Amazon's In-Car Delivery Proposal is a Huge Risk Amid Privacy Concerns

Even in the midst of widespread concern among consumers about their private information and how corporations might be able to use it, Amazon has a brand new delivery feature that they are looking to offer. The feature essentially boils down to this: on specific models of cars (especially those built in 2015 or later), if given permission by the consumer, Amazon deliverers would be able to deliver packages straight into the trunk of a car parked anywhere. David Pierson and Tracey Lien's article in the L.A. Times outlines some of the positive and negative aspects of such a proposed service.

In this modern age, many consumers like features like the one Amazon is proposing because it can make life easier. They don't have to make sure to be home for a delivery, boxes don't get left on a porch, and generally, their deliveries are safer and better protected. Many consumers also like to integrate as much technology into the experience as possible and would value the ability to order something from the road and have it appear in the trunk of their car a day or two later. The move is also good for Amazon because it brings their consumers tighter into the Amazon network, making them more likely to choose to shop with Amazon again in the future.

On the other hand, especially in the aftermath of the Facebook/Cambridge Analytica data scandal, many consumers are wary of giving companies more of their personal private information. It is well-known that Amazon makes money off of selling the data of their customers. They sell advertisement space based on what a customer had searched for on their site in the past. With the integration of in-car delivery, Amazon could also track physical locations, length of time at those locations, and how often the consumer goes to those locations. All of that data is useful to Amazon and its advertising customers, but its also something that most consumers don't want companies to have access to.

Amazon is taking a big risk with this and other somewhat invasive delivery features like in-house delivery. If they're able to become an industry standard before the government gets involved, they could avoid being blocked by regulations. But, if they fail to win over consumers, they could be the reason for even stricter regulations. Amazon, just like other large companies, wants to get as much access to as many lives as possible. The more information they have, the more they are able to adjust their marketing to keep consumers even more involved. It's an endless cycle that locks customers in for life.

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Tech Companies Aim to Develop Ecosystems of Interconnected Devices

Many new technological innovations revolve around the category of "smart devices." These inventions, which tend to be for the home, but can also be used in businesses, aim to integrate all of the user's devices, for a seamless connection and a simpler interface. For example, over the past year or so, several of the largest tech companies (Amazon, Apple, Google, etc) have come out with their own devices powered by artificial intelligence (Alexa, Cortana, Siri, etc). More than that, though, says Tracey Lien in her L.A. Times article, those big tech firms are making a concentrated effort to integrate all kinds of other technologies into their digital assistants, in order to better draw in potential new users.

For example, Amazon approached a company called "August," which focuses on remotely-controlled locking systems, a few years ago to see if August would be willing to allow integration of their service into Amazon's Echo device. The CEO of August agreed, figuring that the partnership with Amazon could only be a good thing, and now a user of the Echo can lock or unlock their doors simply by speaking and instructing Alexa (Amazon's artificial intelligence) to do so. Using voice recognition to control other devices in a home is a highly-sought-after capability among consumers, which is why devices like the Echo have become so popular.

From August to security camera-designer Ring and so many others, there are over 30,000 different ways by which Alexa interacts with third-party devices and applications. With many, the combination of third-party accessibility is the selling point. Let's say you're expecting your friend to come by to pick something up, but you're bed-ridden, or you just don't feel like getting up to answer the door. Ring would tell you who is at the door, then you could use that information to decide whether to let August unlock the door so they can just walk in. The combination of devices makes many things that much easier and more efficient, saving users time.

The purpose of companies like Amazon is to make their devices so useful that they can bring in more and more customers. Then, much like Apple has done continuously over the years, they create an ecosystem of their devices, where each device is useful on its own, but they blend so seamlessly that having all of the devices is the ideal choice. Through various online shopping services, such as Amazon Prime or Google Express, there may even come a day in the near future when users can control everything about their home, including the purchase and receipt of deliveries, remotely. Already, Wi-Fi enabled thermostats and smart electronics are poking out into the marketplace. Who knows what's next?

