TIME

Macy’s Is Taking On Amazon With Same-day Delivery In 17 Cities

Shoppers In Union Square Ahead Of Consumer Comfort Figures
Bloomberg—Bloomberg via Getty Images

The nation's largest department store competes with the e-commerce giant as demand for quick delivery grows

Macy’s, the nation’s largest department store, is starting to compete with Amazon by offering same-day delivery in 17 markets. In order to do this, the retailer is using a delivery service called Deliv. In the same vein as Uber, Deliv is a startup that has a band of contracted delivery drivers on hand who pick up customers’ orders from a store, and then drop the orders off directly at the shipping address.

Macy’s experimented with same-day delivery in eight markets last fall. Its customers appreciated the option to receive a package within hours, proving the experiment to be successful and prompting the retailer to expand same-day delivery to nine new markets. Macy’s also has plans to expand fast delivery at Bloomingdale’s, its high-end counterpart.

Amazon currently offers same-day delivery in 14 metro areas and is working on one- and two-hour deliveries for Amazon Prime members. LaserShip, a Virginia based Amazon contractor, has plans to expand quick delivery to 5 new markets.

Reuters reports that fast deliveries are becoming a “battleground” for retailers trying to increase online orders. However, experts warn that quick deliveries can come as a significant cost to these companies.

Chains such as Macy’s have a significant advantage over Amazon, as they have over 900 locations in the United States. Amazon only has 50 distribution centers, and therefore more distance to cover.

TIME Walmart

Walmart, Amazon Settle With NY Over Banned Toy Guns

U.S. Customs And Border Patrol Hold News Conference On Dangerous Toys
Joe Raedle—Getty Images Toy guns deemed too realistic.

5 companies will pay $300,000 to settle a NY state probe

Some of the world’s top retailers have agreed to pay more than $300,000 to settle an investigation by New York State regulators into alleged sales of banned toy guns.

Walmart and Amazon headline the group of retailers that agreed to settle the probe in an agreement to be announced on Monday by state Attorney General Eric Schneiderman, according to Bloomberg. Those companies — along with Sears Holdings’ Kmart and Sears store brands, as well as California-based company ACTA — had been under investigation after allegedly selling toy guns that were prohibited under state law for being too realistic to New York residents who bought the products online.

Schneiderman’s office sent the five retailers cease and desist letters in December after the state’s investigation turned up evidence of online sales of banned toy guns online and, in one case, in a suburban Rochester Kmart store. In New York, it is illegal to sell toy guns that look too realistic, including those in colors such as black, blue, silver, or aluminum, unless they also have one-inch-wide orange stripes on both sides and on front of the toy’s barrel.

According to Bloomberg, the retailers sold more than 6,400 banned toy guns in New York between 2012 and December. Walmart will pay the bulk of the fine — $225,000 — because the recent probe found that the company violated the terms of an earlier agreement with the state, in 2003, when the company was found to be selling prohibited toy guns.

MONEY

The Top Gear Boys Are Back in Town

Cue the Jessica.

The Orangutan, Hamster and Captain Slow are back, but on the web only. After Jeremy Clarkson’s contract was not renewed — he allegedly punch a producer while on a shoot — and his co-presenters James May and Richard Hammond decided not to renew theirs, a bidding war begun among ITV, Netflix, Amazon, and a few others. Ultimately, Amazon won, announcing it on Twitter. The show won’t be called Top Gear, but it will be led by former Top Gear executive producer Andy Wilman.

Wilman told the Radio Times the team would start working on the new show as soon as they’re back from their summer holiday. The show is scheduled to debut online next year.

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5 Things Amazon Wants Investors to Know About Its Earnings

Amazon.com Illustrations Ahead Of Earnings Figures
Bloomberg via Getty Images

Prime Day was a huge success, according to Amazon CFO Brian Olsavsky.

Amazon.com AMAZON.COM INC. AMZN -0.75% reported blowout second-quarter results last Thursday, along with strong guidance for Q3. While the company’s profit margin remains thin, most analysts had been expecting Amazon to lose money in Q2 and then lose even more money in Q3.

After the earnings report came out, new Amazon.com CFO Brian Olsavsky spent some time talking to analysts about the company’s results and outlook. Here are five important tidbits from his remarks.

