Chris McCabe casts a critical eye over Amazon stories that have been making the news recently, from the price of beans to an international tax controversy.
This post is by Chris McCabe, a former Amazonian and founder of ecommerceChris.com. ecommerceChris shows Amazon sellers how to keep their accounts healthy, or, if the worst should happen, how to get their account back from a suspension.
Amazon’s owes $294 million in taxes, says the EU, due to an improper deal with Luxembourg. Will the many U.S. states and cities vying for Amazon’s second headquarters offer similar deals?
Meanwhile, the MTC is holding an emergency meeting to discuss extending the deadline for the online sellers sales tax amnesty. Anyone can dial in.
The Whole Foods obsession extends to counting the number of cars in their parking lots, using satellite imagery. Amazon elbows its way into last-mile delivery, causing UPS and FedEx shares to slump. But there’s still one area where Amazon has failed to make a serious impact: entertainment.
Breaking news: Amazon avoids paying taxes!
Bloomberg: Why Amazon Is the Latest U.S. Giant in EU Tax Trouble
The EU says Amazon avoided paying tax on 75% of its European sales by making an illegal deal with Luxembourg, and now owes €250 million ($294 million) in back taxes.
The EU announcement that they are now chasing Amazon for unpaid taxes looks like the polar opposite of what we see in several U.S. states right now. Many are lobbying to have one of their cities chosen as the second Amazon headquarters and, by all accounts, tax breaks and incentives similar to the ones put up by Luxembourg will be central to that selection process.
Luxembourg wanted new business and jobs just as certain U.S. states do, along with whatever prestige comes with hosting Amazon in your home base. But will U.S. agencies ever take the same approach that EU regulators are taking now? There have been precious few stories on potential tax breaks coming out of this so-called “HQ2” deal for Amazon, but a lot of foaming at the mouth from this or that American mayor.
Amazon has a long history of tax avoidance, and the Europeans aren’t having it. We’ll have to see if anyone in the U.S. takes an interest in this part of the HQ2 story once Amazon narrows down the field of choices.
Speaking of taxes and individual U.S. states…
Emergency amnesty extension coming our way?
MTC: Emergency Nexus Committee Meeting
The Multistate Tax Commission have scheduled an urgent meeting to discuss extending the October 17th deadline for the current online seller tax amnesty.
Heard the latest news on the MTC-driven sales tax amnesty program? Amazon says they are not a retailer, they are only a platform – a marketplace. You’re the retailer, apparently, if you’re a third-party seller. Is this making sense to anyone?
Collection of sales tax is also tied to an understanding of nexus, or physical presence, in the state where the inventory rests. Do you have physical presence simply by sending inventory to FBA and having Amazon choose where the items go once they take possession? Or do you need to have employees and actual operations in that state?
These are just two of the many questions that need to be answered publicly, and not behind closed doors. The MTC are having an emergency conference call tomorrow, October 11th, to decide whether to extend the deadline for the current online marketplace seller voluntary disclosure amnesty. It’s an excellent opportunity to dial-in and study up for the potential deadline extension. Stay tuned to this space, too.
Whole Foods saga: 4.6% more cars in their parking lots?!
CNBC: Whole Foods’ parking lots were busier after Amazon bought it, satellites show
In September, car traffic at Whole Foods stores had its biggest increase since June 2014, according to satellite data analyzed by JP Morgan.
OK let’s have a show of hands here. Who is getting tired of the daily/weekly/hourly national press stories about Amazon’s Whole Foods acquisition, in all its minutely-detailed glory?
We’re now counting cars in the parking lots of each big Whole Foods using satellite imagery, it looks like. I had no idea this was going on before, if it has been, and it’s really scaring me. Can’t we use those satellites for something a bit more important? Can they maybe keep an eye on the Pacific for us? Amazon’s not launching missiles (yet), they’re just pushing into new business markets, so let’s take a collective breath over how long you may wait to park and buy groceries.
Then there’s the stories about Amazon lowering prices at Whole Foods to make an immediate dent. Do we need to know how the prices of coconut water or turkey and beans match up to Kroger?
