Jul 31, 2017 5:58 AMAs Amazon flirts with a $500 billion market cap, letting Jeff Bezos try on the title of world's richest man on for size if only for a few hours, for Amazon's competitors it's "everything must go" day everyday, as the bad news in the retail sector continue to pile up with the latest Fitch report that the default rate for distressed retailers spiked again in July.
According to the rating agency, the trailing 12-month high-yield default rate among U.S. retailers rose to 2.9% in mid-July from 1.8% at the end of June, after J. Crew completed a $566 million distressed-debt exchange. Meanwhile, with the shale sector flooded with Wall Street's easy money, the overall high-yield default rate tumbled to 1.9% in the same period from 2.2% at the end of June as $4.7 billion of defaulted debt - mostly in the energy sector - rolled out of the default universe.
In a note, Fitch levfin sr. director Eric Rosenthal, said that “even with energy prices languishing in the mid $40s, a likely iHeart bankruptcy and retail remaining the sector of concern, the broader default environment remains benign."
He's right: after the energy sector dominated bankruptcies in the first half of 2016, accounting for 21% of Chapter 11 cases, in H1 2017 the worst two sectors for bankruptcies are financials and consumer discretionary.
And if recent trends are an indication, the latter will only get worse as Fitch expects Claire’s, Sears Holdings and Nine West all to default by the end of the year, pushing the default rate to 9%. "The timing on Sears and Claire’s is more uncertain, and our retail forecast would end the year at 5% absent these filings," Rosenthal wrote.
The list includes name brands such as Gymboree, Payless, rue 21 and the Limited, all of which cited the Amazon affect as a contributor to their downfall.
“Many retailers have echoed the familiar cries of those that filed before them—the proliferation of online shopping, rapidly deteriorating brick-and-mortar retail, the rise of fast fashion, hefty lease obligations and shifting consumer preferences,” Reorg First Day said in a midyear review.
While it is far from empirically, and certainly scientifically established, every incremental retail bankruptcy should add approximately $5-10 billion to AMZN's market cap, further cementing Jeff Bezos as the world's richest monopolist man.
With Amazon's triumphant run in the retail sector, lawmakers are beginning to question its business practices.
Retail is suffering massive job losses in the wake of Amazon's automated business model.
If the chatter over regulatory moves comes to fruition, Amazon's bloated stock price could have some downside ahead.
Overplaying its hand
Amazon’s (AMZN) rise has been prolific. The company did the same thing that every other successful business has done in the past. It just did it online. They made the consumer’s life easier, and sometimes cheaper. By essentially being a “middle man” brokering the sale of goods between producers and consumers (much like Wal-Mart (NYSE:WMT)), Amazon has increased our ability to “shop around.” In five minutes you can look through a whole host of golf shirts, televisions, etc. It also gives access to products you might not ordinarily see.
A small novelty brand that makes customizable t-shirts in Oregon might not have found a lot of customers in say Maine prior to the advent of online shopping. Now, they can get their products on Amazon and gain exposure to anyone with a computer. Cheap knock off brands can get a little slice of Nike’s pie because you see the pricing comparisons right on screen. They also tapped into the simple fact that people are lazy and don’t want to go to the store if they don’t have to. The simplicity of the concept is genius.
Recently, there has been much more chatter about the monopolistic potential of Amazon’s format. It has bothered me for years. I buy very little from Amazon because it hurts jobs. The company has been making acquisitions/corporate moves that are scaring competitors. Its bid for Whole Foods (WFM) has lawmakers questioning whether the company’s rising dominance is healthy for the consumer. House Rep. David Cicilline has requested a hearing on the merger and the economic consequences for the grocer industry. This seems to be the first of many discussions on Amazon’s antitrust potential.
Prices vs. Jobs
The case is there for federal moves on Amazon. When you look at what it has done to apparel stores in such a short period of time, it can absolutely be argued that the company’s dealings could get out of control if acquisitions are allowed. There is a question pervading in economics right now that must be addressed. Which is more important, achieving the lowest prices possible for consumers or ensuring industries can provide ample employment for the labor force? Currently emphasis is not on a balanced front as corporations like Amazon threaten multiple employers in multiple industries. I love finding a good deal, but if you cut too many people out of the game, how will everyone be able to afford to buy anything?
