How Elon Musk Will Revolutionize the Modern World

Elon Musk, Founder, and CEO of Tesla Motors Inc.After selling off PayPal for $1.5 Billion to eBay.com Inc.

Throughout history, humans have dreamed of what the future will be like. We have envisioned flying cars, teleportation devices, vacations to outer space, and much more. A lot of it is pretty farfetched, some of it is impossible, and yet other aspects aren’t as far away as you might think.

(and other companies) has brought the science fiction fantasies much closer to reality than many people realize. His concepts and inventions could potentially revolutionize the way that we do life.

Digital Currency

While most came to know Elon Musk as the CEO of Tesla, Musk is also the co-founder of PayPal Holding Inc.

. It all started back in 1999 as a financial services company simply named X.com. In 2000, it merged with Confinity and developed the online payment system we now know as PayPal (the name was officially registered in 2001). When eBay Inc. purchased PayPal in 2002, Musk was able to fund his other projects. He then quietly slipped into research mode for the next dozen years or so.

PayPal has already revolutionized the way we make payments. I can hop on and transfer money to my brother that paid for dinner last night. I can purchase an item from a manufacturer in China. I can type in my PayPal details at Home Depot and not even worry about bringing my credit card to the store. In short: PayPal has taken over the digital currency world and has already become so engrained in our minds that we don’t even remember a world without it.

Space Flight

, Musk founded SpaceX (I suppose the X moniker has special meaning to him). The company was seen as little more than a fantasy, and something that most didn’t take seriously. After all, space flight was something that was left to government control.Ten years after founding the company, SpaceX’s Dragon capsule was sent to the International Space Station. Since 2012, it has made two cargo runs. SpaceX has an exclusive contract with NASA to help deliver cargo to the floating lab.

But since its founding, SpaceX has never been about cargo runs. Musk’s original plan was to send people to space to colonize other planets. He wants to make sure that Mars is inhabitable in case the earth is no longer a viable option. Will it happen? Musk believes that within 20 years there will be a colony on Mars, and reusable rockets will be able to ferry people back and forth.

Tesla Motors Inc.

. However, these all-electric vehicles aren’t just cars that run without gas. EV (electric vehicles) have been around for a few decades now, but none have really caught on. Primarily because they have had serious issues, like taking too long to charge, short range on a single charge, slow speed, and slow acceleration. Tesla Motors sought to change all of that (and they did with their Tesla S, which can go from 0 – 60mph in 4 seconds), but their goal was loftier.The Tesla Model 3 is set for production in 2017. The price tag: $35,000. Musk’s goal when creating Tesla Motors was never to create an electric vehicle that only the rich could afford (the Model S starts at $70k; the Model X, an SUV, starts at $80k), but to have all electric vehicles that anyone can afford. But since driving a vehicle that is powered from the grid (electricity generated by burning coal) only transfers the pollution somewhere else, there is a loftier goal. That is where Musk’s company SolarCity comes into play.

The Tesla Battery

The Tesla battery is a part of the clean energy company SolarCity. Founded in 2006, this company seeks to make renewable energy something that every home will not only be able to afford but will want to incorporate.

SolarCity designs and installs clean energy systems in residential and commercial settings. They have designed the Tesla Battery, a high-efficiency sleek looking battery, which can be enough to completely remove someone from the grid (given adequate solar panels, low consumption, and other factors). The big idea here is that by using SolarCity’s clean energy updates a household can become less dependent on electricity, power their electric vehicle, and ultimately reduce their footprint on the environment without spending an outrageous amount of money.

The Hyperloop

Southern California has long had a freeway problem. There are so many people living in the area that the roads become congested at nearly all hours of the day. The problem is exacerbated by inadequate public transit in the area. California has proposed a $70 billion high-speed light rail system to transport people from LA to San Francisco. Musk claims that his proposed Hyperloop will cost just $6 billion, and be able to make the trip in a mere 30 minutes.

