Bradley Howard's Blog

Amazon removing more cost centres

Nov 21, 2011 at 12:41pm

It’s quite rare in most industries for a market innovator to become the strongest company in the sector. Usually the market creator is overtaken by a more efficient competitor, who has more time to see what not to do. This has been the case with most industries, not just IT.

One of the first ecommerce web sites I remember using was Amazon. It reduced the cost of books by a huge factor and its recommendation engine is still seen as one of the best in any website. The fact that it launched in 1994 and is still one of the most profitable companies in the World is impressive.

In terms of financial scale, for UK readers, Tesco has a market capitalisation of £31bn and Amazon has a market capitalisation of $89bn. For US readers, Target has a market capitalisation of $35bn.

Turning costs into profits

One of the business initiatives that most people admire Amazon for is how they turn their costly IT organisation from a cost-centre to a profit centre - called AWS (Amazon Web Services). Essentially, running Amazon.com and all the international sites requires a massive amount of servers in data centres all around the world. When I visited one of our US data centres a few years ago we had an area (called a cage, because it is one) and our next door neighbour was a cage several times larger for Amazon.

Anyway, Amazon realised it had a huge IT infrastructure and converted the spare capacity into a facility enabling anyone else to use their infrastructure. Companies can rent this capacity on an hourly charge. And many companies do use it.

Amazon won’t release revenue figures directly, however some reports have estimated its more than $500m annually.

Marketplace

Another innovation that Amazon had to implement, this time by force was their Marketplace. eBay started taking some revenue away from Amazon, so Amazon started allowing third party sellers to sell products on Amazon.com. Fast forward to the present time, and it’s quite often that a consumer will buy something on Amazon, which is actually another merchant – whether it’s a sole proprietor or a multi-national organisation.

If a consumer currently buys something from Amazon, if it’s actually Amazon who sell the product, it will come from an Amazon warehouse and be delivered directly. If it’s a third party seller, Amazon have a clever interface (and contractual terms) which notify the seller to deliver the goods within a set time period.

Removing more cost centres

However the latest area that Amazon is moving into is fulfilment.

Amazon is encouraging merchants who use its platform to send their stock directly to Amazon’s warehouse and Amazon will take care of the rest. They’ll fulfil (pick and package) the order and deliver it to the customer. So if you sold glass vases, you would instruct your supplier to deliver a pallet of vases to an Amazon warehouse and spend all your time and energy making the Amazon pages look as good as possible.

This is ingenious for a number of reasons:

It turns Amazon from a traditional retailer who needs to buy a certain commitment of goods for x and sell at x + y% markup – into a risk free business because it doesn’t need to buy the goods up front
To compete against this model becomes ever more expensive, because the sheer capital infrastructure costs are now prohibitive
Amazon will increase its economy of scale for delivery costs
It encourages merchants to use Amazon as the primary channel, because Amazon performing merchant’s fulfilment requires less overheads and easier.

The fulfilment model is an interesting concept, because it turns retail and distribution into a service and it moves a lot of the risk (of buying the items up front) up the supply chain from the retailer (Amazon) to the distributor.

tags:

Amazon, cloud, eBay, ecommerce, retail,

0 Comments

Google's new shops

Oct 5, 2011 at 9:40am

So Google have announced they will be opening retail stores, or at the very least, concessions inside IT shops.

I’ve talked about the concept of brand showrooms in the past, and Google are reconfirming this prediction.

Why are Chromebooks so expensive? The specs of a Chromebook doesn’t need to be particularly high, and the Operating System and software is available for free on Windows laptops.

Google are trying to compete with Apple on a mobile phone (iPhone v Android) and tablet (iPad v Android) level, where the competing products are becoming ever closer aligned as both sets of products mature. However on a laptop basis, the products are completely different.

Google are purely cloud focussed, with all applications HTML/ browser based and Apple users are still more than happy using downloadable native applications (think iWork/ Office and photo/ video editing applications). Even Google’s answer to photo editing, Picasa, is still a downloadable application – which raises the question of whether it will work on a Chromebook.

It’s interesting how the likes of successful Internet retailers such as Amazon and ASOS have steered away from physical outlets, and whether they are watching technology consumer brands such as Apple and now Google (not sure they have ever been classed as that before) to see how long before whether they shut down their super trendy stores in the near future.

