Wednesday, April 29, 2015

AMAZON, EBAY

I see Amazon as the leader in driving Immediacy in e-commerce.  E-commerce is the growth part of multichannel/ omnichannel.  Too many others are doing little or nothing to compete head-on with Amazon or to develop their own niches. Amazon has competitive differentiation--and are adding to it globally.  Drones in US and UK  3D Printing Truck Delivery.  Same day delivery in Madrid.  Variation of Click & Collect in India.  Delivery to trunks of Audi cars.  Amazon uses Blue Ocean Supply Chain Management.

Amazon and Ebay – showing their age?
27/Apr/2015 by Cathy Roberson
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Among the pioneers of the dot com revolution, Amazon and Ebay have innovated and expanded to keep up with the ever changing global environment. But has it been enough? Are these two e-commerce titans able to take on the growing number of start-ups as well as the omni-channel strategy adopted by brick and mortars?
Each announced their quarterly earnings last week and both achieved positive gains in net sales/revenue. For Amazon, net sales increased 15% to $22.7bn with net losses of $57m compared to $108m for first quarter 2014. Obviously the growing number of fulfilment centres and additional labour are weighing on fulfilment costs, which increased 19.1% to $2.8bn. Meanwhile shipping costs remain high increasing 26% over first quarter of 2014 to $2.3bn. However, increasing the cost of its Prime membership helped the company grow revenue received from shipping 53% to $1.3bn for the quarter.
By reporting region, North America net sales increased 24% and represents 59% of overall net sales, up from 55% for same period in 2014. International net sales declined 2% and its share of overall net sales fell from 40% in first quarter 2014 to 34% first quarter 2015.
For eBay, net revenue increased 4% to $4.5bn. The growth was led primarily by its payments division, up 14% to $2.1bn. Its logistics/e-commerce enabler division, eBay Enterprise, noted a 7% gain to $288m but its mainstay, marketplace division, witnessed a 4% decline to $2.1bn. In its press release, eBay noted this division’s gross merchandise volume (GMV) declined 2%, with the “strengthening dollar significantly impacting results”. In the US, GMV was up 2%, while International volume was down by 4%.
While no size fits all, it is interesting to see the strategy each has pursued over the past twenty years. Through the years, both companies have moved beyond selling goods to consumers. eBay has acquired PayPal and GSI Commerce, which helps to extend its reach into electronic payments and logistics services respectively. Meanwhile Amazon has expanded its fulfilment centres closer and closer to the end customer while devising ways to reduce its shipping costs, including taking some of the delivery on its own.
As a result, these two e-commerce companies now look and behave more as logistics companies versus e-retailers twenty years ago. But the strategies moving ahead now seem to be differing. Last fall, eBay announced plans to spin off PayPal and is studying “strategic options” which include the possibility of selling off its Enterprise division. As such, the company looks to be moving away from its logistics businesses and returning to its roots to focus on its Marketplace division. Perhaps eBay is looking to take a similar approach as Alibaba with its marketplace groups by partnering with logistics and transportation providers.
Meanwhile Amazon is moving further and further into the realm of logistics. In its recent quarterly earnings announcement, it noted its Amazon Web Services was now a $5bn division and growing rapidly. In fact, it was the fastest growing division for the quarter in terms of net sales growing 49%. According to the Washington Post, Amazon Web Services provides the computing power to start-ups and companies such as Netflix and Airbnb. Furthermore, the newspaper notes Amazon Web Services is the largest provider of cloud infrastructure and services to the US government, including to the Central Intelligence Agency and the Pentagon. In total, it has 1,500 government clients globally. Amazon also has a government-only cloud for storing sensitive data.
Twenty years into the e-commerce revolution and Amazon and eBay are still evolving. Perhaps a bit grey around the edges now, Amazon will certainly continue to keep analysts and industries on their toes while eBay will be one to watch to see if their current strategy was indeed the right move in this global business.