75/share (an increase of more than 6.5 percent).

CFO Corie Barry expects “continued positive industry and consumer momentum,” she said in a statement, per Bloomberg, adding that product launches throughout the fall and the holiday season should have a positive impact on Best Buy’s performance.

Still, Barry offers a word of caution regarding the future—particularly the holiday boom, during which discounts and other promotions, Bloomberg points out, cut into the bottom line.

“You can’t always carry trends forward into the fourth quarter,” she said on the call, per Bloomberg. “…there are still a lot of unknowns.”

Best Buy’s success this summer comes as a number of hot new tech products hit the shelves. Nintendo’s new gaming platform, the Switch, and Samsung’s new phone, the Note 8, presumably played a role in boosting Best Buy’s sales numbers, Bloomberg notes.

Sales of smart home devices like the Google Home and Amazon’s Alexa increased as well, as Best Buy made an effort to showcase such devices. Sales of “wearables” like the Apple Watch also climbed.

According to the earnings report, though, pricing pressure in the mobile phone market drove down margins on products like the Note 8, and wearables are inherently low-margin products. A decline in sales of tablets, which are high-margin items, further limited profits.

Still, gross profit increased 4.4 percent, from $2.06 billion to $2.15 billion, while gross profit percentage (i.e. the percentage of revenue that becomes profit) remained flat.

Best Buy’s online revenue increased 31.2 percent “on a comparable basis,” according to the earnings release, while online sales accounted for 13.2 percent of total domestic revenue, an increase from 10.6 percent a year ago.

The company’s online revenue was higher than it has ever been, except during a holiday quarter, Bloomberg reports.

Still, experts doubt whether Best Buy can continue to compete with Amazon, which, according to a consumer survey by Gordon Haskett analyst Chuck Grom (cited by Bloomberg), now controls more than half of online sales across 11 key categories, including electronics and small appliances.

“They are going to get perfect quarters like this every now and again,” Brandon Fletcher, an analyst at Sanford C. Bernstein & Co., said of Best Buy, per Bloomberg.

The company “will continue to face waves of growth and decline,” Fletcher added, “but its base products — printer ink, headphones, etc. — are not related to product launches and those sales are inexorably moving to Amazon and Wal-Mart online.”

Best Buy has succeeded in the stock market despite increasing pressure on the eCommerce front. At Monday’s close, shares had increased more than 60 percent in the past year.

But the company’s own management has asked investors to temper their enthusiasm, and investors are obliging.

Featured Image via Wikimedia Commons

Amazon will take control of Whole Foods Monday, slash prices

Amazon announced in a press release Thursday that it will take control of Whole Foods beginning Monday, The New York Times reports. When Whole Foods stores open Monday, shoppers will see lower prices on a number of products, including bananas, eggs, salmon, tilapia, Fuji and Gala apples, and almond butter.

“We’re determined to make healthy and organic food affordable for everyone,” Jeff Wilke, the executive who runs Amazon’s consumer businesses, said in the press release. “Everybody should be able to eat Whole Foods Market quality we will lower prices without compromising Whole Foods Market’s long-held commitment to the highest standards.”

Wilke said the price cuts to be implemented Monday are “just the beginning” of an effort to “continuously lower prices” at Whole Foods.

In the near future, the release says, Amazon Prime will function as a Whole Foods rewards program, and Prime members will “receive special savings and in-store benefits.”

Competitive pricing is a cornerstone of Amazon’s business model. The company, the Times notes, has made a habit of delighting the consumer even at the expense of its own shareholders, and even its bottom line.

Amazon’s low prices also help appease regulatory agencies like the FTC, which approved Amazon’s acquisition of Whole Foods Wednesday.

“At the end of the day, the FTC is in the business of watching out for the consumer,” said Brendan Witcher, a retail analyst at Forrester Research, per the Times.

Of course, in order to cut prices, Amazon will need to cut costs.

Though Amazon has been developing automation technology meant to reduce the need for human labor, the company has pledged that its acquisition of Whole Foods will not jeopardize the jobs of Whole Foods employees. According to the press release, Whole Foods will “continue to grow its team and create jobs in local communities as it opens new stores, hires new team members, and expands its support of local farmers and artisans.”

Rather than cut labor costs, Amazon and Whole Foods will “invest in additional areas over time, including in merchandising and logistics, to enable lower prices for Whole Foods Market customers,” the release says.

The press release says Amazon values “customer obsession rather than competitor focus,” but the company’s ever-falling prices have historically made things difficult on competitors. In the past, the Times points out, Amazon has started price wars with Barnes & Noble and Walmart. After diapers.com failed to match Amazon’s prices, diapers.com parent company Quidsi agreed to a buyout deal.

Meanwhile, Whole Foods’ high prices have been its primary competitive disadvantage to low-cost, high-volume operations like Walmart and Costco. Many experts expect the Whole Foods-Amazon deal to send competitors reeling as Whole Foods quality becomes available at Amazon prices.

“I absolutely think it’s putting the rest of the market on notice,” Bob Hetu, an analyst at Gartner, the technology research firm, said, per the Times, of Amazon’s announcement on pricing.

Walmart stock dropped 2 percent Thursday following the announcement. Kroger’s shares fell 8 percent.

