Bezos goes, Amazon booms, but the real story is the Marketplace

Amazon has been all over the news the last 24 hours, with Bezos stepping down and Amazon roaring past $100 billion in revenue in Q4 2020. Those are both important stories – but under the hood, it’s the accelerating shift away from Amazon retail and toward the Amazon Marketplace that really matters.

The chart below from Marketplace Pulse tells the story. Total GMV (sales) across the Amazon retail platform reached almost $500 billion. Marketplace sales are up 50% – even though non-essentials sellers were deprioritized in favor of COVID necessities. So Amazon’s total sales have almost surpassed Walmart, and will do almost certainly in 2021.  Another year like 2020 and Walmart will be receding fast in the rear-view mirror.

But there’s an even more important important story here. Amazon is continuing it’s shift away from its own retail operations (Amazon retail), towards its enormous third-party Amazon Marketplace. Over the past 15 years or so, that shift has averaged around 2-2.5% annually. In 2020, the Marketplace share reached more than 60% for the first time, at 61.2%.

This ongoing shift is not surprising. Amazon retail loses money – a lot of money – as I show in Behemoth, Amazon Rising. Conversely, Marketplace made about $17.8 billion in operating revenue in 2019, a margin of 33.1%. It makes perfect sense for Amazon to transition away from its own retail business and into it’s increasingly dominant role as the platform manager.

 

Groceries: Amazon’s Afghanistan?

There’s a ton of excitement about Amazon’s big entry into groceries. In 2017, Amazon bought Whole Foods, and since then it’s opened a handful of new Amazon Fresh grocery stores and plans many more, along with Amazon 4-star stores featuring collections of 4- and 5-star products selected by Amazon, small cashier-less Amazon Go convenience stores, small Amazon Go grocery stores, and some physical bookstores. It is diving deep into physical retail, focused primarily on groceries.

That excitement is sadly misplaced. Continue reading “Groceries: Amazon’s Afghanistan?”

The pandemic and schools – why I changed my mind

This post is sparked by a coincidence. On my morning walk, I listened to Russ Roberts interviewing Emily Oster about her research on the pandemic and schools – an enormous tracking effort covering 780,000 kids in all states. She concludes that especially for younger students, schools have not been super-spreader events, and that infections – which are more common among teachers and adults – align closely with rates of infection outside the schools. In other words, schools are safer than many of us – including me – originally believed.

When I got home, I picked up the Washington Post and turned to an article on how second graders are struggling with home instruction: a class that reached 90% reading proficiency in first grade now has zero proficiency at second grade, and many students have regressed to the point where they cannot read at all.

I believe it’s time to turn away from politics and back toward policy based on evidence and data. Decisions about schools quickly became political because Trump made them political. We need to end that mistake. I understand that teachers are understandably nervous, and so are parents. But the way out of the mess is to recognize that distance learning is inflicting severe damage on an entire generation of kids, especially disadvantaged kids, and that wishing it were otherwise doesn’t make it so. Weigh the evidence first, and then make the best decision balancing needs and risks – which will likely be different for each school distinct, and even for the same district over time.

Amazon and Rural Deliveries – the Story Behind the Story

Amazon recently revealed that it was planning to undertake more rural and super-rural deliveries, replacing USPS and UPS with its own service. The cutely named “Wagon Wheel” project is on the surface completely ridiculous. It makes no real sense for Amazon to compete in precisely the places that are most expensive and least profitable. Indeed, to date it has avoided those routes like the plague.

So what’s going on?

Continue reading “Amazon and Rural Deliveries – the Story Behind the Story”

About that COVID-related “productivity drag” at Amazon

Amazon’s CFO recently explained that about $4 billion quarterly in additional costs during the third quarter were driven by unspecified “productivity drags” related to COVID-19 had cost the company $4 billion in the third quarter of 2020. What does that mean?

As usual, Amazon  conceals more than it reveals. Maybe it’s all about clusters of sick people in the warehouses desperately moving packages around until they collapse and die. Fortunately (for them and us), the reality is different. Continue reading “About that COVID-related “productivity drag” at Amazon”

Antitrust and private labels at Amazon: wrong solution to the wrong problem

Amazon recently got a ton of bad press about its private label brands at the recent House Subcommittee hearing. It was blasted for using sellers’ data to cherry-pick products that it could then directly source (sometimes from the same manufacturers), using its size to brush smaller competitors aside. There were further complaints that it tilts the playing field to force sellers to use Amazon fulfillment, or to tweak the Buy Box in Amazon’s favor.

This is a mishmash of complaints, and the private label arguments are basically ridiculous. Continue reading “Antitrust and private labels at Amazon: wrong solution to the wrong problem”

Unpacking Amazon’s free curbside pickup

Obviously, someone at Amazon has noticed that Walmart and Target are getting traction with curbside pickup. Hence Amazon’s announcement that it will provide free one hour pickup from Whole Foods for orders of $35 or move (and who leaves Whole Foods without spending at least that much). So on one level, this just reflects me-too insurance, so if curbside really takes off Amazon won’t be blindsided.

Continue reading “Unpacking Amazon’s free curbside pickup”