Amazon buys 11 Boeing 767s to expand its cargo fleet
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However one insight into the reason is embedded in this anecdote: My friend was asked by a Chinese supplier to sell a thing on Amazon. But the seller then went on to try and transfer all of the inventory risk, and customer support risk to my friend. They then also refused to give a unique license to the product for Amazon to my friend and also undercut their offer to my friend with another random person in the USA. 6 months later the supplier listed V2 themselves on Amazon once the first person had built them a market and they could copy pasta all the english product info. Seller was left half their V1 inventory and had to sell at a loss to clear it.
Luckily my friend only burned the Amazon seller fee during the trial period and their time.
This is a deal-breaker always for these types of arrangements. I've walked away after months of negotiations when suppliers renege of this key part of any distribution agreement. You cannot be in a position to build up someone else's product or brand, and have them take it away from you at their own discretion, with zero compensation to you. You should not also be diluting your marketing efforts for said product if the supplier is handing out distribution rights like candy.
Get exclusive agreements always. You'll likely need to pay some sort of minimum guarantee, but you can negotiate a rolling start, and if the product is not present in the market, you have leverage to get terms in your favour (ie, exclusive to you, but no sales guarantee for the first 6 months, to "test out the market"). This should still be outlined in writing and signed by both parties.
Ideally, I would love to begin some sort of revolutionary alliance that tries to fight off the behemoth Amazon and how they use their market size, analytics, and predictive analysis to see what's hot, and then either buy or make it at a cheaper cost and a lot of times---a better quality.
They become big because the competitive edge is not in the supply, it's in the demand, as in, they have access to a customer base. Of course, one can't sell complete crap, supplies/products should fulfill a certain market demand, but supply is always secondary to having access to customers.
If you're thinking about becoming a trader or distributor, start backwards from your potential customers. Who are they, what do they want, and what price point and average buying quantity makes sense for them. If you're trading B2B that is quite different from sourcing from a supplier to sell direct to consumers in your market. In the former, your customer is the physical retail stores (or their equivalent), in the latter it is actual consumers themselves. The usual customer profile work should be done here.
Once you have an idea of your customer profile, then you can start sourcing. Luckily there are very few barriers to entry in 2021, you can google for product names or categories, find the suppliers online (China or otherwise), and you can just email them to inquire on their prices. If you're starting out, be a simple as you can:
a) What are their prices and minimum order qtys
b) Can they waive the minimum order qtys while you test out the market on the first few orders (suppliers always have excess stock on previous production runs. You can do them "a favour" by buying that - they recover their costs, you get things for cheap).
c) Pre-sell if you can. That could be as simple as walking to stores with a catalogue, or just a sample to show them. Then collect pre-orders from 50 customers (ideally with some money down), use that to make your first supplier purchase.
d) Ideally, you have exclusive rights to the distribution for several years. When you're starting out, you don't want to spend the money to "buy" these rights, so again, it becomes a negotiation. The supplier isn't selling in your market, so you're helping them reach a wider audience. It's in their interest to support you.
e) Make sure besides exclusive rights, you get collateral support in terms of marketing materials, graphics, ads, freebies, etc. This stuff is huge when you're building up a customer base.
The best structure is pre-sell, purchase from your supplier to fulfill existing orders, then the stuff arrives and you just pack it off straight to your customers. Rinse and repeat. High volume items give you about 10-15% gross margins, but standard is about 30-40% gross margins as a trader. Again, all depends on how you negotiate your total costs. Freight is often a huge win -- get some good freight charges, and your profit can literally double on a specific shipment.
Ideally in your customer identification process, you'll have found some product ideas that they'll want to buy. You are valuable because:
1. Your customers don't want to buy the volumes a supplier would require, they just want a small subset of that total. They're happy to pay a larger price for smaller quantities.
2. Suppliers don't want to sell bits and pieces, they like having someone buy large quantities from them. So they'll give you a good price for bulk purchasing. They also don't want to do the legwork to find the 100-1000 smaller customers to fill a large production order.
Your profit is the difference between the two numbers. So you do the legwork to get that upside.
If you're attempting to sell on crowded locations like Amazon, then you will need to spend/invest on ads to drive the purchasing from you (vs. someone else with the same or similar products). Most marketplaces reward sellers with existing sales volumes, as their algorithms figure you've completed sales before, you'll continue to do so. So that's a game you do need to play to start building a seller reputation. If you have your own Shopify-or-whatever site, it's the same, you'll need to do FB/Google ads to drive that initial customer acquisition.
