Amazon Continues Changing Retail Landscape

One thing is certain. Online retailer Amazon.com (Nasdaq: AMZN) has changed the retail landscape in the United States forever. But that change is an ongoing process. The way Amazon does business continues to prod other retailers to change the way the companies relate to their customers.

For instance, take deliveries of items ordered by customers of retailers' websites. Amazon offers same-day delivery in 10 U.S. cities for an $8.99 fee in most cases. The company is able to do this thanks to the expanded number of warehouses it has across the country.

Amazon has invested hundreds of millions of dollars into expanding its portfolio of warehouses. These new warehouses are an effort to both get closer to its customers (speedier deliveries) and to get around the imposition of sales taxes on items ordered online.

Same-Day Delivery Service

Amazon's introduction of same-day delivery service led to some other retailers jumping aboard the ultra-fast deliveries of online purchases bandwagon last year. But the cost of offering such a service may adversely effect retail companies' profit margins that are already pressure.

Retail firms are still flying blind as many continue to search for the answers to vital questions such as how many customers actually will use such a service,the cost of it and how to divide the cost between the customer and the retailer itself.

Logistics strategist at consultancy Kurt Salmon, Al Sambar, told the Financial Times “It's ultimately a pretty costly service to deliver.” He does not think consumers will be willing to pay for such a service except for a few special circumstances, such as medicines and Christmas toys.

Firms Jumping Aboard the Bandwagon

Nevertheless, many retail firms are pushing ahead with offering same-day delivery services.

One prime example of this is the country's biggest retailer, Walmart (NYSE: WMT). In several markets, it is testing same-day delivery service of goods ordered online. In these markets, customers can have an unlimited number of items delivered for a flat $10 fee.

The company doing the heavy lifting for Walmart is the Supply Chain Solutions division of leading delivery company United Parcel Service (NYSE: UPS) to make these deliveries. This division of UPS is normally used for instances such as the ultra-fast delivery of key machinery parts for a machine that may have broken down.

This business is not completelt new for UPS though. Last year, it took a 6% stake in Shutl, a London-based firm that matches up retail orders with couriers that can make high-speed deliveries.

Online auction site eBay (Nasdaq: EBAY) is also trying out a same-day delivery service in New York and San Francisco. Customers using eBay's special iPhone app in those two cities that place an order are charged only $5 for delivery of the product that day.

According to the Financial Times, eBay is working closely with Target, Toys R Us, Best Buy, Home Depot and Urban Outfitters to make this experiment work.

The Future of High-Speed Delivery Services

The real question here is whether the majority of consumers really want the option of same-day delivery service.

After all, it would be a costly option for retail firms to offer. Most retailers would have to upgrade their logistics system. Many simply do not know what items they have and where. That makes it difficult to locate a product and ship it immediately.

So far, results have shown customers are more interested in knowing when an item will arrive and not if it can be delivered same day.

UPS has found that what customers really want is a service that helps them to not miss deliveries. UPS does currently offer such a notice service that gives customers a four-hour window in which the delivery will be made.

A UPS spokesperson told the Financial Times, “Quite honestly, what customers are telling us is as long as they know what the committed delivery date and time is, they are fine.”

Even Amazon's CEO Jeff Bazos told Fortune that he's “a little skeptical that same-day delivery is ever going to be a huge part of the business.”

Bottom line – such a service is going to be offered by more and more retailers. But it really will not be a driver of the business and may actually be a further drag on already tight profit margins.

 

This article originally appeared on the Motley Fool Blog Network. Make sure to read all my articles for the Motley Fool at http://beta.fool.com/tdalmoe/.

2013 Will Not Be a Good Year for E-Reader Makers

In the midst of a disappointing sales season for retailers, there have been several bright spots. One of those has to be the number of e-book readers that appeared under Christmas trees.

But the cheer is not expected to last throughout 2013. According to some technology analysts, this category of tech gadgets is expected to see a very rapid decline in its fortunes over the coming months thanks to competition from other devices.

Competition From Tablets

There are several well-known e-readers on the market including the Nook from Barnes & Noble (NYSE: BKS). Last April, the company announced a partnership with Microsoft (Nasdaq: MSFT) whereby Microsoft invested $300 million into its Nook unit. This investment is interesting in the light of Microsoft's move into tablets with Surface. 

There also a number of Asian manufacturers, but the best known of the e-readers are the various versions of the Kindle from Amazon.com (Nasdaq: AMZN). In the run-up to Christmas, the latest Kindles occupied three of the top 10 slots for electronics at Amazon's website.

But they were outsold by tablets, which occupied eight of the top 20 spots for electronics on Amazon's website.

Tablets are becoming more user friendly. . .lighter, cheaper and with longer battery life. Not to mention tablets are multifunctional. The Kindle and others are under direct fire from the mini-iPad from Apple (Nasdaq: AAPL) and the Nexus 7 from Google (Nasdaq: GOOG) that costs only $199.

It is this competition that has industry analysts so worried.

The Way of the Dinosaurs?

One worry wart is the research firm IHS iSuppli. It titled its recent report on the industry: Ebook Readers: Device to Go the Way of Dinosaurs?

