retail news in context, analysis with attitude

by Kevin Coupe

There is an interesting piece this week from Knowledge @ Wharton about how Amazon "has not been an investors’ darling of late," with the company's growing financial losses - in the face of still-growing sales - creating equally growing uncertainty about whether it will ever be able to monetize the extraordinary customer base and loyalty that it has built over the years.

Part of the problem, the analysis suggests, is the people who are bearish about Amazon, skeptical about its long-term profitability prospects, have specificity on their side. The losses are right there to be seen, in black and white (and red), and the company has been clear about its continued intention to pour money into product and service investments. Amazon bulls see the investments in a different light, believing that this is what the company needs to do in order to compete both with online and bricks-and-mortar competitors. However, it is hard to get specific about when these investments will pay off, which creates uncertainty.

Indeed, this uncertainty has been fed by the disastrous reception given to Amazon's Fire phone, and the way in which the company's fight with Hachette, the book publisher, has lifted the veil on how Amazon deals with suppliers. (The operative word has been "vicious.")

And, of course, there is the competition … which just keeps coming.

There are, of course, no guarantees that Amazon will still be around five years, ten years, fifteen years from now. I personally wouldn't bet against the company; I've been shopping there since the late nineties, and I fully expect to be shopping there until I drop. Then again, you never know. Rumors to the contrary, Jeff Bezos is only human … he's capable of making mistakes. (I think that's been pretty much proven lately.)

But I think the main reason that you can count me among the bulls is the fact that Amazon more and more seems to be pursuing the "ecosystem" strategy that has worked so well for Apple. The goal is very simple - make Amazon the best, first and often only real option for the online shopper, offering through both software and, increasingly, hardware, a seamless and smooth customer-centric experience that diminishes that offered by any competition.

That's what Apple has done. Very successfully. Buy a Mac laptop, and it almost propels you to buy an iPhone, iPod, iPad, etc… Everything works better, together. Disconnection seems pointless. And, to steal a phrase from Star Trek that I must steal several times a month, resistance is futile.

I think that for many retailers, the "ecosystem" approach is one that ought to be appropriated. It is the unusual retailer who will be the only option … but it strikes me as a noble goal to work very hard to be the first and best option for specific shoppers in specific categories.

I've always loved the approach adopted by Rudy Dory and Lauren Johnson of Newport Avenue Market in Bend, Oregon, who as CEO and COO have made it a core competence to find products that will make them "first, best, and different."

In other words, creating a kind of ecosystem. And learning from Amazon, despite its current travails.

It could be an Eye-Opener.
KC's View: