July 14th, 2015

Fun with Sentences: UBS Global Research about AMZN

From a report dated 14 July 2015, titled: Completing the Checkout; Upgrade to Buy

A big theme of the report is how Prime + FBA cranks up the amount of money that AMZN can extract from a given customer (yeah, El Jefe was looking for ways to do this back _before_ I left; I can testify to the efficacy of Prime + FBA in sucking money out of my account).

Another theme is that the fulfillment center buildout may be nearing completion (altho I must note that people have been predicting that would happen and AMZN would Rake In Money for a long time now, so I'll believe they are done building in the US some years after it has been done).

There are also remarks about the possibility the Kiva investment might allow AMZN to replace Humanz with Robots (again, this has been promised MANY times).

All right. Here's the fun sentence:

"For balance, the prospect of saving ~$1b annually via robotics is intriguing, but small relative to Amazon's revenue and cost base - yet speaks more towards the constant innovation and cost reduction potential that might reside in Amazon's future cost structure."

Yes, yes, Dear Reader, by the time Robots can save a company a billion dollars, investment research writers will go, meh, it's not like a billion dollars is _that_ much money.

Disclosures: Used to work there, still long.

ETA:

More sentences about the Robots:

"At a recent UBS hosted expert event, these robots were discussed as a potential game changer within Amazon's fulfillment cost structure. Specifically, the expert (a former Amazon FBA manager) suggested that each Kiva robot could potentially replace up to 1.5 employees at a cost of ~$25k per unit."

See, I would consider that a big deal. Seriously. 1.5 paid employees gone, replaced with a payment probably less than the annual salary of one of them. (Maintenance costs on the robot could be a huge issue -- I have no idea what those are.) And no possibility of the robot making a worker's comp claim, or selling their story to a progressive alternative media outlet, or attempting to organize the fulfillment center workers or ... Of course, what isn't mentioned here is that the remaining employees probably wind up being paid better and more highly skilled, so the tradeoff is by no means as straightforward as one might assume. I say this because I'm assuming the Robots are the Magic Shelf thingies that Kiva was working on before, and basically fulfillment is now a bunch of shelving driving around and pickers staying in one place picking. But that means pickers have to sustain a high degree of accuracy (fine and gross motor) for long periods of time at a high rate -- they get no break running around the fulfillment center.