Is Amazon Biting Off More than It Can Chew?
It’s funny because when the press release dropped last week on Amazon’s investor relations page announcing that they’d entered into a “definitive merger agreement” with Whole Foods Market, my first thought wasn’t one of complete shock and awe. Rather, I looked the statement over and more or less shrugged and said, “Oh. About time they made a move like this.”
They—Amazon—have essentially stuck their high-flying flag in the middle of the grocery food industry and laid claim to one of the largest national chains out there. The purchase of Whole Foods Market came at a critical time for not only the chain itself (which has struggled mightily over the past few years), but for the food and general retail markets as a whole. Each has watched as Amazon ate away at sales with their promises of low prices and quick delivery. And that was all while Amazon “struggled” to get into the brick-and-mortar game.
Now, on top of their enormous global distribution footprint, the e-commerce giant adds a network of 432 grocery stores in three countries.
How Amazon plans to use its shiny new toy once they bring it into the fold at the end of the year remains to be seen. Lot’s of speculation is floating around about how they’ll bring their Amazon Go model to the national level, or how they could use each store as a mini food distribution center, or how they could leverage these physical stores to sell other Amazon product, or how they might use the access to Whole Foods’ supply chain to disrupt prepared meal services like Blue Apron.
As exciting as the potential is around the acquisition, more questions remain—in our minds anyway—around what the end game is here for Amazon. Do they plan to take over the world? Are they getting too big? And, if so, what happens when they ultimately crash? What will that look like, and who will be there to sift through the pieces and pick up where they left off?
One thing that became clear this week is that Whole Foods isn’t the end game. Jeff Bezos’ company continued with their big-time announcements by unveiling a new service called Prime Wardrobe—basically a Trunk Club style service for Prime members. Consumers will be able to pick and choose from a selection of clothing and accessories, try them out for a week cost-free, and then opt to either purchase those products at a discount or return them for free.
On top of grocery and retailing, Amazon has its toes dipped in (or is completely upending) other industries like entertainment, music, cloud storage, web services, shipping and logistics, and more.
Too Big to Fail?
So, are they doing to much?
If you were to ask Bezos that question, the answer would surely be ‘no.’ If it were up to him—and, uh, it is up to him—Amazon would do everything.
And that’s not necessarily a bad thing. Amazon’s work disrupting every industry is presenting some very harsh realities for everyone operating in those industries, from mom-and-pop shops to major national retailers. But at the same time, Amazon is forcing everyone to rethink how they operate, which, in turn, is forcing every industry they touch to push the pace of innovation. Amazon, as we’ve learned, isn’t beholden to the traditional ways of thinking, no matter the industry that they venture into. They’re first and foremost an e-commerce platform. Retail is where they make a large portion (two-thirds, based on 2016’s numbers), but Amazon doesn’t think like a retailer.
And as traditional retail falters heavily in 2017, the blame can be placed on old-school mindsets that refuse to rethink traditional business models. Amazon’s only concern, as stated very clearly in their mission statement, is to be the world’s most “customer-centric” company. They don’t care who or what they disrupt or take out in their path towards accomplishing that mission, and they’ll use any means possible to ensure their customers receive the best services, best prices, and best products.
Traditional businesses could learn a thing or two by watching how Amazon operates. That’s not to say that a local independent consumer electronics retailer should scale down the Whole Foods purchase and consider shacking up with a local deli market. Rather, they should take into account how Amazon builds up its loyal following with a service like Prime, how they leverage that community of members, and how those members ultimately engage with the company. Think of yourself as more of an association than a retailer.
Though Amazon remains highly secretive around its Prime Membership numbers—it’s somewhere around 70 million according to most accounts, and climbing—the program alone is the biggest teller of whether or not the company is spreading itself too thin. If consumers aren’t happy with the benefits Amazon offers, they have a very simple decision to make: cancel that membership. To this point, they’re not doing that. And as long as those members keep coming back, Amazon will continue looking for ways to keep them locked in.
In that vein, I’d tend to agree with Bezos’ likely assessment of the company. They’re not doing too much, and they’re not getting too big. The effects of their growth might disappoint and depress the retail industry among many others. But the current state of things just means everyone needs to start thinking a little differently about how business is conducted. Amazon’s growth should be looked at as an opportunity not only for the company itself, but for everyone around them as well.