Amazon Launches Flight Booking Service in India

As it continues to expand the e-commerce capabilities of Amazon Pay in India and expand on its “super-app” strategy in the country, Amazon has launched flight booking service in the India market.

Amazon has partnered with Indian online travel agent Cleartrip on the integration. Now, Amazon India users can book flights within Amazon.in just like on any other travel site. Amazon is offering an INR 1500 rebate to first time customers as a promotional launch offer.

Image Credit: Twitter user and travel industry consultant Robert Cole.

In our view there are a few different layers that make this move interesting.

1. Amazon’s travel offerings

Five years ago, Amazon launched and then 12 months later closed a direct hotel bookings service called Amazon Destinations. While Amazon didn’t comment much on the decisions at the time, it became apparent that Amazon found the operational aspects of building direct booking relationships with tens of thousands of lodging suppliers too costly and complex. Since then, Amazon has been generally quiet on the travel offering front.

Image Credit: Houstonia (2015)

This time around, Amazon is choosing to simply integrate a third party meta-search service, rather than build its own. This experiment is thus dramatically simpler than Amazon Destinations for a couple of reasons. One, because Amazon is not building meta-search in house (yet). And two, because the number of suppliers is much smaller – there are only hundreds of airlines in the world whereas there are millions of hotels. But even at this level of integration, Amazon serves as the payments intermediary and gets to potentially cross promote other products and services against customer travel data.

Big picture, we would not be surprised to see Amazon roll out similar functionality in other markets around the world. We also would not be surprised to see Amazon either build similar types of meta-search functionality in-house eventually. (Amazon could even theoretically acquire an existing competitor like Expedia or TripAdvisor that could provide a supply of hotel relationships.)

2. Super-apps

Amazon India is part of a broader trend, particularly in larger markets in Asia, in which e-commerce apps are effectively becoming a “portal” aggregating suppliers across verticals. Led by apps like WeChat in China, these apps have such strong user engagement that they are able to persuade other companies to build proprietary “mini-apps” within their “super-app,” thus giving the super-apps significant leverage as a distributor.

Google is increasingly doing this through Google Maps (restaurant reservations, event bookings, etc.), Facebook has been attempting to do this in various forms for several years with mixed results, and Amazon is doing it through Amazon Pay (utility bills, phone balances, and now flights). The super apps that are successful tend to focus on simplifying the logistics of daily life (like meals, transportation, and payments).

WeChat Image Credit: Connie Chan of A16Z

While super-apps are not as prevalent in the west as they are in Asia, it’s an important product trend, particularly as a few big internet companies (Google, Facebook, Amazon, etc) continue to seek to maximize engagement as growth in their primary businesses slow.

3. Advertising

The last point we’d make here about travel is its synergy with Amazon’s advertising business.

Amazon continues to grow its advertising business primarily though purchase-funnel ads on its site but also through display units that it runs across its networks and properties. By simply integrating travel meta-search, Amazon could theoretically sell more travel ads by pointing more travel related traffic to these new services and tools.

Travel advertisers are looking for alternatives to Google and Facebook, and currently Amazon doesn’t offer comparable opportunities in the way of travel ad inventory.

Amazon Launches Amazon Freight, a New Freight Brokerage Platform

Just a few weeks after we covered the expansion of Amazon Shipping, Amazon is shaking up the freight brokerage industry with the launch of Amazon Freight, a new digital freight brokerage offering substantial discounts to market rates. FreightWaves broke the news.

We do not yet know what portion of trucks available for booking on the service are Amazon owned versus owned by others in Amazon’s logistics partner network.

Given its scale, we think Amazon is already one of the largest freight operations in the US purely through the management of its own supply chain. Amazon ships goods coming in via ocean freightliners as well as between its fulfillment centers using both its fleet of trucks and trailers and others’ as needed.

The launch of Amazon Freight follows a pattern we’ve seen from Amazon over the years. First, Amazon invests in its own infrastructure as a way of creating a sustainable competitive advantage. (For example, Amazon’s own fulfillment centers/FBA infrastructure and AWS.) Then, having invested large sums into these systems, Amazon opens them up for third parties to pay to use, both in order to recoup costs and over time perhaps even earn some margin — in the process continuing to invest in the systems, leading to an even greater competitive advantage.

A larger Amazon Freight system will also likely offer Amazon some insulation against the price volatility of using third party freight services, particularly around the holidays when Amazon volume spikes. Now, Amazon could let third parties fund a larger fleet throughout the year, and then potentially just take over more of that capacity itself in November and December.

Per Freightwaves, Amazon’s rates are 25 to 33% lower than typical contract rates offered on routes out of Connecticut, Maryland, New Jersey, New York, and Pennsylvania. So, it appears Amazon is willing to run this business at little to no margin or at a loss in order to gain market share and ramp up the flywheel on its freight marketplace.

