Changes

“There is nothing permanent except change” – Heraclitus

And so it is, tomorrow will be my final day with Ti. I shall miss my co-workers very much and I wish them all the best in what life has to offer them.

On August 1 I will begin a new chapter with a new company. A bit different from Ti, but a great opportunity to help contribute to the growth of a young logistics IT company here in town.

As for the Blog and Twitter, each will continue along and over the next few months look for some enhancements that I hope you’ll like. And yes, I will continue blogging on other sites as well as contributing logistics articles to various periodicals.

Thank you so much for reading the blog posts and chatting with me here and on Twitter, it is always very much appreciated!

:)

Cathy

Amazon’s Quarterly Earnings – Profit!

A rarity for Amazon but yes indeed, the company scored an operating income of $464 million for the second quarter 2015 compared to a $15 million loss for second quarter 2014. In addition, net sales increased 20% to $23.18 billion. Wow.

By region, North America’s operating income was $703 million compared to $329 million same quarter 2014. International operating income was a loss at ($19 million) compared to ($2 million) for same period 2014.

However, it is Amazon Web Services (AWS) that seems to be generating the most excitement. Only the second quarter in which Amazon reported this group’s earnings – its operating income was $391 million compared to $77 million in 2014. This fast growing division will likely play an increasing role in the overall company’s growth strategy moving forward. Indeed, it is arranged in eleven regions around the world with plans to launch in India as well. In addition, Amazon is one of its primary customers although it is not included in AWS revenue.

An interesting, but really not surprising comment was provided by the CFO on the analyst call July 23 – “We’re using software and algorithms to make decisions rather than people which we think is more efficient and scales better and will be more accurate, especially as we insert machine learning.” (Seeking Alpha) I think as more companies adopt the use of algorithms and such, this will become a norm in all industries. A bit worrisome for me personally…it may be efficient but leaving out the human element may result in missed opportunities.

So, looking at the earnings report from a logistics perspective…..

Fulfillment costs increased 13.1% from Q2 2014.  This is all about getting inventory closer to customers here in the US and throughout the world. The company has recently been investing heavily in India – lots of opportunity and among some of the moves Amazon made in this country was to introduce Sunday delivery across 100 cities. Amazon noted on its call that it is adding and expanding warehouses in the sort centers it introduced last year – at the end of 2014, there were 19 such centers. These are further helping to get goods to customers quicker and also seems to be helping on shipping costs.

And speaking of shipping costs, it appears these sort centers may indeed be helping some. For second quarter, shipping costs fell 22.5% from same period 2014 and declined 10.7% from Q 1 2015. Meanwhile, shipping revenue declined 36.5% from Q2 2014 and 15.2% from Q1 2015.

Among Amazon’s many Q2 achievements that were highlighted in its press release include:

  • Launch of Amazon Business – An expansion of Amazon Supply, Amazon’s wholesale site which launched in 2012, this latest group is a B2B portal that can give such companies as Grainger a run for their money.
  • Amazon Mexico – At long last, Amazon is now selling physical goods in Mexico, a country with great e-commerce potential.
  • Prime Free Same Day Delivery
  • Prime Day – See previous post: Prime Day…the Results Kind of
  • Introduction of the Fulfillment by Amazon (FBA) Small and Light Program – A fulfillment solution for fast-moving, small and light products that increases free shipping selection for customers and provides a low cost shipping option for sellers. This is an interesting move and could further disrupt an already challenged CPG market.

The outlook for the next quarter is an optimistic one as Amazon continues to make investments in its logistics infrastructure in the US as well as international. India will remain a big focus and the UK will likely see the expansion of Same Day delivery and the launch of Amazon Fresh  for perhaps September. This will be interesting to watch as Amazon Fresh will come against some heavy hitters such Ocado.

Stay tune….

Thanks,

Cathy

 

Prime Day….the Results, Kind of

A success or flop? If anything, Prime Day stoked the social media chatter with such trending Twitter hashtags as #PrimeDay and #PrimeDayFails. It seems some consumers were not overly happy with the quality of deals and that some deals were only available at certain times. Some folks questioned if Amazon was just cleaning out warehouses.

However, according to Amazon’s press release, it was a big success with customers ordering 34.4 million items across Prime-eligible countries. The VP of Amazon Prime commented, “Worldwide order growth increased 266% over the same day last year and 18% more than Black Friday 2014 – all in an event exclusively available to Prime members. Going into this, we weren’t sure whether Prime Day would be a one-time thing or if it would become an annual event. After yesterday’s results, we’ll definitely be doing this again.”

