Published on: February 14, 2023
Thoughts this morning about how and why Stew Leonard's has made an extended and significant commitment to the cause of water safety … to the point that they're building a swimming school across from the original Connecticut store.
Published on: February 14, 2023
At a time when Amazon is under financial pressure, one of its solutions seems to be to dip its beak a little deeper into the sales made by the two million third-party merchants on its Marketplace.
Bloomberg reports that "for the first time, Amazon’s average cut of each sale surpassed 50% in 2022, according to a study by Marketplace Pulse, which sampled seller transactions going back to 2016.
"The research firm calculated the total cost of selling on Amazon by tallying the commission on each sale and fees for warehouse storage, packing and delivery, as well as money spent to advertise on a site where hundreds of millions of products jostle for attention. Paying Amazon for logistics services and advertising is optional, but most merchants consider these a necessary part of doing business."
The story goes on: "Sellers have been paying Amazon more per transaction for six years in a row, according to Marketplace Pulse, but were able to absorb the increases because the company was attracting new customers and rapidly increasing sales. That abruptly changed when pandemic lockdowns eased and people began traveling and dining out again, sucking the oxygen out of online shopping. Last year, Amazon generated the slowest sales growth in its history."
One example cited by the story: "Chuck Gregorich, who sells fire pits and outdoor furniture, says turning a profit on Amazon is getting harder.
"One of his popular fire pits costs $200, of which Amazon takes $112 for its commission, warehouse storage, delivery and advertising. That leaves him with $88 to pay the manufacturer, ship the product in from China and cover his overhead. He expects his Amazon logistics expenses to increase up to 8% this year due to a new fee structure that took effect in January and additional changes scheduled for later this year."
Bloomberg also offers the Amazon explanation:
"Amazon sellers choose to use its logistics services because, on average, they cost 30% less than alternatives from other shipping companies, and merchants are free to buy advertising anywhere, company spokesperson Mira Dix said in an emailed statement. The fees Amazon charges reflect the company’s own costs and investments, she said.
"'Many selling partners have built and run their businesses without advertising,' she said. 'If they choose to advertise their products, they have many service providers to choose from. Sellers are not required to use our logistics or advertising services, and only use them if they provide incremental value to their business'."
My first thought when In saw this story was that if Amazon wants to give the Federal Trade Commission (FTC) even more ammunition for an antitrust probe, it is doing a pretty good job. There may be competition to Amazon's Marketplace, but let's face facts - the company has built such a powerful sales engine, backed up by an enormous logistics machine, that in many ways it has a chokehold on e-commerce sales by small and medium sized companies. Sure, you can do it without Amazon … but its access to customers is so pervasive that it is hard to ignore.
Does Amazon have the right to charge what it wants for that access to customers, as well as access to its logistics network? Sure … but when its practices appear to be crushing smaller companies, it can expect heightened scrutiny by lawmakers, regulators and the media.
Interestingly, "The Intelligencer" column in New York magazine just had piece that made the following observation (in the context of a larger piece about Amazon):
"Sellers serve a lot of purposes for Amazon and joke among themselves about the free labor they provide. In exchange for access to the largest sales channel on the internet, they do a lot more than just pay Amazon its fees. They perform market research, obsessively investigating review data and marketplace trends to figure out what’s going to be popular on the platform next. (Recent red-hot third-party product types include miniature waffle-makers, reading lights that drape around your neck, and dog puzzles.) They handle customer service. They exert downward price pressure on one another, and they absorb a lot of risk (dozens of dog-puzzle sellers fail so that one may thrive). No matter what happens to them, whether their own businesses succeed or fail, Amazon makes money."
And the thing is, this is all happening at a time when Amazon increasingly is being criticized for a customer experience that, in a phrase, ain't what it used to be - Prime benefits that seem less than prime, delivery windows that seem less precise than even during the day of the pandemic, and pages that are cluttered by ads that generate revenue for Amazon without improving the experience for the shopper.
The Atlantic the other day observed that "last week, the journalist John Herrman published a theory on why, exactly, Amazon seems so uninterested in the faltering quality of its shopping experience: The company would rather leave the complicated, labor-intensive business of selling things to people to someone else. To do that, it has opened its doors to roughly 2 million third-party sellers, whether they are foreign manufacturers looking for more direct access to customers or the disciples of 'grindset' influencers who want to use SEO hacks to fund the purchase of rental properties.
"In the process, Amazon has cultivated a decentralized, disorienting mess with little in the way of discernible quality control or organization. According to Herrman, that’s mainly because Amazon’s primary goal is selling the infrastructure of online shopping to other businesses - things like checkout, payment processing, and order fulfillment, which even large retailers can struggle to handle efficiently. Why be Amazon when you can instead make everyone else be Amazon and take a cut?"
None of this is good for Amazon.
I've been an Amazon customer since the mid-nineties. I was an early adopter, and always - though I hope, not blindly - have been a fan of the company's disruptive nature.
But there is something wrong at Amazon. Maybe some of it is the inevitable corporate detritus that comes after an event like the pandemic. Maybe some of it is hubris, that Amazon and Jeff Bezos, like Icarus, became so arrogant that they flew too close to the sun.
