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Amazon Roundup: Healthcare, Employment, Hub, Alexa, More

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There’s so much going on with Amazon (AMZN - Free Report) right now that we can just hit the high spots now. These include a new CEO to head up its health insurance initiative, its physical expansion, its apartment house pickup service Hub and new skills for Alexa.

Amazon & Banks Choose CEO

Amazon’s ambition to crack healthcare or at least the insurance side of it through partnerships with leading banks took another step forward with the appointment of a CEO effective Jul 9. The Boston-based company will operate as an independent entity that is free from profit-making incentives and constraints with the goal of ensuring people take their prescriptions to thereby reduce health complications and cost. Healthier people will also be less of a burden for insurance companies.

The person chosen for the job is Dr. Atul Gawande, a world famous surgeon, writer and public health innovator, specializing in general and endocrine surgery at Brigham and Women’s Hospital. He is also Professor at the Harvard T.H. Chan School of Public Health and Harvard Medical School, as well as founding executive director of the health systems innovation center, Ariadne Labs.

“We said at the outset that the degree of difficulty is high and success is going to require an expert’s knowledge, a beginner’s mind, and a long-term orientation,” said Jeff Bezos, founder and CEO of Amazon.

“Atul embodies all three, and we’re starting strong as we move forward in this challenging and worthwhile endeavor.” Warren Buffett, Chairman and CEO of Berkshire Hathaway (BRK.B - Free Report) , and Jamie Dimon, Chairman and CEO of JPMorgan Chase (JPM - Free Report) had similar words of praise for the incoming CEO.

Amazon Expansion and Employment

We can debate about whether Amazon’s operating cost will increase as it creates more of a physical presence because this will require real estate and a larger employee base. In fact this is one of the biggest disadvantages that traditional retailers have to deal with when compared with Amazon. Moreover, once you’re already employing a lot of people like Walmart (WMT - Free Report) , it is relatively harder to automate operations because retrenchment will put you up against labor unions.

Amazon is making the most of its position as a mainly online retailer by significantly automating operations and processes and employing as few people as possible. This is visible in its Amazon Go shop concept and also in its fulfillment centers.

So its fourth Michigan fulfillment center in Gaines Township, which is an 850,000 square foot facility, will create just a 1,000 full time jobs. Similarly, the new Bessemer fulfillment center (the first of its kind in the state of Alabama), which is an 855,000 square foot facility will employ just 1,500 employees. These employees, who will work alongside robots to pick, pack and ship small items to customers such as books, household items and toys, will however be well taken care of in terms of wages and benefits.

What’s more, it isn’t just the mundane jobs of the warehouses that are being automated. Over time, Amazon has even shifted tasks like forecasting demand, ordering inventory and negotiating prices to algorithms.

Amazon says in a statement, “We’ve been working for some time on standardizing the products, tools and services we offer to the brands and resellers that sell on Amazon, and have made some organizational changes as a result.” It also says that it has more than 16,000 corporate jobs open worldwide and that it had created 130,000 jobs last year.

So Amazon’s physical expansion may not be as good as it might have been in terms of employment, but it’s good nonetheless because of the rate of expansion.

Hub by Amazon

Amazon recently announced Hub by Amazon, which is essentially a package pickup location for apartment buildings. The service is available not only on Amazon packages but also from others like UPS, FedEx, or even the Post Office.  

Delivery persons enter their code to drop off packages while residents enter their code to pick them up at any time 24/7. Amazon offers security for the packages and also personal assistance if required. The facility helps Amazon deliver packages for pickup within one day.  

Amazon says that the service is already available to 500,000 residents from 30 such locations across the U.S. Big residential property owners and managers, collectively overseeing thousands of apartment properties like AvalonBay, Fairfield Residential, Pinnacle, J.P. Morgan Asset Management, WinnResidential and Equity Residential, have already signed up to use the service.

This looks like a rather neat way to creep into the broader logistics business.

Alexa Acquires More Skills

Alexa acquired a number of skills over the past week or so-

First, through Alexa for Hospitality, she can serve guests asking for hotel information, guest services, music playback in their room and more. The goal is to improve guest experience while offering them the kind of voice services many are now accustomed to in their own homes. Marriott International (MAR - Free Report) was the first big hotel to adopt the technology, introducing the new Alexa experience at select properties in Marriott Hotels, Westin Hotels & Resorts, St. Regis Hotels & Resorts, Aloft Hotels, and Autograph Collection Hotels starting this summer.

Designed by tech startup n-Powered, college students can now ask Alexa questions, such as when their classes are scheduled, how much cash remains on their food cards and how much they owe for tuition. Northeastern University will be offering its students Echo Dots through which the service will be available but it isn’t known yet what if anything it will charge them for it.  It should make life easier for students and save faculty time, so other colleges may go for similar programs as well.

