Month: October 2019

What proposed Amazon grocery stores teach us about retail

Amazon has signed leases and completed permits for dozens of grocery stores — not Whole Foods — in major urban centers including Los Angeles, Irvine, New York, Connecticut and New Jersey. Wall Street Journal

dis-rup-shun: Amazon’s expansion plans for brick and mortar retail stores – grocery stores — is curious given the company’s dominance of online selling. It is important for all industries to understand that Amazon is not content with dominating online sales, but wants to dominate sales of anything through any channel. What other conclusions should we draw from this initiative?

1. Certain product categories won’t move substantially to online sales. Amazon has likely learned that grocery delivery will not soon move beyond niche or luxury service, and the bulk of food sales will remain brick and mortar.
2. Amazon wants as many touch points as it can get. Almost everyone goes to the grocery store, so Amazon’s presence in the grocery store means it has the eyeballs of most everyone.
3. Amazon should no longer be classified as an online retailer. As stated before, dominating online sales is too limiting for the company’s ambitions.
4. The economics of cashier-less stores change the profit margins of brick and mortar retailing. Most retail stores struggle to produce thin profit margins. Reducing the number of clerks required will profit a margin advantage.
5. The Whole Foods acquisition is proving to be more of an experiment. It seems that Amazon’s acquisition of Whole Foods was more opportunistic than strategic, as the chain seems to be a hot bed of experimentation.
6. Amazon may be changing the idea of food market to corner store — returning to a time when smaller neighborhood stores provided a small number of diverse goods, more similar to 7-Eleven crossed with the now extinct dime store category.

Microsoft launches ARM-based Surface Pro-X – big deal?

Microsoft has launched its first ever ARM processor based PC, using its own chipset, based on a partnership with Qualcomm. The Surface Pro-X processor includes an AI engine, and the device incorporates a removable hard drive. TechCrunch

dis-rup-shun: Why is this announcement a radical move for Microsoft? First of all, this product moves Microsoft one step further from its decades old, tight marriage with Intel — or Wintel, as the marriage was called. Previously Microsoft has not created its own processors, and has almost never released a non-Intel PC. Microsoft missed the entire smartphone revolution and many attribute this miss on Intel’s inability to compete with ARM processors that are the mainstay of smartphones. Additionally, the deeper Microsoft goes into manufacturing its own devices, the more it competes with its best Windows and Office customers, Dell, Acer, HP and Lenovo. Could this move be a bookend to a new product line that starts with the Surface Duo (see below), or is this a defensive move against upstart PC substitutes such as Chromebook?

Microsoft Surface Duo is folding phone or mini-PC

Microsoft surprised watchers yesterday by announcing the Surface Duo, an Android device that runs Windows applications via Windows 10X, an operating system variant that enables the device to run multiple apps at once, using each screen for a different app. The device will be available late 2020. CNBC

dis-rup-shun: Microsoft, like Amazon, Facebook, Google and, of course, Apple, has caught hardware fever — joining the rush to create new categories of devices to dominate before its competitors do. A Microsoft app-running foldable phone makes more sense than the Samsung fold, as the extra real estate afforded by dual screens fills the narrow gap between the Surface or tablet and Microsoft Office applets on smartphones — usable but only in dire circumstances. With a Surface Duo, one could actually sit in coach class and complete a proposal or spreadsheet without contorting the body.

Netflix subscriber base will not be eroded by new competitors

A survey by Piper Jaffray concluded that despite the impending competitive streaming offerings by Disney or Apple, Netflix will not lose many subscribers. 

The analyst firm believes that most Netflix subscribers will stick with the service, and not churn to competitors, and remains bullish on the company’s prospects, saying the competitive threats are already priced into the company’s share price. CNBC

dis-rup-shun: It is true that Netflix subscribers remain pleased with the service and their return on subscription fee. The problem remains, however, that Netflix won’t reach profitability and a positive return on its large investments in original content unless they win many new subscribers in the future. The pie of people who are not yet Netflix subscribers has been sliced into many pieces by competitors who have a stronger catalog of content than Netflix (Disney and Apple for starters), and who have the potential to bundle other services (AT&T). It is not losing existing subscribers, but rather the escalating cost of new customer acquisition that is keeping Netflix execs up at night.