Amazon Cleans Up and Squares Off

Saying the holiday season is Amazon’s busy season is a bit of a misnomer.

Like any retailer, the holiday season is big. But as the most successful e-tailer in the U.S. with millions of highly loyal and big-spending Prime customers at the ready, the holiday season portends even more bigness.

But given Amazon’s ongoing expansion projects, like same day delivery, grocery, payments off Amazon, AI and smart homes – just to name the first few areas of growth and experimentation that spring to mind – it belies the fact that the team at Amazon is always pretty busy.

So busy – and active in so many directions – that it can be hard to keep track of just what Amazon is up to of late.

Luckily we can do that for you – with our regular snapshot of all things Amazon – as it related to retail and commerce – what it’s doing, and where it might be going next.

Care to take a tour?

The Busiest Place Outside The North Pole

In the race to get prepared for the holiday season, Amazon is probably running a close second with Santa’s workshop as of the unofficial November 1 kickoff of holiday 2016.

In the last half of 2016, Amazon has opened 23 new warehouses in the U.S.:, 18 during Q3 and another five during the first few weeks of Q4. They’ve also upped their workforce by about 38 percent for Q4.

All that preparation hasn’t come cheap – and took a noticeable bite out of Amazon’s Q3 profits, a fact that failed to delight investors who responded to the latest report by bouncing Amazon’s share price down 6 percent.

Most analysts took this as a sign that investors weren’t so much unsure of Amazon’s future – so much as they were irked by a return of Amazon’s somewhat lassiez fair attitude about the importance of profitability.

“Amazon tends to flex investment up and down somewhat unpredictably from time to time in order to drive growth, and that’s what’s challenging for investors,” noted analyst Jan Dawson of Jackdaw Research. “Some investors thought the new era of higher margins was here to stay permanently, and this quarter has likely taught them (otherwise).”

Amazon – true to form – responded more directly than apologetically.

“Investments are going to be lumpy,” Chief Financial Officer Brian Olsavsky noted on last week’s analyst call. “The second half of this year looks like a big step up compared to the first half – and it is.”

But it is a big step up that Amazon is betting will be worth its weight it satisfied customers and expanded eCommerce ordering online and on mobile this holiday season. The firm’s upper end forecast is currently set at $45.5 billion – a 27 percent increase over holiday 2015.

Because Amazon isn’t just building more warehouses – it is also getting tightening up how those warehouses are used.

Speaking of that.

Amazon’s New Deal With Marketplace Merchants

Having built 23 new warehouses – Amazon is also trying to keep the shelves from being cloggd with items vice president of fulfilment by Amazon’s Cynthia William described as less than seasonal products.

“We’re trying to incentivize sellers to wait to send us the Easter-themed cookie cutter sets,” said Cynthia Williams, vice president of fulfillment by Amazon. That’s not actually a joke, either — last year, 600 such sets arrived in the fourth quarter.

That incentive is variable pricing for warehouse space – this year storing merchandise in Amazon’s warehouses during November and December will cost more (prices throughout the rest of the year were slightly lowered). Amazon will also be lowering its fees for fulfilling orders, but that benefit of course only accrues to retailrs who actually ship their goods during the holidays.

That policy so far has had the desired effect – and though many retailers report changing their delivery schedule to Amazon’s warehouses to more smaller shipments (instead of larger periodic ones), complaints have been minimal.

More attention grabbing has been the move to make Amazon’s automatic and universal return policy standard for any merchant selling in the marketplace. Previously retailers who sold on the site – but handled shipments outside of Amazon’s fulfilment centers, did not have to conform.

This year, Amazon wrote retailers during the fall with the message: US seller fulfilled returns that are within Amazon’s returns policy will be automatically authorized, and Amazon will provide customers with prepaid return labels on your behalf.”

The email went on to cheerfully note that the new policy reduces the time sellers dedicate to processing returns.

If the vendor does not agree with the return, they are to officially take it up with Amazon via a filed complaint.

That has ruffled some feathers, particularly among retailers who are concerned about the tidal wave of post-Christmas returns.

It has not, however, ruffled enough feathers to cause any sort of of mass defection – it seems sellers are more worried about missing out on the waves of e-commerce shoppers on Amazon this season than they are worried about potential returns.

Amazon Delivers Groceries – The May Also Want To Help Consumers Put Them Away

Amazon, according to local job postings first spotted by the Seattle Times – is looking to hire a few good housekeepers.

Not for internal use – but instead as “cleaning technicians” and “home assistants,” possibly as a service for Prime Members.

Yes, having built the virtual personal assistant that will order their customers’ groceries – it seems Amazon is also now experimenting with a literal personal assistant to put those groceries away.

The listing further specifies that candidates must have a “passion for making a house feel like a home” and will be “comfortable working in homes of customers and lifting up to 25lbs,” and the tasks listed include – apart from cleaning and grocery duties, light laundry and “assuring that customers return to an errand-free home.”

This, notably, is a listing that has only been spotted a handful of times in the Pacific Northwest – meaning most sources says this smacks of an Amazon experiment that failed to fly under the radar.

But as of right now Amazon has neither confirmed, or denied, requests for comment.

Looming Legal Troubles In the E.U.

The good news for Amazon in the case of E.U. scrutiny of its tax bill is no news – so far Amazon has escaped the kind of European Commission judgement that saw Ireland ordered to claw back €13 billion (about $14 billion) from Apple Inc. in August.

But, according to The Wall Street Journal, Amazon is increasingly becoming the favorite among experts to be the next target in the EC’s crosshairs. Based on an analysis of company filings in Luxembourg, home to its European business, it appears as though Amazon paid an untaxed subsidiary in Luxembourg €3.39 billion in royalties, largely from European operations, from 2006 to 2013.

If Amazon ends up facing a similar clawback order as Apple – that could stack up to hundreds of millions of euros in liabilities, according to experts in European state-aid cases. That could be particularly damaging for Amazon – given its historically thin ecommerce margins.

Amazon and Luxembourg’s government jointly maintain that Amazon’s royalty payments in nation correspond to international norms and are not indicative of any special treatment Amazon is receiving.

Amazon further notes “pays all the taxes we are required to pay” and that “our profits have remained low” because of big investments it has made in Europe.

If ordered to pay additional tax, most experts think Amazon and Luxembourg will appeal that ruling – much the way Apple and Ireland are now.

So what are lessons learned by Amazon this week? Clean is priority – in warehouses and customer homes. Spending a little extra is warranted – as long as everyone gets their Christmas presents on time. And watch out for the European Commission in 2017, we assume we’ll hear more from them in the future.


Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The September 2019 AML/KYC Tracker Report provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

Click to comment


To Top