Massive Amazon cloud service outage disrupts sites

SAN FRANCISCO — It didn't quite break the Internet, but a 4-hour outage at Amazon's AWS cloud computing division caused headaches for hundreds of thousands of websites across the United States.Little known to consumers familiar with Amazon's online shopping site, Amazon Web Services is a giant provider of the back-end of the Internet. For sites like Netflix, Spotify, Pinterest and Buzzfeed, as well as tens of thousands of smaller sites, it provides cloud-based storage and web services for companies so they don’t have to build their own server farms, allowing them to rapidly deploy computing power without having to invest in infrastructure.For example, a business might store its videos, images or databases on an AWS server and access it via the Internet.

While not all AWS clients were affected by the outage at one of AWS's main storage systems, some experienced slowdowns, after a big portion of its S3 system went offline Tuesday afternooAmazon wasn't able to update its own service health dashboard for the first two hours of the outage because the dashboard itself was hosted on AWS.

"This is a pretty big outage," said Dave Bartoletti, a cloud analyst with Forrester. "AWS had not had a lot of outages and when they happen, they're famous. People still talk about the one in September of 2015 that lasted five hours," he said.

The S3 system is used by 148,213 sites according to market research firm SimilarTech. It has "north of three to four trillion pieces of data stored in it," Bartoletti said.The outage appeared to have begun around 12:35 pm ET, according to Catchpoint Systems, a digital experience monitoring company. Operations were fully recovered by 4:49 pm ET, Amazon said. The Seattle-based company did not comment on the cause of the outage.

That was exactly the problem faced by Lewis Bamboo, a small, family-owned bamboo nursery in Oakman, Alabama.

“As our business is in bamboo plants, pictures are a very important part of selling our product online. We use Amazon S3 to store and distribute our website images. When Amazon’s servers went down, so did the majority of our website,” said the company's chief technology officer Daniel Mullaly.

“Thankfully we also store the images locally and I was able to serve the images directly from our server instead,” he said.

The effects of the outage  varied depending on the site and how it used AWS. Modern websites usually pull data from multiple databases in the cloud that can be stored all over the world, so a photo might come from one place, a price list from another and a customer database from a third

For that reason, entire websites rarely go down but various part of them may take a long time to load or not load at all, leaving broken links or images.

Companies have been steadily moving storage to the cloud because it is cheaper, easily accessible and more resilient. But the downside is that when there are problems, there's a cascade effect.

It's possible to contract with multiple companies to avoid potential problems, but that strategy is pricey, so many companies make peace with the knowledge that on rare occasions they're going to have a very bad day.

"Only the most paranoid, and very large companies, distribute their files across not just AWS but also Microsoft and Google, and replicate them geographically across regions  —  but that's very, very expensive," Gartner's Leong said.

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Beer to go? Amazon applies for liquor license at its secretive grocery store

Amazon has applied for a liquor license for its secretive drive-through grocery store in Seattle, one of the first official documents that links the almost-complete site to the online sales behemoth.

Plans for the 9,700 square-foot building describe it as “a new model of grocery shopping.” Customers place their orders online, then drive by during a specific 15-minute to two-hour window and have their groceries delivered to their cars.

this image from the documents of amazon 

The documents filed with the city's planning department never name the company building the proposed drive-through grocery facility. However, the liquor license application for the address in the Ballard neighborhood of Seattle, filed Feb. 7, lists Amazon as the proprietor.

After perusing the plans, retail food consultant Roger Davidson with the Oakton Advisory Group called the design "amazing." While there are many chains that offer drive thru and pickup service for groceries, with this building Amazon has one-upped them all, he said.

“They’ve designed this facility so that it’s super efficient, so they’re going to be more competitive on costs and labor. I bet you can put in an order and have it in 30 minutes the way it’s arranged,” he said.

Amazon has done an excellent job of getting consumers to buy all sorts of things they once wouldn’t have dreamed of buying online, said Rupesh Parikh, an analyst who covers food and grocery at Oppenheimer & Co. Inc. “Now, grocery is the next category that people are going to feel comfortable with,” and Amazon wants their business, he said.

From the city planning documents, it appears there will be little or no shelves of food and other items to choose from. Instead, all ordering must be done online. The lion's share of the space is devoted to food storage.