There's a lot more info, but I'll stop here for now. Happy to write more if folks are keen.
BTW: I was being too complicated with the email in the profile. It said "me at my username dot org", I now changed it to just say mkhalil instead of "username". It's me @ mkhalil.org. Would love to keep in touch!
Thanks
How are exclusive rights promised by a manufacturer in China enforceable by a small time buyer not from China? What is the recourse in the event it’s found out the manufacturer violated the exclusivity agreement?
*Edit: "Who else do you supply to" is a very common part of interacting with a supplier, and most of the time they are chomping at the bit to share their "famous customer list" with you. In fact, some suppliers even have pages on their website listing who their "authorised resllers/distributors" are. Having a chat with any of the others helps, and like any business relationship, it's a human relationship with some trust involved. You back things up with legal protections, but in the end, business is about the human aspect of things.
Interesting. I always heard stories about designs being copied and sold under different names in very short time after releasing a product. And in Belgium, you have the EU courts to back you up in simple cases, but I was not aware if its similar in China (unless you had a certain amount of weight to throw around like a F500 company or something).
All the evidence I see indicates Amazon does not want to be this middle man. Amazon wants to be the payment and platform middleman, that’s where all the profits lie due to infinite scale-ability and near zero marginal costs. They removed the ability to let you filter search results for items sold by Anazon.com years ago.
Amazon does not want to be in the 2% profit margin retail business where they are liable for inventory risk and other liabilities like product safety, etc.
They want to be like Visa and take a cut of each transaction. I would too, considering Visa’s profit margins versus Walmart’s.
That feature is still available on the amazon.com site as I write this
I definitely remember 10+ years ago, being able to restrict searches to items sold by "Amazon.com" by clicking the check box. Then they gradually removed it for certain searches. Sometimes, the option to filter by Amazon.com would show up, and sometimes it wouldn't. I thought I was going crazy for a while. Then I realized what they were doing, and then in a few years they got rid of the option completely.
Not that it would make a difference anyway, since Amazon commingles inventory with other random sellers so you never know which supply chain you're actually getting the item from.
A big risk factor is choice paralysis. I know legitimate purchase intent browsing/searching gets derailed when customers see too many choices and lose confidence. Did I specify the wrong search criteria? Am I buying the right one of these 500 near-identical items? Is there a better deal I'm missing? Should I check five other shops?
If marketplace sellers practiced good curation, this risk is reducible, but I suspect marketplace platforms prefer large numbers of sellers and massive inventory count to convey vast selections (of things you don't actually want).
They will let sellers scout products, and then squeeze them out after they have a product that's proven to move. It's better for Amazon this way, you can externalize lots of risk while still making a fat commission + assorted fees.
Most box retail seems to clone high-sales-volume items.
Amazon can afford to clone the long tail, because they'll still make profits off it.
It’s not a new paradigm.
Has Amazon ever shown any indication of raising prices after monopolizing a market? As far as I can tell, the more they dominate a market the lower their prices.
Amazon does seem interested in monopolization, but mostly for the ability to squeeze suppliers into even tighter pricing- not turning around on consumers. Moreover, similar arguments were made for years about Wal-Mart and never materialized. Increasing market share seemed to go hand-and-hand with "Everyday Low Prices".
Who knows. Maybe it really is their secret strategy. One day the shoe will drop, and Amazon will start bleeding consumers in the markets they've grown to dominate. Somehow I doubt it though, and so far their behavior gives zero indication of it.
Cheaper consumer good manufacturing in the US is gone for good.
on the other hand,that means amazon will be competing directly with Aliexpress ,and might trigger some kind of CCP response
All anecdotal but it seems like amazon has made huge progress in their delivery infrastructure in a short period of time.
[0] https://www.theguardian.com/business/2002/jan/24/theairlinei...
That said, Alaska just put in another order for MAXes, and Ryanair is buying more as well. Part of why these 767s were available for Amazon to purchase at all were due to the industry model shifting and airlines favoring single-aisle, fuel-efficient aircraft like the MAX. COVID-19 has only accelerated that, and I wouldn't be surprised to see more MAX orders unless it crashes again or Airbus ramps up their 320neo production.
[1] https://en.wikipedia.org/wiki/2018_Horizon_Air_Q400_incident
Does anyone actually believe we live in such a world today, though?
It should bother them that their direct competitor is a better option for their target customer (budget conscious flyers), even if I am not that customer.