Some industry analysts suggest that Amazon missed an opportunity to emphasize benefits that come with Prime membership such as speed of shipping, video and music streaming, photo storage and e-book lending – much more expanded benefits than what other retailers offer with their own subscription plans.

But, Wal-Mart, which hosted its own sale the same day and also announced success, has something that Amazon doesn’t have right now – physical stores. A jab or PR ploy, take it as you want, but Wal-Mart indicated that Wednesday (Prime Day for Amazon users) was the highest day of the year for same-day pickup at its stores and orders increased “triple digits” over the same day last year.

Indeed, it’s the 2-day free shipping that is such a nice benefit of being an Amazon Prime member but it’s a costly one for Amazon with Forrester estimating that it costs the company more than $1 billion a year. However, according to consulting firm Kurt Salmon, the one-day sale encouraged customers to buy all goods at once which then allowed Amazon to save money on shipping. The firm further noted that the sale served as a kind of Black-Friday test run to help it prepare for other high-volume days.

Amazon is dependent on such delivery networks from UPS, FedEx, USPS and other delivery providers here in the US as well as other locations throughout the world.

So, how did Amazon’s delivery partners do? By all accounts, it appears all went well with a few hiccups scattered about. A few Twitter comments were concerned about 2-day deliveries not being delivered on time and/or rescheduled for Monday.

For the USPS, it was probably more of a struggle to juggle the packages in addition to the usual mail delivery but a key benefit it has over the two main delivery companies is that it delivers 7 days a week.

An interesting analysis of how it was expected to do on Prime Day can be found in the article “Is the Postal Service Primed for Amazon Prime Day?” In which the author estimates the USPS could see 12 million packages, roughly 20 times its normal Amazon volume and more than double its normal daily volume for all Parcel Select packages.

Likely we will learn more when earnings announcements start to trickle in. Estimated dates of these announcements are:

Amazon – July 23
UPS – July 28
USPS – early August
Wal-Mart – August 18
FedEx – September 16

So, as Amazon’s VP of Amazon Prime noted, the sale will probably return next year. Things will likely be different in 2016 as an analyst with NPD Group noted, “Christmas in July is not going to be new next year. It’s going to be repeated and embraced by more and more retailers.”

Other posts related to this topic:

Did Walmart Just One Up Amazon?

July 15th is Prime Day, Are the Couriers Ready?

 

Thanks for reading!

Cathy

Did Walmart Just One Up Amazon?

Just as everyone was getting excited about Prime Day, Walmart announces on its blog, ““We’ve heard some retailers are charging $100 to get access to a sale. But the idea of asking customers to pay extra in order to save money just doesn’t add up for us. We’re standing up for our customers and everyone else who sees no rhyme or reason for paying a premium to save.”

Hmmm…….

So, Walmart plans to offer its own discounted goods as well as lower free shipping minimum order to $35 from $50 which will last “until further notice”.

Ok, so after Walmart took a dig at Amazon, Amazon’s VP of Prime turned around and issues a statement, ““We’ve heard some retailers are charging higher prices for items in their physical stores than they do for the same items online. The idea of charging your in-store customers more than your online customers doesn’t add up for us, but it’s a good reminder that you’re usually better off shopping online.”

Ouch.

But wait, that’s not all. Comments on Walmart blog were decidedly pro-Amazon with several reminding Walmart that it owns Sam’s Club, a member-only warehouse.

So, here in the US, the competition is definitely heating up for online dominance and the winners are going to be not only the consumer but the delivery companies. But, are the delivery companies ready?  There’s no room for error from any delivery company at any time of year of course, but something that is potentially this big, lets just hope Amazon and Walmart have worked and planned with their delivery partners ahead of time. Consumers have become unforgiving and many have long memories.

Suggestion to delivery companies – be sure to bring your A-game.

As for whether Walmart one upping Amazon….Not so sure yet. Let’s wait and see what happens this week.

July 15th is Prime Day, Are the Couriers Ready?

Amazon is celebrating its 20th anniversary with “Prime Day”, July 15th. According to the company’s VP of Amazon Prime, “Prime Day is a one-day only event filled with more deals than Black Friday, exclusively for Prime members around the globe.”