Customers who walk in will order from provided electronic tablets and then wait in the "retail room" for their order to be brought to them, according to the documents.

The Seattle company is also rumored to be working on similar sites, one south of downtown Seattle and two in Silicon Valley. The Ballard store is the furthest along. Its temporary certificate of occupancy was issued on Jan. 12.

Amazon (AMZN) declined to comment on the site or its grocery ambitions.

Work at the site of this emporium began in 2016. It's situated in what was once the sleepy Scandinavian neighborhood of Ballard in Seattle’s north end, now a popular spot for tech workers to buy homes. Located on a busy arterial, it's a few blocks between an upscale Safeway and a Trader Joe’s and a near several microbreweries and coffee roasters.

The model is different from the Amazon Go convenience store that opened last fall near the company's headquarters. There, customers walk in, fill their baskets and then walk out, with everything being tallied up by computer and no checkout lines in sight.

For Amazon, moving deeper into groceries is in many ways low-hanging (if expensive to pull off) fruit. Half of online grocery shoppers also have an Amazon Prime membership, so Amazon knows that some of its best customers are going someplace else to do their shopping.

“So they’re trying to recapture them and keep them in their ecosystem,” said Darren Seifer, food consumption industry analyst with the NPD Group in Chicago.

An already shifting supermarket landscape

Amazon's move into grocery pickup isn’t by any means the death-knell of the supermarket — it’s just one more trend in a rapidly changing arena.

Buying groceries online doesn’t replace visits to the supermarket. About three-fourths of online grocery shoppers still go to brick and mortar stores, Seifer said.

But they may be less likely to enter the traditional 50,000 square foot supermarket.

Smaller stores on the European models of Aldi and Lidl are “hot, as is the larger 85,000 to 90,000 square foot store like Hy-Vee which has —  everything, clothing, dry cleaning, restaurant, beauty products,” said Phil Lempert, an analyst who studies grocery marketing and consumer trends.

Wal-Mart was first

Amazon is not the only one playing in this space.

Walmart (WMT) beat it to the punch by several years when it opened its first drive-thru grocery pickup site in Bentonville,  Ark. in 2014. Customers could order groceries and sundries online, then schedule a pickup time.

In the east, ShopRite offers a similar service, as does Hy-Vee in the midwest.

this image from amazone

Walmart's program is in place in 600 stores in more than 100 markets across the United States, with 500 more locations being added in the next year, said spokesman Scott Markley.

It uses personal shoppers who fill the online order then bring it out to the customer’s car in a designated part of the store’s parking lot. Orders placed before 10 am can be picked up by 4 pm.

Walmart's push into online sales was one reason the company saw profits rise in the fourth quarter and continues to see sales rise

Walmart's service isn’t available in the Seattle area, though. The closest are in Vancouver, Wash. across the Columbia river from Portland, Ore. and in Spokane in eastern Washington.

Grocery versus fresh

Online sales have been slowly picking away at the supermarket model. About 6% of Americans do at least some of their grocery shopping online, NPD Group found.

Much of that has been for items typically found in the interior of a supermarket, canned and packaged goods, toilet paper, pet food, soda and the like. Now retailers want to convince customers to move to online for what they’d buy on the perimeter of the supermarket — the areas where fresh fruit, produce, meat and dairy are found.

“That’s harder to replicate online,” Oppenheimer's Parikh said. A can of Campbell's soup is still a can of soup, but if the beets are too big and woody, or the broccoli's starting to flower, customers are unhappy.

Careful training of the store personnel who do the picking is key. Walmart educates its personal shoppers on banana ripeness, for example, so that customers who want their bananas hard and gleaming yellow get just that while those who want a sweeter, brown-speckled banana get that.

In the end, while Amazon's model isn't that different from Walmart's, its customer base is.

"It's a totally different demographic. Young and hip are not the Walmart shoppers. Amazon is," said Lempert.

The only question is whether Amazon can pull it off, said Tom Enright, an analyst with Gartner.

"It means that they will need to be a retailer, something that they have very limited experience of to date."