Their app is well designed and easy to use. You can contact them via chat and it's free.
Ryanair is OK. Yes, you need to understand they will often be very strict with the rules but that's why they are rules and be aware of the airports they use and you'll be just fine.
I used to be a "strict no" to Ryanair but the last few years I've flown with them. It's OK.
Somehow, some companies still mess it up.
My biggest beef with European companies were some of them insisting on not allowing two bags onboard even for money. By now this has simply disappeared and everyone allows a large and a small bag as they should. I think Transavia might have been the last.
Yet Ryanair is rated as a seven-star airline for safety; it has a fatality-free record since it was started.
https://www.airlineratings.com/news/ryanair-soars-seven-star...
Your ticket purchasing process can be an immensely frustrating experience, dodging a horde of dark patterns coming at you from every direction.
Your check-in process may be a horrible user trap (you must check-in from home, and print a boarding pass there. Said check-in closes 4 hours before takeoff, and there's a 40 Eur fee if you do it at the airport) which the EU had to explicitly ban.
Your refund/rebooking process may be outright illegal, planning on passengers being unaware of their full rights.
In the end, your safety record may not come into play at all: I don't care if your planes crash or not, because I'm never, ever, boarding one again, and neither will anyone who listens to me.
Their cabin comfort, I will admit, leaves a lot to be desire. One gets what one pays for in that respect.
By what metric? Just because of the technical issues?
Statistically speaking it will likely end up being the safest variant of the 737 family simply because we live in an era where death in a commercial airline accident is approaching the level of a statistical anomaly. There are many reasons for this that are external to the actual nuts, bolts, and bits of the airplane.
Now if you're arguing all 737 variants are the shitiest airliner out there for passenger comfort, well I'll jump on board that argument!
But, you can see the price of a flight: https://www.ryanair.com/
> We’re contacting you about your claim for compensation for your KLM-Royal Dutch Airlines flight to Helsinki on 2018-09-11.
https://www.ntsb.gov/investigations/AccidentReports/Pages/AA...
In the accident flight, the first officer (FO) inadvertently activated the "go around" mode during landing, then, in surprise, pushed the airplane into the ground.
> According to one check airman at [FO's previous airline], the FO could explain things well in the briefing room and performed some expected tasks well in the simulator. However, when presented with something unexpected in the simulator, the FO would get extremely flustered and could not respond appropriately to the situation. She said that when the FO did not know what to do, he became extremely anxious and would start pushing a lot of buttons without thinking about what he was pushing, just to be doing something.
Some additional damning quotes:
Another check airman at Mesa said the FO’s stick and rudder skills were weak, and he also struggled with basic flight management system tasks. This check airman described the FO’s piloting performance as among the worst he had ever seen and noted that the FO tended to have an excuse for each of his poor performances, such as blaming his simulator partner, his instructor, or the hotel. A third check airman at Mesa said that the FO had weak situational awareness, did not realize what was going on with the airplane at times, and had difficulty staying ahead of the airplane. She said the FO was completely unaware that he lacked skills, unwilling to accept feedback, and unhappy with her about his failure to upgrade to captain.
An instructor who taught cockpit procedures on the flight training devices at Air Wisconsin Airlines recalled that during one emergency procedures training scenario, the FO made abrupt control inputs that triggered the stick shaker and overspeed alerts. The instructor said that instead of staying engaged in the scenario and addressing the problem with his training partner, the FO just stopped what he was doing and turned around and looked at the instructor. The instructor found this reaction highly unusual.
Turns out Amazon didn't know about any of these failures, because here's your government in action (inaction):
Ten years ago, Section 203 of the Airline Safety and Federal Aviation Administration Extension Act of 2010 mandated that the FAA create an electronic pilot records database (PRD), which was intended to improve the timeliness and efficiency of the PRIA records retrieval process by providing hiring operators and DAs with direct access to pilots’ FAA, NDR, and former employer records in a single database. By 2016, the FAA had not yet implemented the PRD, and Congress imposed an April 30, 2017, deadline, which the FAA also missed. Although the FAA has begun phasing in the use of the PRD, the PRD is not yet fully functional; it contains only pilots’ FAA records and is available to hiring operators for use on a voluntary basis.
You'd think that the simulator would be able to detect inappropriate button pushes in a given situation, and produce a report stating that it had happened more than <some threshold> times during an exercise. That should flag the pilot for further evaluation and training...
