retail news in context, analysis with attitude

Responding to our piece yesterday taking note of a Vox analysis of Amazon's business plan, MNB reader Anjana Agarwal wrote:

I agree with the Vox article, that Amazon's strategy is clearly to redeploy every dollar back into the company to grow it. That's how Amazon has grown so far, it never did make financial sense, right from the time they offered Free Shipping on orders over $25. But they made it work, and the industry soon followed, to the shopper's advantage. Now I can get free shipping from almost any site, although minimum purchase threshold varies.

Prime Now is already launched in some markets, like Seattle, and it works. My teenager ordered the minimum $20+ worth of products the other day as she wanted her $5 beauty product to arrive in an hour and did not have a car to drive to the store, so she just ordered some junk food to supplement her beauty purchase! I've used it before for last minute party supplies, or for a product that's not available in any store close by and I wanted it at my doorstep in a couple of hours. I also like the fact that Prime Now goods arrive in a little brown paper bag instead of cartons as my house is beginning to resemble a recycling plant with all the Amazon orders I place! I believe Amazon is losing money on Prime Now at this point, but if I plot my purchases from Amazon since 1999, my purchase curve looks very much like the overall company sales curve with a big inflection point at the time the Prime program was launched. (By the way, Amazon allows you to download every transaction ever made on an excel spreadsheet through your account page and I am aghast at how much I've spent over 16 years with Amazon! Way more than the lifetime value I've calculated for retailers, except perhaps, Costco!)

I did a little poll at work and almost every colleague is a Prime member and I bet they've all increased spend since they joined Prime. 40% of Amazon customers were Prime Members in 2015 vs. 25% in 2013. Prime members spend more than double of non-Prime members, about half of them spend over $800 as per a RBC survey. So Prime Now might sound crazy if we try to look at the short term numbers, but Jeff Bezos always has his eye on the very, very long term view and wants to keep adding to the Prime base. Every day is Day One for him!

On another subject, MNB reader Rebecka Rivers wrote:

Really appreciated reader Thomas Palmer’s comments on global warming, but wanted to add my understanding to it—yes, global warming gets us more moisture in the lower atmosphere. The reason this becomes dangerous is that it contributes to lower salinity levels in the oceans, which eventually leads to the stalling of ocean currents. Ocean currents keep climates temperate, or, as my father is fond of saying, “it’s not the global warming that you need to worry about, it’s the global cooling (think: ice age) that comes after it that is really worrisome.”

Of course there are also solar flares, the Earth’s proximity to the sun, human events (rise of industry, motor vehicles and airplanes), volcanic eruptions, meteors and magnetic pole shifts that also can lead to changes in the global weather. Just as in retail, change comes not from the identified threat, but instead the unexpected disruptors!
KC's View: