Tag Archives: amazon

The Kindle Fire This Time & the Inevitable Crumbling of Bricks

After long refusing to release hard figures on Kindle sales, Amazon confirmed that they have sold at least four with their announcement today that “Kindle unit sales on Black Friday — including the new Kindle Fire tablet — were four times greater than whatever they were on Black Friday a year ago,” as GeekWire puts it.

More at this astonishingly sales-copy-laden press release.

Across the U.S., 226 million shoppers spent a record $52.4 billion on stuff over the weekend, an average of $398.62. The National Retail Federation’s report conflates online and bricks-and-mortar retail sales, an odd imprecision given that they can tell you that “nearly one-quarter (24.4%) of Black Friday shoppers were at the stores by midnight on Black Friday,” that the most popular category was clothing and clothing accessories (51 percent), and the runner-up was electronics (almost 40 percent).

2011 was the first time that the Federation deigned to ask shoppers what they intended to do with their electronic devices:

More than one-quarter (25.7%) of Americans with tablet devices said they did or will purchase items with their devices, and 37.4 percent will or have researched products and compared prices with their tablets. Overall, more than half (57.1%) said they have or will use their tablet devices to shop for gifts this weekend.

Now comes not just Cyber Monday, but Cyber Week, says the Wall Street Journal, noting that online sales are up 30 percent over last year so far this morning.

It’s not precisely news, but within these developments lies a good deal of tension: If the online shopping experience is as good as the in-store, or even exceeds the in-store in certain ways, then shareholders start to wonder what the point is in brick-and-mortar stores so expensive that they don’t edge into the black until the Friday after Thanksgiving.

Here’s an anecdote, with the usual caveats. In the market for a pair of sandals, I browsed styles online over the weekend. Nordstrom had the Cole Haan’s I settled on in black and brown, so I decided to swing by  to try them on, rather than buy-and-try. The store was the expected madhouse, but Nordstrom staff were as unflappable as always, directing me to the Cole Haan sandals on display, and hurrying off to check on sizes.

Regretfully, the sales clerk told me, they had nothing smaller than a 10. I explained I was hoping to try a pair on before I left for vacation to a spot where you can actually wear sandals (if you were wondering why a Seattleite was shopping for sandals with winter coming on). They could easily order me a pair, the clerk told me, but it would take four to six days. I thanked him, and went home and ordered my sandals from Zappos.com. (“Free Shipping Both Ways!“)

Now let’s return to the comforting realm of statistics:

“Despite some analysts’ predictions that the flurry of brick-and-mortar retailers opening their doors early for Black Friday would pull dollars from online retail, we still saw a banner day for e-commerce,” BBC News quotes Comscore’s chairman, Gian Fulgoni, as saying. On Black Friday, 50 million people visited online retail sites.

Ah.

Remember When Groupon Was the Hot New Thing?

Groupon's Seattle deal

The deal site backlash has lashed back: the New York Times went to press with a story on deal sites over the weekend that included everything but a hand-drawn tombstone and the words RIP.

Just a few months ago, daily deal coupons were the new big thing. The biggest deal maker, Groupon, was preparing to go public at a valuation as high as $30 billion, which would have been a record amount for a start-up less than three years old. Hundreds of copycat coupon sites sprung up in Groupon’s wake, including DoubleTakeDeals, YourBestDeals, DealFind, DoodleDeals, DealOn, DealSwarm and GoDailyDeals. Deal sites were widely praised as a replacement for local advertising.

Now coupon fatigue is setting in.

The upshot, as summarized in another context? “Groupon is just payday loans for businesses,” wrote @vouchey (aka Mike Fourcher) on Twitter. And businesses are wising up to the promise that an initial great deal always brings hordes, let alone instils loyalty. “Even the biggest Web retailer, Amazon.com, has had trouble gaining traction in oversaturated New York, where it started offering deals with great fanfare a month ago,” notes the Times.

AmazonLocal's daily deal

Their unscientific survey of responses to Amazon’s Big Apple-centric deals found only one that reached triple digits, an “Asian bistro” that netted 109 buyers. In Seattle, today’s AmazonLocal deal for a month-long exercise boot camp ($200 value! going for $30!) has so far drawn 110 buyers. Meanwhile Tippr, home of the “hottest daily deals in our city,” is offering not one but two trips to a resort in Belize, stretching the meaning of “in our city” substantially.

This doesn’t mean deal sites are always and everywhere a marketing gimmick. But it does tend to underscore the contrarian view to the hype around deal sites: that, employed judiciously, they may work well for select kinds of businesses, but employed indiscriminately, they can do a great deal of harm to businesses without cushy profit margins, or in comfortable cash flow situations. That is, precisely the kinds of businesses who may clutch at Groupon as at a lifesaver.

The “Live Off Groupon” experiment concludes with two briefly noted RIPs of its own:

This post recognizes my favorite overall Groupon restaurants as opposed to individual items featured in my last post. A small distinction maybe, but there were just too many incredible restaurants to fit them all in one post. Unfortunately two of them closed this year, leaving my top 5, of which three are from my home town of Chicago!

That is where Mike Fourcher’s payday loan analogy comes into play. Back in June, when Groupon had just turned down a $6-billion buyout offer from Google (you can’t say Groupon wasn’t drinking its own Kool-Aid), I wrote down an analysis of that easy-money dynamic:

What is the most salient feature of the social coupon, after all? It’s not the coupon idea. It’s not online delivery. It’s not steep discounts. All of these were available before. (Even the massive audience Groupon provides was around in one form or another.) It’s the transposition of the sequence of events (the small business owner and Groupon make a sale…and then Groupon takes the lion’s share). You could call it misdirection: Watch this sale! says Groupon, and the smiling business owner fails to feel the difference, that it’s not really their sale anymore.

Notice that the small business owner still has to take the marketing theory on faith: These customers will return, spending like sailors! (Not that this doesn’t happen–but Groupon’s ability to guarantee conversion rates is not, I suspect, much better than anyone else’s.) So the main thing that has changed, really, is simply that Groupon has deferred charging for this trial-offer form of advertising until that first sale is made. It’s still the small business owner’s money, but it’s associated in time with the benefit of making a sale.

The New York Times quotes Kevin Walters, a restaurant owner who was ruminating over trying another daily deal, after a disappointing start: “I’m in East Harlem. If the rest of the economy is shaky, then East Harlem is depressed. One way or another, I need to get people here.” That “one way or another” reasoning is how people talk themselves into paying rent with a payday loan, but of course, the tricky part is that soon there isn’t another way.

Seattle’s Office Space Retrenches While Zombies Watch

"PACIFIC MEDICAL CENTER" (Photo: the architecturally-eyed photocoyote in our Flickr pool)

Things are not tough all over in the new economy: There’s persistent reorganization as winners emerge and losers are shuffled to the fringes. You can see this played out in Seattle commercial real estate, where supply has been tightening all year.

The Seattle office space market has absorbed 797,000 square feet so far in 2011, reports Colliers International in their third quarter survey. Colliers tracks Class A, B and C office buildings that are 10,000 square feet and larger (medical buildings excepted). Seattle’s current vacancy rate is 16.53 percent, down from 18.13 percent a year ago. (The Eastside is “stagnant” at 14 percent–there are “16 properties with contiguous vacant spaces above 50,000 SF available.”)

In Seattle proper, larger tenants (namely Amazon and the Bill & Melinda Gates Foundation) have settled upon a build-your-own-campus strategy in South Lake Union, rather than continue to try to piece-meal square-footages. “This year alone, Amazon has moved into 816,000 SF of newly constructed office space and will move into an additional 326,000 SF office building scheduled to finish construction in Q2 2012,” notes Colliers. “Amazon is also rumored to be looking for an additional 300,000 SF in the near future.”

That leaves just two contiguous spaces larger than 200,000 square feet–ten over 100,000–in Seattle’s office market. Yet, volatility remains. Colliers mentions Dendreon’s big move into the Russell Investment Center (175,000 square feet), and of course Dendreon’s other headline news of late was: “Dendreon laying off 100 in Seattle, 400 elsewhere.”

Meanwhile, zombie properties farther from the core take chunks out of the living. As the Seattle Times‘ Eric Pryne reports, “Seattle developer Wright Runstad has defaulted on its loan on the PacMed building—Amazon.com’s former headquarters on Beacon Hill….” Neighbors were thrilled when a proposal to turn the building into a juvenile jail fell through, but without a major tenant, Wright Runstad is on the hook for both monthly debt service of about $181,000, says Pryne, and its monthly lease payment of $143,000.

The building itself is now appraised for about $11 million–close to half of what Wright Runstad owes in debt from their conversion of the building to office space.

A Seattle Times commenter proffers a modest proposal:

We’ve all thought it, I’m going to say it:

Zombie Fallout Shelter.

Tell me there hasn’t been at least one time when you were driving on I5 and saw this magnificent orange castle sitting on Beacon Hill and didn’t think to yourself, “If the undead are attacking Seattle, I want to hold out there.”

The PacMed building is a perfect fit. It’s strategic location allows for virtually 360 degree field of view. It’s open courtyard in the front is ideal for booby traps, barricades, and other devices to slow down the undead. The facility is certainly large enough to safely protect a large enough group of people that if needed, could repopulate the earth after Armageddon.

 

New Title at Amazon: Jeff Bezos & the $10 Million MOHAI Grant

At its new SLU location, MOHAI and Amazon will be neighbors. (Photo: MvB)

True, the $10 million grant isn’t from Amazon, apparently, but from CEO Jeff Bezos. Still, it should do something to stem those stingy-Amazon stories that pop up. And it couldn’t come at a better time: Moves into new buildings can be non-profit killers, as a host of one-time and adjustments to fixed costs come to be “discovered” after the fact.

The Museum of History and Industry, you remember, has been coaxed like a geoduck from its safe harbor down at Montlake, in a paid-for building surrounded by acres of free parking, to become the anchor tenant at Lake Union Park, in the old Armory there. (Last September, Mayor McGinn instigated a brief free-for-all in attempting to Somalia-warlord the money from the State for MOHAI’s building, on the grounds that no one expected MOHAI to get that much for it.)

One of the benefits of the new location, though, is that Amazon’s new offices are just across the street, a factor you’d think played into Bezos’ decision to make the gift. His grant–the largest ever for MOHAI–“will be used to establish the Center for Innovation at the new MOHAI opening in late fall of 2012,” reports the museum in its press release:

Leonard Garfield, MOHAI Executive Director, notes that Bezos’ gift in support of the Center for Innovation aligns perfectly with the museum’s mission and vision to continue telling the story of how Seattle companies like Boeing, Microsoft and, of course, Amazon, have played an innovative role in advancing the lives of billions of people across the planet over the decades. “Jeff is one of the leading visionaries and inventors of our time,” said Garfield. “We are fortunate to have him in our own backyard, helping continue Seattle’s renown for large-scale innovation.”

Note to Jeff: This doesn’t make up for the income tax thing, but good for you.

Will AmazonLocal’s 800-Pound Gorilla Drive Seattle Shoppers Bananas?

“Local online bookseller” Amazon rolled out their new local deals service, AmazonLocal, in Seattle today, pitching shoppers ” average savings of 60 percent or more off everything from restaurants to spas and events.”

The inaugural deal? 50 percent off food and drinks and games at the Garage on Capitol Hill. (668 purchased as of 12:25 p.m.) At first, says Amazon, shopper will find deals from LivingSocial, but soon AmazonLocal will have their own offers. You can also follow AmazonLocal deals on Twitter and Facebook.

However, Mary Osako, Amazon.com spokesperson, emphasizes that it’s not just the price-point: “It’s about opening up Seattle, our hometown, for exploration. From coffee shops to the arts scene, there are so many innovative businesses and locally-developed services to try out right in our own backyard.”

That philosophy of course is a line straight from DealPop, the local online couponer that WhitePages sold recently to Seattle’s Tippr (an acquisition that would indicate Tippr knew they had to get big fast). Here’s Exhibit A, from our earlier profile:

Yaeger said she likes DealPop because “they’re creating destinations,” using the discount not simply to lure bargain-hunters but to entice people to learn about the businesses in their area.

Right now, AmazonLocal is local to Seattle and Boise, ID, but the interested can sign up to be alerted when AmazonLocal comes to their town. How successful Amazon will be with this come-from-behind entry is up in the air. Is there anyone in Seattle who hasn’t bought something from Amazon at this point? (Employees of local bookstores aside.) Clearly Amazon has an enviable pool of customers; but as Groupon’s ceaseless staffing-up (and Amazon’s riding in on LivingSocial coattails) indicates, it takes a lot of salespeople to drum up daily-deal business.