For example, if an electrical system warning presents itself the pilot might first turn off all in flight entertainment. This won't necessarily solve the problem, but the plane can fly fine without in flight entertainment.
If the other flight crew in the simulator at the same time can tell that the pilot was behaving erratically then the simulator reporting software should be able to tell as well.
I could be totally wrong, but based on the past stories I've read about Amazon's negotiations with UPS and their growth of their own delivery network, I'd be surprised if they have much spare logistics capacity to open up to anyone outside the immediate Amazon ecosystem.
There is a lot of crossover between FBA, and a UPS or FedEx, but it's not 100%. FBA is basically B2C, as opposed to B2B or C2C.
Back during the "peak lockdown" of April/May 2020, a little birdie told me about some of the steps that Amazon was taking to give the warehouses and delivery network a break from the increased demand. In other words, Amazon saw lots of unexpected growth due to the pandemic. It wouldn't surprise me if plans to launch "Amazon Logistics" or whatever as a separate line of business got pushed back due to the pandemic.
Edit: I know for a fact that the leadership of the Logistics part of Amazon has expressed a desire to become the "4th flywheel" of Amazon, which is Amazon-speak for being a self sustaining, revenue generating line of business. But as you allude to, they have to soak up all the demand generated from the Amazon consumer business first.
I'm not surprised at all if this is the long term game plan. I'm curious though, what are the first three flywheels? AWS, retail sales, and what? Alexa/Kindle devices? Prime Video? Advertising? All of those seem like strong contenders but I'm not sure they really rival the AWS/retail arms (yet).
> After two decades of risk taking and teamwork, and with generous helpings of good fortune all along the way, we are now happily wed to what I believe are three such life partners: Marketplace, Prime, and AWS. Each of these offerings was a bold bet at first, and sensible people worried (often!) that they could not work. But at this point, it’s become pretty clear how special they are and how lucky we are to have them.
> With good execution and a bit of continuing good luck, Marketplace, Prime, and AWS can be serving customers and earning financial returns for many years to come.
From the Amazon 2014 letter to shareholders: https://s2.q4cdn.com/299287126/files/doc_financials/annual/A...
It's kinda interesting that Devices (Alexa/Kindle) and 1st party retail are not called out as flywheels. Advertising and Alexa are other candidates for the next flywheel I believe. I think the reason they're not there yet is that they're not self-sustaining, i.e. like Logistics, they're growing but their growth is driven by the other flywheels.
What you need is an AWS service where you could schedule a pickup and dropoff between any two locations.
They have the building blocks, but just haven't launched the service yet.
Exceptions being some airlines which are able to operate hub and spoke models and where fuel is cheap like the middle east airlines.
Wouldn't these types of planes be more suitable for a role in logistics which can benefit the greater density of packing?
I am guessing this is something to do with fuel savings, and new composite materials meaning that smaller planes are still more efficient. However, would that necessarily apply to recent 747s/a380s which I think have composite materials and can be retrofitted to efficient engines? I figure these specific planes must be on sale as they are withdrawn from service so I am curious about the use of 767s here.
Somewhat tangentially, there is a (strong) argument that twin-engine aircraft are actually safer than three or four engine aircraft. First, they are at lower risk of having an engine problem (as they have fewer engines). Second, the requirements all focus on having sufficient performance with a single engine out, which means that a twin engine aircraft normally has at least 200% of the power required to keep it aloft, whereas the four-engine aircraft only has 133% of what it needs. Given that many problems can be solved with a sufficient application of power, the twin-engine airplane is actually at an advantage!
I first heard this from a lecture by Henry Pohl (a truly brilliant engineer): https://ocw.mit.edu/courses/aeronautics-and-astronautics/16-...
A jet requires a lot less power to cruise than to take off. Normally they’d operate at 80-90% power when cruising, but they can stay airborne with much less power.
How much power it takes to stay airborne depends on many factors, such as weight, altitude, wind conditions and temperature, but 747s have been known to fly and land safely with just two engines.
The rule you talk about is more clearly applicable to rockets that run at 100% for most of the flight.
https://en.wikipedia.org/wiki/List_of_airliners_by_maximum_t...
I can imagine this being the case mainly because the calculation is assuming 1 engine failed.
Given this, and assuming an almost maximum payload, would there necessarily be scenarios here for the 747 to be more fuel efficient?
Having extra power helps you climb to cruising altitude quickly. This is a significant consideration, as a great deal of fuel expenditure takes place during the climb through dense, drag-inducing atmosphere.
