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Thu July 26 2018 23:47:00

Amazon Success with Subscriptions Impacts Unit Growth

By: Ina Steiner

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Amazon revealed a trend that could have an impact on some third-party sellers both on and off its marketplace - as well as certain types of retail stores. Amazon Chief Financial Officer Brian Olsavsky was asked about the drop in unit growth in the second-quarter (Q2), a period in which Amazon grew sales by 39%.

The Wall Street analyst was asking about the following metric reported in Q2 earnings on Thursday: in the second quarter of 2017, paid unit growth had grown by 27%. In the second quarter of 2018, it grew by only 17%.

Olsavsky outlined some factors influencing that change in growth rate, the first being that Amazon had very strong unit growth last year in Q2, so it was tougher comparison. (Amazon lowered its Super Saver Shipping threshold from $49 to $35 to $25, resulting in growth in lower priced items). 

But he said another factor was "digital content that moves to subscription," thanks to Amazon Music and Kindle Unlimited. 

For $7.99/month, Prime members get access to Amazon Music Unlimited - "Any song, anywhere - Tens of millions of songs with new releases from today's most popular artists. Listen ad-free with unlimited skips. Download for offline listening."

And for $9.99/month, Prime members get access to Amazon Kindle Unlimited - "Unlimited Reading. Unlimited Listening. Any Device - Enjoy the freedom to explore over 1 million titles and thousands of audiobooks on any device for just $9.99 a month."

The revelation highlights the popularity of digital content, and it means sellers who sell physical media such as books and CDs could see a negative impact as buyers forgo purchasing in favor of "renting," if you will, through subscription plans.

That may come as a blow to such sellers, as they helped boost Amazon's reputation and selection in its early years when many thought of Amazon as a marketplace for books and movies. Unfortunately the CFO didn't get specific about how much digital content has impacted the sale of physical goods, whether it's digital downloads or digital subscriptions.

Later on in today's earnings call, Dave Fildes (head of Investor Relations) said tens of millions of paid customers were "enjoying Amazon Music," with Amazon Music Unlimited subscriptions continuing to grow very quickly and available in over 30 countries

One of the most popular features for using Alexa-powered devices is the ability to listen to music, he said. Later, Olsavsky revealed Amazon is increasing its reach of Alexa with 13,000 smart-home devices from 2,500 unique brands, and it is expanding into hotels "to allow you to experience Alexa while you're traveling." It's also working with car makers.

When asked about the monetization of Alexa, he said the biggest thing Amazon could do right now is to make Alexa as useful as possible. It's easy to see why Amazon wants its own Alexa technology to be the standard for smart-speaker and smart-home devices rather than another company's such as Google Assistant or Apple Siri.

Reinforcing the fact that Alexa is a focus for the company, Amazon CEO Jeff Bezos was quoted in the company's earnings release about its importance.

Another point worth calling out regarding Amazon's second quarter: 53% of paid unit growth came from third-party sellers, up from 52% in Q1 and up from 51% in Q2-2017. "We're really pleased with the retail growth," Olsavsky said, "We think it's driven by the Prime program and the engagement of Prime customers as well as increased selection, particularly third-party selection."

And a stat that everyone talking: Amazon showed a profit (net income) of $2.5 billion in the second quarter compared with $197 million in second quarter of 2017. Olsavsky mentioned "efficiencies" numerous times during the call.




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by: shut1968 This user has validated their user name.

Fri Jul 27 02:55:59 2018

The fact that half of those categories are gated now which has driven prices up has a factor in it as well since some customers aren't willing to part with their money because prices are higher.....  There will always be collectors though that actually want to own something physical in their hands, THAT will never go away.

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by: Chicago48 This user has validated their user name.

Fri Jul 27 04:42:29 2018

The other day I bought (and just returned) an AMZ Fire Tablet.  When I boot it up, the first thing I had to do was get a 2-step verification code.  When I finally got to the desktop and it was nothing BUT AMAZON, AMZ downloads, book recommendations, music and one feature was to turn on Alexa.  I couldn't remove the apps that came pre-installed and used up all the storage space. Well, about 10 minutes in I decided I didn't want the damn thing and returned it for a NON-AMZ tablet.  I don't know what AMZ FIRE sales are, but for me, it's very domineering presence on the tablet was enough for me to say "enough."  IMO the government needs to look into how AMZ is trying to rule and control everything and every device we have.

