Package Delivery by Drone?: Bloomberg West (12/02)

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Dec. 2 (Bloomberg) -- Full episode of "Bloomberg West." Guests include Amazon's Craig Berman and Bloomberg Businessweek's Brad Stone. (Source: Bloomberg)

Live from pier three in san francisco, welcome to the late edition of "bloomberg west," where we look at the technology and media companies shaping our world area i'm emily chang.

Let's get to the rundown.

One of amazon's busiest fulfillment centers -- with the fight to keep up with the onslaught on this cyber monday, see how amazon keeps going with computers.

And the amazon box delivered right to your doorstep?

Ceo jeff bezos says they could be just a few years away.

And the obama administration says that healthcare.gov is so much better, it is like night and day.

First, to the lead -- cyber monday is not over but the sales numbers are trickling in.

It is likely to be the biggest online shopping day of the year.

Ibm says overall sales are up 19% so far with more people buying smart phones and tablets.

Mobile accounts for a third of all purchasing with mobile shopping of 62% over last year.

Amazon, the world's largest online retailer, is shipping millions of orders every day.

I want to bring in our editor- at-large cory johnson he was at in amazon fulfillment center in phoenix, arizona.

How was it today?

I wonder how many of these packages are going to my front door.

It seems like the only thing i do these days.

It was not always that way.

This was a promotional event in the past, but this has become an important day.

In part because of the drivers behind the growth of the internet.

One of the things -- the way that amazon has automated this process.

This is called the slam line.

This is one of the final steps.

The item has been picked.

The order number is assigned to the item as it goes through the fulfillment center, the conveyor belt here, they put a label on here.

It goes down the slide.

This is called the slam lied.

Why?

-- this is called the slam line.

It looks like we have lost cory, but it looks like he is having a great time.

This is his second year at the amazon fulfillment center.

We will ask when he returns how busy it is this year compared to last year.

I want to bring in our senior west coast correspondent jon erlichman.

It's also time for brick and mortar retailers to put their digital studies to the test.

For more on what brands are leading the pack, jon joins us from l.a.. what brands are out front today?

I was really interested to see the promotions a variety of retailers were providing.

Obviously this is a big day for amazon, ebay, and walmart, what if you look at apparel retailers -- bloomberg industries was crunching numbers on this today -- they found so many online for motions that were more significant than last year.

Apparel retailers, gap, and taylor, american eagle, with seal, urban outfitters -- wet s eal, urban outfitters.

Then you look at jcpenney and target.

To see those more aggressive promotions online -- that is what cyber monday is all about.

That is what black friday is all about.

Having deals.

If, however, these are deals that are baked in because management decided we needed a little more sales muscle on cyber monday, you have to wonder what that means for margins.

That is how the game works them obviously.

You want to generate a certain number of sales.

Maybe you sacrifice a little bit of margin.

And mobile payment volume jumped 109% year-over-year.

Obviously shoppers are warming up to the idea of paying for things on their phone and potentially mobile payment options are better?

Yeah.

I think that is it.

That number is huge in percentage terms.

This time last year we were not talking as much about people shopping on their phone.

Surfing on their phone, looking for deals on their phone, absolutely.

But actually buying something on your smartphone was less likely last year than this year.

Additionally, we have seen big retailers make huge investments in technology to allow for this to happen over the last 12 months.

He put those things together, that retailers have aggressively implemented new technology to make it easier coupled with the fact that people seem that much more comfortable saying yes, i am going to buy this on my phone, and that helps to explain those big percentage increases paypal was talking about.

Emily?

All right, jon erlichman, thank you.

Coming up on "bloomberg west," we will take you inside another e-commerce giant, ebay.

We have exclusive interview with the ebay ceo and the paypal president.

Do not miss our insights ebay special this friday on "bloomberg west." we will be asking them, of course, about their biggest rival amazon.

Could a drone be bringing your amazon packages to your front door?

We will look into the real lots of drone delivery, coming up.

? i'm emily chang and this is "bloomberg west" streaming on your phone, your tablet and bloomberg.com.

Cyber monday is the biggest day of the holiday season.

And cory johnson had a look at the world largest e-commerce company at the numbers.

Amazon runs on speed.

Keeping those little brown boxes moving is not cheap.

They have 30 million fulfillment and data centers in the u.s. and another 30 million square feet overseas.

Last year, amazon spent almost 4.6 billion dollars in capital expenditures.

That is twice as much as the previous year.

And shipping -- even after charging customers, amazon still lost tree $.3 million in shipping expenses last year.

Amazon is hiring 70,000 temporary workers.

The holiday quarter was 35% of their revenue last year.

