Amazon’s plans to launch delivery service seems like an indictment of UPS which carries a significant volume of Amazon’s shipments.
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#amazonIn his shareholder letter two years ago, Amazon CEO Jeff Bezos said he was looking to team up with banks that could help his company expand its lending program for small businesses that sell on Amazon’s websites.
CNBC has learned that Amazon Lending, which launched in 2011, ultimately found a partner in Bank of America Merrill Lynch, according to people familiar with the matter who asked not to be named because the alliance is confidential. Partnering with Bank of America allows Amazon to reduce its risk and access capital specifically to provide credit to more merchants so they can acquire inventory.
Amazon Lending is an invitation-only program that makes loans of $1,000 to $750,000, with terms of up to a year, for companies that may have difficulty landing traditional business loans. In June 2017, Amazon said it issued more than $1 billion in loans during the previous 12-month period, compared to $1.5 billion in combined loans for the four years prior to that.
But even with the Bank of America deal, Amazon Lending has been tapping the brakes on growth of late. After almost doubling to $661 million in 2016, outstanding loans just barely increased last year to $692 million, according to Amazon’s annual report earlier this month.
One person familiar with the program said there was a deliberate effort by Amazon to slow the expansion in 2017 as the company attempts to better understand the credit risks that come with a large-scale lending practice. The total staff size was also reduced as the team scaled back its customer outreach efforts, the person said.
Another source involved with Amazon Lending said the slowdown is not surprising because the team has always taken a measured approach to growth. For example, there’s never been a public website to promote the lending service, and it still remains available only to top Amazon sellers that need additional financing. The program is not oriented around making money from interest payments, but to support merchants selling on Amazon’s marketplace and to boost Amazon’s overall sales growth, this person said.
Amazon indicated in its 2016 annual report, published a year ago, that it received a $500 million revolving credit facility from a “lender” in October 2016. The company said in its latest annual report that the facility was raised to $600 million “and may from time to time increase in the future subject to lender approval.”
Sources said the lender referenced in the filings is Bank of America.
Representatives for Amazon and Bank of America declined to comment.
Amazon Lending isn’t the best bet for many businesses once they’ve matured, especially as competition emerges from companies including PayPal, Square and Kabbage. One source with knowledge of Amazon Lending said annual rates typically range from 6 percent to 14 percent.
Stephan Aarstol, the owner of Tower Paddle Boards, was mentioned in Bezos’s 2016 letter as having one of the fastest growing companies in San Diego, “with a little help from Amazon Lending.” But Aarstol said he no longer borrows from Amazon, which charged him between 11 percent and 13 percent annually, because his company has grown big enough to get more attractive rates elsewhere.
“If Amazon was the only game in town, I’d happily take money from them at whatever rate,” Aarstol said. He said that he didn’t leave because of a bad experience, “but due to the stage of my business.”
The slowdown in lending coincides with Amazon’s recent company-wide effort to reallocate its resources. Just this week, Amazon said it’s cutting hundreds of jobs to improve efficiency in slower businesses while it accelerates faster-growth areas.
Schwark Satyavolu, an investor at Trinity Ventures and co-founder of financial tech company Yodlee, said Amazon may be seeing better areas than merchant lending to spend its capital.
“It starts to become a return-on-capital question,” he said. “Do I lend money and make a few percent on that capital invested, or do I take that capital and plow it into something like Whole Foods, which could give you a much higher return?”
Still, sources told CNBC that lending is likely to pick back up now that Amazon has a banking partner. Additionally, Amazon’s lending team started sending out a newsletter in November promoting its program for the first time.
“Welcome to the first edition of Amazon Lending’s Newsletter!” it said. “The Newsletter is designed to connect with sellers like you, to share information that we hope will help you grow your business.”
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#amazonAmazon has announced that Jennifer Salke, who is currently NBC Entertainment president, will be taking over as head of its film production and television division. the position is being filled four months since the resignation of Roy Price who was forced to leave after allegation of sexual harassment were leveled against him by Isa Hackett, the executive producer of the television series “The Man in the High Castle.”