And no, Amazon doesn’t replace the jobs it destroys. To sell $100 worth of items, Amazon needs half the labor force of Macy’s (NYSE:M). That sounds great if you own Amazon, but it wrecks our labor markets. This narrative is something that the federal government can definitely employ in regards to Amazon’s tendencies to cut out employment in favor of automated efficiencies.
Universal income is a farce dreamed up by billionaires who want their businesses fully automated. It will never happen, nor should it. Therefore, good paying jobs are a necessity. Henry Ford understood the importance of workers making a living. He increased wages multiple times during his time at Ford in order to ensure that people could afford to buy his cars. It’s simple logic, but sound logic. This is why Amazon’s model will not hold up.
There comes a point where the stock price cannot justify the job losses. Amazon’s approach is more damaging than Wal-Mart 10 years ago.
The move on Whole Foods was a foolish one from Jeff Bezos. The $13 billion bid announced to everyone their plans for conquest. It confirmed that Amazon wants to control everything we buy. It also expands Amazon’s model to a new level. The acquisition would thrust Amazon into the brick and mortar business, something that until recently it hasn’t had much involvement with.
The conversation on Amazon needs to be monitored very closely. A federal case for antitrust moves against Amazon would mean devastating effects on its $1,000 share price. The company’s valuation is extremely high with a P/E of 187. The market has factored in a lot in terms of future gains. Any impediment of those future values could send the stock crashing down. Even Goldman Sachs is beginning to question whether regulatory risks have been ignored.
Wal-Mart’s Advantage in the Fight Against Amazon
Half of Wal-Mart’s stores are in rural areas, where fast shipping and grocery delivery are expensive to operate.
By
Nicholas Jasinski
July 14, 2017 4:54 p.m. ET
Wal-Mart overlaps much less with Whole Foods than other grocers do.PHOTO: GETTY IMAGES/ISTOCKPHOTO
It hasn’t been a pretty year for brick-and-mortar retailers, with a key index tracking retail industry stocks down over 10% since the beginning of the year. Store closures, competition from online retailers, and fear of disruption are all reasons for investors to be pessimistic about future earnings. Amazon.com’s$13.7 billion acquisition of Whole Foods last month was widely seen as the straw that broke the camel’s back, wiping billions from competing grocers’ market values in a matter of hours.
One retailer that won’t go down without a fight, however: Wal-Mart. Analysts from Goldman Sachs upgraded the stock to a “Buy” on Friday, citing the world’s largest retailer’s scale and strong presence in rural markets as a protective moat against aggressive competition from Amazon.
In order to offer two-day shipping to Prime members and build out a grocery delivery service, Amazon needs to be close to where its customers live. Offering the same level of service to shoppers spread out across rural areas would be prohibitively expensive, keeping Amazon from offering such low prices. Compared to its brick-and-mortar peers, Wal-Mart is much less exposed to big cities, with 53% of its stores in the top 100 markets in the U.S. by population versus 79% for Costco and 77% for Target. And 22% of Wal-Mart’s stores are in regions with fewer than 100,000 people -- too sparse for Amazon’s delivery economics (until it gets its drones off the ground, that is).
Additionally, Wal-Mart overlaps much less with Whole Foods than other grocers. Just 43% of Wal-Marts are within 20 miles of a Whole Foods, compared to 81% of Costco stores and 71% of Target locations. What all of that means is that if Amazon turns Whole Foods stores into distribution centers for grocery delivery, Wal-Mart’s rural bias seems to make it safe -- or at least safer than its peers. By continuing to add options such as online ordering followed by in-store pickup, Wal-Mart can offer rural customers a comparable experience to e-commerce without the high delivery costs, unlike Amazon.
The Goldman Sachs analysts raised their price target to $84, a 10% premium to Wal-Mart’s $76.46 Friday closing price.
