It's increasingly fashionable to bash Amazon, to lay blame at the door of this company for the woes of the High Street, for the destruction of traditional commerce and many more industries. I've certainly been guilty of it myself. Recently, at least in my sphere calls to split up the commerce giant are becoming deafening. Some are likening the situation to the American Telephone & Telegraph Company before it was broken up as a result of an antitrust suit in the 1980s. Personally, I feel this is all too simplistic and a bit reactionary but I do feel that it's good to learn from history when we can.
Amazon is successful for one reason, the loyalty of its customers and the resulting investor philosophy. As long as it continues to provide a balance of convenience, service and value to customers, Amazon will continue to grow and challenge. Can the same be said of AT&T? I know enough to be dangerous about it, but suffice to say that whilst AT&T certainly held a monopoly position in communications, its interests were not then and are not now as diverse as Amazon. That said, it could be argued that until the internet era, it was not possible for a business model such as Amazon's to emerge. Either way, communications plays a central role in society and in the internet and therefore the competition that ensued following the breakup of AT&T feels reasonable. The dust hasn't settled to know for sure though; journalist and historian Steven Coll wrote at the time, "Whether the break of American Telephone & Telegraph Company will be remembered decades from now as one of the more spectacular fiascoes of American industrial history, or whether it will be recalled as a seminal event in the emergence of a great global information age, or whether it will be forgotten altogether, is a matter that was impossible to predict intelligently in 1985." Decades later and the jury is still out. The growing discontent about Amazon may ultimately result in a similar outcome. I'm no historian, but if it does, I imagine the same statement could be made about Amazon as Coll made about AT&T three decades ago. And in 2050 it's quite possible someone will be saying the same thing.
Yes, Amazon offers a great service, it's easy, it's no-nonsense, it generally offers close to the best prices; at least at the moment, though there are notable exceptions. Yes, it has also developed a top-drawer supply chain and logistics capability. And yes, with its diversification into devices, content, media and more, it is basically a one-stop shop. All of these things have helped Amazon to build a dominant position across many industries. The truth is that for years the business has operated in conditions that no other western commerce business enjoys or is likely to enjoy. Amazon is the beneficiary of an investment philosophy based on growth. The Amazon difference has been succinctly summed up many times by Professor Scott Galloway, as a business they enjoy "effectively zero cost of capital." Galloway expands on this in his book, saying Jeff Bezos set the expectation early that prospective shareholders should invest because they share the long term value creation focus of the company, not quarterly results. The shareholders and Amazon are hooked on a more prosaic goal - growth. Provided Amazon is growing, everything remains on-track. More traditional measures, that more traditional companies are held to, such as profitability have for a while appeared to be an unnecessary encumbrance. In the past few years Amazon has started to generate profits and with the revenues of the company, the investor community are starting to reevaluate how to value Amazon.
For a long time this has meant that Amazon is more free than most companies to experiment, to diversify; in short to innovate. They have operated in dramatically different business conditions to competitors in existing industries. That is where the dominance and the concerns of monopoly really stem from. They are able to enter markets and offer products and services at a lower cost than most if not all incumbents. So, quite simply - they do; either organically or through acquisition. Consider the cloud infrastructure and platform dominance of Amazon Web Services, the foray into media and content with Prime TV and through the acquisitions of Audible, and LoveFilm, voice with the Echo and Alexa (based by many acquisitions), game-streaming via the acquisition of Twitch and the acquisition of upmarket grocer WholeFoods amongst many more.
For all this diversity, there is one thing in common, with perhaps the exception of AWS, Amazon is about attention. To get people to buy, you need their attention in order to sell to them. All roads lead to the transaction. It is clear that in commerce Amazon have a dominant position in many markets. Some picture a dystopian future where brands are wiped out with clever algorithms giving Amazon an effective monopoly dictating supply and demand. In fact some extrapolate further, picturing a future we are all at the behest of the commerce giant. In short, they believe Amazon has too much control over too many things. There's enough material in the blogosphere about Amazon white labels, fulfilment and logistics operations, buying and category creation, so I will leave that topic there. My view? Suffice to say, what we have here is unprecedented and therefore any prediction is at best a guess. The world is a big place and Amazon isn't the only game in town. Cast a glance to the East, and the rising tide of technology-driven innovation in commerce, communications and society at large and it's clear to see this story is unfinished and will remain so for some time to come.
A contrarian and marginally more optimistic view is that in the name of the customer, Bezos and his company have engineered an environment where customers expect more. The bar was set and keeps being raised by companies like Amazon. This in turn raises expectations and those expectations for many traditional businesses are increasingly hard to bear. In this narrative, the existence of many well-established brands are in jeopardy and this threat covers an alarmingly diverse set of industries. Is that because of Amazon or because of the expectations Amazon and other customer experience pioneers like them have created in general?
In truth Amazon has simply done a better job of focussing on the customer than mainstream businesses have overall. And critically, it hasn't rested on its laurels. Amazon has helped to change the face of commerce for the foreseeable future in ways that we are only just beginning to understand. But at least when shopping with Amazon, the customer for the moment is better off. It's a fascinating debate and one that future generations will study with great interest. Although people express varying degrees of outrage, we are yet to see a radical shift in consumer behaviour away from Amazon. Is that because of the value we place on convenience? What price will we pay for that convenience? In the next few decades we may discover some of the answers. Then again, maybe we simply won't want to.