UPDATED 09:45 EDT / MARCH 20 2012

Amazon Ecosystem Benefits from Kiva Buy, Localization Trends

Amazon, the multinational electronic commerce company, announced that they are acquiring Kiva Systems, maker of robots that service warehouses, for $775 million in cash.  Amazon is a customer of Kiva and the acquisition will help build their company’s vast network of warehouses as well as improve their margins.

“Amazon has long used automation in its fulfillment centers, and Kiva’s technology is another way to improve productivity by bringing the products directly to employees to pick, pack and stow,” Dave Clark, Amazon.com’s vice president of global customer fulfillment said in a statement. “Kiva shares our passion for invention.”

Amazon prides itself with their 2-day shipping for $79 per year for their Prime subscribers and this promotion increased their customer-base, causing the need for more warehouse space as well.

According to the recent update of the AMZN Long Thesis, about 20% of Amazon shoppers included in their survey were Prime subscribers who buy products more frequently and spend more annually than non-Prime subs at $458 compared to $310.  The survey stated that 87% of the respondents shopped on Amazon in the past 12 months with 20% of them being Prime subscribers.

Amazon believes that there is still significant secular growth for Online Retail with the expectation that Online will continue to rise by approximately 1% a year from the current 10% U.S. level.

Amazon goes local

With continued growth in online retail, Amazon is pushing forward in conquering the daily deals sector with AmazonLocal, which now ranks fourth after Groupon, LivingSocial and Travelzoo in the daily deals sector, by offering $10 gift card on Amazon.com for only $5.  But before you get too excited about this, only one gift card per household will be allowed.  The good thing is, the Amazon gift card doesn’t expire and you can use it to purchase anything Amazon is offering like a new Kindle Fire, a Cloud Drive subscription, appliances and more but currently, it cannot be used to purchase anything on AmazonLocal.

The limited mark-down on gift cards will be distributed via e-mail and some Kindle devices.

Trampling the competition

Amazon is ahead of the game compared to Google and Apple in terms of online retail, but the war is really over the extended ecosystem, including digital goods.

Apple sells Apple devices and accessories, iTunes gift cards as well as offer subscriptions to TV shows and movie rentals, Amazon offers pretty much the same thing and much more.

Google on the other hand has Google Product Search that functions much like the Amazon Marketplace that sells anything under the sun.  For fashion enthusiasts, Amazon offers MYHABIT while Google has Boutiques, but it has been recently incorporated into Google Search to make it available to more people, though they are now offering Google Catalogs for tablets.

As for the daily deals offering, Amazon has AmazonLocal while Goolge has Google Offers.  Google even acquired Dealmap last year to boost their daily deals offering but it still doesn’t compare to other daily deals sites.  The two are pretty much stacked up the same but more people are using Amazon’s services since they’ve been in the online retail business longer so people tend to trust them more.


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