Walmart is making its own push to slash prices. Last year, the Times says, Walmart allocated millions of dollars toward the effort.

Walmart is also taking steps to increase its online presence in the grocery sphere and elsewhere.

Google Express, which fashions itself as an Amazon competitor, now sells a number of Walmart products.

Moreover, Walmart’s market share in the grocery space far exceeds that of Whole Foods. With 4,600 stores, Walmart is the nation’s largest grocer. Whole Foods has just 460 stores.

“We feel great about our position with our network of stores around the country and fast growing e-commerce and online grocery businesses,” said Randy Hargrove, a spokesman for Walmart, per the Times.

Stew Leonard Jr., chief executive of a regional grocery chain that operates six stores throughout New York and Connecticut and, like Whole Foods, aims to provide the freshest available produce, says his business has seen and survived a procession of upheavals in the market.

“I’ve been in retail since I was a kid, and I’m always nervous,” he said. “Costcos were opening, then Walmarts, then Whole Foods. But at the end of the day, you just have to try and get the freshest corn out there on the sidewalk.”

Many expect Amazon to leverage the Whole Foods acquisition to grow its online grocery delivery services like AmazonFresh, which has operated for over a decade with limited success.

Per the press release, Amazon will sell proprietary Whole Foods brands—including 365 Everyday Value, Whole Foods Market, Whole Paws and Whole Catch—through Amazon.com, AmazonFresh, Prime Pantry and Prime Now. Amazon implies that Whole Foods brands will be available on said sites beginning Monday.

According to the Times though, most consumers still prefer to buy their groceries at brick and mortar stores rather than online.

Amazon will also install its Amazon Lockers in some number of Whole Foods stores so that customers can pick up and return items purchased from Amazon at their local grocery stores.

Featured image via Pixabay

FTC approves Amazon’s acquisition of Whole Foods

Wednesday, the Federal Trade Commission (FTC) signed off on Amazon’s purchase of Whole Foods, The Washington Post reports. The $13.7 billion deal, which Amazon announced in June, is scheduled to take effect by the end of the year.

The FTC said in a statement that it had examined the “proposed acquisition to determine whether it substantially lessened competition.”

The deal would give Amazon 2% of the US grocery market, according to the Post. Walmart, which is among Amazon’s fiercest competitors in the grocery space and elsewhere, holds 20% of the market; Kroger has 7%.

Last year, Walmart generated $200 billion in revenue via grocery sales, the Post says. Kroger reported $115.3 billion worth of revenue in 2016. Whole Foods’ annual revenue approaches $16 billion.

“Based on our investigation,” the FTC says, “we have decided not to pursue this matter further.”

According to the Post, some have called upon regulators to amend antitrust laws to accommodate a corporate climate in which companies like Facebook, Google, and Amazon continue to grow.

The Post notes that the approval of the merger is the FTC’s first major action since President Trump took office in January. Trump has accused the eCommerce behemoth of shirking its taxes, fostering speculation that he might push the FTC to block the deal.

“Amazon is doing great damage to tax paying retailers,” Trump wrote on Twitter August 16. “Towns, cities and states throughout the U.S. are being hurt — many jobs being lost!”

Per the Post, Amazon reported paying $412 million in income taxes last year, $273 million in 2015, and $177 million in 2014. Though many states do not levy sales taxes on online retail transactions, Amazon collects sales tax in states where it is required to do so.

Whole Foods shareholders approved the acquisition earlier Wednesday. It is by far Amazon’s largest takeover to date, the Post reports.

In 2009, Amazon acquired online shoe retailer Zappos for $1.2 billion, and in 2014 the Seattle-based giant snatched up video game streaming site Twitch.

With the Whole Foods deal, Amazon, which has been closing in on brick-and-mortar commerce with services like Instant Pickup and PrimeNow, will enter a grocery sector that is struggling to keep up with changes in the ways consumers buy food. Over the last three years, the Post says, almost 20 grocers have filed for bankruptcy, largely because online food delivery services like FreshDirect are capturing an increasing share of the market.

Amazon has not disclosed its plans for Whole Foods as yet, but some have speculated that the tech company intends to build an online food delivery operation of unprecedented scale.

There are also whispers that Amazon will integrate Whole Foods into Instant Pickup. Customers could order groceries on their way to the store, then pick up their food as they walked in the door. Amazon could also use some or all of Whole Foods’ 460 brick-and-mortar stores as Instant Pickup warehouses and pickup centers.

Some warn that the takeover may jeopardize Whole Foods’ employees. As Amazon increasingly embraces automation and potentially looks to change the manner in which Whole Foods operates, staffing needs could change, leading to layoffs and personnel turnover.

“Amazon’s acquisition is a threat to Whole Foods workers and their families,” Marc Perrone, president of The United Food and Commercial Workers International Union, wrote in a letter to Whole Foods executives, per the Post. “They deserve a clear commitment from the entire board that their jobs, wages, and benefits will be protected from Amazon’s automated business model.”

John Mackey co-founded Whole Foods in Austin, TX in 1980, and remains its CEO today. The grocery chain is renowned for its favorable compensation and treatment of employees, most of whom earn more than minimum wage and benefits, according to the Post.

“Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades — they’re doing an amazing job and we want that to continue,” Amazon CEO Jeff Bezos said in a statement in June.

