Amazon to ship electronics in Brazil from third-party sellers

SAO PAULO (Reuters) – Amazon.com Inc began offering electronics from third-party sellers to Brazilian shoppers on Wednesday, expanding beyond books in the fiercely competitive e-commerce market in Latin America’s largest economy.

The long-awaited move will offer televisions, cell phones and laptops from hundreds of independent sellers on Amazon’s website in Brazil without involving the company in the tricky logistics that have hurt many online retailers in the country.

Alex Szapiro, Amazon’s country manager in Brazil, declined to say if there were plans for the company to stock its own electronics inventory or open a fulfillment center to ship third-party goods more efficiently, as it did simultaneously with the launch of independent sellers in Mexico two years ago.

“Each country has a different playbook,” said Szapiro in an interview with Reuters at Amazon headquarters in Sao Paulo. He helped launch the company’s Brazil business with e-books in 2012 after running operations for Apple Inc in the country for five years.

Shares of local e-commerce rivals MercadoLibre Inc, Magazine Luiza SA and B2W Cia Digital have fallen 14 percent, 17 percent and 20 percent, respectively, in the past week on concerns of heightened competition from Amazon.

Keeping pace with the local e-commerce market, Amazon will parcel purchases into as many as 10 monthly installments without interest, a practice the company started in Brazil for Kindle e-reader sales in 2014, then extended to Mexico and other markets.

Sellers will be paid up-front, minus a 10 percent commission to Amazon and fees of 19 reais ($ 6) per month or 2 reais per item. Szapiro called the 10 percent commission a “promotional” rate without saying when or how much it would eventually rise.

($ 1 = 3.16 reais)

Reporting by Brad Haynes; Editing by Lisa Shumaker

Tech

Amazon: Hitting Where It Hurts, The Periphery

There are mixed views on whether Amazon (NASDAQ:AMZN) is really killing it in grocery retail. At first glance, it does seem like opinions on both sides have merits. And since these opinions are mutually exclusive, it is easy to wonder about this discrepancy. I gave it a lot of thought and finally arrived at the following two conclusions. One, in grocery retail, Amazon may not have a big figure to gloat about so far. Two, traditional grocery chains are probably taking a big hit, and this is unlikely to be ascertained anecdotally.

Location, Location, Location

The oft heard aphorism location, location, location goes as well for grocery retail chains as it does for real estate. After years of competing and exhausting many options to differentiate themselves, grocery retail chains, the new and the old, are back to square one incurring more costs than ever. If one grocery store offers free parking, the other does too. If one offers a money-back guarantee, the other does too. In effect if one grocery retail store offers something to the customer, a competitor nearby is willing to match that experience. Therefore, grocery retail chains are now left with just three attributes to differentiate themselves.

First is the format. A hard discounter will have less than 2,000 SKUs whereas a supermarket will have 40,000. Retailers are institutionalized in one format or the other. For instance, a Kroger (KR) is not going to turn itself into a warehouse club like Costco (COST). Since, the format of the store generally remains the same, it has no influence over the earnings result year after year.

Second is marketing an effective price perception strategy. Just to make it clear, price perception is different from price. As summed up exceptionally in this HBR article, Amazon uses price as a psychological weapon and uses it better than anyone else in the game. Apparently Amazon sells the top moving items at a lower price compared to other retailers. Since, these products have high velocity, the perception that Amazon is cheaper is stuck. The study consistently found that other products were priced expensive relative to competitors.

And third is the location. A Kroger store in Chapel Hill, North Carolina, is not going to compete with an Aldi in Medford, Massachusetts. At competitive locations, price perceptions can feed into the impact on store earnings. And of all the three attributes, none of them affects quarter-to-quarter fluctuations in earnings more than location.

Why anecdotal verification can mislead investors?

In the past, when I wrote two bearish articles on Kroger, readers gave me stick arguing that competitive threats are not borne out by anecdotal evidence at company stores. Indeed, but why does anecdotal evidence defy numbers reported by the company? I think I have an answer but would like to add a caveat that this explanation is theoretical at this stage and was inspired by my reading of Foxall’s Consumer Behavior Analysis. I have not independently verified it, but readers can let me know what they think about my analysis.

Most grocery stores are more or less certain that customers located nearby will visit their store instead of a competitor’s. Saving a dollar on groceries is often not worth the time and gas expended on a trip to a distant store. Especially when stores hardly offer any differentiation. But for people located relatively distant from two different retail chains, the incentive to defect is higher. This number could be minuscule. But we are not talking about a 10% dip in sales or traffic. In fact sales growth and traffic are dipping just marginally at traditional chains. If Whole Foods succeeds in snapping just these customers at the sideline, and who were previously shopping at a Kroger’s or Wal-Mart (NYSE:WMT), the impact could be substantial. Here’s how.

Importance of volumes and impact on stock

The table below highlights the importance of volumes for grocery retail chains. The return on equity of all companies is driven by asset turnover and leverage. But what has an outsized effect on annual changes in ROE and short-term movement in stock is the net income margin. Even a 50 basis point decrease or increase in net income margins results in approximately -+10% change in the return on equity figure. And because of the high fixed costs, small changes in sales often see net income growth going from green to red.

