13 Sep

Amazon Delivery under Scrutiny: More Trouble for Bezos?

WRITTEN BY Shankar Iyer

Amazon (AMZN) has received a lot of flak recently for its extreme delivery commitments. However, it wasn’t consumers who were complaining about the delivery, but delivery and warehouse employees. They claim to be under tremendous pressure to meet deadlines.

Jeff Bezos built the company with a mission of being consumer-centric. The e-commerce platform’s one-day delivery option is a huge hit, and consumer expectations are high. The company’s delivery chain has always exceeded customer expectations, and news about Amazon Air has gone over well in the market.

Therefore, the recent complaints are perplexing. Even the US Senate is concerned, and is questioning the company’s compliance with labor and safety regulations. It’s not the first time Amazon has come under scrutiny.

US Senate raises concerns

The US Senate has sent multiple letters to Jeff Bezos expressing concerns over Amazon’s delivery chain and retailers. The first letter, dated August 29, directs the company to clean up allegedly deceptive descriptions of products listed on its platform. Senators suggested increasing the scrutiny of third-party retailers and their products.

In its second letter, dated September 12, the US Senate expressed concerns about third-party vendors that are part of the delivery chain, and unreasonable standards for Amazon delivery contractors. The Senate alleges that many delivery contractors are flouting Department of Transportation and Federal Motor Carrier Safety Administration guidelines. Amazon must reply to both letters by the end of this month, at which time its stock could correct.

Amazon’s third-quarter initiatives and launches

On September 11, Bezos announced the launch of Amazon’s FIRST robotics program at 24 public schools in Nashville. In a promotional video for the program, Bezos encourages kids to “build some robots.”

You may wondering if Bezos hopes to add robots to his company’s delivery chain. The concept surely worked with Amazon Air—with the help of drones, Amazon promises to make deliveries within half an hour.

Another company highlight is its September 12 launch of Amazon Music in Brazil, whose market offers a wealth of untapped possibilities. The Amazon Music launch came two days after the release of Amazon Prime in Brazil.

Amazon Europe is also working on strategic partnerships. Wm. Morrison Supermarkets (MRWSY), a British chain, is set to ally with Amazon. Morrison is listed on the London Stock Exchange and has already reported promising results. In this year’s first half, the company’s pretax earnings rose 49%. The tie-up with Amazon could do wonders for both businesses.

What investors could expect from Amazon stock

Many analysts think Amazon stock is overpriced. Between December 24, 2018, and July 15, Amazon stock rose by about 50% from $1,343.96 to over $2,020. The stock has been volatile this year as well. On January 3, it was trading at $1,500. And in late July, the stock fell more than $200, from $2,000.81 on July 24 to $1,765.13 in early August. In the last month, the stock has averaged at around $1,800 with deviations of approximately $50. For more analysis, read Amazon Stock: Price Target, Valuation Compared to Peers.

Bezos has unresolved issues with the Senate, and how those pan out could determine Amazon’s third-quarter results. Furthermore, if regulators impose sanctions affecting Amazon’s overseas ventures, its stock could take a beating. However, Bezos seems to have found a hedge in the Nashville robotics program, earning some brownie points. And the coming quarter may bring even more overseas opportunities for the company.

Alibaba and Baidu expanding business

Other tech companies are also expanding strategically. Reuters reports Alibaba (BABA) is hoping to increase its presence in the streaming music business. Furthermore, the Chinese e-commerce portal has made sizeable investments in NetEase (NTES). NetEase has sold off its online platform, Kaola, for $2 billion to Alibaba.

Baidu (BIDU) is another Chinese technology company considering affiliate investments. BIDU has made a hefty investment in AI company Neusoft Holdings. Neusoft has two offices in the US—one in Houston, Texas, and one in Morrisville, North Carolina.

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