Featured image via Flickr/Mike Mozart

Multiple law firms propose class-actions against Blue Apron as shares fall

A host of law firms have proposed class actions against Blue Apron accusing the company of misleading its shareholders, TechCrunch reports. Bragar Eagel & Squire, P.C. filed one suit, which is more or less a case example of the others, claiming Blue Apron reduced ad spending without notifying shareholders and concealed order-delay obstacles and the resultant customer-retention problems.

Quoted from the suit, per TechCrunch: “1) Blue Apron had decided to significantly reduce spending on advertising in Q2 2017, hurting sales and profit margins in future quarters; (2) Blue Apron was experiencing difficulty with customer retention due to orders not arriving on time or with all expected ingredients; and (3) the Company was experiencing delayed orders in Q2 2017 related to its new factory in Linden, New Jersey.”

Blue Apron stockholders have until October 16 to apply as plaintiffs in that suit. Most of the other suits are seeking plaintiffs as well.

The online food delivery has seen its shares drop almost 45 percent since its June 1 IPO. Many analysts have attributed Blue Apron’s struggles to Amazon’s acquisition of Whole Foods, announced in June.

One SeekingAlpha writer argues Amazon will enter the meal-kit space with a more efficient business model that will appeal to a wider range of consumers.

Blue Apron’s subscription-based model, according to the SeekingAlpha piece, requires a degree of commitment that customers are not willing to make. Blue Apron meal kits show up on a customer’s doorstep every week, whether the customer wants them or not. The demographic to which such a system would appeal is small.

Moreover, the subscription model saddles a company with the challenges of adding and retaining customers.

In contrast, Amazon could allow customers to purchase meal kits at any time, and could then deliver the goods to the customer’s door in a matter of hours. Customers could place combined orders containing, for instance, a few meal kits, a few fresh bananas, a bag of basmati rice and, say, a phone charger. The SeekingAlpha piece holds that the consumer market for on-demand food delivered within hours, without a prolonged commitment, outnumbers the market for steady, weekly deliveries.

SeekingAlpha calls BlueApron “one of this [online food delivery] bubble’s most famously disastrous IPOs. TechCrunch notes that shareholders often sue a company in the wake of a disappointing IPO.

“As soon as the stock goes down like that, the lawyers come out,” said Kathleen Smith, a principal at Renaissance Capital, per TechCrunch.

After Facebook went public on May 18, 2012, with a $16 billion IPO valuation—one of the largest in tech history—its stock dropped more than 38 percent in the first year. IPO investors threatened to sue the company over improper disclosure allegations similar to those law firms are making against Blue Apron. In the Facebook case, a judge ruled that because the plaintiffs had not acquired their shares prior to Facebook’s alleged misconduct, they had no grounds on which to bring litigation against the company.

Facebook offers an example of how a company can thrive despite an underwhelming IPO. Since Facebook stock hit its lowest point (23.63/share) on June 14, 2013, it has soared by more than 600 percent. Today, it is worth almost $170/share.

In May, two months after Snap’s early-March IPO, a new shareholder sued the company for wrongfully inflating its user metrics. At the time of the lawsuit, Snap’s stock had fallen more than 25 percent since the IPO. That suit, like those proposed against Blue Apron, pursued class-action status. By all indications, the case has yet to reach any conclusion.

Snapchat stock has continued to drop. Since the suit, it is down almost 30 percent. Today, shares cost just over half of their IPO value.

For all the lawsuits with which shareholders traditionally bombard companies struggling in the wake of their IPOs, few ever go to trial. The plaintiff, according to TechCrunch, must prove that company made “material” false statements and that the plaintiff relied on them. That burden generally proves too heavy. Most post-IPO shareholder suits are either thrown out or settled out of court.

Featured image via Wikimedia Commons

Amazon Instant Pickup will give customers their orders in two minutes

In this age of instant gratification, eCommerce retailers like Amazon face a dilemma. A consumer can make a purchase in seconds with a few clicks of a mouse or taps on a screen—it doesn’t get much more instant than that. Then, though, customers must wait for days or weeks before they get their hands on the purchased item.

It is arguably the last advantage brick-and-mortar stores have over the eCommerce industry: when customers make a purchase at a physical store, they can walk out with the item(s) in hand.

So, Amazon is making a continuous effort to shorten delivery times—to close the gap between the “buy now” click and the unboxing of the goods. In October 2014, the company launched a same-day pickup service which allowed customers to pickup items ordered before 11:45 am by 4:00 pm the same day, at one of a number of locations throughout the nation and around the globe.

A few months later, the company rolled out PrimeNow, through which Amazon Prime customers in select locations can get household essentials like paper towels and shampoo, small items like books and toys, and even big-screen televisions delivered to their doors in two hours at no added cost, and in one hour for an additional $7.99. Amazon even partnered with restaurants and grocery stores in certain markets to offer delivery from those locations.

Tuesday, the giant announced another leap forward, Reuters reportsAmazon Instant Pickup. The service lets customers pick up their orders within two minutes. It is currently operational only in Berkeley, CA and Los Angeles, CA, per Amazon’s website. According to Reuters, the program will expand to college campuses in Columbus, OH; College Park, MD; and Atlanta, GA in the near future, and to additional locations by the end of the year.