Tuesday, July 11, 2017
Prime Day Predictions, 2017
With Amazon Prime Day nearly upon us, we enlisted our panel of five million online shoppers to predict what is in store for Amazon’s shopping holiday.
Prime Day will be Amazon’s biggest day ever
Prime Day 2016 was Amazon’s biggest day ever with Amazon’s US sales volume (including Prime Now) 18 percent higher than the previous Cyber Monday. With Prime Day starting earlier and lasting longer this year, we expect growth of 20 percent over Prime Day 2016.
Past buyers will catch the Prime Day bug
In 2016, growth was principally driven by spend per buyer, which was 14 percent higher than in 2015. We also expect to see growth in spend per person as Amazon and its vendors should be sufficiently prepared for site traffic and for inventory needs on key products. There is still plenty of room for growth with Prime Day buyers as only 16.2 percent of past Amazon buyers bought on Prime Day last year.
Prime Day will drive expansion of key Amazon platforms
Amazon has historically used Prime Day very successfully to drive growth of its consumer platforms. Amazon Prime membership is the best example, of course, but the opportunity is much broader than bringing more Prime members into the fold. Amazon’s Echo, Kindle and Fire TV products accounted for 70 percent of the top 10 selling products. Each of these products, which are marginally profitable for Amazon, become buying platforms for Amazon shoppers for everything from toilet paper to electronic books.
New Amazon platforms are primed for Amazon’s shopping holiday
Prime Now, Amazon’s same day delivery platform, grew nearly twice as fast as Amazon’s overall sales between Prime Day 2015 and 2016. That growth, however, accounted for less than one percent of Amazon sales leaving a lot of room for more. We’re watching to see how many Amazon customers join Amazon’s Spotify competitor, Amazon Music Unlimited, which is hoping to entice users with a subscription of $.99/month for four months. We’re also very curious to see how the newest additions to the Echo family preform, especially the Echo Look, which is available and (at least briefly) in stock.
Shoppers will sleep in this year
In years past, the two biggest sales peaks came in the morning and afternoon of Prime Day. This year we expect the same with the key difference being that sales will start the evening before, which will allow the most ambitious deal seekers a good night’s rest.
Competitors will largely wait for Prime Day to pass
In 2015, many retailers created their own sales on Prime Day in a vain effort to draft off of Amazon’s holiday, but to no avail. In 2016, many Amazon competitors decided to save their sales for another day when there was less attention on Amazon–Amazon captured 75 percent of sales on Prime day compared with 29 percent the rest of the month. As tempting as it is for competitors to try to capitalize when shoppers have their wallet out, we believe that retailers will again save their promotions for another day.
About this data
With a panel of 5 million online shoppers, Slice Intelligence gives the most detailed, and accurate digital commerce data available, and is reported daily.
Slice Intelligence is the only service to measure digital commerce directly from the consumer, across all retailers, at the item level, and over time. Our retailer-independent methodology precisely measures commerce as it happens. By extracting detailed information from hundreds of millions of aggregated and anonymized e-receipts, Slice can map the entire Purchase Graph, connecting each and every consumer to all their purchases.
Slice gets its data from e-receipts – not a browser, app or software installed by the end-user – so its measurement reflects comprehensive shopping behavior across multiple devices, over time which are key in an increasingly omnichannel retail world. Slice Intelligence is the exclusive e-commerce data provider for the NPD’s Checkout Tracking e-commerce service.
The $3 Toothpaste Club? Startup to Test the Power of Brands
As retailers struggle, startup Brandless hopes generic products and simple pricing will give it an edge
Brandless taste-tests products in its product-development space in Minneapolis.PHOTO: ACKERMAN + GRUBER FOR THE WALL STREET JOURNAL
A new online retailer is betting it can get American shoppers to break up with big brands from Colgate to Heinz.
Called Brandless, the San Francisco-based startup on Tuesday plans to start selling generic, health- and environmentally conscious consumer staples, such as fluoride-free toothpaste and organic agave nectar. Everything will be priced at $3.
The business model: Cut out supermarkets and traditional marketing, funneling that money instead toward making products that can compete with pricier, name-brand counterparts.