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Amazon-Whole Foods Partnership to Offer Two-Hour Grocery Delivery

Many people strongly prefer to go to a brick-and-mortar grocery store and pick out their foods themselves. Often, they have preferences on the level of ripeness they're looking for. Others worry that anything picked out by someone else may be dented or bruised or otherwise rendered unusable. On the other hand, there are many shoppers, especially of younger, more tech-savvy generation, who would prefer the efficiency and time-saving of ordering groceries online. Well, according to a recent L.A. Times article, the Amazon-Whole Foods partnership may make that a commonplace reality for the latter demographic.

This year, Amazon is planning to add two-hour Whole Foods grocery deliveries as another benefit for Prime customers. While some Prime customers have already experienced similar benefits through Amazon Fresh, this is different in that Prime customers only have to pay $99 per year versus the $299 per year cost of Amazon Fresh. Additionally, the Whole Foods service delivers within two hours, while Amazon Fresh deliveries often have to be scheduled for the next day. However, the Whole Foods Prime option will likely have a much more limited selection than that offered on Amazon Fresh, so there is a trade-off involved.

Many potential shoppers consider Whole Food's groceries to be of high quality and therefore doubt that they will have any problems with the service, even though they aren't picking out and handling the foods themselves. Others, who have their doubts about smashed cookies or bruised fruit would prefer to shop online, then pick up in the store, thereby saving some time while still ensuring better quality. Currently, about 7% of households in the United States purchase groceries online, with most of those opting to have the groceries shipped. This new deal through Amazon Prime may drive those numbers even higher.

Amazon isn't the only company looking into the only grocery-shopping business. WalMart has developed a system whereby shoppers can order groceries ahead of time and just come into the store to pick them up. Kroger, the company that owns some grocery stores, including Ralph's and Smith's, has offered in-store pickup and is testing out delivery options. Target recently bought grocery-delivery company Shipt, and Whole Foods has even been delivering products through a company called Instacart. Amazon Prime's move is just increasing the prevalence, and will likely lead to a greater number of people ordering groceries from home.

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Amazon Expects Advertising Revenue to Improve Profit Margin

Jeff Bezos, the CEO of Amazon Inc., recently took over the spot of "richest man in the world" from Bill Gates, the creator of Microsoft. To many, Bezos' wealth doesn't make much sense, because, for the past 20 years, Amazon has not brought in a profit. That may seem pretty cut and dry: profit means financial success. However, for Bezos, that's not exactly how it works. For many years, Bezos' financial strategy has been to choose business growth over profit, reinvesting any revenue into expanding Amazon. In that manner, Amazon's stock value has steadily gone up, even without paying any dividends to shareholders. According to an L.A. Times article by Spencer Soper and Mark Bergen, Amazon's latest shift, to focus on sources of advertising revenue, could help to push the company into profit territory.

Over the past few years, Amazon has been losing money in its e-commerce business but has been able to recoup those losses due to its profitable business of providing cloud services. However, the differences between gains and losses are tight: Amazon's average profit is only around 1%. Up until now, Amazon's advertising business has been pretty small, at $1.7 billion in revenue compared with Google's $35 or Facebook's $17.4 billion. Amazon has nowhere to go but up when it comes to advertising. It is likely that the growth will be among companies trying to get priority placement for their products on Amazon's website. That kind of business plan pivot is unlikely to have high costs and has huge potential for billions more in revenue.

Amazon is in a good place for advertisements. Often, on Google or Facebook, an advertisement appears that tries to push a user toward another site, where the user might purchase the product being advertised. The problem with that system is that users get annoyed by incessant advertisements when they aren't looking to buy anything. The difference for Amazon is that its users are already looking to buy something. Advertisements would be both helpful to the shopper, would benefit the advertiser, and would give Amazon more revenue. Everyone wins!

Food companies spend millions each year to put advertisements on television and in magazines to try to generate more interest in their products among potential customers. The same effect can be achieved on Amazon's website for far lower cost, with less work, simply by adding in suggested searches or sponsored search results. Of course, putting actual images and videos as advertisements can also help, but if someone is looking to buy a product, they're going to choose the one that seems to be at the best price. Through Amazon advertisements, companies can make their products more interesting to the average user. Perhaps one day, Amazon's advertisements could replace those on television entirely. Amazon does have its own video streaming capabilities, after all.