When a buyer places an Instant Pickup order, an Amazon employee culls the purchased item from the shelves and puts it in a locker, which is sealed using a unique bar code. When the customer arrives at the pickup location, they can scan the barcode, open the locker, and retrieve the item.

Amazon considered automating the fulfillment process, Reuters says, decided against doing so at this time. Automation could occur down the road, though.

The service will cater toward impulse buyers: the majority of the several hundred different products available at Instant Pickup locations will be high-volume, quick-purchase items like phone chargers, snacks, and drinks. The last two offerings will make Instant Pickup an alternative to vending machines.

“I want to buy a can of coke because I’m thirsty,” said Ripley MacDonald, Amazon’s director of student programs, per Reuters. “There’s no chance I’m going to order that on Amazon.com and wait however long it’s going to take for that to ship to me.”

That is, MacDonald says, until Instant Pickup came along.

However, Forrester analyst Amanda Chakravarty told Reuters that while the new service will be convenient for some items, vending machines will not disappear anytime soon. “[Instant Pickup] might work for some electronic gadgets that are not commonly available at vending machines,” she said. “Two minutes is too long to wait for a soda can.”

But, many analysts expect Amazon to build Instant Pickup into something beyond a high-tech vending machine: a full grocery store.

“This is a natural extension of [Amazon’s] larger push into the grocery space,” Morningstar analyst R.J. Hottovy told Reuters.

Amazon acquired Whole Foods in a $13.7 billion deal in June. TechCrunch notes that Amazon could make Instant Pickup available at some or all of Whole Foods’ 467 physical locations. Customers could build a grocery cart on their way to the store and pick up their food when they got there. Moreover, the Whole Foods stores have plenty of space for inventory, so Amazon could make them Instant Pickup locations for a host of products beyond food.

In eliminating shipping costs, Instant Pickup may allow Amazon to reduce prices, Reuters points out.

Featured image via Flickr/Robert Scoble

Amazon looks into military food tech

Could I interest you in a package of fully-cooked beef stew that sat unrefrigerated on a shelf for a year before being dropped on your doorstep? Or perhaps a vegetable frittata?

That’s what Amazon might have in store for us — lots of non-refrigerated pre-cooked food.

Amazon is reportedly looking into a process called microwave-assisted thermal sterilization, or MATS. This technology, developed at Washington State University, originated to meet the needs of the U.S. military. The process kills bacteria and seals meals using microwaves, allowing pre-cooked meals to remain safe for up to a year without refrigeration. The meals are easy to transport, and they only need to be heated up a bit before being eaten. As a result, they’re also quite cheap compared to fresh meals.

A Dever-based startup called 915 Labs is shopping the technology to Amazon. According to the startup, MATS has many advantages over other methods of sterilization currently being used in food processing. Traditional processing methods get rid of nutrients and flavor along with the bacteria. MATS allows dishes to be treated in a shorter amount of time, meaning that the dishes retain more of their original texture and flavor.

Amazon could get going on this new venture as soon as 2018. It would give Amazon a stronger foothold in the grocery market, which has long been a goal for the company. Prepared meals are much harder to transport than the millions of other shelf-safe items Amazon sells.

This isn’t the only move Amazon is making to chew up more of the food market. Amazon is also in the process of acquiring the grocery chain Whole Foods, and it already has a grocery delivery program in place called AmazonFresh.

Amazon has not yet confirmed that it will actually end up using microwave-assisted thermal sterilization.

Reuters has also suggested Wal-Mart may be looking into MATS as well. A company called Solve for Food is planning on setting up a MATS facility near Wal-Mart’s headquarters in Arkansas. Wal-Mart has not yet commented.

Featured Image via Wikimedia Commons

Facebook is making moves in the realm of video

In an effort to break into the video entertainment market, Facebook is introducing a new video platform called Watch. The platform will be made available to a select group of Facebook users today. Everyone else will have to wait to try it.

In making this move, Facebook is most likely looking to open up new sources of revenue. If Facebook Watch catches on, users will spend more time on Facebook watching TV-length videos. That means that users will be exposed to more ads, thus generating more revenue for Facebook. And users won’t be required to pay for a subscription.

According to Facebook, Watch will be special among streaming video platforms because it can make TV-watching more social. Users will be able to comment on videos and to see what videos their friends are watching and commenting on. Each user will be watching alongside all two billion other Facebook users.

Watch will have two main components: a watchlist and a discovery section. The discovery section will be a feed of videos curated for you based on your Facebook profile. It will also suggest videos to you based on your friends’ activity on Facebook. It will include subdivisions such as “Most talked about” and “What’s making people laugh,” which is made up of videos that many people responded to with “Haha.”

Although Facebook has a huge user base, it still has ways to go in the realm of online video. Netflix, Youtube, Amazon, and Hulu have already come to dominate the market. Users may be reluctant to migrate their TV-watching time from those services over to Facebook Watch.

Facebook will offer a wide variety of programming on Watch. Some shows will focus on direct communication with their audiences through social media. Other shows might have long narrative arcs, like conventional TV shows.

So far, the list of programs available on the platform includes Gabby BernsteinNas Daily, Returning the Favor, and Kitchen Little, among others. Additionally, Facebook has permission from Major League Baseball to broadcast one game live per week.