The Hyperloop looks like something out of Futurama. Passengers would enter a 2-meter wide pod that would be zipped through a long tube. The entire thing would run on (presumably) renewable electric energy. The result would be a low impact form of transportation that could help alleviate traffic burden across the country (when installed elsewhere).

The Bottom Line

How will Musk and his enterprises revolutionize the world? It has already happened. From PayPal taking over the digital currency world to SpaceX already making flights to Tesla building an affordable electric vehicle (with self-driving capabilities), Musk’s inventions and companies have already revolutionized many aspects of the way we live and think.

As the population continues to grow, we need lower impact forms of living. Regardless of whether a person believes climate change is caused by man or a natural phenomenon, the reality is that any time we can pollute less, and leave the world a cleaner place, and then everyone wins.

Google Express vs. Amazon Prime Now (GOOG, AMZN)

Alphabet Inc. Today Google Express drivers no longer have to visit hubs. Express drivers now pull double-duty as shoppers who receive orders on their phones, purchase the items required and then deliver them to customers. The participating retailers have all approved the Google Express program and drivers are able to pick up items at any branch of Staples Inc.

are competing again, this time in the delivery world. Not only are the two companies trying to get their super-speed delivery businesses off the ground, but they’re both expanding into fresh grocery delivery and competing for independent contractors who will deliver for them.

Google Express

Google Express started out with little fanfare in 2013 in the San Francisco area. The concept at the time was similar to what Amazon does today: drivers would deliver packages from central warehouses to customers within a guaranteed time frame.

. Google Express has now expanded to include 10 states, 10 cities and offers fresh grocery delivery in San Francisco and Los Angeles.The service is not cheap. Membership runs at $95 a year for unlimited deliveries which reach the spend minimum (varies per store), and non-members pay $4.99 and up per store on the order. For drivers, Google Express is another “job” in the sharing economy. Google contracts the driving out to independent businesses who then hire independent contractors for shopping and delivery.

Amazon Prime Now

Amazon Prime Now is a fast way to have your Amazon products delivered. Americans in over a dozen metropolitan areas are now eligible for deliveries within two hours and even more live in cities where Amazon offers same-day delivery.

Very few third-party stores and restaurants have partnered with Amazon to allow Amazon Flex drivers to purchase and deliver products on their behalf. However, at a cost of $99 per year (only $4 more than Google Express), and with many more advantages to signing up for Prime, Amazon’s lack of store choice can be forgiven.

Deliveries within two hours or on the same day are free for Prime members while non-members can expect to pay a whopping $8.99 per order. With massive warehouses throughout the country, Amazon Flex drivers find themselves commuting throughout a city and returning numerous times to an out-of-the-way warehouse to pick up new packages. However, since the work is allotted directly to drivers through Amazon and there’s no shopping required, the system works better than Google’s. Drivers select a window of availability that’s as short or as long as they’d like based on what Amazon decides are the company’s needs at the time.

Which Will Be Victorious?

There is no doubt that from both the consumer and the worker side, Amazon will beat Google as the companies foray into the sharing economy. Amazon provides a better service at a better price than Google. There are few consumers who are loyal enough to Costco or Target and are willing to spend $95 a year to have someone shop and deliver items to them when Amazon likely offers the same products.

Google’s delivery system is also inferior to Amazon’s. Deliveries can’t be left unattended, requiring the customer to be home for delivery. Delivery windows are also larger than Amazon’s, meaning that the customers must be available for longer periods of time. In addition, there have been reports that Google Express is unable to handle its delivery volume, resulting in orders that the customer is unable to complete because of a lack of available delivery windows to choose from.

For the drivers, having an easy-to-use app which allows them to become available at will and choose their shift length means greater independence and higher satisfaction. Workers will not be attracted to Google’s program until they have true freedom or increased security through full-time employment.

The Bottom Line

Google Express and Amazon Prime Now are similar yet different for both customers and workers. Customers with Prime memberships are limited to ordering merchandise from Amazon but have their items arrive faster. Google Express members can shop at a variety of locations but will have to accept Google’s imperfect delivery system. For the workers, Amazon offers more flexible scheduling and freedom, but at the cost of having to use their personal vehicles.

What is Google Express? (GOOG, GOOGL)

What’s particularly interesting about Google Express is that the service isn’t quite like Amazon’s Prime Now where customers purchase items from Amazon.com Inc Currently, the Express service is offered for shoppers looking to purchase items from Staples Inc has begun running a delivery company. Instead of having warehouses though, Google Express uses individual store branches as its own personal warehouses and has drivers shop in-store for customers’ orders.

Sharing Economy

Google Express is Google’s entry into the sharing economy. The sharing economy is a revolutionizing part of capitalism, both for workers and companies. With Express, Google has subcontracted delivery to companies who hire independent contractors. These independent contractors deliver for Google on their own schedule and the set-up keeps Google’s costs low enough that the service is viable.

and have them shipped from an Amazon warehouse. While Google tried that model at first, the company soon learned that the faster, more efficient and more profitable method wasn’t the hub-and-spoke system. Instead, Google Express customers use the Express website to select products from a variety of participating stores. The Express drivers then purchase the items from the stores and deliver the items to customers’ homes.

and PetSmart, but is also beginning to deliver fresh grocery delivery. In essence, Google Express operates quite like Postmates except that all of the retailers are aware of the program and complacent with the business model.

The Google Express Business Model

The best thing about Google Express for Google shareholders is its incredibly low overhead. The subcontracted drivers have taken to the Internet to complain about their lack of consistent hours, meaning that the Google Express team is doing a spot on job at only paying the subcontracted companies when they need drivers. A lack of hubs reduces the number of employees needed, as well as the cost of operating a warehouse.

Customers hoping to save money by using Google Express will be sorely disappointed as the service is not inexpensive and there are minimum shipping requirements.

For a Google Express member, the program has a $95 per year (or $10 per month) price. This fee gets the member unlimited orders at most stores and a reduced $2.99 fee for grocery deliveries or for deliveries required within two hours. Customers not willing to commit to another monthly fee will pay $4.99 per store stop and a $4.99 fee for grocery or two-hour delivery.

Each of these orders is subject to additional fees for alcohol purchases or large or difficult to procure orders. In addition, a $3 charge applies to orders that are less than $15, or two-hour delivery orders that are less than $35. It’s certainly a confusing pricing system.

The Future of Google Express

The complex pricing structure of Google Express might be considered too inconvenient for price-conscious shoppers. However, customers who are unable or unwilling to leave their homes will find the service worthwhile if there are no cheaper competitors.

Right now Amazon is a major and much cheaper competitor. Already operating in dozens of cities, Amazon Prime Now offers free two-hour delivery. In even more cities, same-day or one-day shipping is available for free. The cost of a membership for Amazon Prime is $99, an insignificant amount more than Google Express but with the added benefit of no minimum delivery order and all the other benefits that Amazon Prime affords its members.

The clientele for Google Express is limited: few people are loyal enough to their brick-and-mortar store to pay an extra $95 a year to have someone deliver merchandise when Amazon likely carries a similar product which can be delivered quickly for free.

The Bottom Line

Google Express is not without competition. With a slightly different business model than Amazon, Express drivers shop at brick-and-mortar stores and deliver products to customers. The service is pricey but worthwhile for people unwilling or unable to leave their homes.

Amazon Prime Creates a Captive Audience (AMZN)

Sometimes it seems as though Amazon.com Inc. Once you’ve gotten free two-hour shipping, buying things online from Wal-Mart Stores Inc.

is run by the smartest people in the world. In the past 20 years the company has grown from a bookstore operating out of a single room to become the largest retailer in the United States and one of the largest in the world.

How has Amazon grown this quickly? As its number of customers increase, so too do its number of Amazon Prime members. Amazon Prime is the leading force of growth for the company, mainly because customers find it so difficult to leave.

A Captive Audience

Traditionally, when we think of the term “captive audiences,” we think of advertising in busses and subways and of previews at the movies. However, captive audiences can be created through peer pressure and loyalty. For example, sports teams are notorious for this practice. No one forces fans to buy merchandise and yet the fans are held captive to the teams who can charge as high a price as possible for merchandise.

Amazon Prime membership captivates shoppers. For a small fee, shoppers get a huge benefit over the traditional shopping experience. Once subscribed, members can get free, unlimited two-day shipping throughout the United States, free one-day shipping in most of the United States, free same-day shipping in dozens of cities and free two-hour shipping in 16 cities.

isn’t going to happen. While Amazon once ran the e-commerce world, other retailers are starting to catch up, forcing Amazon to provide more enticement to keep its customers.

Increasing Prime

A Prime membership has only gotten more valuable since it was first introduced in 2005. Aside from free, fast shipping, Prime members have access to the Kindle library, free streaming video and music and free photo storage. Amazon is working hard to increase the number of services it offers to Prime members in order to increase its number of Prime members.

Amazon’s obsession with its Prime number is not unknown. The company grows and boasts about growth of this metric, even when revenue and profit are all over the place. Amazon Prime members spend, on average, twice as much as non-members and have a reported renewal rate of 95%. Despite Prime members making up the majority of Amazon’s dangerously high shipping costs, Prime membership is pushed, repeatedly, on every single Amazon user.

Once a user gets into the Amazon world, he is captivated and unable to find anything similar elsewhere, as well as unable to quit using the e-commerce giant. Once you’ve paid a $99 fee, every purchase lowers the cost per use, creating a permanent incentive for buyers to shop more. There is also no incentive to comparison shop because Amazon claims to sell everything.

Cost of Amazon Prime

Amazon Prime membership is a relatively inelastic service. The company last raised its prices in 2014, claiming that the value of the membership had increased. This price increase did little to affect demand: membership has since grown from an estimated 20 million members in early 2014 to an estimated 54 million members in America alone today. Whether these figures count temporary trial memberships or include figures that are heavy in particular areas is unknown, since Amazon keeps its Prime number a closely guarded secret.

The Bottom Line

Amazon’s growth is fueled by its Prime members. Membership grows exponentially, year after year, and the company boasts an incredible renewal rate. By creating a service to which users are addicted, Amazon has created a captive audience for its merchandise and Prime membership.

What is Costco’s Auto Program? (COST)

, the warehouse store that everyone either loves or loves to hate, has a secret. Costco members can buy cars through a little known program called the Costco Auto Program.

Haggle-Free Shopping

The program works like this: Costco has partnered up with all the major car manufacturers across the country to work out the best pricing for its members. Dealer and car salesmen are trained by Costco to become Authorized Dealer Contacts and can then sell cars to Costco members at the agreed upon price. While Costco isn’t selling the cars directly, they’ve done all the haggling for a one-stop shopping experience on most cars for sale.

Costco members in the market for a new car need to remember one important fact: they must find their dealer through the Costco Auto Program. Stories abound on the Internet of consumers calling dealerships directly and being assured that the salesmen were authorized dealers, only to be bait-and-switched when the customer arrived to purchase a car. Going directly to a dealer is a costly mistake for Costco members.

Non-Confrontational Shopping

By using the Costco Auto Program, Costco members get the benefit of Costco’s Member Advocacy Group: a customer service body to which members can complain if the dealership isn’t treating them fairly.

Since Costco’s car sales are actually sales through a dealership, all national sales promotions and manufacturer incentives are considered when establishing the price. Members can also enter into lease agreements with their Costco Authorized Dealer, as well as trade-in their old vehicle for credit. Despite its name, the Auto Program isn’t limited to new automobiles. Members can also purchase used cars, motorcycles, ATVs, scooters and snowmobiles at prices previously haggled by Costco employees.

