Can Amazon Eat Amazon?
As social and interactive online commerce becomes the talk of town, where does it leave Amazon's somewhat staid and clinical retail business?
The world fits in a brown box.
“Our customers choose Amazon because of our selection, ease-of-use, low prices, and service…”
Most Amazon customers today would agree. The Amazon experience is, indeed, built on the trifecta of convenience, better pricing, and vast assortment. Nothing unusual here, except that the quote is of 1998 vintage.
The Amazon value proposition hasn’t changed for 20+ years. Back in 2001, Jeff Bezos, the Amazon founder, had an epiphany. Better customer experience led to more customers. More customers attracted more sellers. More sellers offered a wider selection. A wider selection, in turn, enhanced customer experience, completing the circle.
Loops around this circle led to growth, which lowered costs and enabled better prices for customers. Better prices reinforced the customer experience, making the flywheel spin faster.
This flywheel became the bedrock of Amazon’s business model. And to this end, the retailer spent year after year eliminating all friction. ‘Minutes to order completion’ became a key metric. The result was a standardised, almost clinical buying experience optimized around efficiency. Categories, as different as books, apparel and grocery were reduced to their lowest common denominator – a brown shipping box.
The early 2000s saw millions of these brown boxes whizzing around the United States.
Wannabe online retailers followed suit.
For two decades no one asked: can online retail go beyond the search-bar, customer reviews and express delivery?
From brown boxes to Disneyland.
And then, not so quietly, in the mystical lands of China emerged a new type of online store. In Harry Potter-esque style, merchants were selling scrumptious fruit directly from their orchards via video streams, customers were haggling with merchants like in local markets, friends were coming together to avail better deals, muggles were playing spin the wheel hoping to win the jackpot.
The Chinese upstart, Pinduoduo, had reimagined online retail. It brought the experience closer to that of shopping in the physical world. A potpourri of fun and community with transactional buying.
The meteoric rise of Pinduoduo, built on the shoulders of half a billion customers, has heralded a new type of interactive, social commerce.
Numerous ‘Davids’ are jumping into the fray. The Goliath Amazon, too, has taken note.
Will the Davids prevail? Or will there be a twist in the classic parable?
It’s always Day 1.
The question above must not be answered without a peek into Amazon’s ‘Day 1’ DNA. An agile, customer-centric mindset, akin to a start-up in its earliest days. Amazon has consistently described itself as an ‘Invention machine’ and ‘Earth’s most customer-centric company’.
“Nothing gives us more pleasure than ‘reinventing normal’ – creating inventions that customers love and resetting their expectations for what normal should be”.
The Kindle e-reader (disruptive for books) and a third-party Marketplace that competes with Amazon’s own listings, are testimony to this ethos.
The Amazon of today is more than an online retailer. With Prime Video, it is a streaming video service. With Echo and Alexa, it is a home assistant. With Amazon Go, it is an automated physical store. With Amazon Web Services, it is a B2B cloud computing provider.
New-age experiments are many too. A recent one is Amazon Explore. An immersive platform that lets customers shop at physical stores via virtual interactions with a personal shopper.
Amazon seems to be in part disrupting itself, in part diversifying.
But is it really?
The glue that holds it all.
Back in 2005, Amazon launched an ‘all-you-can-eat’ membership program, called Prime. Members would get unlimited, prioritized delivery for a flat fee.
The program has been highly successful. Members spend 2x non-member spends. Every Amazon innovation since is in service of these valuable Prime members.
Here’s an example. In 2011, Amazon launched its streaming service. While streaming in itself is big business, Amazon saw it as a ‘benefit’ for Prime members making the Prime bundle more attractive. Today, Prime Video is a major acquisition channel for Prime.
“…we’re the first company to have figured out how to make winning a Golden Globe pay off in increased sales of baby wipes,” Bezos on Prime original content driving sales.
Here’s the point. By design or default, Amazon has the building blocks for interactive commerce: video streaming, smart devices, gaming.
The question then isn’t, can Amazon eat Amazon. It becomes: will it?
The Amazon of tomorrow.
In this decade, the third of its life, Amazon could transform into an immersive experience. Or it could remain steadfast to its flywheel, letting start-ups munch into the long-tail of its categories.
Or it could blend both – retain a standardised experience for categories that benefit from it, like electronics; spin off and build newer experiences for categories that don’t, like grocery.
At the end of the day, for Amazon as it is for you and me, it isn’t what you do, but what you choose not to do.
All views in this article are the author’s own and may not reflect those of this publication or her current and past organizations. The author has no affiliation with Amazon, except as a keen observer.