Ultimately, it was just a matter of time until Amazon opened this up, and we generally expect Amazon to become a meaningful marketplace for third party freight capacity in North America over the coming years.

Amazon Shipping Now Delivering Nationally from NYC, LA, and Chicago

Last year, we saw reports from the WSJ of a new logistics service called “Shipping With Amazon,” which purportedly will compete with traditional logistics providers like UPS and FedEx. Few details have emerged, but last fall CNBC reported that “Amazon Shipping” was offering to take goods from sellers’ warehouses to Amazon fulfillment centers at cheaper prices than UPS or FedEx, and that the service was being tested in Los Angeles.

Now, we are hearing additional details about Amazon’s new Amazon Shipping service.

1. Amazon Shipping is a full seller-to-customer shipping service, not just a “seller to Amazon FC” shipping service.

With Amazon Shipping, invited sellers can print shipping labels directly using their existing Amazon tools and dashboards, we understand. Then, Amazon will pick up packages directly from sellers’ warehouses every weekday and deliver them to Amazon customers 7 days a week.

2. Amazon Shipping currently delivers packages nationally via ground.

Amazon is telling invited sellers it can reach most US destinations via ground within 5 calendar days, we are told. This means that Amazon Shipping is not currently being used to fulfill most regular Prime volume. However, we understand Amazon Shipping is being used to fulfill Seller Fulfilled Prime shipments to customers who live within a 2-day ground shipping radius from participating seller warehouses. It is possible that Amazon Shipping is also being used to ship those Prime items that take longer than the standard 2 days to ship, such as some large or bulky items.

3. Amazon Shipping is currently operational for sellers with warehouses in the greater Los Angeles, Chicago, and New York/New Jersey areas.

We do not know how many sellers Amazon has invited, but Amazon does appear to have expanded the geographical reach of warehouses it will originate shipments from, as we are hearing that the system is now live for invited sellers shipping from the New York, Los Angeles, and Chicago vicinities. We currently have no reason to believe Amazon will not continue to broaden the areas it can handle shipments from in the future.

Big picture, it appears as though Amazon Shipping as a national ground shipping service is real and growing.

While Amazon Shipping currently only originates shipments from warehouses in three major metro areas, we generally expect that to grow over time. In addition, while we understand Amazon Shipping currently only operates via ground, we generally expect Amazon to employ more of its logistics assets and expertise to incorporate air and other modes of transportation in the future. We also expect Amazon to continue to work with logistics partners both for regular Prime shipping and possibly for certain parts of the Amazon Shipping network as well.

Amazon is perhaps uniquely capable of sustained investment in new national and global logistics systems. We’ll continue tracking Amazon Shipping as it grows.

Amazon Building New Perishable Meal Platform for “Time-Starved Customers”

Speculation has been growing about Amazon’s recent grocery efforts. On the one hand, Amazon has built out its first few Amazon Go automated food stores in urban centers and is likely to roll the concept out much more broadly. On the other hand, Amazon has been leveraging its Whole Foods Markets real estate as mini Prime Now food distribution centers, and could build out more Whole Foods stores to be able to broaden its geographic reach and shorten delivery times in more cities and suburban areas.

But what will Amazon’s product strategy be?

An important part of what Amazon is currently thinking appears to be ready-made meals. According to a recent Amazon job posting (which has been taken down), Amazon is planning to build a “new perishable food platform” to deliver “world class meal solutions for time-starved customers.” The listing reads:

Are you interested in changing how customers solve the “what’s for dinner?” dilemma? If yes, Amazon is looking for somebody with your enthusiasm and skills to build and lead the team that delivers world class meal solutions for time-starved customers. We are looking for an entrepreneurial, analytical, operationally-minded category leader to deliver a new perishable food platform. This role will require the ability to set a vision and drive the end-to-end strategy that will fuel the growth and long term profitability of this critical assortment. The right person for this role will have deep experience developing and commercializing a portfolio of perishable packaged foods, communicating effectively to stakeholders and closely with the cross-functional teams as well as owning the P&L.

Ready-made meals is an interesting strategy because it leverages two major competitive advantages Amazon has been investing in heavily: 1) its Prime Now network of last mile delivery solutions, and 2) its growing network of Amazon Go and Whole Foods food distribution centers, er, grocery stores. Ready meals are a logical application to run on top of this infrastructure.

