It's impossible to overestimate the impact those five words will have on the future of consumer marketing, media and advertising as we know it today. If marketers thought they knew disruption, they are about to experience exponential disruption.
Amazon owning Whole Foods is just one more step -- a big one -- toward lower and lower prices on more and more goods, with better tailored consumer experiences delivered to more people at more places faster and cheaply.
For the “everything store,” selling books and electronics is one thing, but selling groceries is something entirely different. We all consume grocery products every day. Food is a basic human need.
These days groceries represent 50% of Walmart’s entire business and are what gets people into Walmart stores multiple times a week. If Amazon grocery delivery takes away only a modest portion of that foot traffic, it will have a devastating impact on the world’s largest retailer, which will have a devastating impact on every company that relies on it for sales, from P&G’s Gillette to Mars’ M&M’s.
Everybody in the consumer economy is now going to have to contend with Amazon-style competition. Everyone. If you’re not ready to compete in that world, better to exit gracefully now. Or, you know, stay on the porch.
What makes Amazon such a Big Dog? Here's what I think:
Amazon is maniacal about consumers. Prices. Selection. Delivery. Returns. Says it all.
Amazon takes risks -- big risks. Building brick-and-mortar warehouses in the late '90s and early '00s. Kindle. Fire. Free shipping. $4.5 billion spent on content this year for its Prime Video. Rights to NFL games. Building a $1.5 billion hub for its new cargo airline.
Amazon executes very, very well. Just ask any customer. Ask Borders, or Barnes & Noble. Or dozens of electronics stores that have closed their doors.
Amazon is extraordinary at attacking from adjacent markets. It makes billions of dollars on AWS, its cloud computing service. Then it uses that money to give people stuff cheaper, and entertainment content for free.
Amazon does surprising things. Who saw Echo coming? 45% discount on Prime membership for low-income shoppers? Building its own movie and TV studio? Buying Kiva, the shipping robotics company?
Amazon has a money machine in AWS that can pay its bills for years and years. Cloud services are growing extraordinarily fast. AWS is the market leader, has massive margins and is gaining network effects. Any consumer marketer wondering what subsidized competition looks like will soon know all too well.
Amazon is on the verge of becoming a significant entertainment company. Tens of millions of video viewers. Well reviewed, and received must-watch programming recognized by industry awards. NFL games, where the company will ask $2.8 million for multiple ad packages in games it only paid $5 million each for. And how much more attractive does that make Prime membership?
Amazon is breeding lookalikes. Amazon might not get you, but one of its fast followers certainly will. Many consumer companies might not face Amazon directly, but they will certainly face its progeny: companies with lookalike models, strategies and tactics. Walmart ultimately spawned an industry with hundreds of chains of discount and big-box retailers, and changed pricing everywhere. Amazon is doing the same thing.
No industry will be more impacted by Amazon than marketing. Amazon is building hundreds of millions of consumer relationships with a breadth, depth and frequency that is unmatched. They are a big dog like we haven’t seen before. Are you ready to run with the big dogs? If not, you’d best stay on the porch.
Now I can achieve the lifestyle change I have always desired! Forthwith I have decided to move to the country and will vacate my city dwellings.
My latest purchase is two Labrador pups, who will henceforth be supplied dog food from monthly Amazon fresh deliveries.
Goodbye city life! Green acres we are here!
Contented Kentucky shopper
As a native of the mountains of western Pennsylvania, I have a lot of hope for what Amazon and its fast foloowers can do for rural America, particularly by bringing to it many of the goods and services and prices and convenience that were only available in large urban markets.
ANd the growers, the distributors and everyone else involved will take a haircut. This is not a win; it is a huge loss. It is a step forward to indentured servitude clamping down competition, increasing price war and hurting incomes, not a plus for the economy.