This is your host, The Badger, providing you with the top Amazon news stories this week. Welcome to Amazon Weekly Digest!
This week we saw a passionate speech from Oprah at the Golden Globes, scientists discovered clean water underneath the surface of Mars, and rumors of Amazon acquiring a large retail chain emerge.
I talked to James Thomson, a partner of Buy Box Experts and adviser, speaker, and publisher on Amazon channel issues affecting brands to discuss the current state of the acquisition rumors. He said Amazon could be aiming to acquire Prime customer’s offline purchase data, along with offline purchase revenue with the purchase of a large retail chain. But something a little more interesting to speculate on is the fact that buying Target (or another large retail chain) would gain Amazon real estate to expand their PrimeNow capacity.
“Target has 1800+ stores in the U.S., which would represent a huge increase in the retail footprint for Amazon. But I think it’s actually far too much if Amazon is primarily interested in the location of the stores rather than the actual revenue in the stores. Given that Amazon has access to tons of brands already sold in Target, and is very competitively priced with Target prices, Amazon would basically be buying existing revenue it has a good chance of grabbing through its existing online business,” said James. “Given that Target is aggressively aiming to add faster last-mile delivery to customers, I see Target currently losing to Amazon for a lot of sales. I don’t see Amazon paying any premium for Target given it can already get most of the key brands Target offers, yet the Target board would never sell to Amazon without an unbeatable purchase price. Target brought in ~$70B in sales in 2016, so a purchase price of $50B would be steep given alternatives available to Amazon today.”
Buying retail space would be fine and dandy for Amazon, but James said there are much better ways for Amazon to go about it.
“To get a retail footprint in urban/suburban locations AND/OR urban/suburban location space for PrimeNow, I see Amazon being able to land this space at a much cheaper space than buying Target. The current value of Target is $40B. Expect a purchase premium to get the price to $50B. There is no way Amazon spends $50B to get Target current revenue, customer data or real estate.”
To conclude, James said, all of this Target acquisition talk started because one prominent analyst made a big statement. He said not to worry if Amazon doesn’t buy Target and to focus on the spirit of the analyst’s comments. Amazon has a small percentage of retail sales. Buying Target would only make sense if it was cheap and delivered a lot of existing PRIME customers’ non-online wallet share.
Here’s what else happened in the world of Amazon:
Amazon Has Quietly Restricted Reviews for its Most Controversial Products
Quartz, January 11
Amazon seems to be taking measures to combat fake reviews but won’t give any details on how their process works. We do know that they have reviews without a verified purchase of their most controversial products. As if fake news wasn’t already enough.
Amazon’s Customer Loyalty Is Astounding
Forbes, January 10
Cyber Monday was insane for Amazon as it capped off a historic year for the giant ecommerce company. In 2017, Amazon shipped more than 5 billion items worldwide and is planning to add more sellers to their “third-party seller program.” It seems as if Amazon is starting to favor collecting money from FBA fees than their own products.
Amazon Launches Virtual Dash Button SDK for Third-Party Screens
VentureBeat, January 10
Amazon has announced the Virtual Dash Button Service (VDBS), effectively a software development kit (SDK) that lets customers put virtual dash buttons on screen-equipped connected devices and reorder past products manually. This helps companies like Whirlpool, LG, and Samsung decrease friction when customers need to replenish products.
Your Amazon Prime Membership Just Got A Lot Better
Food & Wine, January 9
Amazon now offers same-day and one-day shipping on Whole Foods products for Prime members. Good thing The Badger eats organic.
Have a good weekend badgers!
About James Thomson:
James Thomson is an adviser, speaker, and publisher on Amazon channel issues affecting brands. He works with online sellers to grow businesses, acting as a partner for Buy Box Experts and president of the PROSPER Show. Before Buy Box Experts, he served as business head of Amazonservices.com, Amazon.com’s portal for recruiting new third-party sellers. He also developed the original FBA opportunity nudge program and acted as the Category Manager of Amazon’s Sports third-party business. If that wasn’t enough, James has 10 years of experience in management consulting, advising Fortune 200 and mid-cap companies on how to grow their businesses profitably.
I’m still going. He earned a Ph.D. in Marketing Strategy from the Kellogg School at Northwestern University and an MBA in Marketing and Operations from Vanderbilt University. James has been featured in publications like The Street, CNBC, and Huffington Post.