Engines and aircraft structure are non linear in both up-front cost, maintenance, and economy. Two larger engines have about half as many parts as four smaller ones, impacting production costs and service requirements. Larger fans are also more efficient than smaller ones for a variety of reasons. Fuel systems and aircraft structures are also simpler, lighter, and less expensive with fewer engines.
The A300 brought ETOPS, quickly followed by the 767.
It was a design decision to be a people mover. [0]
0: https://www.flexport.com/blog/airbus-a380-no-cargo-equivalen...
I guess you mean "cargo conversion"?
The A380 wasn't designed for cargo so the economics don't work out for many cargo loads. It's also limited in what airports it can operated out of. I'm sure there is some route out there where it will end up as an ideal freighter when they start retiring from passenger service, but it is not very flexible. Definitely not where you'd want to start building out your cargo fleet.
https://www.businessinsider.com/boeing-747-resurgence-in-car...
The A380 never was a cargo plane, big that it is. It also has the four engines with the added maintenance.
Not sure if it would make any economic sense, but maybe it could if the layout could be changed rapidly, with a passenger cabin "slotted in" when needed.
They're also in a strategically good location for connecting Europe to Australia and North America to Africa and India.
It's unclear if the planes mentioned in the OP are talking about Amazon actually outright purchasing planes (which would be a first) or if they are just leasing more.
edit: Actually the article does say this at the bottom:
>Amazon launched its own air cargo fleet in 2016 and, prior to Tuesday's news, the company leased 80 planes, but the move is the first time the company has bought their own
These were probably not leased because they were very cheap and had relatively little future value, making them unattractive for leasing companies.
https://www.bloomberg.com/news/articles/2021-01-05/amazon-ma...
I believe as of late Amazon has been dry leasing aircraft and contracting with Air Transport International, Atlas, Sun Country, and others for crew and potentially maintenance as well.
[1] https://www.aopa.org/news-and-media/all-news/2020/march/pilo...
Airlines are more likely to buy packages of service from manufacturers (especially engines) and big service providers if they don't have enough scale or experience to do their own maintenance, regardless of how it was paid for.
I think there has be change in consumer behavior and expectation to stop Amazon at this point. But will there be significant enough change in consumer behavior so that it is longer feasible for Amazon to grow so much?
why? if amazon is providing a service that people want (and pay for) at a very competitive price (either by making economies of scale that only they have, nor by leveraging existing business assets they own like AWS), then theres' nothing wrong.
Everyday, an anti-trust lawsuit seems to be around the corner.
Who can believe their promise with such a news? https://sustainability.aboutamazon.com/about/the-climate-ple....
Of course it's easy to point the finger of blame to the others (here Amazon). But we are all responsible to consume many things we don't need.
https://www.trucks.com/2018/09/06/mercedes-benz-launches-pro...
From everything I've heard, Amazon's own last-mile delivery service is also pretty awful. They haven't improved anything, just made the problem their own instead of anybody else's.
The 737 MAX might be cheap, but it's not 25-30 year old plane cheap.
[1] https://www.planespotters.net/airframe/boeing-767-300-n503az... [2] https://www.planespotters.net/airframe/boeing-767-300-n1997a...
That makes sense. However a newer plan also has a longer expected usage and likely lower fuel and maintenance cost.
So looking at absolute cost only doesn't really make sense.
Presumably Amazon crunched the numbers though
Weird.
it's just like china
capitalism? only on the surface, but behind the scenes it is worse than comunism, think only a very few profit from it
From the Wikipedia article:
"...the company traded with Indianised Southeast Asian countries when the Dutch government granted it a 21-year monopoly on the Dutch spice trade."
It's a dumb comparison, I know, but it strikes me as similar to how Amazon wound up with a pseudo-monopoly on many goods during the pandemic as brick-and-mortars were shuttered.
And a quote in a quote from the article:
"The Dutch, it seems, more than anyone in the West since the palmy days of ancient Rome, had more money than they knew what to do with. They discovered, unlike the Romans, that the best use of money was to make more money."
Weirdly apropos.
You're forgetting about Blue Origin. Their website has a picture of a rocket standing on the moon that literally says "This Time To Stay"
between their ubiquitous catalogs, trusted brands, huge retail footprint, and huge variety of products (there are tons of craftsman houses in Portland), they had a very large market.
it was sad to see what happened to them.
Sort of like how Nazi Germany was IBM's best paying client running concentration camps.