Photo courtesy of ping ping on Flickr.

tags:

Amazon, Google Chrome, High Street, apple, consumerisation, google,

2 Comments

Two new buzzwords

May 24, 2011 at 10:29am

I heard two new buzzwords today, and as soon as I heard them, I started hearing them used everywhere.

F-commerce is selling products via Facebook. No idea why e-commerce isn't a good enough term, after all, we didn't have w-commerce for products sold via widgets like Amazon and other retailers.

Egosphere is when you ask your online contacts for information rather than asking people 'offline' (by telephone or Heaven forbid, face to face). I think it's a bit negative calling it an egosphere - sometimes I will ask send messages on Facebook or LinkedIn if I want to ask many people simultaneously.

tags:

Amazon, Facebook, LinkedIn, buzzwords, egosphere, f-commerce,

0 Comments

The war on pirates

Mar 10, 2011 at 9:27am

Photo courtesy of Scott Vandehey on Flickr

I've often said it's unfair that YouTube is a virtual broadcaster yet not held to account for hosting so many videos which would not be allowed on traditional (i.e. TV or radio) channels. With yesterday's news of YouTube (Google) acquiring one of the highest traffic (over 2.8 billion channel views) YouTube channels, perhaps YouTube will start to change their 'moderation' approach?

To further help YouTube in the war on pirates, I think Amazon and Facebook could soon join sides with Google.

Amazon (who recently acquired Netflix), Facebook (partnering with Warner Bros) and YouTube are all trying to promote video 'rentals' (they really need to change the term) at the $3-$5 price point. One major problem is that it's too easy to download a BitTorrent client and head to any of the very good BitTorrent search engines to download the movie for free.

Most of us know a number of people who do not work in the computer industry yet download movies illegally, then transfer them to a media player or stream to a device plugged into the TV.

What the three Internet giants need to do is compete with that ease-of-downloading-illegally - including getting the video on to the TV. They also need to ensure the price point is correct - Internet history has shown this is a difficult art rather than a science.

The giants also need to get together to ensure hosting a BitTorrent search engine (without which, by definition finding the torrent to download will be much more difficult) is as difficult as hosting Wikileaks. They need to get the payment partners on their side as well - just like the Wikileaks war.

tags:

Amazon, Facebook, YouTube, business, google, legal, payment,

0 Comments

Why are eBooks more expensive than paper?

Dec 9, 2010 at 10:50pm

If you have any thoughts on this, I'd be happy to hear. Personally I can't understand why Stephen King's latest book is £12.99 on a Kindle, £8.99 as a paperback and hardback is £8.20.

If the Kindle were free, I would understand that the ebooks need to help subsidise the cost of the device. Only the Kindle costs more than £100, and whilst I doubt Amazon make a huge profit from the device, I doubt it makes a loss.

Any suggestions?

tags:

Amazon, blog comment, ebooks,

0 Comments

Akamai Digital Media event

Nov 3, 2010 at 10:25am

Yesterday I went to the a Digital Media event hosted by Akamai. Here are a number of key points from the session:

Only 1% of video is currently delivered over IP (i.e. the Internet). This will keep growing as more TVs are Internet enabled. This probably accounts for why Akamai and the other CDNs share prices are doing so well, outperforming the indices and competitors (see chart above).
1. Video IP usage is up more than a third from 2009
2. and we’re watching video almost 50% longer.
The UK is well advanced of the US in terms of peer to peer – most of the UK’s broadcasters use it, whereas in the US it is only used for illegal file sharing.
60% of Europe’s iPhone market is in the UK. This explains why our sites have low iPhone usage globally. (It’s worth noting that the time spent on apps makes up for the low iPhone usage).
Akamai are bringing out some interesting new services on their Edge network. Other organisations who own huge numbers of web servers such as Amazon and Microsoft are virtualising their environment and renting it out as well known Operating Systems (e.g. AWS and Azure both can both run as Windows servers, sold by the hour). Akamai are working differently by expanding Value Added Services to their customers – keeping the technology proprietary.

All in all it was a good day, hearing about a number of new technologies and an excellent case study from Adam Lynch at The R&A.

tags:

Akamai, Amazon, Content Delivery Network, Endava, Europe, Microsoft, iPhone,

1 Comment

Shouting at the clouds

Aug 31, 2010 at 2:28pm

As a Digital Media agency, we are regularly being asked our view on whether we use cloud services from Google Analytics to Amazon Web Services and Microsoft Azure full hosting.