Facebook funded these early programs in order to “seed the system,” but it does not intend to continue to fund new shows for very long. Eventually, anyone will be able to post videos to Watch, but they won’t get any money from Facebook to get going. By then, Facebook plans to take 45% of ad revenue from shows on Watch.

You can read Facebook’s statement on the launch of Watch here.

Featured Image via Pixabay

Amazon Marketplace to Roll Out New Return Policy in October

Amazon is amending its returns policy to make it easier for customers to return items they purchased from third party sellers, Ari Levy of CNBC reports. Under the new policy, customers will be able to return such items directly through Amazon, without contacting the seller.

The eCommerce giant will also enable “returnless refunds,” meaning merchants can reimburse customers without requesting an item back. According to Levy, Amazon says sellers have advocated such a policy, which would allow them to forgo the cost and hassle of facilitating the return of an item that may be defective, expensive to ship, and/or hard to sell.

CNBC broke the news after an Amazon merchant forwarded the news agency an email he/she had received from the company. Amazon said in the e-mail that sellers will have a choice as to whether or not to offer returnless refunds on a given product, and will be able to “set rules” defining the circumstances under which a refund is issued.

Still, many sellers are expressing displeasure with the policy on the forum linked to above. One merchant said of returnless refunds, “In other words, customers get things from us for free! Is this a joke?” Another said, “Amazon is going to assume that a buyer would NEVER lie about the reason for the return so they don’t have to pay for it.”

The unidentified merchant who forwarded Amazon’s email to CNBC said the return policy “will totally crush small businesses that fulfill their own orders.” He/she means that the policy targets those who list items on Amazon but ship them directly to buyers without using the Fulfillment by Amazon option.

The Fulfillment by Amazon (FBA) service allows third-party sellers who meet certain requirements to make use of Amazon’s fulfillment and customer service operations. FBA sellers store their products at Amazon fulfillment centers, where Amazon employees manage packaging and shipping. FBA merchants can sell their products under the Amazon Prime banner, meaning they can offer customers free two-day shipping. Amazon charges merchants for storage space and per fulfilled order.

Amazon also handles customer service and yes, returns, for FBA members.

The coming change is another move in Amazon’s ongoing effort to provide a uniform experience for customers, regardless of whether they buy from Amazon directly or from a third-party seller.

Levy points out that Amazon’s first concern is maximizing customers’ happiness. Easing the return process simplifies the consumer experience. The new system will “provide customers with an easy and efficient return experience,” Amazon’s email to merchants said.

The new system will allow customers to print return shipping labels prepaid for by sellers, and to deal with Amazon exclusively throughout the return process.

“Certain items,” though, “are not eligible for prepaid return shipping,” according to Amazon’s email, and merchants “can request exemptions for specific items in your inventory.”

Amazon says “early participants [in the new shipping system] have seen RDR [Return Dissatisfaction Rate]  go down by an average of three times after offering prepaid return shipping.” Some on the forum, though, say RDR is a skewed metric. One seller, under the username Lake, said RDR “provides provides better ratings for sellers with lots of returns than sellers who sell good products [and therefore] get fewer returns.”

“It proves that Amazon has no clue what the business issues are” from the seller’s perspective, “Lake” wrote.

Sellers who are dissatisfied with Amazon have limited alternatives, Levy points out, especially if they have already built a thriving business on the site. According to an article published on MarketplacePulse in December, 1,000 sellers join amazon.com everyday. Amazon has twice as many users (i.e. buyers) as eBay, according to a February report by Leanna Kelly of cpcstrategy.com

“Speaking strictly in terms of revenue and growth potential, Amazon blows eBay out of the water,” Kelly adds, although she goes on to admit that eBay has some “clout” by other measures.

By virtue of its number of users, Amazon has all but forced sellers to use its site. When the company, ever faithful to the retail maxim of serving the customer, makes a change that favors consumers at the expense of sellers, sellers have little recourse.

The changes will go into effect on October 2, but those who wish to can apply to begin “authorized prepaid returns” as early as August 25.

FTC Looks Into Price Deception Allegations Against Amazon

As the FTC investigates Amazon’s pending purchase of Whole Foods for antitrust violations, advocacy group Consumer Watchdog has lodged charges that the eCommerce giant has been misrepresenting list prices so as to make discounts look larger, Diane Bartz of Reuters reports. The FTC, which investigates deceptive advertising as well as antitrust compliance, has yet to launch a full investigation into the allegations, but has made formal inquiries into the matter.

Consumer Watchdog examined 1,000 listings on amazon.com, and found list prices (also known as “reference prices”) on less than half of them. Moreover, 61% of the reference prices that were listed were higher than prices at which Amazon had sold a given product in the previous 90 days.

Bartz reports that Amazon has called Consumer Watchdog’s study “deeply flawed” (Amazon’s words). She offers the following quote from a statement the company supposedly issued:

“The conclusions the Consumer Watchdog group reached are flat out wrong. We validate the reference prices provided by manufacturers, vendors and sellers against actual prices recently found across Amazon and other retailers.”

In March, David Pierson of The LA Times quoted Amazon’s website as saying that “list price means the suggested retail price of a product as provided by a manufacturer, supplier or seller.” But, the company does not provide detail as to how it determines list price.