Cyber monday saw more than 20 million -- sold on cyber monday alone.

Our cory johnson is with us now from one of amazon's biggest the film at centers in phoenix, arizona.

Cori, how is it going?

It is crazy busy here.

They are seeing a little business.

They have 100 new employees today.

The head of marketing communications for amazon -- i want to talk about the importance of this eight for amazon.

It remains to be seen what happens today.

Last year, it was our biggest day.

306 items sold per second, which far outpaces any other day of the year.

It is a big day and we have been gearing up for it.

Is this all going to come back up -- i thought the focus of what you guys do, selling stuff, if you would be getting that word out?

What you see in this building is the combination of human power, machinery, the convenience and the conveyor belts, and the software.

It is all put together.

Our i.t. structure, or computing infrastructure, the amazon web services, but also it helps tell everybody where this product is going, where it is on the shelves, and our employees can grab it off the shelf and get it into a box and out the door.

So, what is selling?

Kindles are selling, digital cameras have been really hot.

A lot of other digital cameras.

We had a digital camera earlier today we marked down that sold really fast.

We had an increase in computers today.

When hundred $99. sold out extraordinarily fast.

Toys -- legos and word games.

Thomas the train engines sets.

Is this more deals than previous years?

We have amped it up to offer ordeals adds a higher velocity.

-- to offer more deals at a higher velocity.

We are doing maybe two or three an hour, for an hour.

Now we are up to one every 10 minutes.

The customers love it.

It is competitive, obviously.

There are a lot of folks offering deals.

It is something that customers gravitate to and they tell us that they love it.

You mentioned black friday, and i think a lot of retailers are going to thanksgiving day, a controversial move -- step oh we started a little bit.

We started our big deal week a day early.

But this is a compressed shopping season.

We started maybe a day earlier than we did last year or the year before, but it is because there are fewer days.

We were e-mailing last night.

"check out six d minutes, dude -- 60, minutes, dude." why last night he announcement about the drums?

It was not a date we picked.

It was convenient time to talk about the amazon story.

I think it was more of a coincidence than anything.

This is great, great -- it showcases a lot of what amazon is about in terms of hours.

Of -- our spirit of innovation.

But also how much fun we are having days like today some of being able to create and innovate on behalf of customers.

[indiscernible] it is thinking big.

Clearly, that is in the dna of amazon.

Innovating on behalf of because number.

Innovating, taking something thinking how we can take a technology, create a technology and build it in terms that really benefits customers.

And getting something from the time that someone clicks, it getting out of a building like this and into a patio or backyard in 30 minutes -- that is thinking pretty big.

That goes to the heart of how we think about innovation and experimentation on behalf of the customers.

You have worked in the customer service art of this company -- everyone puts their time and.

What did you do?

We answer phones.

We help answer phone calls.

We also help answer e-mails.

We definitely help customers answer a lot of questions that are easy on the website.

Like the most frequent question people want to ask -- where is my stuff?

We created a button on the screen.

Years and years ago -- it just says "there is my stuff?" -- " where is my stuff?" things may not work out perfectly on delivery.

Things may be damaged.

We have worked it out.

That is something we take very seriously and put a lot of energy into.

When there -- when something is in the wrong place, the does someone care enough to find a solution for it?

That notion of a continual improvement to pick up the rough edges?

Right.

I have never seen this building as full as it is and you were talking about the lineup of trucks.

They have done a great job of continuing to improve and working with all of the associates, the thousands of people in this building, to look for places and look or areas of waste, looking for ways where we can reduce the amount of time, ways to think differently about the situation to maybe streamline it.

I think the team has done an amazing job to further allocate and get more product into the building.

Thank you very much.

All right, cory johnson, editor at large from amazon in phoenix, arizona.

Jeff bezos has a plan to use drones to deliver packages in 30 minutes.

Is this the next stop for amazon?

? welcome back.

I'm emily chang and this is "bloomberg west." you can also catch our early edition at 10 a.m. pacific, 1:00 eastern.

Could you get your package delivered by drone?

That is what amazon ceo jeff bezos hopes.

Take a listen.

I know this looks like science fiction.

It is not.

Wow.

This is early.

This is years away.

We can do half hour delivery.

Half-hour delivery?

It can carry up to five pounds.

The faa released a statement saying it currently does not allow computerized drone like as envisioned by amazon.

How would amazon try to get it to work and how crazy is this?

I am joined by the author of "the everything store." at least leave anyone has any idea about this, it would be you.

Does this surprise you?

Of course.

This is a far out idea.

You can't write it off.

Amazon has had a lot of nutty ideas over the years.