By focusing on ready meals, Amazon is apparently choosing a different strategy than the “mail-order ingredients you prepare yourself” meal kit companies like Blue Apron, Hello Fresh, Plated, and many more. Instead, Amazon is focusing on the “time-starved” segment of the population. We think that makes sense. (Note, however, that Amazon does offer its own selection of non-perishable meal kits, but they appear to be sparsely reviewed. There is also a single perishable meal from Tyson available via AmazonFresh in our spot check.) Amazon does also offer perishable foods at Whole Foods and Amazon Go currently.

By ramping up its ready meal efforts, Amazon will also be competing more broadly with restaurants that offer takeout or delivery, and the logistics networks like Uber Eats that are virtualizing them. (Amazon is also building its own food delivery service, Amazon Restaurants, that is available in about 20 cities.) Just as Amazon has built out its own portfolio of private label brands across multiple retail categories, including non-perishable food, we could see Amazon creating its own “restaurant-like” private label brands for different types of ready meals (pizza, Thai, etc).

Given the investments Amazon has made in grocery and logistics thus far, we expect perishable meals and related new food products to be an area that Amazon is prepared to invest in and grind it out over a period of time.

Amazon Looking for Researchers to Apply Machine Learning to Meteorological Data

Amazon is looking for a Research Scientist with “Knowledge of meteorological modeling and familiarity with application of statistics in meteorology” to improve its logistics operations.

Per Amazon’s job listing, the company is looking for PhD’s who can apply ML to weather modeling:

We are looking for motivated scientists with strong statistical modeling and machine learning skills who are comfortable owning their own data and working from concept through to execution. You will be responsible for combining meteorological information, including large scale numerical forecasts, with our internal fulfillment data to provide information on weather-related impacts applicable to our business. You will work closely with engineers, business stakeholders, research colleagues, and IT groups in incorporating the essential trade-offs within the models and take an active role in effectively communicating the recommendations to senior management.

Amazon operates and coordinates a large and growing system of logistics and fulfillment operations, including air, maritime, and ground.

Just yesterday, Amazon unveiled the final 767 it is leasing from Atlas Air. It has leased 40 total, 20 from Atlas and 20 from Air Transport Services Group.

Amazon is rumored to be looking for more aircraft to lease as well.

Amazon Shipping added to TJI Amazon Product Database

We’ve added Amazon Shipping to the TJI Amazon Product Database.

  • Amazon Shipping – handles shipments from third-party merchants to Amazon warehouses (invite-only program in the Los Angeles area only currently)

Eugene Kim of CNBC has a story today on the program and highlights that Amazon is offering lower prices than FedEx or UPS for certain shipments from seller warehouses to Amazon fulfillment centers.

Amazon Ends Instant Pickup Service

Last year, Amazon launched Instant Pickup at five locations on US college campuses where it was already operating regular Pickup Locations. The service allowed customers to order certain items and then retrieve them a short time later from nearby lockers, somewhat akin to a vending machine that you could order online from and then go pickup yourself. Amazon made available items like phone chargers, snacks, and drinks, which were placed in the lockers by an Amazon staffer after the order was placed.

“I want to buy a can of coke because I’m thirsty,” Ripley MacDonald, Amazon’s director of student programs, said at the time. “There’s no chance I’m going to order that on Amazon.com and wait however long it’s going to take for that to ship to me.”

Today, Amazon said it has ended the program. Its regular Pickup Locations efforts will continue at these locations.

Instant Pickup was an interesting experiment for Amazon to test out stocking items that fit the impulse purchase scenario at its Pickup Locations.

Since last year, Amazon has expanded its retail efforts substantially, through the growth of Amazon Books, the launch of Amazon Go stores in Seattle and Chicago, and the launch of the first Amazon 4-star store in New York City.

Is Amazon Building Multiple Four-Story Fulfillment Centers in the US Right Now?

Traditionally, e-commerce warehouses have taken the format of massive one-story buildings, due to the nature of the logistical work required to sort, stock, pick, and ship — with thousands of people, robots, and vehicles making the system work.

That’s why we were intrigued to read reports of Amazon reportedly (although nothing has been confirmed) building multiple four-story fulfillment centers currently — in Oak Creek, Wisconson (near Milwaukee), Garner, North Carolina (near Raleigh), Bakersfield, California (somewhat near Los Angeles), and Brooklyn Park, Minnesota (near Minneapolis). Per Bisnow,

Though no centers have been publicly confirmed as meant for Amazon, reporting across the country has connected the tech company to four nearly identical plans, each for a four-story warehouse totaling around 2.5M SF…

Modern distribution centers tend to require such high clearances and so much truck activity that multistory buildings have not made financial sense in the past, but in urban areas like Atlanta and New York where space is so tough to come by and access to the population center is so important, developers have started to make it work.

