China shutdown, free music, one day shipping and direct fulfilment improvements

Amazon plans to shut down stores in China 

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Amazon is closing its online store in China as it downsizes operations in the country. They will close fulfillment centers and wind down support for domestic-selling merchants in China in the next 90 days.

Local e-commerce rivals have made it difficult for Amazon's marketplace to gain a foothold in China. Alibaba and JD.com control 82% of the Chinese market and have a significant advantage over Amazon with their retail portfolio and delivery times. The only reason to go to Amazon was to buy an imported good they could not get elsewhere. Consequently, Amazon was not growing and not profitable in the market.

Moving forward, they will focus their efforts on more lucrative businesses selling overseas goods and cloud services in China. Chinese shoppers will still be able to order goods from Amazon's global store.

Amazon launches free music tier

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Amazon soft-launched a free tier for its music streaming service this week. 


This move is designed to attract more people to the service because Amazon Music trails both Spotify and Apple Music in terms of listeners. It had previously only been available to Prime members or those who subscribed to Amazon Music Unlimited. Alexa users will now have access to play a station based on a song, artist, era, or genre, and to hear some of Amazon Music’s top global playlists. The music is accessed via Alexa commands such as “Alexa, play the Rock music playlist”.


It was the second media move by Amazon this week. On Thursday, they announced the launch of an official YouTube app on Amazon Fire TV devices and Fire TV Edition smart TVs will arrive in Q2 2019. This ends the spat between Amazon and google which led to YouTube being removed from all devices.

One day shipping worldwide

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Just as the competition starts catching up, Amazon raises its game.


Amazon plans to offer free one-day shipping of its products worldwide to members of its Prime scheme in a bid to increase sales and cement its dominance over the high-street. Their goal is to evolve the two-day free shipping programme into a one-day free shipping programme.


Amazon hopes that cutting delivery times in half will make its Prime membership more attractive, since other online stores offer free deliveries in two days.


Amazon didn't say when the change to its US Prime membership will happen, but it has been increasing its selection of items eligible for one-day deliveries. In the UK, Prime members are already offered one-day shipping. However, less than half a million Brits are expected to sign up to Amazon Prime this year, new research has suggested, as amazon battles growing competition from Netflix.   


The announcement came as Amazon posted record profits on Thursday night. Net income in the first three months of 2019 had more than doubled to $3.6bn (£2.8bn), as sales increased by 17% to $60bn. Despite the good profit performance, Amazon will be concerned with their US and international revenue growth which has slowed significantly on last year. 

Direct fulfilment improvements

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Amazon has started assigning lead times at an ASIN level rather than at a cumulative account level for Direct Fulfillment (DF) products. The goal is to improve lead time approximations and give high-performing products more priority. Originally, DF products were assigned lead times based on collective warehouse data across an account’s complete catalogue. This meant that no matter how well an individual product performed, it displayed the same lead time as all other products from that warehouse. Amazon has realised that this operational approach was not consistent with delivering excellent customer experience.

 

Now, a DF product will have its lead time set by the performance and shipping speed tied to the individual ASIN. This lets products within a catalogue that have different lead times remain competitive by meeting the standards that Amazon customers have for ship speed. 


This and other such improvements to seller services are the reason the Amazon seller marketplace continues to grow at a faster rate than first party sales. In his quarterly shareholder statement this week Jeff Bezos shared data on the growth of independent sellers. In twenty years, sales have increased from 3% to nearly 60% of retail revenue, a growth rate of 52%. Whilst first party sellers have grown by 25% in the same period. Bezos puts this success down to the importance of FBA and the Prime membership programme in meaningfully improving the customer experience of buying from independent resellers.