To be sure, as jeff claimed quite openly on the 60 minutes piece, it's not happening anytime soon.

The faa is talking 2020 really for this kind of unmanned aerial traffic in our skies.

Talk about the challenge that would be involved.

You mentioned interference?

Sure.

If someone wants to grab one.

There are also questions about a device delivering one item at a time.

Our skies would be filled.

Would they put lots of boxes in a truck and achieve scale that way?

I think it has more to do with the state that jeff was making about amazon itself.

Ok, let's talk about that.

Why mention this now?

I think it's reflects the kind of risks they like to take.

They want to be seen as big thinkers, as a risk takers.

Look, amazon is a discount retailer.

And like all discount retailers -- they need to be comfortable with the larger economic impact they can have.

Amazon had a lot of labor problems in europe.

Let's talk about that.

Are they trying to divert attention from that?

There are workers striking in europe, in germany right now.

I do not think it is a matter of diverting attention.

They are on their own.

It's cyber monday.

Amazon does have its share of stories.

To be clear, walmart is facing a lot tougher scrutiny in the u.s. and around the world.

Amazon is on that path where people will begin to scrutinize the way in which it treats its employees.

It is very frugal.

We will see if there is more trouble along those lines.

You've talk to workers writing your book.

How taxing is it to work in the fulfillment centers?

They do have extra staff, but it's tough.

I talked to a lot of workers, temporary workers who plan these years, who like it.

I'm not willing to sit here and say that these jobs are bad because they are hard.

People generally know what they are signing up for an amazon is paying higher than the minimum wage.

They do make mistakes.

The big one is the lack of air conditioning in southwestern facilities.

That is something that they have corrected.

Also, jeff raises likes space.

Space exploration.

It's this marrying his passions?

I don't know.

I think they are pretty separate.

Maybe this does reflect his greater interest in these technology leads.

It's a very different kind of problem sets.

Mostly i think it is him trying to position amazon as being futuristic, risk-taking, at a time when we might see them as a discount retailer.

And rb ever going to see amazon drones?

Eventually.

You say yes?

In our lifetime?

There are practicalities that have to be overcome.

How much do you want to wager?

You made a lot of money on this book.

I think in our lifetime.

All right.

Thanks, brad.

We will be right back.

? this is not paris or milan.

But this fashion show in mongolia is when them on the map . it showcases what nations have to offer.

Mongolia is only second -- gobi is a rarity in the industry, but it is being challenged by increasing the petition and a shortage of skilled workers.

One problem is the shortage of raw material.

But our goal is to make the final product to send to other countries.

Kashmir makes up six percent of mongolia's exports.

Mining is 80%. economists say the balance needs to change.

We have to take measures to diversify the economy.

It's not easy.

But change is beginning.

Mongolia recently contributed millions to the cashmere industry as it strives to become an independent player in global fashion.

Invest in mongolia.

? ? you are watching "bloomberg west," where we focus on technology and its future.

Trying to reassure business customers about the struggling smartphone makers, and in a letter, the blackberry ceo says they still manage more mobile devices than any other competitor.

Nervous times at nintendo, as console and software sales stall.

They are standing by a prediction that they will sell 9 million wii's. meantime, the new xbox and sony playstation sold more than one million units in the first 24 hours on the market.

Disney's "frozen" could not pull off number one, with "catching fire" getting a total of $573 million worldwide so far.

And apple is buying a social media analytics firm which specializes in data from twitter and offers tools to analyze tweets and other information to track and simmer sentiment.

According to "the wall street journal," they paid $2 million for it, and why would apple want to buy a company that analyzes social media?

Ok, i am going to answer that question, but first, i am going to give a little bit of background on what topsy does.

It looks at social media platforms and all of the data, and it tries to make sense of all of that data on behalf of brands.

There are a number of companies doing this.

The hope is you can better target an ad or better engage with a consumer by making sense of all of the tweets, all of the stuff that is happening on social media.

You are right.

The cofounder of topsy has been on "bloomberg west," talking with emily.

Here is what they had to say.

Back in 2009, after that, we made a deal with them.

We were one of the first licensees.

Ok, so to answer the question about what interests apple in topsy, apple has got a lot of data on its own, and it is always looking for ways to improve the user experience, make sense of some of that data in a way that an apple customer may appreciate.

It is a growing product for apple, so it may be a way to give designers more.

It could be so they can figure out what people are saying about apple, but they are already pretty good at that, so i would say it is the first two.

Does this say something about the battle with apple and samsung?

Does this give them another arrow in their quiver in terms of taking on a competitor?

I think it is important.

It is getting tougher for apple to impress with the hardware.

