Posts Tagged “amazon effect”

Understanding The Amazon Effect

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Understanding The Amazon Effect

Retail will never be the same. And behind just about every major move, regardless of market, vertical, innovation and disruption is Amazon. Twenty-five years ago, Amazon was this new book distributor with a funny name that was saturating the airwaves with branding. It took a while, about a decade before Amazon was the undisputed champion of book ecommerce. And around the same time it started to, after a decade of losses in the billions, did the company get in the black.

You would think that Amazon’s many venture capitalists and investment bankers would be satisfied to see daylight between itself and actually making money, but Jeff Bezos was only getting started. By around the time that the world was recognizing Amazon as the world’s largest book distributor, a position it was unlikely to lose, Bezos was already preparing to make Amazon the go-to site for every retail product available, plus some that would need to be invented, namely the Kindle and Alexa voice recognition, and some logistics software that runs the most complex distribution chain the world has ever seen. Oh yeah, and let’s not forget the early adoption of drone technology.

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We feel the Amazon effect everywhere. And so do retail dinosaurs like Sears, JCPenney, and to a lesser extent, Toys-R-US, all of whom are either bankrupt or desperately seeking a buyer before it’s too late. We also see the Amazon effect with its acquisition of Whole Foods and its market entry into content creation and distribution via Amazon Prime which also includes original programming similar to NetFlix.

In the wake of the Amazon effect is a host of 2nd tier service providers and distributors such as Uber, GrubHub, and Wayfair. And considering Amazon’s market power, which is already enjoying monopoly status as defined by the United States Department of Justice in several markets right now, it behooves Amazon to allow some competition while, at the same time, the music distribution business in which Amazon is a player, remains dominated by Apple’s iTunes. Yes. It’s complicated. What used to be well-defined and demarcated industries are now distribution channnels within a monolithic super eTailer. And as more traditional retailers are regulated to the scrap heap of history, look for Amazon to glide in and gobble up a few more for pennies on the dollar since it knows there will always be some need for brick-and-mortars. So why pay top dollar when you can be the cause of their demise and the savior of their resurrection. That pretty much sums up the Amazon Effect.

Learn more about Diane Israel. Also, see Diane Israel on LinkedIn.

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