Ecommerce Search Ad Spending Soars
eMarketer estimates that US ecommerce search ad spending will rise to $55.72 billion by 2026, up from $27.10 billion this year. Display advertising will more than double from $8.86 billion this year to $17.31 billion. Insider Intelligence also estimates that Amazon will account for 77.7% of US ecommerce channel ad revenue this year, or $27.94 billion of the $35.96 billion. Amazon’s share of ecommerce ad revenues is shrinking but is still growing in the double digits, recording 56.5% growth in 2020. Other top retailers, including Walmart, saw revenues grow less than expected. Ecommerce overall has been losing share to brick and mortar since pandemic restrictions eased and people began traveling, eating out and going to entertainment venues again.
A Bad Time to Buy a Home
A majority of Americans responded to a recent Gallup poll by saying that now is a bad time to buy a home, citing rising mortgage rates, record-high home prices, soaring inflation and limited supplies. It’s the first time since 1978 that most Americans agreed it was a bad time to buy. While still historically affordable, interest rates have zoomed up 75% in a few short months, driving up monthly mortgage payments by 30%, or more than $500 per month on a $400,000 mortgage. That means people would need an additional $12,000 of annual income to qualify. In addition, the cost of everything related to buying or remodeling a home has also gone up, with construction materials up 31.3% since January 2020. Labor and services have also jumped, and labor is in short supply. The Case-Shiller National Home Price Index shows single-family home prices have risen 34% since the start of the pandemic. Most housing analysts believe the double-digit pace of annual price increases will slow but still expect mid-single-digit gains this year. Low inventory is also contributing, as housing inventory is down 9.5% from a year ago, leaving prospective buyers with just a 2.5-month supply of homes compared to about a 6-month supply in a normal market.
No Shortage of Labor at Retail
Both Walmart and Amazon said they were overstaffed during their recent quarterly earnings calls with analysts. Throughout the past several months most businesses struggled to find employees and deal with short staffing situations created by many people being out sick on CV19 leave. Walmart and Amazon both hired extra staff at the end of 2021; when cases declined in the first quarter employees came back to work sooner than expected and wage pressure ate into profits and reduced productivity, with both retailers quickly going from understaffed to overstaffed. Walmart said the problem was resolved during the first quarter, primarily through attrition. A New York Times investigation last year found that hourly workers have a turnover rate of about 150% each year.
Stores Overstocked with the Wrong Stuff
Chains like Walmart, Target and Kohls are finding themselves with way too much inventory that consumers no longer need or want, including basic apparel, home appliances and furniture. Retailers determined to take advantage of holiday demand cushioned orders and now shelves are overflowing. There are basically two shifts going on now. Some consumers are switching from discretionary spending to essentials and getting pickier about what they spend money on. There is also some trading down going on or switching to smaller sizes or private labels. In addition spending is shifting to what shoppers need as they go back to the office, attend concerts and events, travel again and struggle to keep both their gas tanks and their refrigerators full.
Fed Grants for Battery Production
The US Energy Department announced $3.1 billion in grants for battery and component production to support new, expanded or retrofitted facilities. They are also earmarking $60 million toward electric vehicle battery recycling and reuse as part of the administration’s push for electric vehicles (EVs) to comprise half of all US vehicles sold by 2030. Funding is coming from the new federal infrastructure investment law, which includes more than $7 billion for battery supply-chain related investments between fiscal 2022 and 2026. The US currently has 13% of global lithium-ion battery cell production, compared to China’s 80% share, and domestic factories account for just 10% of global manufacturing plants currently planned or under construction.
Amazon’s First Fully Autonomous Robot
Amazon’s first fully-autonomous robot was put to work a decade after Amazon bought robot coordination and fulfillment company Kiva and made its first nearly billion-dollar bet on robotic automation. Amazon now employs about 200,000 robots across its 1,137 fulfillment centers but, up until now, the bots have never worked freely alongside human Amazon workers. Their new addition, named Proteus, was built for autonomy and to safely work around employees.
Proteus resembles a giant iRobot Roomba, but with friendly, monochrome eyes that blink in the front. The flat robot rolls under an Amazon GoCart product cage full of products and automatically balances loads to prevent it from tipping over. After so many trips, Proteus will navigate to a charging station and plug itself in. The robot is programmed to stop when a person crosses it’s path. For now, Proteus is confined to warehouses with GoCart handling areas but Amazon plans to expand Proteus throughout their inventory and fulfillment network.
Amazon also unveiled Cardinal, a single-arm robot that, using AI and computer vision, can identify, lift, and sort heavy packages that weigh up to 50 pounds.
Drone Delivery Expands
Amazon will begin drone delivery to several towns in Northern California this year. The Amazon Prime Air drones can carry packages that weigh 5 pounds or less, filled with items such as beauty and cosmetic items, office and tech supplies and batteries and household goods. Customers will also need to identify a suitable landing area for the newly redesigned drone, reportedly now about the size of a large shoe box with a hexagonal shape. Since former CEO Jeff Bezos appeared on a "60 Minutes" segment in 2013 to announce Amazon would begin delivering packages by air within four to five years the program has been plagued by crashes, one of which started a brush fire, and other problems.
Walmart said they’re expanding their "DroneUp" delivery network to 34 sites by the end of 2022, giving it the opportunity to reach 4 million US households across six states. Despite all the past setbacks, they expect to be able to deliver more than 1 million packages by drone in a year.
Technologists believe that one day in the not-too-distant-future, drones will be as common as cars.
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