First signs of cost leverage

So, we are getting very good top-line growth. A lot of that is fueled by Prime, Prime adoption. And we are dropping a lot of it to the bottom line with … efficiency projects.
— Amazon.com CFO Brian Olsavsky

For a long time, the investment thesis for Amazon bulls has been that as the company’s revenue rises, it will be able to leverage fixed expenses to drive significant margin expansion. As a result, these investors haven’t been worried about Amazon’s razor-thin profits.

But even as Amazon’s revenue surged more than tenfold from 2004 to 2014, its profit margin actually shrank quite a bit. With the company approaching $100 billion in annual revenue, it was reasonable to wonder when Amazon’s profitability would start to rise again. Last quarter was a nice proof point in this regard, as Amazon’s top-line growth helped drive strong earnings growth.

But still investing heavily

Yes, headcount was up 38% year over year. The vast majority of that is in operations where we’re adding people for our new FCs and call centers.
— Brian Olsavsky

On the other hand, investors shouldn’t conclude that Amazon is backing off on its investments for future growth. In fact, Amazon’s headcount is actually growing even faster than revenue, at 38% year over year. In Q2 alone, Amazon added more than 18,000 employees.

As Amazon continues to grow, add more warehouses, and sign up more Marketplace sellers for Fulfillment by Amazon, it needs to continually increase its shipping capacity. Amazon wants to make sure it can support the expected growth in demand. Meanwhile, it also needs to keep up on the customer service side in order to maintain its legendary customer satisfaction ratings.

Prime Day was a big success

[W]e’re thrilled with the results of Prime Day, surpassed all of our expectations. Any metric we looked at, we think it was a huge success. Customers saved millions. New Prime members signed up in higher rates than we’ve ever seen. People bought more devices than on any other day.
— Brian Olsavsky

There’s been a lot of controversy about Amazon’s recent “Prime Day” sale and whether it was a success. Wal-Mart attempted to disrupt the sale by offering its own huge online sale while chiding Amazon for requiring customers to be Prime members (at a cost of $99/year) to access the sale. Meanwhile, many Amazon shoppers complained the deals weren’t very good.

But Amazon’s management has called the sale a huge success. It did so in a press release during the event itself and in another press release issued the following day.

Olsavsky pointed to one of the biggest successes of the Prime Day sale: encouraging more people to sign up for the program. Since Prime subscribers are by far Amazon’s best customers, any event that drives a big jump in signups is a win for Amazon.

Amazon Web Services growth accelerates

[AWS] growth of 81% was up from 49% in Q1. You remember that we’re lapping a number of large price decreases in Q2 of last year, so it was somewhat expected.
— Brian Olsavsky

Another area where Amazon blew past investors’ expectations was in its Amazon Web Services cloud computing unit. Analysts had been very pleased last quarter when Amazon broke out AWS profitability for the first time, showing a segment margin of 16.9%. Yet Amazon managed to blow that number away in Q2 with a segment margin of 21.4%.

Olsavsky talked about how AWS is becoming ever more efficient on a cost basis. And Amazon lapped some big price cuts from 2014 last quarter, which led to a sharp acceleration in year-over-year growth in addition to the segment’s margin improvement.

Price wars might be less necessary now

While pricing is certainly a factor, we don’t believe it’s always the primary factor. In fact, what we hear from our customers is that the ability to move faster and more agile is what they value.
— Brian Olsavsky

While the AWS segment margin is soaring now, it was in the single digits just a year ago thanks to a big round of price cuts as Amazon and its tech peers angled for bigger pieces of the cloud-computing pie. Some investors may be wondering whether another profit-sapping price war could occur in the future.

Obviously, it’s impossible to be sure. But Olsavsky did have some good news on this front, too. He stated that pricing is less important to AWS customers than things like speed, agility, and innovation. The more that AWS can move toward offering unique value-added solutions rather than providing commodity services, the more secure its long-term profitability will be.

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TIME Amazon

Amazon Wants a Special Air Zone For Its Fancy Delivery Drones

The Internet retailer wants a 200-foot space of air

Online retailer Amazon wants to someday deliver your order via drone — a high-speed one, at that — and it wants a special piece of the sky to shuttle those drones, according to a proposal the company unveiled on Tuesday at a NASA convention in California.

