Will Amazon drain itself dry or move to Blockchain?
By Edward W. Mandel
One of the oldest sayings in e-commerce is, “Amazon wasn’t founded by Borders.” The point of that dictum is that internet businesses are more likely to succeed when they disrupt, rather than expand, existing businesses. Legacy companies might be lulled into a false sense of security by their name recognition and market share. Those are good things to have, but they’re elusive.
That truism, though, is so old at this point that its context could be missed by digital natives. For the younger crowd: Amazon started out as an online retailer that sold only books. Borders was a leading brick-and-mortar bookseller. Within a handful of years, Amazon was selling everything and anything that you don’t have to dive into the dark web to get. Meanwhile, Borders went bust.
Not long before that, though, Borders was the feared aggressor. Many were the local booksellers who closed their doors when this 600-store chain opened up a location three times the size of the bookshop across the street.
IOU.io team is aware that revolutionizing e-commerce means going up against the most successful company ever, whose founder, Jeff Bezos, has become the richest man in the world. But we take courage in the fact that we not only have a new technology, we have an improved business model based on processes that couldn’t be imagined when Amazon was first launched, almost a quarter century ago.
We also take courage in another fact: Borders, the company it put out of business, went from grand opening to Chapter 7 bankruptcy in only 40 years. Why would anyone believe that the disrupter can’t be disrupted? And, with the speed-to-market that blockchain technology engenders, why shouldn’t we believe that the end could come sooner than expected?
Cracks in the Amazon armor
To be honest, the idea of burying Amazon doesn’t originate with me. If I was the only one going around saying, “Amazon like businesses must move to Blockchain” that would be reason enough to have me locked up somewhere I couldn’t hurt myself.
Rather, this idea comes from one of the brightest minds and energetic spirits in the e-commerce world. KJ Erickson recently published a fascinating post on PaymentsSource titled “Blockchain plays can create new rivals to Amazon and eBay”. Her credentials are without reproach: Stanford grad, Oxford MBA, Y Combinator alumna, three-time founder in the crypto space. I figure, if you want to know how to slay an Amazon, listen to a real-world woman-warrior.
“The e-commerce marketplaces that developed in the web 1.0 and web 2.0 eras are facing increased competition from … decentralized, blockchain-powered alternatives that use tokens to keep the incentives in networks aligned and do away with the extraction imperative,” Erickson writes. “Far away from the internet’s original promise of unfettered peer-to-peer exchange, online commerce is today dominated by a small handful of middlemen marketplaces that charge outsize commissions for access to a consolidated buyer pool.”
Her thesis, citing eMarketer research reported by TechCrunch, is that this is getting worse rather than better. Due to network effects, she says, Amazon accounts for 49% of all U.S. online sales. It was just 43% a year ago, according to the study, which means that Amazon’s burgeoning growth trajectory doesn’t seem to be leveling off.
So why am I smiling?
Two reasons. Erickson and the writer at TechCrunch provide.
“The rocket ship for Amazon’s growth at the moment is its Marketplace — the platform where Amazon allows third-party sellers to use its retail and (if they choose) logistics infrastructure to sell and deliver items to Amazon shoppers. It’s currently accounting for 68 percent of all retail sales,” according to reporter Ingrid Lunden.
You might think that’s good news for Amazon, but Erickson doesn’t. It could be good news — should be good news — but Amazon might allow itself to be thrown for a loss the way it’s handling these piggyback retailers.
A “peek into the Amazon Seller Forums shows deep and growing discontent among third-party sellers,” says Erickson, who is currently focused on her ecommerce protocol venture Public Market. “The first concern is that growing fees are cutting into margins. The second is that, in many categories, Amazon is competing directly with third-party sellers through private label offerings. Indeed, some 40 percent of Amazon sellers list ‘competition from Amazon’ as their top concern.”
The second reason for the grin on my face is that, even though Amazon is about to breach the surreal milestone of 50% of America’s e-commerce volume, e-commerce itself is still barely out of its toddler phase. When you consider all U.S. retail trade — online and IRL — it’s only 5% of the total. That’s a lot — more than a quarter trillion dollars per year. But it’s merely significant, not dominant.
There’s still plenty of room in the passing lane, even if retail sales volume remains constant — which it won’t.
Time for a change
Here at IOU.io, we’re focused on building an online, peer-to-peer market where the intermediaries are few, protecting your privacy, guarding your data security and speeding your transactions. The intermediaries will also be nominally priced, so the number at the bottom of your checkout page resembles the number at the top of your product page. And you won’t have to worry about the people running the platform competing and undercutting you as you bring your goods to market. Our business is our business, your business is yours.
Amazon rise was dramatic. Its fall might be less so. But it is inevitable. And IOU.io intends to be your go-to-market choice as that day approaches.
Edward W. Mandel is a strategic advisor for IOU.io , he is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and ICO projects and recently launched his own BQT.io P2P Hedge Exchange helping traders connect with each other to leverage their crypto assets.
IOU is a blockchain-based peer-to-peer platform designed to unify ecommerce transaction and customer retention processes, incorporating trade-able IOUs. It is currently raising capital through ICO. The platform can be found online at IOU.io and its community on Telegram at https://t.me/IOUCommunity.