Stock Net Income Margin Asset Turnover Leverage Return on Equity
Costco 1.98% 3.56 2.75 20.71%
Wal-Mart 1.70% 3.28 5.45 28.98%
Sprouts (NASDAQ:SFM) 3.07% 2.82 2.14 16.62%
Kroger 2.81% 2.44 2.56 16.65%
Amazon 1.74% 1.83 4.32 14.52%
Target (NYSE:TGT) 3.94% 1.78 3.42 22.89%

Therefore, if people at the sideline show up at, say, a competitor of Kroger, the company’s decline in net income margin is quite severe relative to decline in both sales and gross margins. The company’s recent earnings were a case in point. And since this competitor could increasingly turn out to be Whole Foods, Kroger does deserve the decline in its market cap. At the same time as long as Whole Foods nibbles at just the periphery, it is unlikely to post a massive increase in its own top line. Therefore, the opinion of weaker results at traditional grocery chains without, say, a double-digit growth in Whole Foods seems coherent. In terms of the impact this could mean more pain for Kroger, Wal-Mart, Sprouts, and Costco. Amazon should rise once these players start capitulating.

Note: Company related data have been sourced from Morningstar.

Note: If you find the article interesting, kindly hit the follow button to be updated about my latest insights.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

SeekingAlpha
Tech

Amazon now has its own Prime Air cargo planes for quicker delivery


Amazon is leasing 40 cargo planes to shuttle its own shipments through the air, with a view to improve its delivery times. And today, it’s launching its first branded aircraft, the Amazon One at the SeaFair Air Show in Seattle, where the company has its headquarters. The branded Boeing 767-300 has a prime number as its tail number (get it?) and will join 10 other planes that have initially been designated as exclusive cargo carriers for the company. More planes will be added to the fleet over time. In addition to speeding up deliveries, the introduction of these planes also…

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Google and Amazon execs to debate future of app distribution at Mobile Summit

cavallo point

VB EVENT:

Google and Amazon may be top dogs in their respective industries, but they both face challenges when it comes to mobile.

Jonathan Pelosi, Head of Industry, Mobile Apps, Americas at Google

Above: Jonathan Pelosi, head of industry, mobile apps, Americas at Google

Google is the largest ad company in the world, and it earned that status by dominating search. It sells ads to brands wanting to reach Google’s users. Lately, though, people are spending more time in mobile apps, and Facebook, the king of mobile apps, has emerged as a fierce competitor, in part by selling ads to app publishers seeking new users. So how does Google respond, to serve its massive number of customers seeking to get users on mobile?

Ryan Lysne, Head of Mobile Marketing, Amazon

Above: Ryan Lysne, head of mobile marketing, Amazon

And while Amazon is the largest ecommerce company in the world, one of its challenges is to stay that way on mobile. Mobile commerce will explode to $ 1 trillion over the next decade from $ 100 billion this year, so the opportunity for Amazon is huge. But with users spending more time in apps, they’re likely to be buying things from within those mobile apps. It’s important that Amazon market its own app effectively.

We’re delighted to have Jonathan Pelosi, who leads Google’s mobile app marketing and strategy efforts, and Ryan Lysne, Amazon’s head of mobile marketing, join us at the Mobile Summit on April 4-5 in Sausalito, Ca.

They’ve agreed to join the stage together, to talk about the big trends in mobile app distribution.

In many areas, Google and Amazon overlap, and compete. Google has its various commerce initiatives, including Google Express. They are competitors in supplying cloud services to businesses, too. But in others, they cooperate, in particular Amazon’s need to extend its reach on mobile and Google’s need to serve the largest customers there too.

It’s rare to get the two giants on the same stage, and so it will be a great addition to our two-day executive event. Among the topics they’ll be discussing:

  • How they see apps consolidating or proliferating over time
  • Alternative technologies/platforms that they see developing
  • What are some of the differences, and similarities, between usage of mobile web and apps? How will this evolve over time?
  • How to drive distribution, keeping scale and quality in mind at the same time
  • What metrics do they look at? How do they see this evolving over time?
  • How to think about lifetime value — and to leverage it in buying decisions
  • How to think about defining and driving engagement
  • How is the industry evolving with regards to app strategy? Will developers consolidate or have separate app experiences?
  • Are apps a longer-term play or are there other platforms that will take over?

Other speakers at Mobile Summit include leading executives from Pandora, GrubHub, Touch of Modern, Runtastic, Pocket Gems, Kik, Zynga, AOL, and more.

GrubHub CMO Barbara Martin Coppola

Above: Barbara Martin Coppola, CMO, GrubHub

We invite only 180 executives to the Summit (you can apply to attend here). It’s designed to be an intimate experience where executives exchange strategies around some of the hottest trends in mobile — at a time when brands are having to move quickly to embrace instantaneous distribution. The goal is to make the Summit the best insider event, and an independent one free from influence from specific vendors or platform owners.

Leading vendors will be there, but we try to invite brands and other independent app owners to create the best mix possible.

Ethan Smith, Yummly

Above: Ethan Smith, chief growth officer, Yummly

Working sessions go into depth on specific topic areas, and cocktail receptions make sure the networking juices flow.

Topics include the following:

  • User acquisition
  • Designing the user experience
  • Messaging and video
  • Mobile marketing automation
  • Targeting your marketing
  • How to build your mobile marketing team
  • How to orient entire organization around mobile
  • M-commerce and online-offline convergence
  • Nurturing existing users
  • Harnessing data for mobile engagement
  • Mobile advertising attribution
  • Predicting and measuring

Call for sponsors

If you’d like to sponsor, please send a message to [email protected].

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