Some more ratios - and why does wikipedia need my donation?

Having started to delve into the annual reports / 10-K for Amazon and Asos for my last post, I thought I'd extract and compare a few more data points from their published information. Firstly their fulfilment centre density.

Asos have just opened a new 1.1M sq ft facility (for metric readers, 1 square metre = approx 10.7 sq ft, 1:10 is an easily memorable ratio). According to their published figures, they expect to be able to serve £1.2 Bn of sales from this warehouse: a ratio of £1090 per year per sq ft. This fairly high figure presumably reflects the relatively high price points of clothing.

By contrast, Amazon publishes (non-services) sales of $42Bn from 44M sq ft of warehousing (although it is not clear how much of this warehousing space is already open, and how much is secured/under construction for the future). Converting the currency, this is equivalent to around £600 per year per sq ft. Interestingly this figure is remarkably close to the ratio for Ocado, the online only grocer, at around £630 per year per sq ft; this either reflects very well on Ocado - typical price points for grocery are around £1 per item - or rather badly on Amazon.

(It's also interesting to compare with sales / sq ft / year in a typical supermarket of around £1000 in the UK, although less than half that in the US.)

 

 

Secondly, sales per visitor. Asos also publishes visitor numbers in its annual report, based on comScore data. Most online retailers seem rather reluctant to publish these numbers, but comScore occasionally publishes data points for huge sites like Amazon (282M visitors in June 2012 worldwide) which can be used for estimation. With these caveats on the reliability of the numbers (and some allowances for seasonality), it's possible to estimate revenue-per-visitors figures.

 

 

Assuming the data is reaonably trustworthy, it becomes more evident why Amazon is such an effective machine: the cash it extracts per visitor to its website is quite spectacular. Almost 5 times what Asos manages, and treble eBay - and the eBay figures include the income from paypal. (Note that this is eBay's revenues, not the total value of transactions on eBay).

 

Although this is nothing to do with multichannel retail, on another tab I am now looking at yet another appeal from Wikipedia for donations. Why? I know it is supposed to be a wonderfully pure site, unsullied by commercial interests, unbiassed in its editorial approach. Would it, I wonder, be compromising its principles too far by becoming the biggest Amazon affiliate in the world? Most Wikipedia entries (should!) have a list of citations and sources; many of these are books. Would it be a commercial step too far to advertise just the books that are specifically in the citations; a wikipedia citation is almost an advertisement anyway? And Wikipedia has visitor numbers that make Amazon look really rather pathetic - at least double. Just a thought...

 

 

 

 

 

Is taking a page out of Booker's book an opportunity for Ocado?

Another set of Ocado sales figures, another half year of no-profit growth.

The latest figures continue to underline the basic issue with Ocado's business model. Quite simply, on a cart-by-cart basis they've just about made it break-even. But on that same basis it's extraordinarily difficult to see where the profits are going to come from.

This picture tells the story:

Ocado enjoys pretty good margins for a Food retailer, but these are entirely swallowed by the costs of delivering each order. Margins are being squeezed, and delivery income is being squeezed by increasing competition.

The only way forwards is to increase cart-sizes. But year-on-year, cart-sizes actually fell  by almost £2 between 2010 and 2011 as customers cut back.

One option to increase cart-sizes to to increase the range of products on offer, which Ocado continues to do. The problem with this approach is that eventually you start to extend into categories which are not naturally part of a weekly grocery shop. Health & beauty: maybe. Consumer electronics or fashion: probably not. And as Ocado themselves observe in their analyst presentations, non-food requires a different distribution model. In other words, it doesn't really play to their strengths. Worse still, it sets them into online competition with Amazon, John Lewis, Tesco Direct, Argos, Debenhams, Marks-and-Spencer...

But while Ocado has been slugging it out unprofitably with the supermarkets, another online Food retailer has been quietly growing its online business even faster than Ocado: Booker Cash & Carry.

And while Ocado has a minimum cart-size of £50, Booker has two minimums (depending on whether you are a restaurant or corner-shop customers): £100 and £500. What would Ocado give for some £500 shopping carts? Maybe a bit of that 26% gross margin - cash-and-carry margins are inevitably lower. And e-commerce in the B2smallB sector is a tough nut to crack. These customers expect B2bigB service, B2bigB prices, and B2C charges.

But with all that automated infrastructure, you can't help wondering if there's an easier way to profitable growth than slugging it out with Tesco and Sainsburys.