tower of Amazon packages in front of a door
Editorial

What Are the Implications of Amazon's Platform Dominance?

5 minute read
John Mancini avatar
A time is coming when we will be forced to reexamine the consequences of platform dominance by some of the internet giants.

In 2009, my household had a total of eight Amazon orders, often containing multiple items to consolidate shipping cost, and mostly by me for large ticket electronic doodads. The total was $1,084.81.

In 2017, freed from the tyranny of shipping costs by Amazon Prime, we had 107 orders for 170 separate products. The total: $3,905.21.

It's disorienting to become worried about something you like so much.

My total migration in shopping habits occurred seemingly without my even noticing it. My experience with Amazon is like the parable of the frog in boiling water. You know the premise: drop a frog into boiling water and it will jump out, but put it in tepid water and slowly bring that water to a boil and the frog will not perceive the danger and be cooked to death. 

(Side note: According to James Fallows of the Atlantic, in addition to being a bit sadistic, the parable is not actually true, but that’s another story for another day.)

Amazon's Relentless Growth

A lot has happened since Amazon's founding in 1994 and its first book sale in 1995. What started with a few books a little over 20 years ago now represents $607 billion in shareholder value and is on the path to becoming the first trillion-dollar company.

Whether the parable of the frog is true or not, the “Amazoning” of the retail experience has occurred quickly and dramatically. But other than the fact that it sure felt good as a consumer, I hadn't given much thought to the winner-take all implications of this retail tsunami platform.

And then I read Scott Galloway’s "The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google." It was a bit of a personal epiphany in thinking about the long-term implications of Amazon’s dominance. Galloway's take is this: “Amazon has become the Prince of Darkness for retail, occupying a unique position — inversely correlated to the rest of the sector.” If you haven’t read it, it’s both informative and enjoyably snarky. A couple of data points from the book:

  • 44 percent of U.S. households have a gun, and 52 percent have Amazon Prime.
  • Wealthy households are more likely to have Amazon Prime than a landline phone.
  • When in a brick-and-mortar store, one in four consumers check user reviews on Amazon before purchasing.
  • 44 percent of the value of U.S. malls is generated in just a hundred places, and sales per square foot dropped 24 percent in the past decade.
  • Amazon is worth more than Walmart, Target, Macy’s, Kroger, Nordstrom, Tiffany & Co., Coach, Williams-Sonoma, Tesco, Ikea, Carrefour and The Gap combined.
  • From 2006 to 2016, Amazon’s stock price increased 1,910 percent. The stock performance of some other major retail companies was as follows: Sears (-95 percent), J.C Penney (-83 percent), K-Mart (-59 percent), Best Buy (-49 percent), Macy’s (-46 percent), Nordstrom’s (-21 percent), Target (-15 percent) and Walmart (+2 percent).

But that’s just the beginning.

The Amazon Portfolio, From A to Z

Amazon’s reach now includes a much broader portfolio of products, content resources and previously independent online platforms than is commonly realized. A representative — not comprehensive! — sample would include:

  • Amazon Music
  • Amazon Video
  • Audible
  • BeautyBar.com (cosmetics)
  • Box Office Mojo
  • CreateSpace
  • Diapers.com (baby supplies)
  • IMDb
  • Kindle
  • Kiva Systems (big-time robotics)
  • Soap.com (household needs)
  • Twitch.tv
  • Wag.com (pet supplies)
  • Whole Foods
  • Woot
  • Zappos

Amazon has also moved aggressively into the creation of Amazon branded products and house brands. For example, consider the top choices I see when I search for AA batteries, diapers and paper towels. Think about how much more compelling this all becomes when the interface changes to voice (Alexa):

Amazon branded batteries

Amazon diapers listing

Learning Opportunities

Amazon branded paper towels

Mike Murphy at Quartz explored some of the trade names that Amazon has trademarked over the past few years. He divided these into two categories: 1) brands that are owned by Amazon and sell products or have product pages on amazon.com; and 2) other trademarks that Amazon is pursuing (or owns) that do not currently have products listed on its site. Here’s what he came up with:

Category 1

BrandProduct
ArabellaLingerie
Beauty BarCosmetics
DenaliTools
Franklin & FreemanMen’s shoes
Happy BellyFresh food
James & ErinWomen’s clothing
Lark & RoWomen’s clothing
MaeUnderwear
Mama BearBaby products
MyhabitConsumer goods
North ElevenWomen’s clothing
NuProTech accessories
Pike StreetLinen
Pinzon (by Amazon)Linen
Scout + RoKid’s clothing
Single Cow BurgerFrozen food
Small PartsSpare parts
Smart is Beautiful.Clothing
StrathwoodFurniture

Category 2

BrandProduct
Bloom StreetHousehold goods
Concrete New YorkLeather goods
FamilyhoodBaby products
FindHandbags
GT PrimeCar products
Instant PrettyMakeup
RV MeMotor homes
SingleFrozen food
Skate CreekMusic services
SweatermenMen’s clothing

What Are the Costs of Platform Dominance?

Platform-based market plays tend to create winner-take-all consequences for those who achieve dominance. This usually isn't a huge issue when thinking about successful business platform plays tied to particular products (e.g., Netflix, Uber, Airbnb, Lyft and more).

I love Amazon as a customer. And that is still true. But what are the consequences of broad-based dominance extended over the entire retail segment?

As machine learning starts to take the potential of the technology platforms we rely upon (not only Amazon in retail, but also Facebook, Google and Apple — and Alibaba and WeChat in China) into the next phase, I get a feeling that after a long, free ride, we are moving in fits and starts toward a more critical societal reexamination of their role.

It should be interesting.

About the author

John Mancini

John Mancini is the President of Content Results, LLC and the Past President of AIIM. He is a well-known author, speaker, and advisor on information management, digital transformation and intelligent automation.