My answer at this point in time is really simple we don't use them because if these services go wrong, we (and our customers) have no one to pick up the phone and shout at.

For example, we generally use Omniture (Adobe) for site analytics rather than Google Analytics. I know the name and mobile phone number of our Omniture account manager. I guess that just knowing who to contact gives a level of reassurance.

One of our partners uses one of the large cloud services for it’s main business operations. It makes sense to them – they need to simulate hundreds of computers during tests, for short periods of time. Trying to do that from a standard Internet connection in the office is fraught with problems, and it’s easier and cheaper to rely on the cloud’s infrastructure. Except recently they have been experiencing problem after problem in that cloud’s environment, and their entire business is dependent on that specific cloud provider.

When you experience an outage on Azure or Amazon, who can you call? How can you offer an SLA to end clients when you can’t contact your infrastructure provider?

There are companies who have invested in setting up their own ‘cloud’ environments (we are one of them), with proven support systems in place, and the real USP… a manned 24x7 helpdesk complete with an Account Manager.

tags:

Amazon, Endava, IT, Microsoft, analytics, business, cloud, digital media,

0 Comments

A nation full of shopkeepers?

May 24, 2010 at 6:02pm

Napoleon and Adam Smith described the UK as "a nation full of shopkeepers". Walking down my local high street today couldn't confirm anything further from the truth. My local high street goes something like this:

Coffee shop
Pharmacy
Bank
Coffee shop
Bank
Bank
Hairdresser
Restaurant
East European Supermarket
Hairdresser
Bank
Sandwich Shop
Barber
Coffee shop
Restaurant
Restaurant
Nail shop (as in the decorative one, not a DIY shop)
Restaurant
Coffee Shop
Stationers
Bank
Sandwich Shop
Barber
Bicycle Shop
Restaurant

There used to be an electronic retailer, which is now the east European Supermarket. Virtually all the other shops have either become hairdressers/ barbers, or a coffee shop.

The confusing factor here are the banks. I can understand the barbers, hairdressers, coffee shops and sandwich shops/ restaurants - in all these cases, you can't buy the equivalent from eBay/ Amazon/ the rest of the Internet.

It's the banks that confuse me - why do we need all the major high street banks here? Can/ do they all depend so much on customers physically entering their premises? The answer is either yes - because of the cash that the local shops need to keep paying into their business accounts each day, or no - and over the coming years we're going to see many more high street banks closing down branches, similar to the Post Offices that we've seen in the past few years.

In the future I think we will see the coffee shops close down quite rapidly. The high street can't sustain a Starbucks/ Costa/ Nero on every corner (and a couple in between). The same happened in the 1950s with Lyons' tea rooms, who had 250 shops in London at the time.

What will replace them? One idea (expanding on Richard Watson's prediction) is to have 'brand showrooms', where a manufacturer, say Sony, needs to show off it's latest products. Because we'll all be using our phone to buy the latest 5D, nanotechnology television, we won't see the other latest gadgets that Sony will be inventing. So we'll go into a brand showroom to see these new releases. New brands that come along (say, a 21st century Dyson) will have to create these showrooms as well, or else people won't be able to discover them.

tags:

Amazon, High Street, business, economy, predictions,

0 Comments

Reading the Future

May 20, 2010 at 9:35pm

If I've bumped into you during the last 3 or 4 weeks, I've probably mentioned the book I've been reading - Future Files by Richard Watson.

My introduction to the book began in the reception of a creative agency in central London. I picked up the book from the coffee table and thought the front and back covers described a shallow author who claimed to be a 'futurologist'.

"What a great idea - write a factual book that no one can argue with (or at least, for the next 50 years)", I mocked. "Worse still, he works for some sort of futurology consultancy".

I shared my views of the book to a colleague, and opened it half way. Hmmm, it seemed quite interesting.

Knowing that I had a trip to the New York the next week, I got back to the office and bought a copy from Amazon.

Since the moment it arrived, not only did I have difficulty putting it down, I had difficulty not discussing a number of the points raised in the book with pretty much anyone I met.