Because the prices are standardized for all Costco members, there’s no need for the car salesman to be pushy or for the consumer to feel intimidated. Instead, Costco has created a program which allows for a comfortable, non-confrontational shopping experience.

The Side Effects

The program is obviously not without its drawbacks. Customers who are great hagglers have reported online that they were able to get an equivalent or better price than what was offered. Members should also beware of dealers who are looking to make a bit more than the tiny margins that Costco offers by selling complimentary or accessory products or by trying to up-sell the shopper on a different vehicle.

Perhaps the most inconvenient factor of all is that Costco’s Authorized Dealers cannot reveal prices over the phone. For members who live near an authorized dealer, this isn’t a problem because the customer can easily go to a dealership, have a coffee and learn the prices. Customers who must travel long distances to get to an Authorized Dealer are either less likely to make the journey or more likely to make a purchase since they’ve traveled all that way.

All members can take advantage of Costco’s Auto Program Service Centers. In areas where the local Costco doesn’t have a service center, Costco has teamed up with Authorized Dealers to provide a 15% discount on services (excluding oil changes). A member who buys a used car through Costco’s Auto Program sees a one-time coupon for 50% off at an Authorized Dealer Service Center. The prices set at Authorized Dealers are not negotiated through Costco and so buyers should also beware when bringing their vehicle to a Service Center.

The Bottom Line

Costco’s Auto Program is a great idea for shoppers who are too nervous, too ill-experienced or too busy to negotiate on a new car price. For only the cost of a membership, Costco members get a set price pre-negotiated by Costco. At the very least, all consumers should visit an Authorized Dealer at the beginning of their search for a new vehicle.

Airline Ticket Prices: What a Difference a Day Makes

 

It’s not too early to start thinking about summer. For the best prices, book domestic tickets starting about three months from your departure date or five months ahead for international travel.

When to Fly

The main question now is when to fly. Suggestion: Don’t just pick a week or two and say that’s when we’ll go, not if you have any flexibility at all. Instead, take advantage of seasonal airfare changes and see what a difference a day makes. If you depart on your trip 24 hours too soon or 24 hours too late you could miss significant savings.

The following good and not-so-good departure dates come from an analysis of my company’s vast storehouse of historical and real-time airfare data. Use these dates as a general guideline because airfares can and do sometimes change based on rising or falling demand (which is why it’s a must to always compare ticket prices no matter when you fly). As of now, the following dates are expected to be the best bets for passenger prices breaks.

Best Dates to Fly: Spring and Pre-Summer Trips

It helps to know that airlines divide the year into specific fare seasons. Winter is cheapest, fall is generally a little cheaper than spring while summer is most expensive. There are also lesser variations within seasons.

  • March 16: Last day to depart and still pay winter season ticket prices (generally the cheapest of the year). As of March 17, most prices will rise.
  • May 16: Last day to depart and still pay spring season ticket prices (generally cheaper than summer). A bump in prices begins May 17.
  • June 9: Last day to depart and still pay lower pre-summer season ticket prices. As of June 10, peak-summer prices take over.

Best Dates to Fly: Late Summer and Fall Trips

Best bet for summer vacation bargains: Take off on Aug. 23 or later. Most airlines drop prices at this point because demand drops. You can thank all those children heading back to school.

  • Aug. 1: Starting this date, airfare drops slightly for weekday flights (Monday to Friday).
  • Aug. 23: Starting this date, airfare drops significantly as the cheaper fall season gets underway. Watch for another fall price drop in mid to late-October.
  • Thanksgiving Day (Nov. 24): The holiday itself is typically the cheapest day to fly during this popular travel period. The most expensive days to fly during Thanksgiving are usually the Wednesday before (Nov. 23) and Sunday after (Nov. 27).