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California has Potential to be a Strong Contender in Amazon's Search for New Headquarters

Last week, an exciting opportunity arose for cities throughout North America. Amazon Inc. announced its plans to expand further by building a second headquarters, dubbed HQ2. Since the announcement, mayors and governors across the United States have been submitting proposals and offering tax incentives to the giant company, trying to get Amazon to choose them. According to Andrew Khouri's L.A. Times article, California won't be offering quite as much as other states when it comes to tax incentives, but instead, will be relying on its inherent attractiveness as a metropolitan area with good weather, education opportunities, and skilled laborers.

In some states, like Wisconsin or Nevada, billions of dollars in subsidies and tax incentives are offered to manufacturing and tech companies looking to make a move. They hope that the tax incentives they provide initially will be paid off in the future by thousands of more jobs in the area and an improvement in the housing market. Wisconsin is in the process of working out a $3 billion package with television producer Foxconn. In 2014, Nevada's $1.3 billion package earned them Tesla's lithium-ion battery factory, a factory that Governor Jerry Brown has been vying for.

The amount of money being offered may not matter as much for landing the Amazon deal. Amazon is one of the wealthiest companies in the world, and they have made the parameters of their new headquarters well known. They are looking for a metropolitan area with skilled workers, desirable housing, good distribution routes, and a strong base of customers. With its shipping ports, high quality of life, and many prestigious public universities, California could be a strong choice for Amazon's second headquarters.

Analysts believe that Amazon's main purpose in being so public about their search is to try to get competing offers from different cities so that they can use them to leverage a better tax incentive package from whichever city they actually want for their headquarters. That's why they believe that California has a good chance. Research shows that around 90% of the time, companies would choose the city they chose whether they got the same incentive package or not. It really seems to be up to California itself to shine. Either Amazon wants to build HQ2 here or the company doesn't. The amount of money being offered is unlikely to make much of a difference.

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Best Buy's Pivoting has Helped the Company Survive Amazon's Expansion

As more consumers look to online sources for many of their purchases, brick-and-mortar retailers have had to work on quickly adjusting their business model to stay in the game. Many such retail outlets have failed and filed for bankruptcy in recent years, including Radio Shack, once one of Best Buy's biggest competitors. Somehow, Best Buy was able to avoid a similar fate and has in fact made great strides since 2012, when most analysts thought they were doomed to fail. A recent L.A. Times article by James F. Peltz and Jack Flemming describes some of the methods Best Buy's CEO used to get the company back on track.

One of the biggest factors hurting the electronics chain's profits was a practice among shoppers called "showrooming." Consumers like to be able to see the products in person before purchasing them, which is one factor that makes people hesitant about making purchases on Amazon. However, they also want to make sure they're getting the best deal and spending the least amount of money. So, what they would do is go into stores like Best Buy, look at the variety of products, figure out which specific model they wanted to buy, then simply order it on Amazon for a cheaper price. To combat this practice, Best Buy invested more into expanding its market to the online sector instead of just focusing on its stores. Additionally, they have cut their profits on individual items in order to match Amazon's prices. In the short run, they may be losing money on an item-by-item basis, but overall, getting back some of their market share on electronics has been beneficial.

Even though Best Buy has been developing the online sales portion of their business model much more in recent years, the CEO of the company still considers the physical stores to be a huge asset. Although "same-store sales," which is a measure of the number of sales within a lasting store as opposed to new locations, was on a decline for 4 years, revenue at the older stores has been steadily increasing over the past 3 years. Online sales rose 21% this year and now account for 12% of Best Buy's overall sales. According to analysts, Best Buy's overall sales have remained flat because the electronics industry has been growing very slowly. The economy may be improving, but people are not buying as many "big-ticket" items anymore. Slower innovation and the vast range of retailers has led to a decrease in prices and less interest among consumers who might otherwise be interested in personal computers or televisions.

By offering the same prices as Amazon and speeding up their shipping times, Best Buy has been able to reel in some customers who want to get their product immediately, rather than waiting a while for it to be delivered. They also integrated a way for online shoppers to pick up the ordered product at their local store, which cuts down on shipping costs for both parties. Finally, Best Buy has invested heavily in education for their employees. By making sure that their employees are tech-savvy enough to explain products to shoppers, they are more likely to make a sale. Additionally, customers are more likely to shop at the store where the product is explained to them than on Amazon, where all they have is a description and some pictures. Improving customer service and lowering prices have helped, but it's still quite a while until we can determine whether Best Buy and other similar retailers will survive Amazon's spread throughout the industry.