Sounds a bit like Alibaba’s annual Singles Day doesn’t it? According to Alibaba, 2014 Singles Day was a record breaking one. Check out some of the stats:

  • Generated over $9.0 billion in sales
  • 278 orders placed
  • About 200 million packages
  • Transactions occurred in more than 200 countries with Hong Kong, Russia and the US leading this group

While it’s unlikely the upcoming Prime Day will reach these kinds of stats, it is creating a buzz and its ramifications could be huge. Prime Members in  the US, UK, Spain, Japan, Italy, Germany, France, Canada and Austria will be able to take advantage of savings on Amazon’s website beginning midnight, July 15th. Not a member? no worries, Amazon is offering interested folks to sign up for free, 30-day trial membership and gain access to all of the deals, then cancel before the trial is up.

So, besides celebrating an important milestone, why is Amazon doing this? One of the main reasons is that Amazon’s competition is growing and catching up with it. A few months ago, Walmart announced its $50-a-year Shipping Pass, similar to Amazon Prime. When it is officially launched, it will include three-day shipping of more than a million products. However, it will come with none of the extra bells and whistles Amazon Prime offers.

Ebay introduced its eBay+ in Germany for about $17 to $22 a year, it offers fast delivery and free returns. Selected vendors are participating in the program, and it’s aimed at the site’s heaviest German users.

But it’s Alibaba that Amazon needs to be wary of if it wants to succeed globally. Alibaba has been vocal of late that it plans to emphasize its global push. It recently consolidated its Asian dominance by investing further in Singapore Post for logistics/delivery purposes. Amazon is investing heavily in India with fulfillment centers and has also just recently expanded further into Mexico. However, both companies have had trouble successfully expanding globally which may lead one to question if the future of e-commerce will remain regional-focused.

As Amazon battles on, the couriers, I would imagine, are preparing for quite a delivery bonanza. Among the huge benefits for Prime members is free 2-day delivery and in some locations, free same day delivery.

Couriers throughout the US, Canada and Europe will benefit with volume gains. Here in the US, the US Post Office could be the biggest winner but UPS, FedEx and the Regionals will also likely see some benefit. In the UK, while the Royal Mail and such couriers as Hermes and Yodel will see volume increases, it will be Amazon’s own delivery service that will likely be at the forefront of attention. In 2014, Amazon expanded its UK network and introduced its same-day delivery service called Pass my Parcel which is free for Amazon Prime members. This service could see volume gains as a result of Prime Day.

But what to be particular mindful of is the volume increase. If this indeed proves to rival “Black Friday” will couriers be able to manage not only this extra volume but also be able to deliver within 2 day, or for some, same day?

So, stay tune and let’s see how Prime Day 2015 plays out. Will buyers flock to the website to take advantage of great deals? will couriers be ready? Watch this space later this week to read what happens.

Thanks!

Cathy

Don’t forget the basics

I’ve said this a number a times and it’s worth repeating…”Don’t forget the basics”. Uber, Amazon, Cloud, crowd-delivery, same day delivery, driverless cars, IoT etc. are all very cool and will, if not already, affect your supply chain. Should you jump on the bandwagon before you miss out?

Just a suggestion…do your homework. Make sure your basic supply chain is in order. How’s that network? what about your carrier partners? Can you manage through a crisis such as another port situation we experienced earlier this year/last year?

Just a few things to ponder. I really enjoy reading and chatting with folks on innovation and yes, it is having a major effect on supply chains but don’t just be a “me too”. Do the math. Make sure you have a solid supply chain. Maybe by being “innovative”, you simply readjust the number or type of carriers or change the percentage of modes of transport used.

Another Update!

Yeah. Ok, finally realizing I can’t do everything. Still trying though so thanks for your patience. I did find out our CPG report will be published next week so be sure to look for that announcement. Also coming out next week is CSCMP’s State of the Logistics Report. For more info on that check out Penske’s blog post.

I’ll be hanging out at local hospital tomorrow and through weekend so if you want to chat I’ll be checking Twitter and email. Otherwise, I’ll be working on our freight forwarding report and some other stuff.

Thanks again for your patience. I promise, newsletter and new, more interesting blog post coming soon.

Cathy

P.S. Update on the hospital situation…all went fine. What was suppose to be a 3 hour surgery turned into 5 hours thanks to a stubborn valve. Otherwise looking forward to getting my hubby back home within the next few days. Thank you very much for your well wishes!