There is, of course, another possibility - that what you are seeing in in New York and The Atlantic and countless other publications, including MNB, is a kind of piling on, an over-reacting to a confluence of bad news that doesn't really reflect the reality of Amazon's existence.
But I hope that Amazon's leadership is not embracing this last possibility. There's no percentage in that approach, largely because it would reflect a Day Two mentality.
There is no such thing as an unassailable business model. That's been a tenet that we've repeated over and over here on MNB. For most of the last two decades, it has been a tenet that Amazon brought to the marketplace, carnivorously fueling its own growth. But now, it has to consider the possibility that it is on the other aside of that precept, and act accordingly.
There's another tenet that we've often used here - that when businesses suffer, often the problems are self-inflicted … a result of being unable to see the bigger picture, to accept reality, and to understand that the moment you put your own priorities ahead of the shopper's, you've taken a first step on the path of irrelevance.
I think Amazon has to at least seriously consider the fact that it is looking down that path, and that its next steps need to be carefully considered.
Here's a passage from FT about the challenges Jassy is facing:
"The longer term challenge is similar to the one Tim Cook faced at Apple: to take over from a visionary leader who created one of history’s most successful companies in their own image, and somehow put his own stamp on it. Yet one year on, and investors will want to see what fresh ideas of his own the 55-year-old has to fend off 'Day Two', the uncomplimentary term Bezos used to describe the 'stasis' of a company that was no longer innovating after the outpouring of ideas on 'Day One'.
"There are as yet no 'Jassyisms' to add to the evangelical 'Jeffisms' imprinted on employees; no significant projects that were not already well under way during the founder’s quarter-century in charge. His decisions are also hampered by Amazon’s balance sheet. Prior to the pandemic, the company’s multiple high-margin operations drove up net income. That was supercharged by the boom in sales in 2020. But a combination of high spending and falling demand led the company to report a $2.7bn net loss for 2022. Long-term debt now exceeds cash, cash equivalents and restricted cash. Jassy is sanguine about the challenge."
"Companies that last for long periods of time have to find ways to adapt, and be successful, in lots of different phases,” Jassy tells FT. “And this is just one of them.”
Call me crazy, but now seems like the wrong time for sanguinity.
Published on: February 14, 2023
The Wall Street Journal reports that Walmart will close three of its technology hubs - in Austin, Texas; Carlsbad, California, and Portland, Oregon - and will require "hundreds of workers to relocate to keep their jobs."
At the same time, the Journal writes, Walmart also will "require all its technology workers to come into the office at least two days a week."
According to the story, "Walmart will pay for workers in those locations to transfer to other primary offices, such as San Bruno, Calif., or the company’s headquarters in Bentonville, Ark. The company hopes to relocate most of the workers, and some will be allowed to become full-time remote workers."
On the technology front, Walmart is simply doing what so many tech companies are doing - trimming expenses, rightsizing organizations, and figuring out what makes sense.
I also have no problem with the in-office mandate. For the most part, people are going to restaurants and gyms and ballparks and arenas and parties … going into the office regularly, with an eye on networking and pollination of ideas and innovations, is not too much to ask. (Though I concede that I haven't had to go into an office to work with other people in 28 years, so I may not be the best judge of such things.)
Published on: February 14, 2023
The Financial Times reports that Amazon CEO Andy Jassy says that the company is ready to "go big" on bricks-and-mortar stores, despite the fact that in recent days Amazon seems to have put its physical store opening plans on hold.
Jassy blames the the pandemic for the problems being experienced by the company's physical stores, saying that the "lack of normalcy" forced a series of "stumbles."
“Remember, a lot of these opened right in the heart of the pandemic,” Jassy tells FT.. “So we haven’t had a lot of normalcy. We’re experimenting with selection, checkout formats, assortment, price points. I’m encouraged we have several that I think are promising … We’re just still in the early stages. We’re hopeful that in 2023, we have a format that we want to go big on, on the physical side … We have a history of doing a lot of experimentation and doing it quickly. And then, when we find something that we like, doubling down on it, which is what we intend to do."
Some context from FT:
"Building a formidable grocery arm has long been touted by Amazon as one of its most important priorities. When founder Jeff Bezos announced he would stand down as chief executive in February 2021, he made clear he would still be involved as executive chair in 'important Amazon initiatives' of which grocery was one.
"However, the Whole Foods acquisition had failed to provide the bedrock for a broader Amazon grocery strategy, analysts said, with inconsistent store formats making it difficult to use the locations as local delivery hubs. Instead, Amazon moved to create its own purpose-built stores in a variety of styles, from corner shop-sized Amazon Go stores — which include cashier-less technology powered by an elaborate array of cameras that follow customers — to Amazon Fresh, a more traditional offering with a few tech-enhanced aspects such as 'smart' shopping carts."
I've largely been impressed by the technology that Amazon has brought to its physical stores, but too often, it seems to me, the formats have been there to serve the technology, as opposed to being formats that, along with customers, are served by the technology.
That's not a semantic difference.
