Amazon: spreading fear and panic

Yesterday, Amazon announced the acquisition of PillPack, a small but very interesting company in Somerville (Boston) with an app for the sale of drugs in personalized packages whose last valuation in a round of financing in 2016 was $361 million. Amazon paid almost $1billion, ahead of Walmart. Pillpack’s nationwide pharmaceutical license means Amazon can avoid the legislative difficulties involved in the sale of prescription drugs.

For Amazon, it’s business as usual in its race for world domination: earlier this week it launched an aggressive discount program to encourage Whole Foods customers to sign up to Amazon Prime, as well as announcing plans to create an army of small companies to take care of the final stage of deliveries.

Amazon’s steady march of progress now sparks panic throughout entire industries: following the purchase of Pillpack, CVS shares fell by 8.1%, while Rite Aid’s and Walgreens Boots’ plunged by 3.1% and 9.2% respectively; all large companies with a major presence in most US cities.

In a single week, Amazon has sent tremors through three industries: large-scale distribution, logistics and parcels, and pharmaceuticals: a few billions slashed from the valuation of a number of large, well-known companies not for mismanagement, but simply for failing to anticipate Amazon or for not sending out a message that they were prepared for its latest move, assuming anybody would believe them.

For the moment, the shock waves are limited to the United States, but given the company’s aggressive international expansion strategy, other markets will be rocked, sooner rather than later. Who would dare to say how many Americans will have stopped shopping at their favorite supermarkets and gone over to Whole Foods, in addition to signing up to Amazon Prime? How many homes will receive their Amazon purchases through one of the new companies partly created by Amazon? How many people will stop handing their prescriptions in at CVS, Rite Aid or Walgreens Boots, and instead receive their medication at home through Amazon PillPack?

Amazon’s acquisition of PillPack is important for another reason: it brings the company an older demographic. Older people have been slow to move to online shopping, but will doubtless see the appeal of not having to make their way to a high street pharmacy. Amazon’s strategy is to fill in the gaps in the market with surgical precision, boldly invading new segments.

Start thinking about what your company does, and consider what will happen if, or when, Amazon announces its arrival in your industry, in your country. Think about how many of your customers will give Amazon a try, then stay with it, based on price, convenience, service… if the thought makes you nervous, then remember that your business too, can change, and that within a very short time, you could be left behind, a fast-fading memory of how things used to be done.

(En español, aquí)