The opening chapter pretty much agreed with my original assessment - here was a guy who was interested in articles that described future trends, and decided to make a reasonably light hearted living from it.

via amazon.co.uk

The difference between this book and other futurology books and documentaries is that it only brushes on technology. It's not written by a technologist. This means that Watson often refers to social impact and psychological effects of future events.

For instance, it's hard to deny that we're all obsessed with covering our work surfaces, home surfaces, and even our hands, with antibacterial spray. However it's the generation before us, who never used the spray that are living the longest, and more children are being born with allergies. I've digressed. Watson predicts that in the future we all have defibrillators in the home, blood test machines that send the digital samples via the Internet to a doctor the other side of the World (which we'll use daily), and so on... we will become more and more paranoid in the future.

How can we tell if Watson is right or not - well we can't. However he did predict the global recession triggered by banks and debt (he wrote the book in 2007), and quite honestly, I don't care if his predictions are true or not... the point is that trends are going in a direction and he's trying to see how they are linked together and what the sum of all the parts will be like. For instance I disagree with him about the availability of 'free' - my personal opinion is that we are at a peak in terms of free products and content - and our children won't believe what we have access to in 2010, for no cost.

Watson has produced a map of all the trends that he keeps a tabs of. The maps are available here:

http://www.nowandnext.com/?action=misc&subaction=trend_maps

In a nutshell, if you want to read a book that predicts flying cars, interplanetary transport, Warp speed motorbikes or Internet links implanted in our brains, don't buy this book. If you want a glimpse into the kinds of things that may affect our children and their children in the future, it's definitely worth a read.

My apologies to Richard Watson for the initial mocking - it just proves you can't judge a book by it's cover.

tags:

Amazon, book review, future, trends,

1 Comment

A technology review from New York

May 11, 2010 at 10:13pm

I have spent the last few days in New York for a family celebration. I took my son (aged 8) and we had a great time.

I've come back to a different government and seen the ash cloud with my own eyes (I can report it's a bit underwhelming).

Over in New York, we visited the top of the Empire State Building (86th floor, because the 102nd was closed that day) and a whole host of other tourist activities. We also visited FAO Schwarz of 'BIG' fame where he played the now famous 'piano'. Once we'd visited FAO, we went to the Apple store which is literally outside the front door.

Inside the Apple store, which was absolutely mobbed - much busier than I've seen similar stores in Paris or London - I saw the new iPad. Apparently the device has sold its first million units in 28 days. Staggering, considering it's [very] heavy, difficult to type (my thumbs couldn't meet in the middle even in portrait mode) and doesn't support Flash (so my son's favourite kids websites didn't work).

As someone at work described it - it's a perfect coffee table device that people will pick up, check a couple of webpages and put down. I can't see it replacing a laptop for email.

On the Sunday it was Mother's Day in the US and my cousins bought my aunt a Kindle. It's a pretty smart device. Straight out of the box it picked up a wireless connection quicker than my iPhone in the same apartment (and oddly didn't need a password).

The text is incredible - much more readable than a laptop or computer flat screen. The usability is what you would expect of Amazon, downloading books easily and quickly (you can start reading the book instantly - before it's downloaded the rest of the book). Whilst the average non technical user will love a Kindle (until they drop it on the floor in their bedroom, or the swimming pool on holiday), I think technical users would find it frustrating that it's not as powerful (or as colourful) as an iPad.

I thought it was interesting showing my son the Kindle and telling him that the chances are, in a couple of years time he won't be carrying books to school - all the books will be on an electronic device like this.

Another interesting observation is that Amazon are keen not to repeat the same mistakes of the Internet's free content model on their device. All newspapers and books require a paid subscription on the Kindle.

One word of warning if you are going to buy an iPad as a present - by default it comes logged in as the buyer. That means the lucky recipient will open the box, switch the device on... and see the recommendations that Amazon suggests for the buyer. So if you've bought anything from Amazon that you'd be normally be embarrassed by, I would suggest you switch the Kindle on and logout, before handing over the [very nice] present.

tags:

Amazon, Kindle, ebooks, ipad, technology,

0 Comments

Tags

Amazon removing more cost centres

Google's new shops

Two new buzzwords

The war on pirates

Why are eBooks more expensive than paper?

Akamai Digital Media event

Shouting at the clouds

A nation full of shopkeepers?

Reading the Future

A technology review from New York

Bradley Howard

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