Consumers use list prices to judge the value they are getting on an item. The greater the difference between the list price and the price at which a store is offering an item, the better the deal. So, companies stand to gain from inflating the list price. Bartz, however, points out language in the FTC’s “Guide Against deceptive pricing that warns against the practice.

Consumer Watchdog conducted a similar study in March across 4,000 Amazon products, and claimed that “at least half of the list prices examined were greater than the prevailing market price,” Pearson said. Following that study, the group filed a petition urging California Attorney General Xavier Becerra to launch an investigation.

Canada’s Competition Bureau fined Amazon Canada C$1 million (approximately $750,000) for deceptive pricing on amazon.ca. As part of the settlement, Amazon “made changes to the way it advertises list prices on its Canadian website,” Hollie Shaw of The Financial Post reports.

Shaw cites the Bureau as saying that the settlement “resolves its concerns.” There is no indication, however, that Amazon made similar amendments to the manner in which it displays prices on its US site.

The FTC came down on Amazon in 2016 over $84 million worth of in-game purchases made by children without parental consent. When Amazon first released its app store, which comes standard with devices like the Kindle Fire, the software did not require password authorization for in-game purchases, so children could make such purchases on their parents’ accounts.

In March 2012, amidst a barrage of complaints, Amazon updated the system to require passwords, but only on purchases over $20. Then, in 2013, Amazon began asking for passwords even on purchases below $20, but left a 20-minute window between transactions during which passwords were not required.

The FTC said the purchasing system was not one hundred percent fair to adult consumers until July 2014. Amazon initially pursued a lengthy appeals process, but in April 2017 it agreed to drop the appeal and refund parents for the unauthorized charges.

As for the price deception allegations, Consumer Watchdog has asked the FCC to delay Amazon’s acquisition of Whole Foods until list prices are represented accurately. But, Erin Fuchs of Yahoo! Finance cites antitrust expert Herbert Hovencamp as saying that even if the FTC finds substance in the price-deception allegations, it would have no grounds on which to impede the Whole Foods deal, because misrepresentation of price poses no antitrust threat.

“Normally, we don’t think about deceptive pricing as a sign of market power and indeed if you look at the people who do it, they’re not monopolists,” Hovenkamp said.

Featured image via Flickr/Global Panorama

Facebook to Allow Publishers a Subscription Fee

Facebook is planning a new tool that would establish a means of adding subscriptions to news organizations that publish directly on the social media outlet. The intention behind this new tool is to help pacify the tension the social media giant and publishers, who find their audiences shifting more to what becomes available on Facebook.

The potential newly innovated tool will be included by Facebook’s Instant Article product, which allows new media companies to publish their articles directly onto Facebook, granting immediate access to the article, instead of transporting readers to the news website.

While the details are still in its preliminary stages, it has been theorized that Facebook may be introducing a metered pay wall product similar to those used already by the news publishers. For example, after reading a set amount of articles on Facebook by a particular news provider, a user will be sent to that news provider’s subscription page to continue reading more articles.

Before Facebooks has a large rollout, it plans to start a smaller pilot with a group of publishers using the tool in October, and should the tool prove promising, then the early initiatives will be expanded. It has not been established which publishers will be included in the pilot testing, not any details regarding the types of publishers based on size, frequency or popularity.

Tensions have increasingly risen with the advent of online platforms like Facebook and Google amassing more readers through their mass influence, allowing them to expand into the consumer digital advertising market. The constant increase of control over the online distribution of news has threatened publishers’ business model, stimulating a response by publishers to gain group bargaining rights enabling more effective negotiations with online platforms.

While nearly all publishers have adjusted their priorities to increases digital revenue, most are still seeking profitable long term solutions. Publishers recognize the importance and mainstream relevance of online platforms, as well as their role as a medium for allowing articles to be broadcasted to larger audiences.

However, these also include serious drawbacks for publishers, as they lose valuable ties to their readers, making loyal relationship building far more difficult, while also affecting subscriber data and payment connections. Publishers fear that readers are becoming more and more accustomed, which they are, to staying in Facebook to consume news, instead of visiting directly the publisher’s websites, threatening both future growth and livelihood.

Facebook on the other hand has also received criticism from publishers regarding the ability to distribute false or unverified articles that push an agenda or for the sake of trolling that readers can mistake for real. This propagating of false news has been an already reported issue that other companies such as Twitter have been developing means to filter and restrict its spread.

This is also an important issue for Facebook as other companies have been able to use the tensions between Facebook and publishers’ wariness to their advantage. Google has introduced its AMP tool that offers a way to expedite the delivery of partner’s articles in search results, while Amazon in the meantime has been paying publishers to post articles on Spark, its commerce-related social network.

This move by Facebook may offer a way of dealing not only with the tensions between the two parties, but also as a means of dealing with other issues including regulatory and antitrust scrutiny. Furthermore, a Facebook subscription offer would move the platform to closer regulating the relationship with the reader, capitalizing on a role previously filled by the news outlets themselves.

While it is not clear as to whether Facebook will benefit financially from a new subscription feature, but the feature does encourage more time spent on the social media site, and helps foster more attachment to the services provided. There are some issues regarding the number of publishers that will be allowed to post directly to Facebook, as there is a chance for this to be exploited by users by staggering the number of articles they read per month from each unique publisher. In this case, users will be able to benefit without needing to pay, which may result in some serious consequences on Facebook’s part.