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Amazon wants to drop packages by parachute

Amazon may have a new option for how it plans to patent filed with U.S. Patent and Trademark Office gives some details on how drone-delivered packages could be dropped by parachute.

From the patent, which was made public Tuesday: "The package delivery system can apply the force onto the package in a number of different ways. For example, pneumatic actuators, electromagnets, spring coils, and parachutes can generate the force that establishes the vertical descent path of the package."

The drone would stay nearby to make sure it arrives in the right spot.

The patent also covers how devices could be used to alter the flight path of packages to avoid things like trees, carports, balconies, power lines, eaves, etc. The vertical decent could even be altered to slip the package onto the balcony of a high-rise building.

In December, Amazon successfully completed its first delivery by drone in a test in the United Kingdom.

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The company's drone delivery service, Amazon Prime Air, is designed to deliver packages five pounds or less via drone within 30 minutes.

Amazon's parachute is not the most out-of-the-box concept the company has considered for its delivery ambitions. In late December, a separate patent was uncovered detailing Amazon's desire to create a flying warehouse hosting drones and packages.

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Amazon sees lower operating profit this quarter, shares dip

THIS IMAGE FROM GOOGLE 

Amazon.com Inc forecast an unexpected dip in operating profit for the current quarter, sending shares down more than 4 percent due to concerns about the costs of investments including new warehouses and video content.

The world's largest online retailer also reported lower-than-expected fourth-quarter revenue and missed Wall Street targets for its closely watched cloud computing unit.

The Seattle-based company is spending heavily to take greater control of package delivery and to expand its video service around the world. Key to its plan is to entice sign-ups for Amazon Prime, its $99-per-year shopping club, which has led to users buying more goods, more often.

"The story is an investment story," said Amazon Chief Financial Officer Brian Olsavsky on a conference call with reporters, noting "stepped-up" spending levels have continued into 2017.

GlobalData Retail analyst Anthony Riva warned of profit erosion.

"Low cost and fast delivery are a fundamental part of Amazon’s appeal to consumers. However, they are also its Achilles' heel," he said in a note.

For years, Amazon has posted roller-coaster results as founder and Chief Executive Jeff Bezos emphasizes building up businesses rather than making an immediate profit. He has sunk profits into new areas that have either built new markets - as with cloud services or its Kindle e-readers - or have floundered, like its Fire Phones.

"Failure and invention are inseparable twins," Bezos wrote in a letter to shareholders last year.

This has made some investors uneasy and, after periods of Amazon's growth, quick to sell shares when forecasts miss expectations.

Sales in the first quarter will have a tough comparison to the year prior, Amazon's Olsavsky said, when foreign exchange rates were more favorable and the Feb. 29 leap day gave shoppers an extra 24 hours to spend.

The just-ended holiday season was Amazon's best-ever. It was a heavily promotional period for Amazon, said Olsavsky, though he did not comment on how discounts compared with prior years.

Net sales for Amazon rose 22.4 percent to $43.74 billion in the fourth quarter, compared with the average analyst estimate of $44.68 billion, according to Thomson Reuters I/B/E/S.

Amazon is now producing television shows for Prime subscribers to watch online. It is developing gadgets with an artificially intelligent assistant, Alexa, so users can buy toilet paper and other goods by voice command. And it is building out a system of trucks, planes and warehouses so orders are sped to Prime members in two days or less, a convenience that few online retailers can afford to match.

The company also said it was making a large investment in its India operation.

"After these periods of intense investment or spending, then we see acceleration in sales and profitability, or at least historically we have," said Edward Jones analyst Josh Olson.

The company forecast first-quarter operating income between $250 million and $900 million, below the consensus estimate of $1.34 billion, according to market research firm FactSet StreetAccount.

Amazon had reported operating income of $1.1 billion for the same period last year.

Amazon Web Services, the company's fast-growing and lucrative cloud business, posted a 47 percent jump in revenue to $3.54 billion, but fell short of the average analyst estimate of $3.60 billion, according to FactSet StreetAccount. Amazon is the market leader in the space, selling computer services, hosting websites and storing data.

The company said it would delay its annual financial filing so it can revise its disclosure of net product and service sales, following a letter it received from the U.S. Securities and Exchange Commission. This does not impact its financial results, it said.

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