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E-Commerce Round-Up: January 2016

E-Commerce Round-Up covers major recent events and news from the past month in the e-commerce world, and provides a brief analysis of what they mean. This month’s Round-Up covers recent Amazon developments (confirmed and rumored) and the declining fortunes of online flash sale and daily deals companies.

Amazon buys a French delivery company . . .

Amazon continues to beef up its investments in supply-chain companies with its purchase of Colis Privé, a delivery company in France that specializes in deliveries from online retailers to buyers within 24 to 48 hours.  Amazon had previously owned 25% of the company, which uses subcontractors to handle the deliveries. Elsewhere in Europe, Amazon already owns a stake in 4.2% stake in Yodel, a private delivery company in the UK which is the second largest in that country after the national postal operator Royal Mail.  

The Colis Privé buy follows on the heels of several shipping–related investments Amazon has made in recent months in the US, including adding thousands of trucks to its fleet and reportedly negotiating to lease 20 Boeing cargo jets.

Implications:

These purchases indicate that Amazon wants more control over its supply chain, rather than having to depend entirely on third parties for its shipping and deliveries. The question remains of whether these moves are meant to merely plug in gaps that Amazon has experienced during peak periods, or whether they are more strategic. If the latter, that’s a direct threat to the private delivery companies like UPS as well as the national postal services in its largest markets.

. . . and (supposedly) plans to open 300-400 brick-and-mortar stores in U.S. malls

Amazon itself has stayed silent on this claim, which the CEO of a shopping mall company brought up the topic in his earnings call. However, following the social media-fueled news frenzy, that CEO has since dialed back from this statement, saying that it was “not intended to represent Amazon’s plans.” At present, the retailer has just one physical store in operation, in its home base of Seattle.

Implications

To shift from operating just one store to opening “hundreds of stores” would not only be a massive undertaking even for a commerce leader such as Amazon. It would also be completely out of character. Jeff Bezos started the company with books as the main product, but his vision was to take advantage of endless selection opportunities the web made possible. As such, he has built a company that has mastered, and set the standard for, a lot of what customers want from retailers in the digital era. Yet one thing Amazon is not known for is its personal, human touch, which is a key part of any physical store experience. For example, Amazon’s help page, there are options for narrowing your search, but no phone number or click to chat function to speak with an actual person. And a recent New York Times article about working at Amazon painted a picture of a high-pressure and grueling environment that even top performers found hard to navigate. Making the leap from that impersonal and intense scale to the one to one human one would be a major culture shift for Amazon. 

Troubled times for e-commerce companies specializing in flash sales and daily deals

Department store retailer Hudson’s Bay just bought Gilt Groupe for $250 million. The luxury flash-sale provider was not long ago valued at $1 billion and IPO’d at $280 million. This announcement is the latest from once-hot e-commerce companies that have struggled to mature. Two of the more prominent ones include:

  • Online furniture and decorating retailer One Kings Lane, once valued at $900 million, announced in mid-December that it would be cutting 25% of its staff.

Implications:

Are these a sign that these companies were overvalued? Probably, but it’s not like the dot-com 1.0 era where start-ups earned multi-million dollar valuations without actually generating any revenue. All three companies above, in contrast, experienced rapid market adoption and revenue growth, and have large customer bases.

That may in fact have been the seed of their current problem: that they expected growth to continue at the same rate without doing anything differently. It’s like these companies  looked at their addressable market as driven by the same thing over time, in these cases by great deals on fashion and experiences. Yet customer’s relationships to brands evolve over time, as their habits, preferences, and environment change. Hopefully future e-commerce start-ups will learn from these examples and look at their customers not as transactions, but as people.

 

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