As part of its plan, Amazon suggests a 200-foot space of air — between 200 and 400 feet from the ground — be reserved for state-of-the-art drones flying at speeds of 60 knots or more. To keep things safe, it also proposes that a 100-foot cushion just above that airspace be made a no-fly zone to act as a buffer between drones and other aircraft, such as planes, according to The Guardian.

“The way we guarantee the greatest safety is by requiring that as the level of complexity of the airspace increases, so does the level of sophistication of the vehicle,” said Gur Kimchi, VP and co-founder of Amazon’s delivery-by-drone project, Prime Air, at the NASA event, according to The Guardian. “Under our proposal everybody has to be collaborative – vehicles must be able to talk to each other and avoid each other as the airspace gets denser at low altitudes.”

In Amazon’s world, the drones it and others use will be highly sophisticated, safe, and autonomous. The company has outlined five capabilities drones in the special zones must have. They include: sophisticated GPS that tracks the location of other drones in real-time; a reliable Internet connection; online flight planning to communicate the drone’s path; communications equipment; and sensor-based sense-and-avoid equipment to fly around other drones and obstacles.

Amazon’s proposal would also set some limits on drone hobbyists. Their aircraft would be confined to small pockets outside of these new flight areas unless they meet the criteria to fly among Amazon’s drones. Currently, they are permitted to fly up to the 400-foot mark.

But even if Amazon’s proposal becomes reality, it will likely be a while from now before drones flying in a special zone to drop off packages are an everyday thing. Only recently did a company complete the first successful drone delivery — and it wasn’t Amazon. The company is unfortunately still butting heads with the Federal Aviation Administration over how strict its regulations should be.

MONEY online shopping

It’ll Probably Be Years Before You’re Forced to Pay Online Sales Tax

man using credit card to make online payment on laptop
Martin Barraud—Getty Images

For that matter, you might never have to pay up.

Two separate bills working their way through Congress could theoretically close the loophole that allows consumers to skip out on paying sales tax on purchases from e-retailers located in different states. Even so, in all likelihood online shoppers won’t be forced into paying sales tax anytime soon.

Over the years, e-retailers and the consumers who shop online to avoid sales taxes have been accused of having a “free ride.” For the most part, the laws stipulate that online sellers must charge sales tax only when the merchant has a physical presence in the state where the purchase is taking place. The net result is that a consumer in state X might not have to automatically pay sales tax when he makes a purchase from an e-retailer based in state Y.

The scenario gives an unfair advantage to the e-retailer over local brick-and-mortar retailers, which obviously have to collect local sales tax. Consumers are supposed to keep track of their online purchases and pay the appropriate sales tax when filing their income taxes, but the number of individuals who do so is approximately … zero. (Well, it’s close to zero anyway.)

Amazon, all-powerful online entity that it is, has come under fire in particular for not universally collecting sales tax on purchases, and it has made agreements with states on a case-by-case basis to charge the appropriate taxes.

Even as the vast majority of Americans now pay sales tax on Amazon purchases regardless of where they live, there are still many e-retailers that aren’t required to collect sales tax on out-of-state purchases. If either the Remote Transaction Parity Act or the Marketplace Fairness Act of 2015 become law, this loophole would be closed and states could start requiring nearly all sellers to collect sales tax.

Yet, as InternetRetailer.com reported, it’s not looking likely that either of the bills will pass in the near future. What’s more, if and when either does manage to become law, in order to allow time for e-retailers to tweak their operations to be in line with new regulations, there will be a delay of at least 12 months before sellers will have to collect sales tax. E-retailers will also be given a reprieve from charging sales tax during the peak winter holiday shopping season in the first year after either bill becomes law.

The upshot for consumers is that even if one of these bills suddenly catches fire in Congress and surprisingly passes soon, “2017 would be the first holiday season it could take effect,” InternetRetailer.com states. Remember, that’s only if one of these bills passes. If neither does, then many online shoppers can continue enjoying their free ride indefinitely.

TIME Amazon

Amazon Creates Startup Service To Find The Next GoPro

Amazon-prime-day
LIONEL BONAVENTURE—AFP/Getty Images

The company wants to be the go-to retail platform for emerging products.