In doing so, Brandless aims to capitalize on a packaged-goods sector in upheaval, one that faces increasing competition among both high-end and discount brands as well as consumers who are doing more shopping online and demanding less-processed foods.
“It’s an inefficient process,” Brandless co-founder Ido Leffler said of the traditional system of packaged-goods companies selling their products through brick-and-mortar retailers. “We are re-appropriating those dollars back to the consumers.”
STEPHANIE STAMM
The 115 products that will be initially available are generally more expensive than their big-brand rivals. Brandless hand soap, for instance, costs 31 cents per ounce, more than Dial, which goes for about 27 cents an ounce on Target Corp.’s website for a similarly sized bottle.
But compared with hand soap sold by Whole Foods ’ private-label 365 brand, which has a similar emphasis on natural and healthy products, the Brandless option is cheaper, by about 9 cents per ounce.
Brandless hopes its simple, one-price-for-every-product proposition will be another draw, much like the Dollar Shave Club, which upended the men’s razor market when it introduced a subscription service costing $3, $6 or $9 a month. In a few cases, $3 buys multiple Brandless items, such as a two-pack of organic macaroni and cheese. Shipping is $9, or free for orders of $72 or more. People who pay a $35-a-year membership fee get free shipping on orders of $48 or more.
The trick, industry experts say, will be to convince shoppers that Brandless products are of a high enough quality that shoppers feel like they are getting a deal.
“They need to make sure their quality is by far the best in the market for the price they are charging,” said consumer-products consultant Thom Blischok, especially since price-conscious Americans, which comprise nearly three-fourths of the U.S. consumer market, generally aren’t willing to experiment with their household staples.
David Garfield, head of the consumer-products practice at consulting firm AlixPartners, said the concept could appeal to millennials who are less brand-loyal than older generations, and more inclined to shop online. Brandless is, he said, “seeing the factors and phenomena in the market in the right way.”
He added, however, that consumer-goods companies spend heavily on advertising and prominent shelf placement because those techniques pay off. “They are underestimating how difficult it is to thread the needle and execute,” he said.
Dressings are taste-tested at the Minneapolis site in late June. PHOTO: ACKERMAN + GRUBER FOR THE WALL STREET JOURNAL
Mr. Leffler, who has founded several other startups including a line of natural beauty products and another of school supplies, has been working on Brandless since 2014 with his co-founder, Tina Sharkey, former chief executive of strategic advisory firm Sherpa Foundry. She also was an investor in venture-capital firm Sherpa Capital, whose investments include Uber Technologies Inc. and Slack Technologies Inc.
Much of their several years developing Brandless was spent combing the industry for suppliers who could provide products that are organic, gluten-free, free of genetically modified organisms or have other health-conscious credentials. Orders placed on brandless.com will be shipped from three distribution centers, two in California and one in Indiana, with most delivered to shoppers within two days.
The company plans to focus its marketing on social media and free samples, rather than costlier avenues like television and print advertising, Ms. Sharkey said. “We’re not anti-brand, we’re reimagining what it means to be a brand.”
As an online operation, the company won’t have the overhead pressures that have forced traditional retailers like Wal-Mart StoresInc. and Target to push their biggest suppliers to cut prices. Brandless plans to double its lineup of merchandise by mid-September and eventually expand the price range. The company said it has received $50 million in funding from investors including New Enterprise Associates and Google Ventures.
Mr. Leffler said the company doesn’t necessarily expect to replace Amazon or the grocery store.
“The average consumer shops in multiple locations,” he said. “For some people, we’ll be their everyday destination, and for some people we will be their No. 5.”
"Amazon Assistant": The New Path-to-Purchase Disruptor!