Amazon’s investment in logistics provides it a substantial competitive advantage over e-commerce competitors. If Amazon is able to build four-story warehouses in areas that only allow for buildings with smaller footprints than what would be needed for a traditional one-story FC of that size, that advantage is likely going to get bigger.

SOUQ Launches Amazon Global Store, Opens 1M Amazon.com Items to Saudi Arabia

Amazon has announced that is is launching an Amazon Global Store on SOUQ, its e-commerce site and platform serving customers in the Middle East. Per Amazon:

Amazon Global Store on SOUQ offers a completely localized and effortless experience for customers in the KSA: Customers can shop in Arabic or English and pay in SAR using their local credit cards or cash on delivery (COD). Customers will see prices in SAR inclusive of import fee deposits at checkout (where applicable) – without any unexpected fees added later. With Amazon Global Store’s hassle-free customs clearance, purchases are delivered right to customers’ door steps. SOUQ offers two convenient delivery options for Amazon Global Store, from click to delivery: priority (2-5 business days) and standard (6-10 business days).

Let’s take a look at how the integration looks. First, here’s how the Amazon Global Store is promoted on the SOUQ home page (it’s pretty prominent — just below the fold):

Now, let’s compare the listings of an item for sale on Amazon.com in the US with the same listing in AGS on SOUQ.

 

They’re remarkably similar, with real-time inventory data syndicated to SOUQ as well.

The logistical operation here is impressive. In addition, Amazon is offering, “Local Customer Service and hassle free returns within 30 days.”

Amazon is doing a lot of work behind the scenes to make international e-commerce simpler for merchants and customers. That is going to pay off in the long run.

Large Restaurant Brands and the Future of Amazon Restaurants

Amazon Restaurants, which is live in 20 cities as of today, is looking to accelerate the growth of its restaurant supplier network by partnering with the largest restaurant brands in America.

“National restaurants play an integral role in the Amazon Restaurant Delivery business strategy,” according to a current job posting for a business development position. The listing goes on: “Amazon Restaurants is seeking an entrepreneurial, results-oriented Technical Business Development person to lead negotiations with the largest 200 restaurant brands such as Applebee’s, P.F., Chang’s, Red Robin and point of sale (POS) brands such as NCR.”

A few locations of national restaurant brands such as Subway, Firehouse Subs, Five Guys, Applebee’s, and Which Wich are already on the Amazon Restaurants platform. However, based on our review of restaurants available in each city currently, the large majority are local brands.

Last summer, Amazon announced the launch of Amazon Pay Places, a service that enables select QSRs running the Clover POS to accept takeout orders via the Amazon app. Amazon says it charges restaurants, “10% of each order that’s processed through the Amazon App. This cost covers marketing and payment processing, including fraud protection. Amazon’s marketing may include a variety of paid social media, email, and in-app marketing.” We do not yet know what the specific pricing model is for Amazon Restaurants partners.

Restaurant food delivery is a highly competitive landscape, with a slew of startups operating in the space including DoorDash, Grubhub, Eat24, Caviar, Postmates, and more – in addition of course to Uber Eats (which Uber CEO Dara Khosrowshahi said in May has a $6 billion bookings run rate).

As former Uber growth leader and current Andreessen Horowitz General Partner Andrew Chen articulated recently, the nature of transportation marketplace businesses favors platforms that can keep transportation suppliers continuously in demand throughout the day. While the nature of Amazon’s local transportation demands differ from Uber’s, it does seem generally better equipped to keep more couriers busy more often than the vertical food delivery platforms, and thus to be more economically viable, in the long run.

One potential long-term play for Amazon, given its large volume of both customer relations and inventory of perishable food in its Fresh warehouses and Whole Foods stores, is to enter the virtual restaurant business. A “virtual restaurant” is a restaurant that doesn’t exist for physical customers, but rather appears as a restaurant brand in your food delivery app only. Fulfillment can occur in a space shared with other “virtual restaurants,” perhaps also in a lower-rent location than many traditional retail establishments. Delivery logistics are thus also simplified since the number of food source locations is potentially reduced. (In some cases, restaurant entrepreneurs are creating virtual restaurants inside their physical ones in an effort to grow.)

Another potential option for Amazon long-term is to create “private label” restaurant brands with fulfillment provided by existing third party (physical or virtual) restaurants, somewhat analogous to how it has created private label products in many hardline and softline retail categories. (Given how much Amazon has already aggregated demand, it has more options than most when evaluating how to go about aggregating supply.) We have seen no evidence of Amazon’s intent to pursue either of these strategies yet, but Amazon is at least getting more sophisticated in some aspects of retail food preparation through offerings in its Amazon Go and Whole Foods stores.

For now, Amazon is racing all of its competitors to bring on as many restaurants as it can to the platform, and national restaurant brands are a fast way to gain footprint.