Through the Seattle Times, here is a clip on the history of Amazon Prime. Below, I discuss two points on scaling Prime services. Two Points on Scaling: Scaling Volume: Prime was clearly a way to scale revenues through the volume of transactions, even at a huge setup cost, by introducing a subscription plan. An issue with scaling revenues this way is the stickiness of prices. It took a whole nine years for Amazon to go from $79 to a more profitable fee of $99. (I thought they would be raised to $108 at $9 a month – closer to NetFlix rates – but the fees were stickier than I had thought). Scaling Speed: It is much harder to scale on…
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Here is the previous post on Amazon Key, which begins services on Nov 8 in about 37 cities. Many are skeptical about the usefulness or the need for the service. For instance, here is “I’m not ready for Amazon Key” on CNBC, and a dramatic narration (“I’d rather have porch pirates steal my sponges than let Amazon in my house“) of the trust-in-service path point that I made in my previous post on Amazon Key. Here is a Statista chart capturing the results of a poll: “How comfortable do you feel about guest access via smart locks?” (source: in the chart). Here is another chart through Morning Consult that gives some additional information on reception to the idea based on…
Leave a CommentIn 2014, Tech Crunch reported Amazon filing a patent for “Anticipatory Shipping”, i.e., getting the package ready for shipping even before a customer orders the package. The coverage on this issue has been minimal. Today, through a student (ht: PB), here is an article on Economist (subscription required) about German firm Otto using AI and machine-learning to purchase 200,000 items a month from third-party suppliers without any human intervention. The orders are made purely based on machine learning on 3 billion prior transactions and a variety of variables (weather, etc.). Two important factors stood out from the article. Customers are less likely to return if the product arrived within two days. Pre-shipping helps eliminate risks due to shipping delays. (There…
Leave a CommentThe Amazon Cloud Cam and compatible locks. Photo Credit: Becca Farsace / The Verge Amazon has just released Amazon Key to Amazon Prime members. (I am not an Amazon affiliate, i.e., I derive no financial interest from the link). Amazon Key is a product-service bundle that includes buying an indoor security camera, and a compatible (electronic) smart lock on your door (totaling $250). Hardware is not dead yet. See detailed coverage at Verge. How does the Amazon Key delivery work? Amazon authorizes the delivery, then turns on the security camera, and unlocks the customer’s door. The customer will get a confirmation (via email/text) that his or her package was delivered. Customers can watch the delivery live or later through a recorded…
Leave a CommentWall Street Journal reports that Amazon has signed contracts with Apartment building owners and managers in order to install 850,000 locker units in apartment complexes. One of the challenges that remain in last-mile deliveries is “matching” delivery times with guaranteed time windows. Say, you need a delivery to be made between 1-3 pm on Tuesday. It is hard for a firm (i.e., expensive to accomplish, not mathematically hard) to make sure that the delivery occurs exactly in that window. Having some select products in stock at lockers in apartment complexes will address some of the “matching” problems. This is effectively like the consignment model in the medical devices industry. The devices are physically held at hospitals, but owned by device companies…
One CommentAn excellent recent article on Atlantic by Derek Thompson talks about how the History of Sears predicts nearly everything that Amazon is doing. I recommend this well-researched article as a great reading to understand Amazon in the context of how Retail business has changed over the years. Interestingly, this has been a point I have been stressing about understanding Amazon in the Operations Strategy Class (OIDD 615) at Wharton at least for the last 5 years. Here is the slide I typically show before beginning the Amazon discussion in OIDD 615 Class (the one below is from October 2016), while building up to the eventuality of Amazon opening more stores. I think that the theory is working out pretty well.…
Leave a CommentThis November’s Atlantic Issue has an interesting, humorous article (includes a bit of french from a Parisian cab driver) about the very first Costco in France. The location on the outskirts of Paris has apparently become “an unlikely hit in a city known for its refined tastes.” This is attributed to be surprising especially as a magazine called Costco an “American Mastodon”. Speaking Retail Operations, it is not surprising that a Costco superstore is welcome in France. They signed up 12,000 members in 10 days. (See the excitement in the video of Costco Franco opening, for yourself. Video Credit: Huffington Post France). First, the Costco France opened in Villebon-Sur-Yvette, which is about 30 km from where-ever one thinks the epicenter of Paris…
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