Amazon is Making Grocery Brands Pay for Losses on Prime Day Promotions, as Focus on Profit Grows
Amazon is redesigning its Prime Day dynamic by charging what is called “additional funding” to grocery brands whose products result in a loss for Amazon. To soften the news, Amazon is removing its Prime Day promotion fee of $500 per deal. The important note in this shift is Amazon’s greater focus on profitability. This should really come as no surprise, because Amazon routinely flexes its muscles with sellers on its platforms, but typically less explicitly. So, the question is: are they pushing this profitability as part of their normal business practices or is this partially due to overstepping on their part in a rush to shorten Prime delivery? Will Amazon push one cut too far as they try to “disrupt” Walmart and other competitors? One important thing to note is that grocery products are generally more expensive to ship due to package size.
Japan’s Restrictions on South Korean Chip Makers Backfire
In the short-term, Japan’s restrictions against major South Korean chipmakers are actually serving to benefit their intended targets. The restrictions, which require semiconductor makers to apply for permission to ship certain Japanese materials used frequently in semi-conductors, are lessening the glut of semi-conductors already manufactured, caused by trade war tensions and slowing memory chip demand. However, while there are minor positive effects in the short-term, this “trade-war” may quickly spiral into a much more tumultuous situation in the long-term. Since the Japanese materials are central components of the global semiconductor supply chain, a prolonged conflict could have major negative repercussions for the entire chip industry. This is an indication that trade tensions are not restricted to US involvement.
Microsoft Opens First Retail Store in Europe – Just Down the Street from Apple
With the emergence of Amazon and other prominent online retail vendors, traditional brick-and-mortar retail appears to be growing obsolete. While this statement could be partly true, the hinge-descriptor is the word “traditional”. Retail has now converged to become more experiential than ever. Flagship stores, such as this new Microsoft store based in London, are designed as centers of activity, as opposed to just centers of commerce. This store, for example, will have meeting rooms for enterprise clients, a digital classroom where students can learn how to code, and an Xbox gaming room – inside a Microsoft store! This represents what could very well be the future of retail – a place where people go to do things, not necessarily buy things, where merchandise and other products are purchased almost as an afterthought. What better way to market than to market an experience?
China Producer Prices Stall, Adding to Industry Woes
Production prices in China are decelerating. May’s producer-price index rose only 0.6%, which was below expectations. This is in the midst of the US-China trade war, and issues regarding rising producer prices due to a severe swine flu and decreased crop output. These indicators each serve as signs in their own rite that the Chinese economy is having some difficulties. What are the implications for the broader global economy? Well, stagnating growth in China isn’t going to be helpful. Europe is dealing with its own economic issues and seems to be hovering outside recession territory. The U.S., though growing, has also displayed some warning signs (the inverted yield curve, for instance). A turbulent Chinese economy may well turn out be the “straw that broke the camel’s back” for the global economy.
People in Japan Are Renting Cars but Not Driving Them
Part of Uber and Lyft’s raison d’être is decreasing the excess of idle cars in the public system. However, to this date, their business has only resulted in the increase of cars on the streets. For ride-sharing competitors in Japan, this excess is causing some strange consumer behaviors. Cars are being rented (sometimes for only a few hours) as an alternative use of space – a kind of mobile real estate if you will. They are being rented and then being returned with zero miles logged. Instead, they’re utilized for a quick nap, lunch break, storage, or even as a phone-charging outlet. This says a lot about the challenging business model with which rental car companies are faced. These companies make the majority of their profits off the miles driven by their rental stock, and have allowed cars to be rented for only a few hours in a day. This situation quickly negates their source of profit, turning their product into one that is really only beneficial to consumers. We believe this dilemma also says a lot about the opportunity for innovation to fill this niche. In the end, we think this is a perfect anecdote of how markets innovate: demand drives new use for resources.
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