It may not while you, but the software is so rich and valuable -- it may not wow you.

It is really about improving it for the customer, improving it for the marketer, improving it for the apple partners.

All three of those areas that apple could basically take the technology and try to improve the overall software experience.

Emily?

All right, jon erlichman, thank you.

And the obama administration says it has met its goal in repairing the healthcare.gov website, calling it night and day for where it was in october.

It will allow 800,000 people to sign up daily, but have the government i.t. experts made a enough tweaks, and have they made it known how to hack the site?

For more, i want to bring in our bloomberg news reporter who has been covering this closely.

First of all, is it really fixed western mark they will definitely make improvements to the site, but coming from silicon valley, we have a different idea about what a good performance means, and some of the metrics that healthcare.gov are posting are far below what we would expect for some, like google.

6%, at that rate, we would be aghast if google returned numbers like that for errors or if you're gmail did not work -- if you're -- your gmail did not work.

There are so many engineers out here that probably would have set up a site that would have been working right out of the gate.

You have also said in the process of fixing it, they have perhaps unveiled greater vulnerabilities?

I had an interesting conversation with someone yesterday.

As many as 50,000 people can be online concurrently, simultaneously on the site, and the expert told me that is a blueprint for a hacker.

It was an interesting perspective that i had not thought of before, but it is absolutely true.

In person adding 50,000 is nothing for a hacker.

They may have opened themselves up to hacking.

Can they backtrack on that?

Is there anything we can do -- they can do?

Considering all of the amounts they have paid for this project -- something else, 50,000 simultaneous users does not sound a lot like -- sound like a lot to us where google processes more.

It is a very small number.

However, it may be enough for the site, so while it may seem small by our standards out in silicon valley, and the end of the day, it is certainly not up to the standards of silicon valley, but it is just another sign of the gap between d.c. and silicon valley.

Will it stand up to potential attacks?

Soon, the deadline for signing up is approaching in just a matter of weeks, so it needs to be fully operational, and it is very important that it is.

It seems that they have made good enough improvement.

What problems?

G, if a hacker decides to take out the site, that could be a real problem -- gee, that could be a real problem.

There are a number of people who say they cannot get to the site -- it depends on how many pages you have to go through, and if it is quite a number of pages, and you get an error on one of those pages, and your application vaporizes, that is not successful, though that is a key metric, not how many people can use the site but how many people can complete an application.

All right, we will continue to look at the story as it progresses.

Jordan robertson, thank you.

Up next, it is a day in the life of an amazon package.

How does it get from the amazon loading docks to your house?

You are watching bloomberg, streaming online and on your phone.

? ? this is "bloomberg west." i am emily chang.

We are covering cyber monday from all angles, as retailers have sales.

One of the biggest online retailers of all is amazon.com, but did you ever wonder how those brown boxes end up on your doorstep?

A day in the life of an amazon package.

Heinz catchup, the bagel sli -- heinz ketchup, the bagel slicer, next to one another.

Inside, an army of workers stand each item, and while there is odd emotion everywhere, this is largely a job performed by people, not robots.

A team of people called stormers s --torers -- storers do it.

Location is all tracked by complex software.

As soon a something is sold, another worker, a picker, uses a wireless device, almost like a gps, so the brainteasers is picked from the shelf and sent packing.

Software selects just the right box, even cutting off just enough tape to seal the box.

Then they are stamped and labeled on a fast-moving conveyor belt, and they go down a series of slides, going to the right truck, where they packed the truck, squeezing in as many boxes as possible before the truck hits to its destination.

Stored, pat, picked, and shipped in a way that business has never seen before.

And cory has spent the day in that amazon fulfillment center in phoenix.

He has been covering this story a few years in a row now.

Excuse me.

We are going to go straight to him right now.

I am here with a picker at the amazon phoenix fulfillment center.

Nick, describe what you are doing right now.

It is pretty simple.

You look at what pops up on the scanner screen, and then you pick it out of the bid and send it on.

You are looking for this number.

C, i have learned, is probably the third row up.

Yes, sir.

All kinds of items.

Bags.

A cable for a television or something stashed next to some sunglasses.

Wine corks next two cups, next to baseball caps.

Does this computer know where you are in the building?

Or does it have you running from one end to the next?

It sometimes sends you running from one to the next, but the location is what it gives you.

In other words, it is feeding you things to pick near where you are to be more efficient?

What is next?

This is a raspberry pie small computer.

Though we are going to go this way, straight in the same file.

Where you are, and probably somebody in the west coast that you do not know.

Do you pick until it is full?

Yes.

You have all of these temporary workers coming in.