Amazon is offering a new service that will make life easier for start-up founders. Amazon Launchpad, announced on Tuesday, creates an “Amazon Launchpad store” that will showcase start-up products and provide the makers with marketing and distribution support.

Start-up products featured in the store include the Soma Sustainable Pitcher and Plant-Based Water Filter, Rumpl High-Performance Indoor/Outdoor Blanket, Casper Mattress, and eero Home Wifi System, among others. So far, the store boasts more than 200 products from more than 25 accelerators, crowd-funding platforms, and venture capital firms.

“We…know from talking to startups that bringing a new product to market successfully can be just as challenging as building it,” Amazon Vice President Jim Adkins said in a press release. The Launchpad aims to smooth over that process by taking care of order fulfillment and customer service for start-ups. As a part of the launchpad, start-ups can offer their Amazon Prime customers free shipping.

“Amazon Launchpad gives customers access to a dedicated storefront featuring a variety of innovative new products from emerging brands. For startups, we handle inventory management, order fulfillment, customer service, and more, allowing them to focus their efforts on the innovation that results in more cool products,” Adkins said.

TIME Amazon

Amazon’s Next Innovation Could Be ‘Drive-thru’ Grocery Stores

Amazon.com Illustrations Ahead Of Earnings Figures
Bloomberg—Bloomberg via Getty Images Amazon.com's website.

Customers would order online and schedule a store pickup, report says

Amazon wants to change how shoppers tackle a top weekend errand: going to the grocery store.

The e-commerce company is reportedly developing a drive-up store concept in California, according to the Silicon Valley Business Journal. It would allow shoppers to order grocery items online and then schedule a pickup at a dedicated facility. The project would not only showcase a new distribution strategy for Amazon, it would also put the retailer in another major consumer spending category: grocery.

There’s no way to know for sure that this latest rumor will come to fruition. Recall that in October last year it was reported Amazon planned to open a store in New York City in time for the busy holiday shopping season. That rumored store never opened.

In the grocery aisle, there’s a lot of room for e-commerce disruption, although the tech industry has so far had little success in getting shoppers online for their grocery orders. While more than half of global consumers polled by Nielsen said they were willing to buy groceries online, online grocery sales in the U.S. only capture about 1% of total spending.

An Amazon representative wasn’t immediately available to comment on the drive-up grocery store concept speculation.

MONEY stocks

Jeff Bezos Is $4 Billion Richer Than He Was on Thursday

Liberty Science Center's Genius Gala 4.0
Taylor Hill—Getty Images Amazon founder Jeff Bezos speaks during Genius Gala 4.0 at Liberty Science Center on May 1, 2015 in Jersey City, New Jersey.

The Amazon founder and CEO owns about 18% of his company's stock.

Amazon.com founder and Chief Executive Officer Jeff Bezos got a lot richer while he slept on Thursday night, after the company reported its quarterly earnings and its shares rose 20.1%.

The stock jump added $8 billion to Bezos’ net worth as the market opened on Friday, but by the time the market closed, he had given back roughly half of that gain. The shares, which had briefly hit a record high of $580.57 overnight, closed at $529.42.

It is all in a day’s work – or a night’s sleep – for Bezos, who owned 83.92 million shares, or roughly 18% of Amazon’s outstanding stock of May 14.

His stake easily dwarfs those of other insiders. Diego Piacentini, senior vice president of international consumer business, is the second-largest insider holder behind Bezos, with 110,000 shares. Jeffrey Wilke, senior VP of consumer business, owns 80,000 shares.

The stake held by Bezos would hold a market cap of about $48.6 billion on its own, which is bigger than S&P 500 names such as FedEx, Caterpillar and Netflix. It is more than 18 times more than the smallest company in the S&P 500 by market cap, Joy Global.

It is too soon to tell whether Bezos was up overnight selling some of his highest-priced shares, but an examination of his filings with the U.S. Securities and Exchange Commission show he has been slowly cutting his stake, mainly by donating stock to charity. He owns roughly 5% fewer shares now than his 88.1 million as of Aug. 1, 2011.

Amazon declined to comment.

Update: This story was updated to reflect the closing stock price for Amazon on Friday, July 24.

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