Amazon — our biggest threat or opportunity?

In light of their recent Whole Foods acquisition, much has been made about Amazon flexing their muscles again in a new industry. It’s certainly not the first time we have heard cries about the impending threat of Amazon. This has been going on since their early days, when brick and mortar bookstores feared the online giant.

As it turns out, the book stores’ old fears were warranted. Amazon rapidly made book buying easier, and simultaneously consolidated supply into one simple, yet massive digital library. You know the rest of the story.

Here we are again with Amazon’s latest foray into groceries. I’m certain the initial reaction is to highlight their big, bad, industry-consuming behavior. Fair enough — I’m sure any altruistic behavior is merely an externality of some profit-driving activity. BUT, every time that Amazon digitizes vertical X, Y, or Z, they send up the newest signal that X, Y, and Z are open for business to everyone.

Amazon may kill late online adopters, but they also democratize the market and distribution engine for all kinds of products. It’s the Amazon Catch 22 — they may kill small book stores, but they simultaneously create a market for anyone to become an author and monetize their craft.

Case in point — my Uncle In-law, spent a significant amount of time drafting up his first novel. Pre-Amazon, any kind of monetization would be tied to a few key publishing relationships, or significant hustle to get his book placed in stores.

With Amazon, the publisher acts more as the desired stamp of approval — a signal; not the only driver for consumer viewership. There are good book listings and bad book listings on Amazon, but there are few barriers to entry for both. Now, more than ever, anyone can create a product, and sell it to practically an unlimited audience through Amazon. Amazon doesn’t care who you are or where you’re from. They care about your conversion rate on their site. (Yes, you can now buy his book in one click online…great reviews btw).

Incredibly, 50% of online product purchases start on Amazon. Yet, there is paltry information on Amazon SEO and their product listing engine. I did some digging, and A9, Amazon’s algorithm for product ranking, seems to be a big mystery. In contrast, every big business employing paid acquisition has dedicated significant resources to SEM and traditional SEO. What does that mean for the small entrepreneur?

By digitizing vertical after vertical, Amazon is creating the greatest opportunity for small sellers to reach massive audiences. The individuals who figure out Amazon SEO and listings, can create cash cow businesses with all kinds of products. Thousands of authors and small business owners can now compete on a much more level playing field.

Going forward, it will be fascinating to see how big online retailers react to a growing group of savvy individuals, who eat into their categories with solid Amazon fundamentals. It’s the new online competitive landscape, where execution and digital know-how can trump war chests and long-standing relationships.

All of this is creating our latest Amazon conundrum — they are empowering small entrepreneurs and potentially hurting big online business. It seems we can’t escape the Amazon Catch 22.