Vice President, Digital Marketing at Behr Process Corporation
This week I was on an ecommerce site and I got a sudden pop up for an Amazon price comparison on the top of the page! I forgot that last year I downloaded the Amazon Assistant tool for Firefox. It never did anything so I forgot I had it. UNTIL NOW! Whatever they did to activate it, suddenly every ecommerce site I go to has pricing comparisons on Amazon of the same item or a like item. They even show the ratings and reviews and offer one click to go to the page. I am an active Prime member and becoming more loyal every day because of my Echo. Now with this assistant, I see sites like Walmart.com, Target.com, Macys.com and others being in more trouble, especially since it is estimated that over 65% of US households are Prime members now (about 80MM). This could be the ultimate disruptor of my path-to-purchase for many cateogries, as it makes it so easy and convenient for me to make smart purchases and give more business to Amazon. If more people learn about it and see that it is available on ALL the major web browsers, it could make a major impact and really hurt the competition. One to watch!
The Brick & Mortar Store Genome: Decode It Before Amazon Does
Traditional retailers have already lost online momentum but have an opportunity to win the in-store battle. There is no doubt that Amazon’s proposed acquisition of Whole Foods is going to accelerate online grocery shopping, putting increasing pressure on optimizing the performance of the brick & mortar store. Beyond growing online sales, Amazon will bring its data science to the physical store, analyzing shopper behavior just as it does behavior across its digital properties.
Merriam Webster broadly defines ‘genome’ as the genetic material of an organism. The retail industry has a unique opportunity to decode the brick & mortar store ‘genome’ and leverage improved understanding and new capabilities into dramatically increased store performance. And like the human genome project, the benefits are substantial and wide-ranging.
As one of the first supermarket operators to deploy video analytics years ago we found that specific products would invariably drive increased aisle traffic along with associated product sales. We learned the impact of on-shelf vs. off-shelf displays. Imagine doing promotion planning — or strategic personalized marketing — with a goal of maximizing shopper traffic across the store, knowing that as department, aisle, or category traffic increases, the sale of adjacent products also increase. In-store analytics represent a powerful opportunity for brick & mortar retailers to optimize store performance.
Here are five steps to optimizing the brick & mortar store: Step 1 - Conversion rate scorecard: Ask nearly any store manager what their department, aisle, or category conversion rates are and you'll probably get a blank stare. Even the best retail operators have very little understanding of true customer behavior in the store, let alone how it can be positively impacted.
There are a growing number of solutions using mobile device detection or digital video available to retailers to analyze the flow of customers in and around the store, including dwell time in specific areas and even purchase conversion. Retailers should create conversion rate scorecards showing customer traffic entering the store and then the percentage of shoppers going to departments, aisles, and categories. These scorecards can also reflect dwell events (the number of shoppers spending more than a specified amount of time in front of a category) and purchase conversion.
Digital video solutions using anonymous facial recognition are able to measure customer sentiment, measuring how many customers are happy, sad, frustrated, angry, etc. in different parts of the store. Other solutions using 3D motion sensors are able to understand behavior at the category, knowing what specific product a customer picks up and from what shelf. Step 2 - Overlay with merchandising activity: Each year brand manufacturers and retailers pour billions of dollars into in-store merchandising events from special displays to special signage and more. Rarely is the impact of this promotional activity measured let alone the larger impact to customer behavior.
Retailers need to consistently and accurately track merchandising activity in each store each day and week. This would include location of on-shelf and off-shelf displays, special signage, endcap displays, and other merchandising activity. Step 3 - Customer-intelligent product selection: Kroger and a (very) few other retailers leverage customer intelligence into store-level product assortment plans but the vast majority of retailers continue to stock their shelves with products that have always been carried, that their vendors ship in, or that syndicated data shows are good sellers in the market. No heed given to an understanding of the customers actually shopping the store.
Retailers can gain these insights either through loyalty programs which provide customer-identified purchase data or by using anonymous facial recognition capabilities which provide customer demographic data (gender, age, ethnicity). Step 4 - Automate out-of-stock notifications along with merchandising and pricing compliance issues: There are a rapidly growing number of solutions available to help retailers automate and quickly discover product out-of-stocks, promotion compliance failures, too little or too much product inventory and even pricing issues around the store. Robots equipped with a full range of cameras and sensors are able to roam the aisles, neatly avoiding customers, to peruse the shelves. Cart mounted devices provide similar information and notifications as customers shop. And fixed camera deployments on high-volume categories or areas of the store add another layer of data. Step 5 - Tie to realtime in-store marketing: Retailers such as Coborns, Foodtown, and Niemann Foods already have the ability to message a customer in the store based on realtime location. Imagine the power of knowing that if traffic in aisle 5 is lower than usual on Tuesday afternoon, communicating a promotion on a relevant product in that aisle to customers in the store can help drive aisle traffic along with sales of adjacent products.