Amazon Studios is moving its base to occupy 280,000 square feet in the iconic Culver Studios, in Culver City, California. Amazon said in a press statement that the TV and film production division will be housed in the 99-year-old center comprising of The Culver Studios Mansion and Bungalows.
Culver Studios was built by movie pioneer Thomas H. Ince. Amazing productions have been filmed at this location including “The Matrix,” “E.T.,” “Legally Blonde” and the original Batman series.
Hollywood classics like “Citizen Kane” and “Gone With the Wind” were also shot in the renowned complex which will now be home to several teams working on technical, legal, creative, and marketing aspects. This will be a hub for Amazon Video, IMDb, Amazon Studios
and World Wide Advertising teams which means that by the close of this year, 700 employees will have shifted their working spaces out of Santa Monica, California into Culver Studios
Amazon scooped Oscars for “The Salesman” and “Manchester by the Sea” becoming the first streaming studio to win an Academy Award. This places the studio in a league that has given the online retail giant great influence in Hollywood resulting in several Emmy awards.
Amazon has expanded its film business and has concrete arrangements to distribute Woody Allen’s film “Wonder Wheel,” using its own network.
Albert Cheng, head of Amazon Studios has reiterated that the studio is energized and is proud to be part of amazing movie and TV history that has been represented for over 100 years at The Culver Studios. He added that it was necessary to give the teams adequate space to be productive and churn out exceptional movies and series for their Prime programs.
Cheng is the interim head of the studio having taken over from Roy Price who resigned amid allegations of sexual harassment from Isa Hackett, the executive producer of the television series “The Man in the High Castle.” Cheng has previously held the position of chief operating officer for the same studio since 2015.
The allegations against Price were reportedly investigated by Amazon but were brought forth on the backdrop of the recent accusations of sexual assault and abuse by dozens of women against the famous Hollywood producer Harvey Weinstein.
In events unrelated to Price’s departure, Amazon Studios has also let go of three more executives this past week.
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#amazonAmazon is planning to launch a delivery service to cater for its third party sellers in a move that will become a direct threat to deliver leaders FedEx and UPS,
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#amazonAmazon’s Prime program will be featuring more in the Whole Foods operation as a senior member of Amazon Prime shifts attention to the grocery chain. Amazon’s VP for Prime and delivery experience Greg Greeley, is spending more time at Whole Foods and his role at Prime has been taken over by Neil Lindsay, who is Amazon’s Vice President of worldwide marketing.
In a statement, Amazon said that Whole Foods Market is working towards delivering great value to Amazon Prime members and while Greg Greeley has expansive roles in the company he has been given the mandate to drive that agenda. However, the company reiterated that the management at Amazon Prime will remain largely intact with a clear laser attention to broadening the products and services available on the platform including entertainment, transforming it into a rapid service and offering numerous advantages like free shipping.
At Amazon’s earnings release function last week, Brian Olsavsky, the company’s CFO indicated that by the end of the year Amazon Prime should be available across Whole Foods stores country-wide and that the company has began laying out the technical aspects of integrating Prime to become Whole Foods’ customer rewards program.
Greeley’s move therefore gives the clearest indication that Amazon wants full control of that process.
Amazon acquired Whole Foods last year for $13.7 billion and has already included Whole Foods products on its website. Greeley has worked at Amazon for 19 years and has for the past four years been running the Prime program. His stewardship has seen the program become a profitable part of Amazon with membership running into the tens of millions. With benefits like unlimited video streaming, free two-day shipping, online storage space, one-hour delivery option and many others the program has grown to become a lucrative customer loyalty program rivaled by a few.
When Amazon finalized its acquisition of Whole Foods on August 28 last year, the first move was to reduce prices. The initial price reduction targeted several items including creamy and crunchy almond butter, organic avocados, animal-welfare-rated 85% lean ground beef, 365 Everyday Value organic butter, organic large brown eggs, organic baby kale, organic responsibly-farmed salmon and tilapia, organic Gala and Fuji apples, organic rotisserie chicken and Whole Trade organic bananas. The cuts later extended across various items.