We’re in Q4 now, people. Every Christmas peak is promoted as the biggest and best we will ever see, and there’s so much inventory in Amazon’s fulfillment centers now that they are pushing up timelines for their own delivery services, just to keep it moving! Big things are going on in FBA and products are flying around the globe like never before. Perhaps some of that is worth discussion? How much is inventory management suffering from the regular influx of products for sale on the ever-growing 3P marketplace?
I think we all know the answer: a lot. That’s why fees are higher and Amazon is so aggressive in competing with FedEx and UPS on “last mile” deliveries. Now that’s something to talk about.
A valued customer? More like a terrifying competitor.
Bloomberg: Amazon Is Testing Its Own Delivery Service to Rival FedEx and UPS
Spencer Soper reported on Amazon’s ambitions to deliver direct from third-party warehouses to shoppers’ homes. UPS and FedEx shares fell sharply on the news.
A quote from this article covering an official UPS statement on this topic doubles as both a textbook attempt to spin bad news and ecommerce entertainment.
“Amazon is a valued UPS customer,” said Steve Gaut, a UPS spokesman. “We support all our customers with industry-leading ecommerce solutions and expect to expand these relationships further in the future.”
So they say they welcome it, more or less. Don’t believe a word of it. They are aware that soon they’ll be running scared, and they know it but cannot stop it. Like any industry Amazon aims to disrupt, fighting back will mean longer work as they decide how to cope, declines in company revenue over time, and perhaps eventual extinction – depending on how long it takes Amazon to get more planes in the air, and trucks on the ground.
Sure, it takes time and resources to build a shipping empire. But anybody want to bet against Amazon? I don’t. Marketplace sellers should get used to the idea that they may be shipping things on Amazon planes and not FedEx ones in the not-too-distant future. That impacts fee structures around shipping, of course, and puts price control of yet another area of your business in Amazon’s hands.
Well, there may be one area where Amazon cannot expect overnight dominance, or even disruption, anytime soon: Hollywood, and in-house mastery of entertainment.
Manchester by the what now?
WSJ: Where Amazon Is Failing to Dominate: Hollywood
Amazon didn’t win a single prize at the Primetime Emmy Awards, and has failed to create a major TV hit, despite annual spending of around $4.5 billion on programming content.
Most of us have probably heard of the Amazon Studios show Transparent and the awards it won in years gone by, but how many of us are actually watching it? Are we watching other Amazon shows and movies? I saw Manchester by the Sea but I was on a plane, and I’m a Boston-area native. Loyalty to homegrown talent is strong enough in Massachusetts that you more or less feel obligated to consume certain TV shows or movies – trust me on this. But I didn’t know that Amazon had a hand in funding this movie until it came time for the Oscars.
In a Seattle Times article a few months ago, I guessed that Amazon would eventually try to buy a major Hollywood studio, just as they bought Whole Foods to make that big splash in the grocery business. Amazon have already strayed from their original model of using data as their primary means of deciding who wants what kinds of content, and how to produce it. If anything, they learned that painful lesson the hard way and finally (if reluctantly) acknowledged the need to make changes, like appointing a new studio head.
If Amazon are willing to consider big changes in some parts of the company, can they make them in others? Can we review my former teams, and reflect on the need to make changes among the decision-makers in TRMS (Transaction Risk Management Services), the arm of Amazon that houses Seller Performance and Product Quality teams? Maybe the “content” of some of those outbound messages to sellers could include a bit less unintentional “entertainment” and a bit more clarity?
But wait, back to another Whole Foods story.
Beans-and-turkey fans, stock up now!
Bloomberg: Amazon Sells More Beans, Turkey Online Thanks to Whole Foods
Following the acquisition news, Amazon immediately started selling about 2,000 items from Whole Foods. Sales surged for popular staples like canned beans and tomato paste.
Amazon is selling more beans and turkey now! And at lower prices. Why are you reading this? Go to Whole Foods, right now! Or, are you reading this in one of the store aisles?
Time to take a break. There’s more going on at Amazon than their entry into the grocery business. Unless you’re selling food on Amazon, this is not going to create huge waves in your Q4 revenue expectations.
Admittedly, this news is not from last week, but the same kinds of stories keep coming. I understand that we all need food, and some of us shop at Whole Foods. But there’s a whole wide world of important Amazon stories out there, and they’ll impact buyers and sellers in the marketplace. Those are the ones we should be talking about.
Chris McCabe can be contacted via ecommerceChris.com.