According to iSuppli, total e-book readers shipments grew from a mere one million worldwide in 2008 to ten million in 2010. Shipments hit a peak of 23.2 million units in 2011. But even then, tablets had already taken the lead over e-readers with shipments of 67 million units.

In 2012, iSuppli has forecast that sales will fall 36% to just 14.9 million units. Another drastic 27% fall is forecast for 2014 when shipments decline to 10.9 million units. The firm sees sales of only 7.1 million units by 2016 as the consumer trend toward a multifunctional device – the tablet – continues.

Research firm Forrester is in agreement with iSuppli. It also believes that tablets will be become cheaper and cheaper while at the same time screens and battery life improves.

An analyst with Forrester, James McQuivey, believes e-reader prices and sales have only one direction to go. . .down. He told the Financial Times' Chris Nuttall, “Prices are falling so quickly that at some point Amazon's going to give you one for free to extend its customer relationship.”

Small Hope

As iSuppli points out in its report, it is an inexorable move from a single-use device to multifunctional devices. But it doesn't mean the complete end for e-readers. Think GPS devices and MP3 players.

There still may be some demand for the devices from one specific sector – the education industry in emerging markets.

With the growing popularity of the iPad and other tablets, it may too late to tap into the U.S. educational market in a big way. But it is a different story in the emerging world. But only if the e-reader makers grasp the opportunity quickly.

Jordan Selburn, an analyst with IHS, told the Financial Times “the future [for e-readers] is in emerging regions and in heavily subsidized opportunities.”

But in those markets, with incomes low, e-readers would have be very low-cost. Perhaps in the less than $20 range for end users. Some one (governments?) would have to subsidize the cost so e-reader manufacturers would make some profit.

So there is a bit of hope for e-reader manufacturers. But just not a lot of it.

 

This article originally appeared on the Motley Fool Blog Network. Make sure to read all of my articles for the Motkey Fool at http://beta.fool.com/tdalmoe/.

Gaming Console Landscape Changed Forever

During its first week on sale in the United States, Wii U from Nintendo ADR (NASDAQOTH: NTDOY) sold more than 400,000 units. This is far less than the original Wii, which sold 600,000 units in its first 8 days on sale. No wonder many Wall Street analysts said that the 400,000 figure was disappointing. But is it really? It may not be, because the video console gaming landscape has changed drastically in the last few years.

The introduction of the Wii U is obviously important to Nintendo. It is trying to revive its flagging sales. . .sales that led the company to report its first annual loss in five decades as a public company. Nintendo has been especially hurt by poor sales of its handheld 3DS gaming device.

The original Wii to date has sold approximately 97 million units, the best of its generation. Its competitors – the Xbox 360 from Microsoft (Nasdaq: MSFT) and the Playstation 3 from Sony ADR (NYSE: SNE) – have sold about 70 million units each to date.

The Wii U

Nintendo is hoping to get back its mojo with the Wii U and its GamePad controller that has a 6.2 inch touchscreen imbedded in it. This not only allows a different view of the game but also permits users to transfer, if they wish, a game on the TV to the controller. This allows a game to be played on just a handheld device.

The Wii U also offers HD-quality gaming as well as online gaming. This matches its rivals and should encourage games publishers including Activision to release some of the most popular games on the Wii U, such as Call of Duty: Black Ops 2. But so far, only games publisher Ubisoft seems willing to promote its game on Wii U. This may leave Wii U with a limited selection of games and not many of the best selling games.

Changed Gaming Landscape

The Wii U is also vitally important to the video console as a whole. This launch served as the introduction to the eighth generation of the traditional video game console. The previous cycle was kicked off seven years ago by Microsoft and its Xbox 360. The worry in the industry is that this may be the final generation of video game consoles.

These worries are centered around the fact that the gaming world is very different from the one that Microsoft launched the Xbox 360 into. Back then Facebook social gaming, smart TVs, smartphones and tablets from Apple and others were not a threat. But they are today.

As Piers Harding-Rolls, head of games at research company IHS Screen Digest, told the Financial Times “It's a much more competitive landscape. The question is whether Wii U. . .has enough selling points to elevate it to being a device that consumers will see themselves purchasing and engaging with on a daily basis?”

It is right to be concerned about the industry, but don't bury it yet.

Nintendo's Future

Despite all the concerns, Nintendo will have a rather successful launch of the Wii U. The company should still be able to hit its target of 5.5 million units sold by the end of its fiscal year in March 2013.

However, late next year will see fresh competition for the Wii U as both Sony and Microsoft come out with their new consoles. Sony's next game console will be the Playstation 4 or perhaps Playstation Orbis. Microsoft' offering will be the Xbox 720.

Early talk among analysts about the competition between the three consoles is that Microsoft's Xbox 720 will be the winner. Doug Creutz, analyst at Cowen & Company, told the Financial Times that Microsoft's superior media content and services will give it a clear edge.

But the question remains whether there will ever be a big “winner” again in the video game console industry in the true sense of the world.

This article originally appeared on the Motley Fool Blog Network. Please be sure to read all of my Motley Fool articles at http://beta.fool.com/tdalmoe/.