Amazon has been in the news in recent days at the local and international levels for several things. The first, and the one that most affects Amazon Prime users in Spain, is that it will raise the prices of your fast shipping subscription and many other advantages. The second, globally, its announcement of the purchase of iRobot, the company that owns the well-known automatic roomba vacuum cleaners, for 1,700 million dollars. And, the third, and that has gone more unnoticed, the possible elimination of its Amazon Basics brand.
A lot of movement in a short time in a company that has always risen like foam, but in recent years, and especially after Andy Jassy took over from Jeff Bezos, has found itself, like all sales companies, with the problem of rise in prices —for Amazon the rise in the cost of fuel is especially relevant— and, something that comes in the long term: the reality that your business in the cloud and advertising is becoming more profitable compared to your native business as a marketplace.
All this can admit some readings about how Amazon can be in the medium term. Not very different from the current one, perhaps on the outside, but in some details that have become part of the company itself.
Amazon already has us: now it can raise prices
Amazon has always been characterized by entering markets with low prices. Your Echo, Kidle, or Fire are examples versus other devices. And so was his Prime subscription. Fast and free shipping on hundreds of thousands of products. Two million songs -and now also a podcast- free on Amazon Music. Series and movies on Prime Video. Books with Prime Reading. Storage of photos in the cloud in front of Google Photos that happens to be paid… The amount of services that Amazon offers in its Prime subscription is absurd.
And although the rise in prices in other countries already made it clear, now it is Spain’s turn. How much more does the price of Amazon services go up? Those who had a fee of 36 euros per year, will now have to pay a total of 49 euros per year; specifically for those who prefer to pay all at once in a single installment. It is a big increase if we put ourselves at the rate of almost four years ago, when the platform only asked for 19 euros to contract its services. That’s a 38% increase in your rate.
On the other hand, and in terms of the monthly Amazon Prime rate, there is also an increase. It goes from 3.99 euros to 4.99 euros.
It’s still a good price compared to other services – just comparing Prime Video with other platforms, it’s extremely cheap – but this may be the first step towards already loyal customers and after already becoming a reference.
The new assault, now for real, our houses
Because part of this pricing strategy had also been followed as we had said with home devices. A bet that has now just added a fundamental piece. Amazon has just announced the purchase of iRobot for 1,700 million dollars.
From a smart home point of view, it seems clear that Amazon wants iRobot for the maps it generates of houses to have a deep understanding of our homes. The vacuum cleaner company has a detailed knowledge of our rooms, of our habits – cleaning schedules or not being at home – and, above all, how they change. It knows where your kitchen is, which are your children’s rooms, where your sofa is, and if you have recently converted the guest room into a new room.
That context is especially important for other smart devices. Digital gold for a company whose main goal is to sell you more stuff. And —guess the riddle— surely for this it begins by lowering the prices of the roomba or taking out a cheaper model.
And the end of Amazon Basics
Another aspect that seems to be changing is Amazon Basics. Or, rather, disappear. Amazon’s white label is a host of complaints, especially in Europe and, furthermore, it has ceased to be profitable.
According to a study by the Institute for Local Self-Reliance, a center in the United States that, it should be noted, encourages local commerce, Amazon earns more and more money in the form of management fees and delivery to third-party products, something that with Basics does not take If we add to this the increase in costs and the risk of receiving lawsuits…
This termination would not apply to the company’s own gadget lines, including Kindle, Echo and Fire TV devices.
Talk at Amazon about ditching its private label brands has been going on for several years as scrutiny of the line of business has increased, according to a source seen by him. Recode.
Managers in favor of this decision believe that Amazon has the right to sell private labels, as many retailers do, but that the business is not crucial enough. from the strategic point of view to defend it against possible requests from the antitrust authorities.
Amazon has said that its private labels represent a single-digit percentage of total product sales in its online stores. But they certainly remain a major source of profit for Amazon’s retail business, in part because the company doesn’t have to spend as much on advertising as an outside brand does.
If so, Amazon would resume its role as a marketplace, where data and ads would once again be the mother of the lamb, those two divisions that have grown the most in recent years to represent 12% and 8% of their revenue respectively, but being the most profitable.