"Amazon.com has installed more than 15,000 robots across 10 U.S. warehouses; a move that promises to cut operating costs by one-fifth and move packages out of the door more quickly in the run-up to meet the Christmas shipment rush."
Another example of how Amazon is working to
reduce operating costs on the road to profitability. My view of Amazon is that they are trying to
grow sales while increasing efficiency of delivery system and gaining leverage
over suppliers in order to drive competitors out of business and eventually be profitable.
- Amazon may be willing to take losses for a very long time to gain market share and customers—this puts enormous pressure on their competitors.
- Amazon Prime is another very interesting and useful (from a consumer perspective) loss leader.
- How long can Walmart match Amazon’s prices while paying overhead and employee costs?
- On the other hand, how long can Amazon wait to be profitable? It’s been 20 years so far, so perhaps a while longer.
Walmart—probably has the best chance of competing with
Amazon online.
- Their store experience is very poor--crowded, dirty, not enough customer service or sales people--those there don't seem to be very motivated. Our family avoids Walmart stores at nearly all costs--we might go early in the morning, but never during prime shopping hours.
- Their online store is decent, prices are good, and ship to store could be useful, but there is still work to be done there. Did I mention I really don’t like walking into Walmart—it feels like I'm losing a small piece of my soul each time. What if they set up a drive through pickup? You’d order online, then drive to an area where someone would bring you what you ordered (like several grocery stores are doing). I’d much prefer to order from them online if I could avoid the experience of parking, walking into the store waiting in line at customer service to find someone to give me my order.
- I once ordered something, put down the wrong store for pickup, then found that the store my wife went to to pick it up for me couldn't fill the order (even though the item was on their shelves). She had to go across town to the other Walmart to pick it up. You could probably guess the feedback she had for me on that one. Walmart’s inventory/sales management tools should have been able to handle that easily--needless to say we haven't tried that again.
Target—store experience is much better than Walmart (less crowded, more and better help), can’t necessarily compete on price.
Leveraging online sales with positive store experience could be the
way. Still, they are struggling in the
revenue and are having a tough time with new stores in Canada. While their stock dividend is holding, their payout ratio is now way too high.
Barnes & Noble—similar to Target, they present a very good store experience,
but how many people browse Barnes & Noble, and then order a book from Amazon
either for delivery or for their Kindles? I can’t imagine their supply chain is anywhere
close to Amazon’s in terms of efficiency. Nor do I think they can handle extended unprofitably the way Amazon can.
- It’s tough to imaging Barnes and Noble being around another 10 years, but perhaps they’ll find a way.
- Tying the Nook to the Android/Google platform might be that way.
- Highlight that store experience--find people who will pay to sip coffee while browsing for books.
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