Facebook isn’t the only tech monopoly to keep an eye on
Amazon has a monopoly and nobody has realized it yet.
There is plenty of chatter about Facebook’s monopoly on social media.
While Facebook’s power position is concerning, Amazon is a bigger threat to competition than people realize.
Logistics
Amazon has re-invented online deliveries. The expectation used to be that products would take weeks, or even a month, to arrive. If they showed up in two weeks or less, expectations were beat. Amazon Prime changed this.
Amazon has combined the smart usage of fulfillment warehouses that store commonly ordered products and an advanced logistics network to deliver products in a day or less. We have entered a new world where a person rushing home to join an online meeting can have a headset delivered in time for when they arrive.
People with injuries, illness, who are caught in bad weather or just plain lazy can stay at home and have products they need delivered to their door.
When we think of traditional delivery services, we think of DHL, UPS and FedEx. These companies are synonymous with their trucks and drivers. In addition to trucks, Amazon has its own airline for deliveries and has famously experimented with drones.
There is much debate about Amazon’s delivery prowess and the threat it poses to traditional carriers. Amazon now has the ability to provide package delivery services for products not even carried on Amazon, while offering faster delivery times than competitors.
Faster deliveries and love for the brand (particularly Amazon Prime), will send customers to Amazon as opposed to UPS. Online shoppers who prefer Amazon’s delivery experience will push companies to sell their product on Amazon. This will hurt companies like NIKE, who try to control their e-commerce experience.
Costco
A membership fee and bulk quantities of products. Sound familiar? While you can’t fill your car with gasoline online, you for certain can at Costco.
People looking for deals on bulk amounts of products no longer have to make trips to Costco. Amazon offers many household items in bulk. A prime subscription gives you access to many other digital benefits such as Amazon Prime Video and Twitch Prime.
If Amazon can step up warranty practices, there will be little room left for Coscto.
Instacart
While Instacart has expanded seemingly successfully, quick growth comes at a cost. Scaling the company to compete with Amazon post their acquisition of Whole Foods was necessary to survive.
Instacart has long been one of the world’s hottest startups. If they wanted to scale the way they had to as of late, they should have elected to do so earlier. Raising millions (even billions) of venture dollars isn’t an issue for Instacart. They only expanded their operations when pressure from Amazon forced them to.
This unnatural growth may have long term effects on the company. A six hundred million dollar investment might sound glamorous, but behind closed doors the founding team’s ownership has been diluted. This changes the dynamics of startups. Some founders have enough cash from stock they’ve sold to investors or feel they no longer own an important stake and re-sign.
Resignation happens by choice or by force. Just look at Groupon’s Andrew Mason. Not long after Groupon’s IPO, Andrew’s ownership was under 10%. That’s not a compelling reason to stay with a company you founded less than a decade ago. He was eventually fired not too long after the IPO.
Amazon’s brilliant acquisition of Whole Foods may have sent Instacart on the same death spiral as Groupon.
Everyone else
Other than Apple, what company can battle Amazon’s online presence? People prefer to shop on Amazon. The question remains of what will happen as Amazon makes more of their own products?
AmazonBasics, a product line of household and office supplies produced by Amazon, are unsurprisingly a huge hit. While Amazon branded batteries are great for the consumer, Duracell. who also tries to sell on the Amazon e-commerce platform, likely is horrified.
Amazon has more money at its disposal than most companies combined. Amazon also has a much tighter logistics network than almost every manufacturer.
Unless you can incentivize or force people to buy on your platform, they will flock to Amazon. You will have lost control of a ton of the buying experience to a company that also has competing products. This is a huge threat to companies across the board.
Is there any hope for a more competitive e-commerece marketplace?
Yes, surprisingly there is. A little company named Uber (and possibly Lyft as well) can deal a blow to Amazon’s monopoly.
UberEats has been driving Uber’s growth of late. While some investors are afraid this will dry up, it presents the company with a huge opportunity.
If you’re already delivering food, why can’t you deliver products? Uber should offer its logistics network to companies with local warehouses (or create their own warehouses) and use Uber drivers to deliver products.
While some ground work will have to be done to secure expensive purchases like MacBooks and exclusive NIKE shoes (expensive pairs getting swapped with fakes is a big risk), other simple and less valuable purchases will be an easy win. Toothpaste and laundry detergent end up in your car when you buy them from the store anyways. Why not have Uber pick up your supplies and deliver them to you?
This may be the only chance left at a fair marketplace. Otherwise, domination by Amazon seems rhetorical.
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