Can Amazon Be Stopped?
August 18, 2013
Amazon is taking on all comers and causing massive disruption with its lower than low cost business model.
It’s playing a risky game as it tries to capture market share and customers across multiple categories and its paranoia has forced it to develop new areas of expertise like consumer electronics hardware and even television production as it tries to defend and expand its turf.
While the company has earned the consumer’s trust, it consistently achieves the highest satisfaction ratings in polls, it has yet to make any significant profit.
Jeff Bezos has urged Amazon’s shareholders to think long-term, but it’s hard to tell what the future of retail will look like in 5 years and it might look nothing like Amazon.
This problem is nicely summarized by Horace Dediu of Asymco in his blog post entitled “The Anti-Apple”
Where they differ is in others’ perception of sustainability. Whereas Apple is perpetually given an expected lifespan of less than a decade, Amazon is expected to have an indefinite lifespan. This is because Amazon is seen as having no competition and Apple is seen as having infinite competition. In other words, Amazon is perceived as a monopoly and Apple is perceived as the innovator that is in a permanent state of being disrupted by the low end.
I disagree with both assumptions. I’ve always thought Apple fragile but dedicated to moving into new markets as older markets are disrupted. It’s a tough strategy and one which (literally) nobody believes possible. But I’ve also thought Amazon’s monopoly status fragile. This too is not a popular idea but the company depends on many variables.
Retail is hard and it is being disrupted by technology wielded well by Amazon. But it’s also subject to further disruption. Amazon’s job to be done can be done by alternatives. Buyers are typically hiring Amazon for convenience, not just price and ease of use is where the value is. But again, new information technology which makes shopping, discovery and delivery of products directly from the vendor, bypassing the aggregator (i.e. retailer) could shift value along the value chain yet again.By the time Amazon reaches some point of monopoly in distribution it could be too late to make the switch to profit generation.
I don’t want to suggest that failure is inevitable, but I want to point out that success is not certain by any means. Disruption happens.
As Horace suggests it’s guaranteed that retail is going to look very different from the current binary bricks and mortar v’s the Amazon online store model, that’s played out by analysts and the media. You can already see glimpses of that in the incredible rise from nowhere of Fab.com and in Facebook’s recent experiments with mobile payments.
Overall, it’s hard for anyone to see the future and to imagine what your business might look like and it’s obviously very dangerous to base your vision on soon to be outdated paradigms.Next post Previous post