Amazon, the dominant marketplace in North America has always wanted to be the everything store. Amazon Fashion, however, seems to a rudder-less business that is tone-deaf and looking to be a savior amidst COVID-19 horrific impact on the apparel sector.
Let me start off by saying that I am not an accountant nor a financial professional but I believe that there is a story that has been developing that can impede Amazon’s dominance in the US. Amazon is a hybrid marketplace in the US as it is both a retailer and allows third parties to sell to their customers to ensure that they can be the “Everything Store” that has virtual shopping isles that has an infinite length. Amazon has inadvertently created a situation in which sellers are generating sales to States without them knowing the location of their products due to them using Fulfillment by Amazon (FBA). As Amazon moves products to warehouses all over continental US these sellers are generating Tax Nexus in States that could lead to an increase in tax to certain States.
Amazon has been seen by many and a certain leader as not paying tax and thus negatively impact retailers in the US. Amazon has started collecting taxes in most states to ensure that they can build logistics facilities closer to customers in various US States.
According to CNBC, after 1 April, the only states in which Amazon won’t collect taxes are Alaska, Delaware, Oregon, Montana and New Hampshire. These five states don’t have sales levies.
I have purposefully not commented on Walmart’s ecommerce efforts after the retail giant acquired Jet.com. There were many immediate reactions to the acquisition but the simple truth is that no-one had any idea how it would end up. Let me be clear – the acquisition is a long term bet by Walmart on Marc Lore and his team to grow their ecommerce efforts. This is also a reflective post in which I am trying to be as objective as possible.
On 8 August 2016 Walmart shocked the ecommerce industry by announcing their acquisition of Jet.com for $3.3 billion. $300 million will be paid via Walmart stock. The acquisition ensured that early Jet.com investors made large returns on their bet but no-one expected Walmart to be the ultimate end game for Jet.com as the company rapidly gained size via heavy spending on advertising, low pricing and buzz.
The initial thinking was that Jet.com was acquired due to the business taking market share away from Sam’s club. Jet.com used bulk sales and technology to provide customers with low pricing. It is important to note that while Jet.com was a startup Marc Lore ensured that he never mentioned Jet.com as an Amazon competitor but rather it was described as online version of bulk retail operations seen at Sam’s Club and Costco. I also need to mention that once Jet.com launched publicly it initially was going to use a membership fee to subsidize the low pricing it would provide to consumers. In a space of 6 months Jet.com moved away from the membership fee as customers were not willing to pay another subscription to a retailer (I believe that this was aimed at Amazon Prime but Lore under estimated the impact that Prime has on customers.)
I strongly believe that until the day of the Walmart acquisition, Jet.com did not have a business model that was sustainable nor clearly defined their future.
Amazon has entered Singapore in a new fashion that should put new countries on alerts. As I wrote in my newsletter last night that this is potentially a very big future indicator. By using Prime Now Amazon is leveraging local assets (local logistics, staff) to enter Singapore.
This past week Amazon entered Singapore via their on demand mobile app, Prime Now. Amazon has used this country as its market entry into South East Asia. Singapore is not large and thus quicker market entry has been possible. Amazon has used 2 Singapore born staff to go run this new market. By appearing in Appstores instead of via a website Amazon has shown their secretive nature but also how they are going to go into new markets in Asia. This past week should provide more than enough evidence of the future battle that is going to appear more and more, Alibaba vs Amazon. Both have significant capital and desire to enlarge their businesses.
The last 24 hours is the reason why Amazon has hired Jay Carney, a former Obama spokesperson to be responsible for global corporate affairs. Amazon has seen a fair share of controversy over the warehouse workers and working conditions. As usual the company has largely remained quiet and I believe this is one of the areas in which Carney will be more verbal.
The issue is in my mind – the technology chameleon that does ecommerce (Amazon) is still very reliant on human intervention when packing of purchases are done inside Amazon warehouses. Speed and efficiency which is sold to customers lead to very harsh working conditions for seasonal and temporary workers. Robots who don’t have unions can only work for so many hours until they need recharging. Also sometimes logic is needed for packing which cannot be seen inside a robot.