Ignorance of true shopper behavior in-store will no longer stand as Amazon leverages its vast technological prowess to understand and then optimize the physical store. As the market stands today, traditional operators are behind the curve in online sales but the battle for physical store optimization is just getting started. Decoding the store genome will help retailers gain significant advantage as they leverage new understanding paired with new in-store marketing capabilities to pull ahead of traditional competitors and better position themselves for Amazon’s entry into brick & mortar retail.
By providing better search results, Netflix estimates that it is avoiding canceled subscriptions that would reduce its revenue by $1B annually.
These and other findings are from the McKinsey Global Institute Study, and discussion paper, Artificial Intelligence, The Next Digital Frontier(80 pp., PDF, free, no opt-in) published last month. McKinsey Global Institute published an article summarizing the findings titled How Artificial Intelligence Can Deliver Real Value To Companies. McKinsey interviewed more than 3,000 senior executives on the use of AI technologies, their companies’ prospects for further deployment, and AI’s impact on markets, governments, and individuals. McKinsey Analytics was also utilized in the development of this study and discussion paper.
Key takeaways from the study include the following:
Tech giants including Baidu and Google spent between $20B to $30B on AI in 2016, with 90% of this spent on R&D and deployment, and 10% on AI acquisitions. The current rate of AI investment is 3X the external investment growth since 2013. McKinsey found that 20% of AI-aware firms are early adopters, concentrated in the high-tech/telecom, automotive/assembly and financial services industries. The graphic below illustrates the trends the study team found during their analysis.
Source: McKinsey Global Institute, Artificial Intelligence, The Next Digital Frontier
AI is turning into a race for patents and intellectual property (IP) among the world’s leading tech companies.McKinsey found that only a small percentage (up to 9%) of Venture Capital (VC), Private Equity (PE), and other external funding. Of all categories that have publically available data, M&A grew the fastest between 2013 And 2016 (85%).The report cites many examples of internal development including Amazon’s investments in robotics and speech recognition, and Salesforce on virtual agents and machine learning. BMW, Tesla, and Toyota lead auto manufacturers in their investments in robotics and machine learning for use in driverless cars. Toyota is planning to invest $1B in establishing a new research institute devoted to AI for robotics and driverless vehicles.
Source: McKinsey Global Institute, Artificial Intelligence, The Next Digital Frontier
McKinsey estimates that total annual external investment in AI was between $8B to $12B in 2016, with machine learning attracting nearly 60% of that investment. Robotics and speech recognition are two of the most popular investment areas. Investors are most favoring machine learning startups due to quickness code-based start-ups have at scaling up to include new features fast. Software-based machine learning startups are preferred over their more cost-intensive machine-based robotics counterparts that often don’t have their software counterparts do. As a result of these factors and more, Corporate M&A is soaring in this area with the Compound Annual Growth Rate (CAGR) reaching approximately 80% from 20-13 to 2016. The following graphic illustrates the distribution of external investments by category from the study.
Source: McKinsey Global Institute, Artificial Intelligence, The Next Digital Frontier
High tech, telecom, and financial services are the leading early adopters of machine learning and AI. These industries are known for their willingness to invest in new technologies to gain competitive and internal process efficiencies. Many startups have also had their start by concentrating on the digital challenges of this industries as well. The MGI Digitization Index is a GDP-weighted average of Europe and the United States. See Appendix B of the study for a full list of metrics and explanation of methodology. McKinsey also created an overall AI index shown in the first column below that compares key performance indicators (KPIs) across assets, usage, and labor where AI could make a contribution. The following is a heat map showing the relative level of AI adoption by industry and key area of asset, usage, and labor category.