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by: Chicago48 This user has validated their user name.

Fri Jul 27 04:44:05 2018

@shut1968: The fact that half of those categories are gated now which has driven prices up has a factor in it as well since some customers aren't willing to part with their money because prices are higher.
^^ You are SOOOO right.  Prices are much lower elsewhere if you shop....esp. at Walmart (luv it!) and Ebay.  Almost everything I try to list from books to CDs to housewares is gated.  Seems the only items I'm able to list w/o a gate are collectibles.

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This user has validated their user name. by: Rexford

Fri Jul 27 06:32:15 2018

"I don't know what AMZ FIRE sales are, but for me, it's very domineering presence on the tablet was enough for me to say "enough."

I would have returned it as well.  I was incensed recently after a Windows 10 update. Inaddition to my password, they were now asking me to set up a PIN.  I just want to log in for Pete's sake, I don't want to jump through a series of hurdles to do so.  It took lots of Googling and a couple of YouTube videos to dismantle the prompt that appeared every time I logged in but I finally succeeded.

And by the way, that last Windows 10 update took almost an hour, so who knows what that was all about.  I would love to know if any of that update involved data harvesting from my desktop.

These companies will not be happy until they know everything there is to know about us.  Amazon is looking more and more like the Book of Revelation's "mark of the best"    

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by: DingDong This user has validated their user name.

Fri Jul 27 07:15:45 2018

"I don't know what AMZ FIRE sales are, but for me, it's very domineering presence on the tablet was enough for me to say "enough."

This is the same way GOOGLE took over. All the new PC's were loaded with the Google Browser and people just used it.
Same thing when they offered Excel (short version) on PC's and not Lotus or QuatroPro.

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by: sasikat9 This user has validated their user name.

Fri Jul 27 07:29:49 2018

We are currently prime members. We love Amazon as most of our shopping is done on line. Two members of our family have disabilities and Amazon is great for them. Unlike ebay one nevers knows when their item will be delivered. 99 per cent of the things we buy are usually delivered in 2 days even on Sunday.

As buyers we don't care who sells us what we want, just that we get it.

We don't have the time or energy to try an navigate ebays search and all their glitches. We used to compare ebay prices with Amazon but now we no longer check. Just head directly to Amazon. Both sites have some very NASTY ARROGANT SELLERS. When something needs to be returned we don't want any arrogant sellers telling us we are losers. I just want to return the junk you sent. This is a problem on Ebay. On Amazon, just do it, no sass.



People can say what they want about Amazon or Ebay but the whole bottom line is what site delivers the goods when we buy something.

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by: Vernfern This user has validated their user name.

Fri Jul 27 21:58:07 2018

I also returned a Fire tablet due to the non-stop promotions and ads for Amazon products. However for an extra fee up front, these products are offered without advertising through AMZ only (the ones at local stores will have the advertising in them).

However even without those pop-ups and ads at boot-up, their tablet is a very crippled device and really aimed at Amazon products. No wonder they are so cheap vs. a similar grade Android based one.  

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by: Carol Is Here This user has validated their user name.

Fri Jul 27 23:56:02 2018

Did anyone see Friday's news story about Amazon's cloud services earnings up (that's where the money comes from and always has) while retail growth has slowed.

Amazon has been willing to lose on retail and let their services income fund it so they can form their monopoly.

It's sort of a loss leader. Their eye is one the prize of monopolization, and when that happens, people will realize how bad that is.

it is too bad that the public doesn't insist that political leaders break up this monopoly before it is too late.

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by: Grady This user has validated their user name.

Sat Jul 28 23:13:09 2018

Everything is focused on "the cloud" now.

Just wait til the Chinese strip it of all usable data

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by: Moonwishes This user has validated their user name.
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Mon Jul 30 02:35:18 2018

When the Fire tablets first came out, I bought two, one for me and one for hubby. It barely took 60 seconds to know that hubby wouldn't be able to use it as the fonts were too small! He has vision problems and even though the fonts could be increased if needed, The biggest you could get wasn't big enough.

The tablet I got for me was defective. Just trying to set it up if I typed an S a W would show. Type an N and J or H would show up. Then tried to figure out how to get the movies and even though one showed like it was ready to go, It wouldn't play due to the Wifi not being correct even though it was the same wifi that I had set the tablet up with in the first place. Back they went to Amazon. Not worth the aggravation to keep trying to figure out how to make them work.