Blowing Away the Cloud

Cloud and Weather (Image: Salvatore Vuono)

Recently I was listening to an Earth Day interviewee claim that nuclear power, despite its shortcomings, was still strongly advocated by corporations and government agencies mostly because nuclear energy is centrally controlled. Why else go to such elaborate lengths to boil water? Central control means fewer people own the pie and so gain a larger proportion of money. Conversely, solar, wind, and hydrogen are largely decentralized, effectively obsoleting the business of large, centrally controlled power organizations.

We know that distributing work in a decentralized manner, amongst many things, is a good idea. The Internet was born from this thinking, by design–highly tolerant of any small or even large segments failing. The military knows that relying on central control makes you both vulnerable and dependent. So the Internet requires no central authority to operate in any fundamental sense. If a failure occurs, it routes around that failure. This is the aspect, ironically created through military funding, that now physically embodies democracy–disparate entities functioning together loosely as a greater whole, both individually free and collectively resilient.

It was not always so. Just a couple decades ago, Apple created the famous commercial where the beautiful and free “new order” smashed the tyranny of Big Brother and his centrally kowtowing minions. IBM mainframes, the huge repositories of centrally controlled information, were the mainstay of corporate and government life. When they failed, everything stopped. Your only choice was to call IBM, whose agents arrived en masse, unsettlingly dressed all alike in creepy dark suits to set things right; so business carries on. As long as you purchased the right plan….

When Apple came along with computers for humans, or “end users” in corporate IBM-speak, IBM realized their business model must change. They already had branched into “distributed computing” by installing smaller mainframes at customers’ satellite companies that fed into larger, central mainframes. Now it was just a matter of embracing these “personal” computers as well. Although centralized power resisted distributing processing to end users, mostly by the technorati themselves, and doomsaying abounded, the newly freed employees could finally have their way with their own information, and productivity soared. People could get what they needed, when they needed it, change it into any form they could imagine, and were no longer wholly dependent upon centralized resources and control.

Yet strangely, a trend seems to be moving us back toward the centralized control of information processing, glitteringly re-branded as some amorphous “cloud.” The reality is, this cloud is really just a collection of CPUs and storage devices, very much the same as any latter-day mainframe. In essence, the big Old Iron has returned, and we’re eagerly handing our data processing capabilities right over to it. And it’s not even our mainframe any more. It’s someone else’s. Some might say it’s not a mainframe, but a cluster. A collection of CPUs and memory that have access to large and fast data storage and retrieval. Those people need to take another look at what latter-day mainframes are.

Even if we do get past the cloud of marketing and look at using another company’s data processing services, certain realities remain: Maintaining 100 percent uptime is a holy grail. Despite all the effort and cleverness a systems engineer will devote to maintaining uptime, the fact is, we are returning to a single point of failure every time we put something on the cloud, unless we are using the cloud as merely a supplementary or backup mechanism, or have those mechanisms ourselves as backup. And there is little, if any, transparency.

Even several days after a major failure of the largest cloud, no detailed information has been provided about what actually went wrong, nor what is being done to mitigate such an incident in the future. Even IBM in the days of the old iron would provide immediate and ongoing detailed status reports. But “the cloud”…who knows? Right?

One last thing to consider other than central points of failure, and their accompanying points of performance limitations and benefits, is that using another company’s mainframes creates a single point of access for increased government access and control. When everything is on the cloud, the government needs only to deal with one company–one ring to rule them all, so to speak. During the infamous illegal government wiretapping case that broke during the Bush era, the government compelled AT&T to allow access to our communications by forcibly bringing all data into one hub in San Francisco, so they could snoop. Using the centralized old iron model makes this government behavior simple, whereas the distributed model once again points us toward democratization.

As the dust settles from this failure, the spin, which will be dutifully echoed by all the tech heads currently ensorcelled with the cloud computing moniker, will be that there is nothing wrong with cloud computing. In fact, it is user error–the customers who were too cheap to purchase a second or third redundant site at another data center (or region) deserved what they got. And strangely, they won’t even notice this implies multiple clouds, nor will it raise any questions as to how this cloud differs, in essence, from any well-managed colo rental space.

If anything comes of this, perhaps people might start saying the plural clouds instead of the singular, amorphous cloud. I doubt it. It’s one of those sensationally brilliant marketing accidents that is perpetually reinforced by throngs of parrots. What we must learn is to start asking the question once again: Who are we renting our servers from, and who are we giving our, and our customer’s data to? And why?

Perhaps cloud fans would find Eucalyptus interesting.