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#amazonAmazon customers with a Prime membership in Cincinnati, Virginia Beach, Austin and Dallas will this week become eligible to have Whole Foods products delivered for free in two hours. The new service known as Whole Foods Prime Now will initially be available in the selected cities and gradually roll out across the country during the year.
Shoppers with an Amazon Prime subscription will be able to buy a variety of products depending on availability. The company said that it will endeavor to provide the majority of items that one could find from their local store. The items in the Whole Foods range include meat, fresh produce, fresh flowers and dairy products.
With the subscription, customers are able to buy these items via Prime Now or at Amazon.com. It will take the company two hours to deliver the purchased items to the customer with another option to have them delivered in one hour at an extra cost of $7.99. However, eligibility for the one hour delivery is on orders above $35.
When customers place orders via Prime Now or at Amazon, workers pick up the items and package them ready for shipment at a Whole Foods store that’s in close proximity with the service operating during normal store hours of between 8 a.m. and 10 p.m.
The orders are then picked up by drivers from the Amazon Flex delivery service who are supposed to drop off the items in two hours. These drivers work on contract, much like Uber, whereby they drive their own vehicles using Amazon’s routing app to deliver goods for Amazon Fresh, Amazon Restaurants, Amazon itself and Prime Now.
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#amazonAmazon has announced changes to smartphones sold under its “Prime Exclusives” program that will give buyers an ad-free experience for the first time.
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#amazonAmazon’s ad for the Super Bowl features the company’s Alexa-powered speakers with a cast of the rich and famous including Amazon’s CEO Jeff Bezos. Other celebrities making an appearance in the ad include Rebel Wilson, Cardi B, Gordon Ramsay and Anthony Hopkins.
Amazon Echos in consumers’ homes did not wake up at the mention of the word “Alexa” which was voiced 10 times in the 90 second spot. The speakers are customized to differentiate commands from users and those from other sources. According to an Amazon spokeswoman, Alexa ads are modified to prevent Echo devices from erroneously reacting at the utterance.
Amazon has taken steps to ensure that the smart speakers are immune from such interference from advertisements. According to a patent that was published in 2014, Amazon described “Audible command filtering” which is a system that prohibits Alexa from waking up. This is particular to a transmission that affects a huge segment of the population for example a political rally or sporting event. If Alexa were to wake up in response to such a broadcast then Amazon’s servers would be inundated with tens of millions of concurrent requests leading to congestion and frustrated users.
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#amazonAs the big tech companies prepare to announce their earnings, Apple is poised to exceed expectations from the figures seen previously. The companies expected to announce their results this week include tech giants Amazon, Alphabet, Microsoft, Facebook and Apple. These companies which constitute over 40 percent of the Nasdaq 100 are keenly watched as they are indicators of the state of the tech industry.
According to Craig Johnson, an analyst at Piper Jaffray, Apple is among the companies to look out for in this year’s earnings release period. He added that the tech giant has managed to survive a tough market even as the S&P 500 soared to new heights this year. Last week’s drop of4 percent in Apple’s shares was the worst since September. The slump was occasioned by reports of a slowdown in sales of the iPhone which remains the biggest sales driver for the company.
The drop has impacted the company’s price-to-earnings ratio which now hangs below 15. This has resulted in Apple trading at 14.2 times forward earnings against S&P 500’s 18.6 times forward earnings and Technology Select Sector ETF which trades at 18.9 times forward earnings.
Apple’s P/E ratio may not necessarily compare favorably with other top tech stocks like Alphabet, Amazon, Facebook and Netflix. Amazon, for example trades at 168 times forward earnings having grown 56 percent in 2017 partly due to the acquisition of Whole Foods. The tech rally did not leave behind Google which rose 33 percent bringing its parent Alphabet’s P/E to 28 times forward earnings.
The market in 2017 was largely driven by tech stocks with companies like Facebook performing exceedingly well. Netflix rose 55 percent on the back of sizable growth in subscribers. S&P 500’s 19 percent rise paled in comparison to XLK Tech ETF’s 32 percent growth.
If the tech sector wants to maintain the kind of growth that we have seen so far then innovation will have to take center stage moving forward. Companies have to focus on new inventions even as the earnings season brings out the efforts of the past year.
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#amazon