- For some time I've known the key to Amazon's current and future success will be the growth trajectory of Amazon Prime. The attack from Wal-Mart confirms it has been making a lot of headway, and presumably is not only taking enough business away from the struggling Wal-Mart to cause the Bentonville company to take this type of action, but shows it is considered a significant future threat as well.
- On the other hand, the quick response by Amazon founder and CEO Jeff Bezos to the attack on its flagship business also confirms he can't allow Wal-Mart to take away market share. If that were to happen, I don't see Amazon having the ability to become profitable on a consistent basis. That means this is going to be an entertaining but expensive battle now and in the future.
I'm having a hard time thinking of two companies I'd rather see engaged in a pyrrhic race-to-the-bottom.
Genuine question - Why's Amazon evil? I totally get Wal-Mart, though.
Amazon's business model in a nutshell Bezos has always wanted to profit by being the only thing between you and the manufacturer. By being that one thing, he gets to beat the shit out of the manufacturer. If there's competition he leverages his market position to destroy the competitor. Me and insomniasexx have had some great discussions about Amazon but I'm not finding them right now.
Thank you for the articles. Follow-up question on this piece in particular. Is this legal? It almost seems like extortion. "Pay our price or we'll disrupt your livelihood."Amazon had been demanding a larger cut of the price of Hachette books it sells; when Hachette balked, Amazon began disrupting the publisher’s sales. Hachette books weren’t banned outright from Amazon’s site, but Amazon began delaying their delivery, raising their prices, and/or steering customers to other publishers.
Sure does, doesn't it? Here's a nasty fact about capitalism: above a certain market cap you get to keep rolling along until things are decided one way or another. Classic example is Aereo. Idea was, you put a whole bunch of antennas up all over NYC. You grab that OTA (free) content and you stream it over the internet. Then you charge people to get at your streams. In other words, you charge people for something you got for free and violate a whole bunch of content distribution deals, sandboxing, etc. Illegal? Mos def. Like, really really illegal? Well, nobody died. Eventually going to get shut down? Oh, for sure. But in the meantime, VCs piled into Aereo 'cuz there was always a chance the Supreme Court wouldn't strike them down (a slim chance, but a chance). So Aereo flaunted the law until they got a cease and desist from the Supreme Court, everyone counted their money and walked away. This is why "gouging" is usually a separate crime: in the amount of time it takes to investigate, indict and prosecute someone for taking advantage of surge demand, the gouger has made his money and stopped. But if you don't have statutes against gouging, you get to gouge until they tell you to stop. So yeah- Amazon was totally extorting Hachette. They were literally making an example of them for the rest of the publishing industry. But nobody was going to do anything in the amount of time it took Amazon to send a message. And they do this. Like all the time.
Know what I want to see? I want to see Alibaba take a run at Amazon. And I want to see them do it subsidized by the Chinese government. Then I want to see them not do the same thing to Walmart. Then I want to see Jeff Bezos crying to congress about protectionism and the free market.
I wonder how many heavy Prime customers are buying things they could buy from Walmart. We were afflicted with the "long tail" buzzword because that's where most of Amazon's money came from from, the long out of print and very very niche books. Walmart doesn't sell that stuff. Amazon has been expanding into all sorts of retail, but if niche books are no longer their primary business I missed hearing about it.
Most of the stuff available on Prime is stuff available from Walmart.com. it's the mainstream shit. As far as revenue, something like 40% of their money comes from electronics. AWS is like 5% of their revenue and growing but the big numbers are still coming from gadgets... a notoriously profit-free sector.
So the last things I bought through Amazon:
- Advances in Automatic Text Summarization, edited by Inderjeet Mani and Mark T. Maybury
- OpenGL Insights, edited by Patrick Cozzi and Chrishophe Riccio
- Three Rival Versions of Moral Enquiry: Encyclopedia, Genealogy, and Tradition: Being Gifford Lectures Delivered in the University of Edinburgh in 1988, by Alisdaire McIntyre
- Calendrical Calculations, by Nachum Dershowitz and Edward M. Reingold
All were eligible for Prime. None of them are particularly obscure books, but they're not 50 Shades of Grey either. Only one is available on walmart.com. At one point I was a pretty typical Amazon customer. I'm willing to believe the typical Amazon customer has changed, but I still don't buy that they're interchangable services.
Amazon's margins on books have always been essentially zero. Bezos was never interested in being an online bookstore; however, because 90% of all books at the time were sold by one distributor it was easy to set up a website and sell for basically Ingram's price (which was about 40% of retail). Because their warehouses are pretty much bigger than Ingram's at this point, there's no harm in warehousing textbooks. Doesn't mean they're a profit center. And c'mon. We didn't really have to have a discussion about how Walmart doesn't stock Advances in Automatic Text Summarization did we? ;-)
But that's why it's relavent. You can buy a TV from either of them, sure. You can get in your car and go buy a TV without paying shipping too. Personally, if I wanted one I'd buy it from the old phreak up the road's shop, and get stories about sticking it to Ma Bell back in the day along with it. But Amazon has Advances in Automatic Text Summarization, and also uranium ore, and there's a decent chance they have anything else you might want too. That is not a small advantage.
So the discussion at hand is how often a consumer's purchases are influenced by the fact that Amazon has uranium ore and obscure books. I would argue that the availability of uranium ore and obscure books matters only when a person wishes to purchase uranium ore and obscure books; the rest of the time they're buying on price and convenience. Your point about the phone phreak is well taken - consumers, given a choice, will reward people they feel kindly towards. Neither player in this instance has made much headway on that front lately.
I can't tell you how many times I thought, "I'll go to store X and see if they have item a. But maybe they don't, I should probably go to store Y because they also have b, c, d, and e. I don't mind paying a bit extra for availability." Granted, I don't do it as much with online shopping, because I know how to online shop. My mom, however. If she doesn't find it in a store she goes to amazon because she knows Amazon has everything. Needs a gardening tool they don't have at the hardware store? Skip the hardware store's website, go straight to Amazon. I'd argue having uranium ore and obscure books does matter to the customer.I would argue that the availability of uranium ore and obscure books matters only when a person wishes to purchase uranium ore and obscure books; the rest of the time they're buying on price and convenience.