Recent Amazon Moves Could Strengthen its Marketplace BusinessWhile most of the coverage of a Monday report about Amazon.com's ( AMZN) plans to make a policy change for its giant retail marketplace business focused on its political implications, there could be a major business angle to Amazon's actions as well.
According to a source talking with Axios, Amazon plans to stop prohibiting merchants on its U.S. retail marketplace from selling goods they offer on Amazon at a lower price on another website. The report comes three months after Sen. Richard Blumenthal asked the FTC to probe this policy for potential antitrust violations, and six years after Amazon dropped this policy for its European marketplaces.
Though raising the risk that some items sold on Amazon's marketplace will be available for less elsewhere, giving U.S. merchants the freedom to charge less for an item on another site could (in addition to appeasing politicians and regulators) help Amazon win over some of the direct-to-consumer (DTC) e-commerce startups that have been wary of working with the company. These startups directly sell internally-designed products, tend to rely heavily on Facebook (FB) , Instagram and Alphabet/Google (GOOGL) to promote themselves and have collectively been seeing strong growth. But when it comes to selling on Amazon, they've been worried about everything from Amazon's marketplace commissions to the limited customer data it shares to the pressure to pay for ads to stand out within search results.
But there's no denying Amazon's immense customer reach, or the degree to which legions of Amazon Prime members don't even bother shopping on non-Amazon sites when making certain online purchases. If Amazon gives D2C brands the chance to charge a slightly higher price on its marketplace to offset some of the costs associated with selling Amazon as opposed to selling products on their own websites, some of them will likely be more willing to test the waters.
Separately, in another sign that Amazon appears driven to boost its marketplace sales, Bloomberg ran a story last week noting that Amazon's direct e-commerce business has stopped buying goods from certain wholesalers, and is pushing them to sell those goods on its marketplace. It added that Amazon's order cancellations "prompted panic" among sellers at the recent ShopTalk retail conference.
This push to boost marketplace sales comes at a time when a large portion of those sales now involve the use of Amazon's FBA fulfillment services, which make it much easier for marketplace goods to support Amazon Prime. They also come at a time when Amazon's fast-growing ad business, which depends heavily on listings from marketplace sellers, has become a bigger company priority.
Thanks in large part to commissions and FBA fees, Amazon's third-party seller services revenue rose 27% annually in Q4 to $13.38 billion. And after factoring an accounting change, the company's "Other" revenue, which is now dominated by ads, rose about 38% to $3.39 billion.
Along with Amazon Web Services (AWS) and Prime subscription fees, the growth of Amazon's marketplace-driven revenue streams are a key reason why its gross margin has risen more than 10 percentage points over the last four years and hit a new high of 40.3% in 2018. These revenue streams look poised to drive additional margin expansion in the coming years.
Apple's Video Service Will Be Main Attraction at Its March 25 EventMarch 12, 2019 | 12:26 PM EST
Confirming prior media reports, Apple (AAPL) sent out invites on Monday for an event on March 25 at 1 P.M. Eastern Time at the Steve Jobs Theater at its Cupertino, Calif. headquarters. The company is widely expected to show off a new streaming video service, as well as a news subscription service that will be integrated with the Apple News app.
Some new Apple hardware -- second-gen AirPods supporting hands-free Siri activation, a new standard iPad and a new iPad Mini -- are also rumored to be on the way. However, with some reports saying that the event will focus exclusively on services, and the event's invite featuring the words "It's show time," Apple might actually launch those products on a different date.
Between the video service and the news service, the former is likely to be the more important one business-wise. Apple has reportedly committed to spending over $1 billion on original content, and has signed off on projects featuring the likes of Steven Spielberg, M. Night Shyamalan, Jennifer Garner, Reese Witherspoon and Charlie Brown.
However, while Apple has confirmed quite a lot about the shows that will be offered by its service, the company has remained tight-lipped about how the content will be priced and bundled. CNBC reported last October that Apple will provide the content for free to hardware owners through an app called (simply enough) TV.
If CNBC's report is right, Apple is wagering that its video content will do enough to both reel in new hardware buyers and keep existing hardware buyers loyal to justify being given away for free to customers. Such a move would definitely act as a boon for sales of Apple TV set-tops, which are priced at a premium relative to Amazon.com (AMZN) and Roku's (ROKU) most popular living room streaming devices, and are estimated to have a much smaller market share.
With Apple having a strong track record of cross-selling hardware buyers on additional devices, the company might also be wagering that the average long-term payoff for obtaining a new hardware customer with the help of its video content will be considerable. We'll know for sure on the 25th.
To see Tech Check coverage from the previous trading day, click here.
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