A voice-based, music education startup called Bamboo Learning has released an Alexa skill called Bamboo Music that will help students learn and practice music theory through voice and listening exercises. The company was founded by Amazon veteran Ian Freed, who was VP of Amazon devices from 2010 to 2015 and helped design the Alexa-enabled Echo.

Users will now be able to get Alexa to set recordings, launch apps and navigate menus on the Dish Hopper range of set-top boxes.

Private-Label

D A Davidson analyst Tom Forte raised his price target on the stock from $1,900 to $2,100, because of “the increase in our annual sales forecasts by 100 basis points, per year, due to our increased confidence in its ability to generate additional private-label and advertising revenues."

With private-label growing in importance at Amazon, Coresight Research, in partnership with DataWeave, recently aggregated data on 6,825 products across 74 identified Amazon private labels to study their progress. Coresight had the following observations:

The bulk of Amazon private labels are apparel brands with many sub categories containing relatively few (around 100) products each as Amazon tries to cater to a broad cross section of people with targeted offerings. But other leading retail categories like food and beauty haven’t received the same attention. With the acquisition of Whole Foods, the company gained access to its food brands, which are listed on its site. It appears that Amazon will take a similar approach to food and beauty as it has with apparel.

Its private label brands are also getting a boost with Amazon Prime Wardrobe that is now available to all U.S. users. The system allows you to select at least three and at most eight items that you have a week to try on and reject if necessary. Amazon says that its private label brands Lark & Ro, Daily Ritual, Amazon Essentials, and Goodthreads are the top-ordered items, which could just be because its own brands are more widely available on the service.

Customers

Amazon has reported that online retailer zulily has been moving its business critical workloads to AWS, including its store, mobile application, and supply chain, as it leverages the cloud to serve customers better. The press release said that zulily has seen a 30-40% performance improvement per request made on its website and mobile app.

  Meanwhile, Sears has announced that the number of its Auto Centers accepting Amazon tire pickup and fixing has now been increased by 71 to total 118. Sears collects a small fee for the service.

Facial Recognition Issue

Amazon employees are protesting its marketing of face-recognition technology called rekognition to private businesses and law-enforcement agencies. An American Civil Liberties Union (ACLU) investigation earlier this month showed that Amazon has been selling such information to police in Florida and Oregon.

The WSJ reports that in fact anyone with a credit card and an Amazon Web Services account can access it. There is also no approval process for consumers, who can be tracked just about anywhere there is a camera, even if they aren’t carrying any devices.

According to a recently-published letter posted to an internal forum, employees who called themselves Amazonians said that “Our company should not be in the surveillance business; we should not be in the policing business; we should not be in the business of supporting those who monitor and oppress marginalized populations.” It also objected to and called for the cessation of infrastructure service provision to Palantir, the Peter Thiel-backed surveillance company, which has ties to the Immigration and Customs Enforcement (ICE) department.

Seattle Head Tax Battle Won

Big companies won the battle against homeless people when the Seattle City Council repealed a newly enacted "head tax" on the its largest companies by a 7-2 vote. The tax would have impacted only the largest companies by revenue, Amazon being one. It was expected to hit 500 companies that would have been required to pay a tax of roughly 14 cents per employee per hour worked within the city to raise at least $45 million over five years. The money was to go toward affordable housing and support services for the homeless.

Amazon was one of the most vociferous opposers, threatening to take its business to other states to avoid the tax. Since this trend would have led to unemployment, the state was forced to reconsider. Amazon promptly said it would support non-profits working for the homeless.

Senators Question Echo Privacy

A recent controversy over the way an Echo device inadvertently recorded a conversation and even sent it to an unintended recipient have raised privacy questions around the device.

U.S. Senators Jeff Flake and Chris Coons have written to Amazon CEO Jeff Bezos requesting information about the technical design and privacy features of Echo devices as well as the Alexa digital assistant platform. Flake is chairman of the Judiciary subcommittee on Privacy, Technology and the Law, and Coons is a member.

Supreme Court Ruling Will Have Minimal Impact

In a 5-4 decision, the Supreme Court has said that states can tax online companies. The existing law based on physical presence hasn’t however been nullified.

Since Amazon already collects taxes in all states in which it operates and also charges a fee for taking on the hassle for sellers that want the service, the decision is a slight positive for the retail business.

For buyers, cost of products on Amazon’s marketplace (not the stuff it sells directly) could go up if the concerned sellers aren’t collecting sales tax. However, since Amazon is also in the process of integrating its marketplaces business into the retail business, so any negative impact on this business will likely be small for Amazon.

One-Month Pice Action

Recommendation

Amazon shares have a Zacks Rank #3 (Hold).

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