Clear Digital Digest: subscription coffee, Amazon ads, retail sales update and cricket data

Today’s Clear Digital Digest looks at some recent stories regarding Pret A Manger and Amazon, reviews today’s new ONS retail data and learns how the data revolution is transforming the world of cricket.

• Pret A Manger’s new subscription service
• How Amazon’s ads service is driving its profits
• Hot off the press: today’s ONS retail sales update for August
• And finally…the cricket data revolution

PRET A MANGER: ALL YOU CAN DRINK

• There’s been quite a bit of noise surrounding the recent launch of Pret A Manger’s new subscription service offering unlimited hot drinks for £20 a month, something I was actually first alerted to via a Gmail ad (see below) last week…

• With its ever increasing profile – and high density of London outlets – Pret is increasingly viewed as an emblematic example of the issues facing coffee/sandwich shops who continue to struggle with the unforeseen ongoing trend to work from home.
• Within this context, this new subscription service makes sense as Pret urgently needs to try new revenue streams.  Wired had a typically insightful take on this story with their article “The rise and fall of Pret A Manger”.

AMAZON’S PROFITABILITY: INCREASINGLY DRIVEN BY ITS ADVERTISING

​Well worth a read is this fascinating article about Amazon and its profitability, courtesy of Ben Evans.

• The article firstly challenges the initially previously received wisdom that “Amazon doesn’t make a profit”, perhaps true in years gone by, but profits jumped especially in 2018 and 2019, reaching $22bn last year.
• More recently, the conversation has shifted a little to state “ah but all the profits come from AWS” – ie Amazon Web Services, Amazon’s highly successful cloud computing service.  Again, while this may historically have been true, the case is made that it’s now Amazon’s ad services that are really gaining in profitability, having grown hugely in revenue over the last 5 years as the graph below shows…

• Although these figures relate just to ad revenue (not profits), Ben Evans posits that “we can make some informed (wild) guesses. So: it mostly leverages existing technical infrastructure and engineering resource. It must have meaningful numbers of sales and operations people, but the system itself is mostly automated. It will have knock-on consequences to other parts of the business - for example, it may steer sales to product with higher or lower profitability. And it seems reasonable to assume that it has pretty high margins…it’s reasonable to suggest that the ad business is contributing as much operating income as everything else apart from AWS, and it’s not absurd to suggest it might be close to matching AWS”.

• Finally, the article also highlights how an ever growing amount of Amazon ecommerce sales take place through its third party marketplace, a trend that I’ve also recently explored in my “The UK marketplace sector – and the role of community” deep dive.  The graph below shows how this has evolved over the last 6 years…

RELEASED TODAY: ONS RETAIL SALES UPDATE FOR AUGUST

The Office for National Statistics (ONS) have today released their latest retail sales figures for August.  We reviewed July’s data in a Digital Digest last month, so here’s a quick update, one month on…

• Overall retail sales increased slightly in August, up 0.7% against the previous month, but more pertinently, up 1.7% on the previous year (August 2019).
• Internet sales accounted for 26.6% of all retail sales in August, the second full month since all physical stores were able to trade.  This share fell back slightly from the 28% recorded in July, but is still significantly higher than the 18.1% recorded in August 2019.  
• With the current volatility surrounding Covid, it is difficult to make any predictions about how much of this shift to online shopping will remain in the medium/long term, but it is certainly interesting to continue tracking this share.

AND FINALLY...

When my subscription copy dropped through my letterbox this week, I was surprised to see The Cricketer magazine (now in its centenary year) highlighting “The Data Decade” on its front page. 

​With the relevant articles exploring how increasing use of digitised data has fundamentally changed recent cricket coverage and some future predictions on how this may evolve, it’s a timely reminder than even such a traditional pastime as cricket is experiencing unprecedented change with its own digital/data revolution. 
But this also demonstrates that there is still a place for more traditional media…yes I do still read some print magazines as well…