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Over 50% of U.S. Households Expected to Have Prime Membership by Year's End

Amazon Prime is a popular service that allows subscribers to pay a yearly fee in order to get expedited shipping on everything they order. Two years ago, on July 15, 2015, which was the anniversary of the company's founding, CEO Jeff Bezos started something new to further incentivize Prime users: Amazon Prime Day. On Prime Day, subscribers get special deals on select Amazon products. According to the L.A. Times article written by Angel Gonzalez and Ethan Varian, this year's Prime Day (on July 10th), attracted over 60% more shoppers than last year.

Prime Day, which has been compared to Cyber Monday or Black Friday, was designed by Amazon founder and CEO Bezos to be a "holiday" of deals. Not only was it intended to reward current Prime members, but it was also meant to attract new users. Although Amazon has only released the numbers of users that made purchases on Prime Day, it's likely that they gained many more Prime users in the weeks or months leading up to Prime Day. Tens of millions of users made purchases on Prime Day, over 50% more than last year, which brought in over $1 billion in revenue for Amazon over a single 30-hour period.

Analysts have calculated that the number of households in the US with a Prime account has increased 7% over the past year, and they predict that over half of the households in America will have Prime membership by the end of the year. Free shipping and various deals led people to buy some of their favorite new gadgets this year. Over the 30 hour period in 13 countries, Amazon's biggest sellers were their Amazon Echo speaker, Amazon Fire tablets, and Instant Pot programmable pressure cooker. Many other items sold well, but users were really after the deals on personal electronics.

Other retailers tried similar promotions to either compete with or ride the hype of Prime Day. Fry's Electronics offered free same-day delivery on select items and Best Buy had a "Big Deals Day." In the years to come, it is likely that many other businesses will follow suit, offering free shipping at the very least. Some day in the near future, Prime Day may become a holiday in its own right, similar in scope to Cyber Monday or Black Friday. As long as the deals keep coming, customers will keep shopping, so we'll just have to wait and see.

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Grocery Delivery: Niche or Mainstream?

Going shopping can be both inconvenient and time-consuming for the average person. People like to save time and money so you might think that a technological innovation to make grocery shopping more convenient might attract a lot of interest. According to David Pierson's L.A. Times article, that might not be the case after all.

Amazon recently put in a $13.7 billion bid to acquire Whole Foods Inc., including all of its stores, warehouses, and distribution centers. Although Amazon already has a service called AmazonFresh, which allows customers to order fruits, vegetables, and other perishable food products to be delivered on the same day, this acquisition seems to show that Amazon is looking to gain greater traction in the grocery-delivery market. But, the question still remains: will grocery delivery be a successful venture in the years to come?

During the dot-com boom of the 1990s. a company called Webvan had a goal of making grocery shopping a thing of the past. They planned to do what Amazon is attempting to do: make grocery delivery mainstream. Unfortunately for Webvan, even after $800 million in funding, they were ultimately forced to declare bankruptcy nearly 20 years ago. They realized too late that, at the time, grocery delivery was both incredibly costly and extremely risky because it takes a certain kind of customer to let someone else pick out their groceries for them.

Research has shown that people have some innate preference for picking out their groceries themselves. They want to be able to look at each and every piece of fruit before purchasing it, making sure that it's unbruised or the right level of ripeness. Consumers don't trust that an employee of AmazonFresh or another similar company will be able to do as good a job as them when picking out their groceries. Especially if they end up paying the same amount for the delivered groceries as for those purchased in the store, customers will not sacrifice quality for a little bit of convenience.

However, if the convenience factor was there and the prices were reduced, studies show that the combination might be enough to convince some customers to try out grocery delivery. People care about the price more than anything else. That's why discount grocery stores like Aldi have been expanding so quickly in recent years. Even if the quality of the food is not phenomenal, the lower prices bring customers in faster than at any other chain. So, although many people in this day and age want organic fruits and vegetables, few of them purchase their organic foods at Whole Foods, because the chain is known to have high prices. If Amazon somehow found a way to reduce the prices and deliver the food, all while still making a profit, their goal might be achieved in the near future.

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