I don't know about you, but somehow I don't find Jassy to be particularly persuasive. The words seem rote, and motivations hollow. Someone should feel free to correct me if they think I'm wrong, but I find myself wondering who the hell is following this guy into battle?
Published on: February 14, 2023
The Providence Journal reports that a bill has been introduced in the Rhode Island legislature that would "limit the number of self-checkout lanes at any grocery store in Rhode Island to eight and mandate that grocers provide a 10% discount to customers who use self-checkout for 10 or more items."
Rep. Megan Cotter, who introduced the bill, explains it this way: “Self-checkout is a way grocery stores are avoiding paying employees by getting customers to do cashiers’ jobs for free. It seems only fair that if they are going to take on cashiers’ work, the customer should get something in return."
The story notes that "an army of lobbyists for Rhode Island's grocery stores, supermarkets, and unrelated retail businesses fearful they will be the next target" have descended on Providence to object to the legislation, saying that, in the words of cott Bromberg, president- CEO of the Rhode Island Food Dealers Association, ""This bill confronts a fundamental question for the state — to what length can government dictate the operations of a business."
The Journal says that the bill at this point seems to be supported by progressive Democrats and organized labor.
This legislation is a crock. First of all, stores can't find enough employees. Second, customers like self-checkout because it gives them a sense of control and speed (though the latter can be illusory).
I have no problem with legitimate public policy, but this is protecting special interests in a way that is both obvious and misguided.
Like I said, a crock.
Published on: February 14, 2023
Bloomberg reports that "US labor board prosecutors have concluded that Amazon.com Inc. illegally used subpoenas to coerce staff and try to interfere with labor activism at a New York warehouse.
"A regional director of the National Labor Relations Board has determined that, in doing so, the e-commerce giant violated employees’ rights, agency spokesperson Kayla Blado said. Absent a settlement, the director will issue a complaint on behalf of the labor board’s general counsel, Blado said in an email.
"The dispute stems from Amazon’s ongoing effort to overturn the Amazon Labor Union’s historic election victory last spring at an 8,000-employee facility on Staten Island. ALU attorney Seth Goldstein says Amazon sought in that case to obtain extensive records including text messages among employees, which had a chilling effect on workers’ willingness to be involved with the organization."
Amazon has denied wrongdoing.
Bloomberg also reports that "Starbucks illegally threatened, interrogated, and terminated pro-union employees in Philadelphia, the US labor board ruled.
"In a Monday decision, a panel of three Democratic members of the National Labor Relations Board ordered Starbucks to 'cease and desist' from prohibiting staff from raising workplace complaints, placing them under surveillance when engaged in collective action, and discriminating against baristas for supporting labor groups. The decision also ordered the company to offer reinstatement with backpay to two terminated activists."
Starbucks said it disagreed with the decision and is considering its options.
Published on: February 14, 2023
• From the Detroit News:
"Zoox, the self-driving startup owned by Amazon.com, carried passengers in its fully autonomous vehicle on public roads for the first time.
"Last week, the electric vehicle, which doesn't have a steering wheel, ran a mile-long route carrying staff between Zoox's two main buildings in Foster City, California, the company said in a statement. The firm will now operate a shuttle for employees on the same trip while it seeks additional clearances to expand its service to the public.
"The company said the robotaxi trip marks the first time that a vehicle designed without human controls has carried passengers on a public road.
"Zoox's driverless testing permit, which it has held since September 2020, was extended by California to include the purpose-built robotaxi. To date, Zoox's public-road testing has been limited to a fleet of retrofitted gas-powered cars that carry sensors powering the self-driving technology."
Published on: February 14, 2023
• From the New York Times this morning:
"All across the country, rising prices at grocery stores and restaurants have altered how many Americans — including a good number older than 65 — shop and eat out. While food prices are expected to moderate a bit this year, many people will still feel squeezed. After climbing nearly 10 percent last year, food prices are expected to rise another 7 percent in 2023, according to the Department of Agriculture … Combined with higher transportation and housing prices, the rising cost of food is being felt disproportionately by lower-income households, meaning those with $50,000 or less in annual income, according to a study released in January by the Federal Reserve Bank of New York.
"And in 2021, about six million Americans over 65 — more than 10 percent of their population — were living below the poverty line, according to data from the Census Bureau. And while Social Security benefits increased by 8.7 percent this year, their biggest inflation adjustment in decades, it is still not enough for many retirees.
"As prices climb, experts worry that older individuals who are in poor physical or mental health or who have lower incomes are at greater risk for not having enough food or for eating less healthy foods. The squeeze also has the potential to isolate them socially, if they back away from activities like eating out with friends."
Published on: February 14, 2023
Executive Suite is sponsored by Robin Russell Executive Search.
• Innovative Food Holdings (IVFH), which creates specialized e-commerce software and platforms for specialty food companies, announced that Bill Bennett, most recently Vice President of eCommerce for Kroger and before that a Walmart executive, is joining the company as its new CEO. He succeeds Sam Klepfish, who remains with IVFH as chairman of the board.
Published on: February 14, 2023
…will return.
Published on: February 14, 2023
Apologies for the lateness of the posting this morning … blame it on "user error."
(That would be me.)
Mea culpa, mea culpa, mea maxima culpa.