Source: McKinsey Global Institute, Artificial Intelligence, The Next Digital Frontier
McKinsey predicts High Tech, Communications, and Financial Services will be the leading industries to adopt AI in the next three years. The competition for patents and intellectual property (IP) in these three industries is accelerating. Devices, products and services available now and on the roadmaps of leading tech companies will over time reveal the level of innovative activity going on in their R&D labs today. In financial services, for example, there are clear benefits from improved accuracy and speed in AI-optimized fraud-detection systems, forecast to be a $3B market in 2020. The following graphic provides an overview of sectors or industries leading in AI addition today and who intend to grow their investments the most in the next three years.
Source: McKinsey Global Institute, Artificial Intelligence, The Next Digital Frontier
Healthcare, financial services, and professional services are seeing the greatest increase in their profit margins as a result of AI adoption. McKinsey found that companies who benefit from senior management support for AI initiatives have invested in infrastructure to support its scale and have clear business goals achieve 3 to 15% percentage point higher profit margin. Of the over 3,000 business leaders who were interviewed as part of the survey, the majority expect margins to increase by up to 5% points in the next year.
Source: McKinsey Global Institute, Artificial Intelligence, The Next Digital Frontier
Amazon has achieved impressive results from its $775 million acquisition of Kiva, a robotics company that automates picking and packing according to the McKinsey study. “Click to ship” cycle time, which ranged from 60 to 75 minutes with humans, fell to 15 minutes with Kiva, while inventory capacity increased by 50%. Operating costs fell an estimated 20%, giving a return of close to 40% on the original investment
Netflix has also achieved impressive results from the algorithm it uses to personalize recommendations to its 100 million subscribers worldwide. Netflix found that customers, on average, give up 90 seconds after searching for a movie. By improving search results, Netflix projects that they have avoided canceled subscriptions that would reduce its revenue by $1B annually.
This Research Might Make You Rethink Your Social Media Habits
Step away from the ‘like’ button.
by
Emma Haak
Prolific social media users, take note: A study published in the American Journal of Epidemiology has linked frequent Facebook use over time to poorer well-being. According to this Harvard Business Review article written by the study authors, mental health is particularly at risk.
Researchers Holly Shakya, a professor of Global Public Health at UC San Diego, and Nicholas Christakis, director of the Human Nature Lab at Yale University, recruited 5,208 adults and tracked both their Facebook activity and real-world social lives in addition to their well-being for two years. (Well-being included life satisfaction, self-reported mental health, self-reported physical health and body-mass index.) Actual in-person relationships were, unsurprisingly, linked to better overall well-being, as a wealth of research has shown that close social ties do our mind and body good.
Facebook use (measured by by often subjects’ liked other people’s posts, created their own posts and clicked on links) was negatively associated with well-being. As the authors write, “These results were particularly strong for mental health; most measures of Facebook use in one year predicted a decrease in mental health in a later year.” This is in line with prior studies showing the less-than-beneficial effects of social media.
What makes these findings particularly attention-worthy is the design of the study itself. According to Shakya and Christakis, most of social media studies conducted in the past looked at one particular point in time (i.e. how much do you use social media and how are you feeling right at this moment) — this study took place over the course of two years, allowing the researchers to monitor changes in well-being that could be linked to social media use. Another important distinction is that Facebook use here wasn’t self-reported — the researchers pulled actual data from subject’s Facebook accounts, giving them a much more accurate picture of their usage. The researchers were also able to compare the links between social use and well-being and real-world relationships and well-being.
Since this study proved correlation, not causation, the researchers can’t definitively say how increased social use might erode your well-being, but they do have some theories, from the destructive effects of comparing your digital life to the lives of others to engaging in fewer IRL interactions because you assume that digital missives are just as beneficial.
Even without causation, this study is still more reason to unplug and connect offline. “The tricky thing about social media is that while we are using it, we get the impression that we’re engaging in meaningful social interaction,” Shakya and Christakis write. “Our results suggest that the nature and quality of this sort of connection is no substitute for the real world interaction we need for a healthy life.”