Featured Image via Pixabay

Sears to Sell Kenmore Appliances On Amazon

Sears announced Thursday that it would begin selling Kenmore appliances on Amazon, Phil Wahba of Fortune reports.

By partnering with Amazon, Sears will bring its Kenmore products to a wider market than ever before. “The launch of Kenmore products on Amazon.com will significantly expand the distribution and availability of the Kenmore brand in the U.S.,” Sears Holdings CEO Eddie Lampert said in a statement.

Sears Holdings’ stock jumped over 20% on the news in early trading Thursday, to $10.50 a share, but have since modulated to $9.78 per share as of 1:00 Eastern, still an 11% increase since the market closed Wednesday.

Kenmore appliances will also be integrated with Amazon Alexa, as Sears looks to capitalize on a recent boom in the “smart home” industry, which sells high-tech home appliances that can, among other things, be controlled remotely.

“Voice is a natural interface for the smart home, so we’re thrilled that customers can now simply ask Alexa to interact with their Kenmore Smart appliances,” said Charlie Kindel, Director of Alexa Smart Home. “We’re excited that Kenmore has added Alexa functionality to these products and we think customers will love the convenience of cooling their home, starting their laundry, and more, using only their voice.”

J.C. Penny is making its own strides into the “smart-home” sector, and in late June Best Buy announced plans to showcase the Amazon Echo and the Google Home, which can be used to power “smart appliances,” more prominently at 700 of its stores.

The Amazon partnership marks Sears latest effort to compensate for declining sales numbers by licensing out or liquidating its proprietary brands. In January, Sears sold Craftsman, its line of tools, to Stamley Black and Decker in a $900 million deal.

“We continuously look for opportunities to enhance the reach of our iconic brands to more customers and create additional value from our assets,” Lampert says.

Sears Holdings, which owns Kmart in addition to Sears, has seen drastic drops in important performance metrics over few years, largely because Amazon continues to dominate the retail sector. Since 2012, Sears Holdings’ total revenue has fallen almost 50%, according to eMarketer.com. Its online sales, which consistently account for less than 10% of total revenue, have dropped almost 40% since 2013.

Sales per store have risen more than 11% since 2012, but Sears has been forced to close almost half its stores in the past five years. As of June 2017, after Sears’ announcement that it would close 72 more stores, approximately 1200 stores were operational, as opposed to 2073 in 2012, Hayley Peterson of businessinsider.com reports. Almost 900 Sears stores (43%) have shut their doors in the past half-decade.

Meanwhile, Amazon’s total revenue has soared by over 130% since 2012. That year, the company reported just over $61 billion in revenue; in 2016, it brought in almost $136 billion. Gross profits have jumped by 235% since 2012, from about 15 billion to just under 51 billion.

Sears is not the only retail company to join forces with the eCommerce giant, which has so long been the enemy of brick-and-mortar operations. Spencer Soper of Bloomberg  reported on June 21 that Nike was set to begin selling shoes directly through Amazon. Nike products were already sold on Amazon by third-parties, but many of them were knockoffs.

Nike’s annual revenue, unlike Sears’, has continued to trend upward over the past five years, as has the company’s stock. Still, by hopping on the back of Amazon, the company stands to make exponential gains. Jackie Wattles of CNN cites a Goldman report that says the partnership could increase Nike’s annual revenue by over 150%, from $200 million to $500 million.

Sears’ and Nike’s partnerships with Amazon could spur a new trend toward cooperation rather than competition between online retailers and brick-and-mortar stores. Traditional retailers are presumably employing an “if you can’t beat them, join them” logic, while Amazon jumps at the opportunity to offer established and well-renowned brands such as Kenmore on its site.

The alliance makes since, even if Sears and Amazon have been sworn enemies since the latter began cutting into the former’s profits.

Featured Image via Flickr/Raymond Shobe

Amazon Meal Kit Plans

Amazon is proceeding with its expansion plan to diversify into surrounding markets and innovate in order to establish a dominant position. In recent news, Amazon expressed its intent to redesign and push the boundaries in the prepared meal kit world that is currently dominated by Blue Apron Holdings Inc.

Amazon is throwing itself in the deep end by competing with an already established IPO by challenging to compete with its major project. However, Amazon’s research team is well-experienced and confident that they can in fact provide a competitive edge in the food industry.

This announcement comes after Amazon filed a trademark for the phrase: “We do the prep. You be the chef,” which is closely related to prepared food kits similar to what Blue Apron provides. Meal kits provide the customer with recipes and the corresponding ingredients that enable the customers to prepare fresh food while having most of the preparations already being completed. This service caters well to an audience that is more time-starved but still looking to eat more fresh food.

With their intentions revealed, Amazon has helped elaborate the reasoning behind its recent acquisition of Whole Foods, which would act as a supply base for the meal kits while also generating income through its retail locations. Amazon is trying to incorporate more incentive into being a loyal customer instead of trying to attract new customers, capitalizing on the similar consumer base of customers who are young, urban and affluent.

The focus on having loyal customers spend more instead of attracting new customers is supported by the fact that about 81 percent of customers who have visited Whole Foods on more than one occasion are already Amazon customers. Furthermore, about just over half of all Whole Foods shoppers are Amazon Prime members, customers who are willing to pay $99 for free two-day shipping amongst other member benefits.