Best Dates to Fly: Europe Trips

This year, the better and worse days for trans-Atlantic flights mirror the domestic dates. Tip: Look for more competition in the overseas market from European discounters such as Norwegian and Wow Air

  • March 16: Last day to depart to take advantage of cheaper winter rates. Prices jump a bit starting March 17.
  • May 16: Last day to take advantage of cheaper spring fares. As of May 17, ticket prices jump significantly as the peak summer season for Europe gets underway.
  • Aug. 23: Fall pricing begins, and fares drop for the season. Look for another price drop as the cheap winter season gets underway in late October.

The Bottom Line

Final thought: Travelers can usually save even more on domestic flights by flying on one of the traditionally cheapest days – Tuesday, Wednesday and Saturday. For Europe, it’s usually cheaper to fly during the week than on a weekend.

Wait on Buying a Pickup (F, GMC)

Wait on Buying a Pickup (F, GMC)

By Tim Parker | March 11, 2016 — 6:30 AM EST

 

 

It’s a buyer’s market if you’re looking to purchase a new car. And if you can wait even longer, prices may get even better, if auto analysts are correct.

The Wall Street Journal, citing Manheim Inc., a leading auction company that tracks vehicle prices, reported that the average pre-owned vehicle fell 2% year over year to $10,345 in February. This represents the second consecutive year that monthly vehicle prices have declined.

A Good Time to Buy Used Cars

Here’s where the news gets even better for consumers – though not so good for car dealers. Economists believe that prices will continue to drop over the next couple of years as an increasing amount of lease returns hit the market for resale. In 2009, approximately 2.4 million cars came off lease and re-entered the market as used vehicles. That number decreased to 1.7 million by 2013, but as the economy rebounded from the Great Recession, it rose.

According to Manheim estimates, more than 3 million cars are expected to reach the used car market in 2016. Anyone with an understanding of basic economics knows that when more of something is up for sale, prices tend to drop – and there’s little car dealers can do about it.

But Not Trucks

But there’s one large exception to this trend: pickup trucks. Per a recent Manheim report, pickup truck values shot up 7.4% to an average price of $16,125. In addition to fetching higher prices, automakers love pickup trucks because they’re popular. In 2012, Ford Motor Company’s F-Series line of pickup trucks was responsible for 90% of its profits and General Motors Company’s (GMC) Silverado and GMC Sierra lines accounted for about two-thirds of its earnings.

Don’t Get Too Excited

You may be rejoicing at the fact that your next used car may come at a bargain, but this isn’t good news for consumers looking to sell, as their car’s trade-in value could be significantly lower. Having a glut of cars on the used car lot will make dealers less willing to pay higher prices for trade-ins.

And what about leases? Lower used car prices can affect new leases, too. Because you won’t own your car at the end of the leasing term – unless you buy it – you are essentially renting the vehicle. Your monthly lease payment is based on the dealer’s perception of the car’s residual value, which is how much the car is worth at the end of the lease; in other words, you’re paying for the depreciation of the vehicle. If, at the end of the lease term, the residual value is significantly lower than the sticker price because of low used car prices, your lease payment has to be higher to make up for the car’s drop in value. That kind of stinks, doesn’t it?

Then there’s the projected rise in interest rates. Although the financial markets aren’t off to a very good start in 2016, the trajectory for interest rates is clearly to the upside. Nobody knows when the next rise in rates will come, but one thing is for certain: Those ultra-low interest rates on car purchases won’t last.

The Bottom Line

As used car lots fill up with an oversupply of vehicles, prices should drop. That will bring down the price of new car purchases as well. Does this situation mean you should rush out and purchase a vehicle? Probably not. There are many deals out there now, but even better deals could come later.

 

Is Amazon Prime for Frugal Shoppers? (AMZN)

Given today’s economy, frugality is far from people’s minds. For some Americans, saving as many pennies as possible is the most important part of any shopping trip. For these people, Amazon.com Inc.’s Amazon Prime is a program where members pay to shop. Retailers like Costco Wholesale Corp.