I heard a couple of thousand.

What is the first thing you have got to get them to do?

A couple of things.

One is the physical labor.

It is very physical for the first weeks, and then it becomes routine.

The other is navigating.

There are tricks?

You have to remember it starts low to high and then low to high.

This seems like really grueling work.

You are going to school full- time.

A full-time picker.

A full-time student.

Actually, i love my job.

This is probably my favorite job so far, simply because i get to be so active area i get to walk around all day, and i am busy, and i get to do a lot of orders for the holiday season.

Did you get a sense of that today?

Yes.

We had about 1000 employees.

We had about 190 employees this morning that we had to train.

You can definitely tell what the number of employees we have had that the orders have skyrocketed.

Sort of an inside look at what is going on in the aisles.

All right, thank you, cory johnson.

And "bloomberg west a reminder, join us for a special," as the broadcast live -- and a reminder, join us for a special "bloomberg west" this friday dealing with ebay.

Surviving and thriving after the dot com bubble, coming up friday on "bloomberg west," and coming up next, can the future be found on railroad tracks?

? ? this is "bloomberg west." i am emily chang.

It is a platform you may have never heard about, focusing on japanese anime, and one company took a majority stake in it.

Our own jon erlichman is in l.a. to explain.

Please explain.

What can you tell us about the company with a funny name?

It is a san francisco company founded by berkeley graduates, and you can get access to network television shows right after they are on tv or right around the same time, so it is a concept for japanese m&a -- anime, and they get access to the shows right after they have aired or right after the same time.

You can get them on playstation or xbox, and people pay.

They pay.

Earlier this year, it was something like 200,000 subscribers, and that number has continued to climb, so it is attractive.

They got started for less than $100 million.

What about the kinds of deals we are going to see in the entertainment industry?

A well-known person, someone who is a longtime fox executive, investing in young companies, a board member of both pandora and twitter, and they were involved in acquiring hulu, and they decided they were not going to sell that platform.

And they talk about this being an anchor platform for the chernin group, because it is the power of the platform.

Especially those who want to pay for content.

We saw it with hulu, and maybe we will be seeing it more with crunchyroll.

Thank you.

We take you to our partnership with innovative ideas.

They may have found the american energy future by looking to railroads.

Wind and solar.

Great ideas, totally renewable, but one of the big questions, when the sun is shining and the wind is blowing, is there an efficient way to store excess power?

These guys had an idea, and they uploaded it to planetforward.org.

Their innovation, use excess solar and wind to power a car uphill.

And water generate electricity.

When wind and sun stop, let gravity go to work.

Coming back down hill.

Giving back to the grid.

They say this could be even cheaper and environmentally friendlier than other power, because no valley would have to be flooded, no dams built.

This could be equivalent to how or half a million homes with just eight miles of track and 800 cars.

It is a process we retake a mass that is twice as much as water, which is what we have here, and we lift it three times higher, so six times more energy production that out oh and equivalent amount of water -- and then out of an equivalent amount of water.

--the -- than out of an equivalent amount of water.

Something outside of fossil fuels, and i think that is important.

During the electricity from sun and wind.

It would make renewables more valuable and move the planet forward.

And frank is with us from washington.

Frank, this could be the key to america's energy future, that is quite a proclamation for this provocative concept, but i imagine there are some challenges with it.

Lots of challenges.

First of all, you have to have an uphill grade, does you have to put them up hill so you can generate power.

Secondly, there is still cost involved.

This is still expensive stuff.

But, emily, here is the thing.

If we are going to move away from fossil fuels, we have to crack the code on energy storage.

As i mentioned, they have a pilot plant outside of bakersfield.

Stay are looking at doing these outside in places like germany, where the top of her fee would lend it self like this -- to this.

In california, one third of the power generated by renewables it holds some possibility.

They say it costs about the same to build as a store and hydro plant but without all of that environmental disruption, so we will see.

We will see, but i like this one.

It has got a lot of potential.

Emily?

All right, we will see.

Thank you so much, and if you have an idea that you would like to submit, visit planetforwar d.org, and check out bloomberg.com/sustainability, and it is time now for the bwest byte, and cory has been all day long at the amazon fulfillment center in phoenix, arizona.

What have you got for us now?

What are you talking about?

I am just getting started.

26.5 million.

That is the number of items that amazon sold on last year's cyber monday.

That is the number, 26 point 5 million.

They suggest that this year could be even bigger.

Jon and i are waiting.

The pickers have good ideas for holiday it.

All right, thank you, guys, and thank you for watching.

We will see you back here tomorrow.

?

This text has been automatically generated. It may not be 100% accurate.

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