How Amazon Can be a Friend To Small Businesses


March 19, 2012 12:37 PM 

Rocky Agrawal of VentureBeat

I’ve been testing out the Kindle Fire tablet for the last several weeks. At $199, it’s a tremendous value. It’s no iPad — I just upgraded to the new iPad as well — but it provides a solid base-level tablet and reader. I can think of a lot of uses for it: an e-book reader, a video consumption device, and a dedicated Sonos controller. But the most exciting use I can see for it would be for Amazon to turn into a device that helps small, local retailers.

Amazon could leverage its massive scale in searches for online commerce to help drive business to local businesses, while simultaneously generating revenue and cementing itself as the place to go to shop online.

Here’s how I see it working:

  • Merchants would use the Kindle Fire to load their inventory on to Amazon.
  • In addition to the standard options consumers have for standard delivery, second-day shipping with Prime, or overnight shipping, Amazon would offer the option to buy locally.
  • When an item is selected to buy locally, the merchant would be alerted via the Kindle Fire and could confirm the order.
  • Once the order is confirmed, Amazon collects payment from the buyer and the merchant sets the product aside. (Larger merchants with sufficient inventory could configure it to auto-confirm orders.)
  • The consumer stops by to pick up the item and shows ID.
  • Amazon keeps a percentage of the revenue.

Amazon already does this for some merchants who sell through the mail; I frequently buy items from third-party sellers through Amazon’s site.

The key is that the Kindle Fire is a simple, inexpensive device that integrates well with Amazon services. Add in the option to generate revenue with it, and it can be an important step in increasing the connectedness of small businesses.

The Buy Local service could be augmented with local delivery from a company likePostmates.

Amazon has been working to expand its reach into the local market. Its daily deals product, AmazonLocal, is launching a subscriber-acquisition promotion tomorrow, selling $10 Amazon gift cards for $5. Although it has lagged well behind industry leaders Groupon and LivingSocial, this is a sign that it may be getting serious about the deals space. (Amazon sources many of its deals from LivingSocial.)

Beyond local retail there are a number of other compelling services Amazon could offer to make Kindle Fire a must-have for small businesses:

  • Deal redemption tracking for AmazonLocal.
  • Social media management tools for Twitter and Facebook accounts.
  • Scheduling tools similar to Groupon Scheduler.

Amazon and local businesses have had a tumultuous relationship, with some blaming Amazon for the demise of local independent bookstores. But these days, even prestigious independent bookstores such as Portland behemoth Powell’s Books are selling through Amazon. Same-day fulfillment plays to the strengths of local retailers and provides consumers a service that Amazon can’t offer today.

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LivingSocial lost $558M in 2011

I wonder just how much of those $558 Million Dollars in net loss where spent on placing ads on Pandora just about every 2-3 songs… 

Via Jennifer Van Grove for VentureBeat:

Amazon spent $175 million for a 31 percent stake in number two daily deals site LivingSocial, and in so doing bought us all the best look yet at the privately-held Groupon competitor’s financials.

Buried in Amazon’s annual 10-K filing, made public following the company’s disappointing fourth quarter earnings report, we get to take a gander at its investee’s financial well-being.

LivingSocial, according to the financial information it shared with Amazon, made just $245 million in revenue in 2011 and closed out the year with a $558 million net loss. We also learn that the book value of Amazon’s investment, or the total value of its stake, is now $208 million.

LivingSocial, like Groupon, is clearly operating in the red, and the revenue figure appears more than extremely low (so low that we question how LivingSocial is accounting for revenue), especially if you consider a leaked report from April of last year that suggested LivingSocial was on track to make north of $1 billion in 2011. But the financials, if you believe one source, may be more like abstract art than they are writing on the wall.

“The revenue would have been significantly higher had it included the company’s full international results for the year, which were boosted in part by a series of overseas acquisitions,” a person familiar with LivingSocial told GeekWire. “In addition, the bottom line was impacted by heavy marketing expenses, as the company sought to grab market share, and those expenses were concentrated heavily at the beginning of last year.”

In addition to Amazon’s original $175 million investment in LivingSocial in December 2010, it recently participated in a substantial follow-on round to help the young (and obviously still unprofitable) company put off a public offering. In furtherance of its investment, Amazon also offered a $20 voucher for $10 on LivingSocial last year. The deal was too good to pass up, and LivingSocial ended up selling 1.3 million Amazon vouchers.

AOL co-founder and LivingSocial investor Steve Case recently defended the deals company, in an interview with The Deal, as still being in the early stages of social commerce.

The video is embedded below

Steve Case: In ‘early stage’ of social commerce evolution from The Deal on Vimeo.

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