Due to the supposed correlation between Amazon and Whole Foods customers, Amazon’s acquisition of Whole Foods is estimated to increases its customer base by 5 percent. While this does have a large enough impact on Amazon’s revenue stream, as Amazon will accrue all revenue generated by customers of both, this shows that increasing its customer base was not Amazon’s prime concern.

The customers that do consistently shop at Whole Foods while also being Amazon Prime members spend average about $306 more, looking at an average of $1,371 spent during six visits during a 12-month period. But what has the most impact is the percentage of shoppers who online as compared to other food retailers, with 10 percent of Wholes Foods customers shopping online compared to the 6 percent for Albertsons and 5 percent for Kroger.

Amazon is using the opportunity that Whole Foods shoppers provide by offering more online food delivery services, and in doing so they ensure they have the largest consumer base for their new meal kit plans. Research firm NPD Group shows that while only 5 percent of consumers have purchased a meal kit over the past 12 months, 60 percent of millennials have purchased something from Amazon over the same time frame. Amazon’s priority is discovering a way to transition its customers into using meal kits, increasing its revenue stream by creating a greater dependence on online food delivery services.

Usually the meal kits have a high entry barrier, with Blue Apron requiring about $94 to acquire a new customer. Amazon advantages comes in the form of its Prime membership fees which should act as a reliable and effective way of managing its costs. Furthermore, Amazon already has a strong supply chain that can easily adapt to ensuring that customers receive their meal kit in the timeliest and efficient manner.

Amazon’s expansion plan proves troublesome to its competitors in the food industry, as its meal kit plans narrows the opportunities for other smaller food retailers to enter the meal kit market. Amazon has considerable experience with retail, and that might translate in food, which is by far the largest category in retail. If Amazon is successful in establishing a market leader position in food, then the possibilities for its growth into other markets will be that much easier.

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Amazon Sparks Antitrust Concerns

Amazon Inc. has recently agreed to buy Whole Foods Market Inc. for $13.7 billion as part of their expansion plans. Amazon’s sustained major growth is raising concerns with Wall Street and Washington regarding antitrust policy. Lawmakers are cautious but wish to investigate the potential ramifications this business deal will have on customers.

One U.S. lawmaker, in particular, has called for a hearing on the proposed hearing on the subjects of monopolies and their effects on the consumer base. Amazon’s shares have increased by 34 percent this year, rising to $1,003.21 per share on Friday. Despite the huge growth, market analysts have dismissed concerns regarding Amazon as a trust on the grounds that the company does not have large market concentrations in any one product category, making it unrealistic that a monopoly is established. Furthermore, Amazon has a history of helping to keep prices low and very competitive for customers.

The major concern is not that Amazon has grown too large that it can now dominate the market from a price point of view. The issue is regarding as to whether Amazon has grown to the point where competitors are discouraged and unmotivated to innovate. Competitors risk funding research and development for new services for customers because they might either be bought by Amazon, or inspire Amazon to create or improve on that innovation.

Hedge-fund managers like Doug Kass are betting against Amazon by arguing that the value for the fast-growing online retailer will be eroded by antitrust concerns. Goldman Sachs raised questions concerning the track records of tech company stocks, specifically determining whether stocks were overpriced and investors were overlooking the risks associated with government regulation policy.

Despite the political buzzing regarding Amazon’s growth, it is more than likely that the Whole Foods acquisition will go through. Only now Amazon and similar companies are being placed under scrutiny regarding competition policy, judging how the transaction affects the future of retail grocery stores, and the possible innovation repercussions that may arise. From a more political standpoint, this situation will cast a review of the antitrust laws to ensure they are working effectively to ensure economic opportunity, choice and low prices.

While many investors are now trying to short Amazon based on the value erosion capabilities of government regulation, many analysts are not worried about the Whole Foods deal greatly impacting antitrust policy. Their reasoning is that Whole Foods has just 1.6 percent of the U.S. grocery market, being overshadowed by other competitors such as Wal-Mart Stores Inc. at 26 percent of the market, and Kroger Co. at 10 percent. Shifts and enforcing of antitrust policy usually occur when a retailer controls 30 percent or more of a particular market.

For Amazon, the purchasing of Whole Foods indicates a shift in its business model from only selling products online to establishing a physical store location that is intent on attracting customers. This expansion could remain a one-time opportunity to penetrate an important market and establishing a strong position, but it will also likely lead to a collaboration between the online and physical stores, either providing a storefront for online purchases, or a capitalizing on the online selling of groceries. There is speculation that Amazon might use Whole Foods’ retail locations to launch a pharmacy business.

Monopolies are dangerous because they allow companies the ability to influence the market to maximize their profits at the expense of customers, competition and government. By being the dominant force in a market, monopolies are able to set the price that no other competitor can match, limiting choice for the customer as well as competitor innovation.

Monopolies are also able to influence government through the support of certain legislation beneficial to them, which might affect the outcomes of law that are not beneficial to society. This is why the government is so concerned with antitrust laws, and are eager to ensure they are working.

While this is the biggest acquisition of Amazon’s expansion plan, it is doubtful this will be the last, and so it is certain that this issues will arise again in the future.

Featured Image via Flickr/Fumiaki Yoshimatsu