Prime membership program sounds like a great idea: save time by shopping online, take advantage of free shipping and get access to free media services. But with the $99 a year price tag and the addictive properties of Amazon Prime, is it a good idea for frugal shoppers?

Cheaper and Better Options

and Sam’s Club (a subsidiary of Wal-Mart Stores Inc. have also successfully implemented pay-to-shop programs. In Costco’s case, margins are capped a little over 10%, providing shoppers with more or less the lowest price all the time.Unfortunately, Amazon doesn’t have a true pay-to-shop business model. The company allows members and non-members to purchase the same products at the same prices. The $99 fee is not for access to cheaper goods, but a promise for fast delivery.

By signing up for Amazon Prime, a frugal shopper might feel that he’s saving money. Shipping is “free!” after all. However, by joining an addictive service and removing the incentive to comparison shop, members may be missing out on the potential for better prices elsewhere.

On the service side of Amazon Prime, users looking to sign up for Amazon Prime to take advantage of cloud storage can instead look to the abundance of free storage services. Users excited about the Kindle library, Prime Instant Video or Prime Music can find free or less expensive counterparts elsewhere.

Don’t Tempt Yourself

What’s more, frugal shoppers who sign up for Amazon Prime will find it difficult not to shop. The company is very adept at targeting customers based on search and purchase history. Constantly seeing things you want or that are on your wish list can be too tempting for some shoppers, especially when Amazon has one-click shopping and there’s no need to accumulate $49 worth of purchases for free shipping.

With a fixed-price membership, every purchase lowers the cost per use. A Prime member who makes 10 purchases a year will pay $9.90 per shipment, and a member who makes 100 purchases a year will only pay $0.99 per shipment. In fact, Amazon Prime customers make so many purchases that they spend, on average, twice as much per year than non-members.

Even frugal customers looking to join Amazon Prime for their media services will likewise receive promotional material, tempting them to make purchases they would not make otherwise.

Amazon has an estimated 54 million Prime subscribers in America alone and a renewal rate that tops 90%. While data about how many free trials are converted to memberships is unknown, taking a look at Amazon’s reported Prime numbers over its decade in operation tell you that people are converting to full memberships at an incredible rate.

Amazon is in the business of selling things and it’s really, really good at it. Frugal shoppers without an iron-clad resolve will find themselves slowly succumbing to Amazon’s marketing department.

The Bottom Line

The convenience of free, fast shipping makes Amazon Prime an addictive shopping program. Joining a membership program which sends targeted advertising and whose members spend twice as much as non-members is not the way to be a frugal shopper. People looking to save money should comparison shop and not be loyal to a single retailer.

Will Amazon’s Logistics Ground UPS and FedEx? (AMZN, UPS)

How much will Amazon.com, Inc.’s That’s become a legitimate question after Amazon said last week that it would lease twenty 767 freight aircraft made by The Boeing Company

improved logistics network hurt the growth of United Parcel Service, Inc.

from Air Transport Services Group. These are wide-bodied freighter jets which Amazon will use for its own air transport network to speed up delivery, presumably to avoid having to depend on either UPS or FedEx. And that’s just the beginning.
According to reports, the Seattle-based e-commerce giant has had discussions with Boeing about buying its own 767 freighters. What does that mean for UPS and FedEx? Mark May, an analyst at Citigroup weighed in on Monday.

This creates concerns of a significant new investment cycle and of a change in the competitive landscape of the U.S. small package market…. While Amazon may shift greater shares of volume to other channels, we expect package volume growth to remain stable from Amazon and be complimented by growth from other e-commerce customers.”

According to May, FedEx and UPS combined delivered roughly 28% of Amazon’s U.S. packages in 2015 and made up — give or take — 5% of domestic volume at each carrier and approximately 15% of FedEx and UPS’ incremental domestic volume growth in 2015. In other words, while Amazon is an important customer to both UPS and FedEx, the numbers suggests that both UPS and FedEx won’t fall off a cliff should Amazon decides it can live without them.

