Amazon is a behemoth but in many ways, it’s a surprise that its functional. It makes TV shows, sells washing powder, delivers computing horsepower to thousands of firms and is moving into healthcare. Its profits are negligible yet it’s the 3rd most valuable company on the planet. Its even auditioning a couple of dozen US cities in a corporate Battle Royale to find a location for its HQ2, which is effectively a race to the bottom thanks to cities falling over themselves to give Amazon vast tax breaks that it doesn’t need.
Investors love Amazon, it’s stock price has continued to perform with only Apple and Alphabet more valuable. Consumers love Amazon as it removes friction from transactions, making it super easy to order almost anything.
But what about companies? Over the last three years or so, Amazon even became a verb – to be 'Amazoned' – meaning to have your business wrecked as they entered your industry. Its recent ambition over the last three years has dwarfed anything it did in the preceding decade. It’s started leasing aircraft, won an academy award for a TV show, created a new product category in the voice-activated speaker and bought Whole Foods. Whilst the $180bn in annual sales is far below Walmart’s $500bn, it rose 25% in 2017. This is the key point – they are still growing and fast.
Though in the USA, more than 90% of retail sales are conducted in physical stores, Amazon is responsible for roughly 44c of every single dollar Americans spend online. This figure is just staggering especially as the share of online shopping looks to increase, and as Amazon break into new categories, they will benefit most.
More recently there has been the talk of regulatory action to break up GAFA ( Google, Amazon, Facebook, Apple) as there are many who think these companies have too much monopolistic power. Some might remember the anti-trust action that Microsoft spent 15+ years dealing with and in that case, it's not clear how consumers were really any better off at the end of it. Are they too big? Maybe it would be easier to break up someone like Amazon as many of the company elements could operate as standalone businesses.
But waiting for regulatory action for brands is not a strategy. Washington these days seems incredibly paralyzed and maybe doesn’t even have the appetite to do something that could dampen the economy, even if it appears to be softening already.
It’s been said that voice control is the death of brands – if you ask Amazon to order your batteries, it will ship you its own brand batteries. Data has shown that customers are less likely to call out a brand name in a voice search and so putting the onus on Duracell to start buying adverts to make sure they are the preferred first voice result.
Product diversion is already a huge problem for many brands, with many products finding their way onto Amazon from sources other than the manufacturer. The manufacturer then has very little understanding of how their products ended up there or to which consumer they will end up going to thanks to the barebones data that Amazon shares with brands.
Though Amazon has fundamentally changed retail, recognizing the opportunities and taking advantage of their reach can give your brand a huge competitive advantage.
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