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by: Chicago48 This user has validated their user name.

Mon Jul 30 05:43:01 2018

@shut1968 is correct (The fact that half of those categories are gated now which has driven prices up has a factor in it as well since some customers aren't willing to part with their money because prices are higher.....  There will always be collectors though that actually want to own something physical in their hands, THAT will never go away. )
^^
There are so many categories gated that sellers are going elsewhere.  I went to 2 estate sales this weekend and the owners had tons of books that no one was buying, and there were resellers there.  Physical books are dead.  Maybe DVDs and CDs are still worth it, but not books, unless they're technical, collectible, or textbooks.

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by: Chicago48 This user has validated their user name.

Mon Jul 30 05:45:31 2018

I too returned an AMZ fire last week that I bought at BestBuy and got an ASUS tablet instead.  There was just too much AMZ stuff on their fire.  Overkill.  I couldn't remove apps.  It was over-domineering.  The company should be investigated.

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by: thebobman This user has validated their user name.

Mon Jul 30 08:18:52 2018

>Maybe DVDs and CDs are still worth it, but not books, unless they're technical, collectible, or textbooks.

I went to a garage sale just as they were closing and got a copy paper box full of DVDs for free. Decent movies from the 90s and 2000s. In the past i would have gone through them and sold them online, but i just found an empty slot in my retail store and put a sign up "single dvds, $1 each"

No way to make any money on a dvd online, even aquired for free after paying shipping and fees. $3.99 w/ free shipping for a copy of "spies like us"

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by: Chicago48 This user has validated their user name.

Mon Jul 30 14:03:37 2018

@thebobman:  Better to sell at flea markets, the ones that are left :)
I found a rare TV classic, The Night Stalker at an estate sale for $2, and sold it within 2 days for $69.  You have to look for the rare, the obscure, the cult favorites.

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by: thebobman This user has validated their user name.

Mon Jul 30 16:17:56 2018

@Chicago48

To me, flea markets are overpriced junk thats been brought to flea markets for the last 15-25 years as no one is buying it. The microwave cooking novelties from the 80s, still in sealed boxes. VHS tapes of ken burns, the civil war. 60s records, easy listening stuff that has no value. Corded phones and 90s clock radios and 70s truck CB radios. I don't have time to haul all that stuff, set up, sit there all day, make $75, maybe $100 if im lucky and then tear down, load and unload.

Around here, used stuff has little value. People have garage sales, sell stuff for almost nothing, and still not that great of sales.

I bought a food strainer for $5, possibly less if i made an offer(i bought it as least 4 months ago), still in box and sold it on Amazon for $100. No one locally would have paid more than $15 for it

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by: mindelec This user has validated their user name.

Wed Aug 1 11:10:31 2018

@Chicago48

Books aren't gated on amazon, even the marvel scare of a few weeks ago didn't really affect books.  I only had 2 of40 items ended.

They did do a good job of killing, dvds, cds, and records though.

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by: Troy Stiffler This user has validated their user name.

Fri Aug 3 09:46:09 2018

@shut1968 - The increased prices have a lot to do with non-authorized sellers being booted. A lot of liquidators and store-returns type sellers were posing as OEM's. For example, someone would buy Home Depot returns, do a little bit of rehabilitation on the packaging, and then sell them on Amazon as "new", below any OEM's cost.

Amazon appears to turn a blind eye to those sellers, until non-authorized claims come in from the manufacturers, competitors, or buyers. Then the account gets reviewed, invoices cannot be supplied, and the seller is booted. There are sad stories almost daily on the Amazon Seller Forums.

I think Amazon is overstepping their domination of markets, and very close to their ceiling. There's a point when there's nowhere else to go, and the company's value stagnates. But I believe they've only hit their ceiling for their marketplace. And their marketplace is less than half their revenue (and probably much less a part of their actual profit). They're a very diverse company, and don't seem to get in much trouble with their acquisitions and other non-marketplace ventures (which is very admirable). Soon enough we'll be driving Amazon cars, run by Amazon software, made from materials from Amazon mines.

I'm pretty sure the world ends with Jeff Bezos sitting in a dark room, with wires plugged into his head, absorbing the collective consciousness of all Amazon Prime members.



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