For some context, consider Amazon contributes about 2% to 3% of UPS’ earnings. In fiscal 2015, UPS earned $5.43 per share. Assuming Amazon accounted for 3% of that total, it comes to about 16 cents per share. This means without Amazon, UPS would have earned $5.27 per share in 2015, which would have still been a 61% year-over-year rise from 2014 of $3.27 per share.

The Bottom Line

Amazon’s goal is to get products to the consumer as quickly and as efficiently as possible. While Amazon is also exploring drone deliveries and ocean freight as potential delivery and logistical options, it will still rely on both UPS and FedEx to maintain its delivery scale. And that will be the case for the foreseeable future.

Amazon is the New King of the Wal-Mart Effect (AMZN, WMT)

The Wal-Mart Effect is the name given to the economic pressures created by Wal-Mart Stores Inc

as it cut prices so low that the retailer destroyed even its strongest competitors. Today though, Wal-Mart faces a new mega-retailer, one that seemingly came out of nowhere.

In fact, Wal-Mart became so large and so inexpensive that it began to put large retailers out of business. In the United States, both Sears and K-Mart Amazon.com Inc

is the new leader in driving its competition out of business.

The Wal-Mart Effect

In the late 20th century, Wal-Mart took over rural America in a way that had never been seen before. The company’s growth rate exploded in the 1970s and Walmart has continued exponential growth by expanding internationally. With a company so large and newly present in every American’s life, it became hard not to vilify Sam Walton and his chain of discount stores.

The largest complaint that the rural population had was that Wal-Mart was shuttering local businesses that couldn’t compete. Although the movement to “buy local” became widespread, the cheap prices, extended hours and generous returns policy that Wal-Mart offered was enough to lure people from the local businesses and cause the smaller retailers to close or leave town.

suffered under Wal-Mart’s growth as its middle-class clientele saw the low prices offered by Wal-Mart and abandoned stuffy downtown department stores.

Enter Amazon

Ironically, Amazon is having a Wal-Mart effect on Wal-Mart itself. The upstart e-retailer has grown from a single room online bookstore in 1994 to a multi-billion, international leader in the e-commerce industry. In July 2015, Amazon overtook Wal-Mart to become the largest retailer by market cap in the United States, a feat that dozens of retailers have tried to regain since Wal-Mart stole the title from them.

How is Amazon winning? Much like Wal-Mart was in small towns, Amazon is universally more accessible to consumers than its competitors, and offers lower prices on certain merchandise. Free shipping and free video and music streaming via their Amazon Prime program also entice customers to shop at Amazon over the competitors.

Cut-Throat Amazon

What really helped Amazon with its growth is the management’s ability to be cut-throat. Amazon’s team has no problem pushing suppliers to continually lower prices (much like Wal-Mart still does today), nor do they have a problem with losing money if it means driving the competition out of business.

Amazon’s main competitive factor in its early days was what helped it drive bookstores, small and large, out of business. Amazon is not required to collect sales tax in states in which it has no physical presence so it opened few bookstores in less populous states.

Today, Amazon no longer needs that sales tax advantage. The e-commerce retailer has grown so massive and has shareholders that are willing to accept huge losses for the greater good of the company. So, rather than continue to have warehouses only in small states, Amazon is opening warehouses everywhere. Although people will have to pay sales tax, Amazon can now market itself as the closest thing to a brick-and-mortar store as any e-retailer can, and major U.S. cities can now have products delivered within two hours.

The Bottom Line

Since the 1970s, Wal-Mart has been using its status as an economic powerhouse to force suppliers to cut their prices and to then pass these savings onto consumers. Local businesses were unable to achieve the same low prices and were ultimately driven out of business. Today, Amazon is employing the same tactics to crush Wal-Mart and dominate the American retail market.

The author is long Wal-Mart.