Why an (unofficial) anti-Amazon alliance is a very good thing

In late 2015, an eBay tech briefing startled me with the fact that someone on a mobile device was buying a car on eBay every 20 minutes. At the time, eBay was waiting for the first house to be bought on a smartphone or tablet, a feat that surely has happened by now.

In late 2017, that’s less surprising. Someone’s probably already bought something as valuable as a car through the next technology platform: voice, through Amazon’s Alexa, or Google Assistant.

It’s perhaps more likely because Amazon is tearing apart retail—not just in America—and reducing friction to buying is a big part of their success.

On December 5, Amazon launched in Australia. Critics called the launch underwhelming, but Amazon came noted the launch was its biggest ever international opening, beating first day orders from the likes of Singapore and Mexico in 2013, and the Netherlands in 2014.

It completes Amazon’s 12th global marketplace, fulfilling orders in more than 180 countries. The company’s annual revenue has grown to over $100 billion, and the company’s stock has been ticking up to create an entity with a market cap well over $550 billion. That’s despite razor-thin profits and close to 100 cents in every dollar earned reinvested into optimizing operations and the retail experience, all somehow without fear of disgruntled stakeholders.

Amazon remains a distant third in retail to the world’s biggest company in Walmart, and a ways to go to reach second-place CVS, but even Walmart is a massive underdog in investors’ eyes.

On December 6, after 47 years, Wal-Mart Stores Inc., said it was dropping “Stores” from its name to acknowledge the importance of e-commerce to its business. Walmart trumpeted that it tripled the number of items sold in online in 2017 from the year before, but Amazon soaks up approximately 44 cents of every dollar spent online in the US.

Walmart does just 3.6c per ecommerce dollar, according to estimated data from eMarketer; the same as Apple (including iTunes).

Despite the total revenue of Walmart topping every other company in the world, at more than $466 billion annually, the company is valued at $288 billion.

Amazon is such a destructive force that merely seeking approvals, can make market interest in even hypothetical competitors drop.  The company recently received approval for wholesale pharmacy licenses in at least 12 states, according to reports.

On this news alone, stock in drugstore companies plunged; Walgreens Boots Alliance, Rite Aid, and CVS Health fell 3.2 percent, 6.2 percent and 2.9 percent respectively.

The Big Four players

All of this competition is good news for us. Of the ‘Big Four’ tech players, Google, Facebook, and Apple aren’t seriously tapping into retail where Amazon is making hay. Even if they generate very different revenue, they are each encroaching on the other’s territory more and more.

Apart from Facebook, each have their own retail revenue streams, though Amazon dwarfs the other two. It’s like the sun compared to Apple’s Pluto-sized retail ventures, both in-store and iTunes, and Google’s even smaller offerings.

Still, the good news is that each company can’t stand the other, and that’s useful for us both economically and competitively. It might even save us.

Amazon recently acquired WholeFoods for a physical retail store and R&D lab, and has started to eat into digital marketing. It captures more searches than Google for products. It’s showing more innovation in the hardware space, and is an early winner in voice. It owns Twitch, won three Oscars with Amazon Studios, dominates cloud computing via Amazon Web Services, makes clothes, hardware, and publishes books.

The unexpected success of Amazon Echo products and Alexa has led to a smart speaker revolution, but Amazon is the only company that sells products from their stores via voice-activation. Third-party research indicates that Alexa alone could bring $10 billion in revenue for Amazon by 2020, and devices like Google Home, Echo, or Apple HomePod will be in 75% of US homes.

The fight against Amazon—once a middle-man for books, now a middle-man for everything else too— is becoming more pronounced, and perhaps more desperate.

The company is currently in an open fight with Google, whose smart home products, like Chromecast and Google Home, haven’t been carried by Amazon since 2015. Amazon also ditched the Nest line of products in October, right around the same time it introduced the creepy but useful Amazon Key. Amazon Prime Video subscribers can’t even use a Chromecast to stream to TVs because Amazon doesn’t support it.

Google is fighting this by blocking access to its YouTube apps on Amazon’s Fire TV and Echo devices, starting January 1st, 2018. [Update: Since this piece was written, Amazon has announced it’ll be stocking Chromecast and Apple TV again.]

Squabbling over streaming video devices aside this unofficial anti-Amazon alliance is an overall win for consumers, as it’s working to avoid a monopoly.

Back in October the news that Google and Target were teaming up caught a lot of attention. U.S. consumers are now able to shop for Target items through Google Assistant voice shopping, and on Google Express. Google hardware will also be available in Target stores.

Walmart popped up on Google Home just a week before that, joining other stores like  Costco, Kohl’s, and PetSmart. Target carrying Google’s products in-store makes for an even bigger deal.

Michael Fauscette, chief research officer at G2 Crowd, said via email that Google, Target, Walmart, and others joining up to fight Amazon is just good business.

“I’d call it good business to help compete with Amazon. It’s beneficial to both Target and Google in a joint battle against Amazon,” said Fauscette.

“For Google, it helps them compete in smart home and cloud platforms. For Target, like most large retailers, Amazon has caused a lot of disruption. Think of the outcome, you can now order from Target.com on Google Home and can buy Google Home and phones in Target stores.”

It’s not too late, but it’s closer than we realize

Amazon is going to take a lot of effort to stop. Even the three other gargantuan tech companies are in danger of being overwhelmed, as Amazon spends more on R&D than any other company on the planet.

The risk isn’t that we see more squabbles between competing streaming platforms or hardware availability limits, it’s that the efforts to stop Amazon are so late that retail is dominated by one player with so many network effect positives it’s almost impossible to compete.

The Big Four look like they’ll be overshadowed by one big player: Amazon. Scott Galloway’s new book The Four is invaluable extended reading on this subject.

All of this is a U.S.-centric view though – Chinese online retailing behemoth Alibaba has a market cap of $450 billion and on the back on China’s continuing rise, could have the muscle to fight Amazon. Both are currently competing to tap India’s emerging ecommerce market .

Dramatic policy change or the passing of new antitrust laws could also limit, or even break up players in the Big Four, especially Amazon.

Even President Donald Trump isn’t a fan of Amazon, or the Jeff Bezos-owned Washington Post, perhaps his real target. Posturing is different to action but if we know Trump at all, he will continue to agitate.

The consensus on antitrust has been foremost a concern about harm to consumers. When prices don’t —Amazon has done much to create better outcomes for consumers—there’s little scrutiny. Lina Kahn’s article in The Yale Law Journal dives deep into this issue.

The rise of Amazon poses a threat to the American dream. It isn’t just about buying lower priced stuff.

Can you get rich and move up in the world by taking on Amazon in an increasing range of products and services? If you’re a Mom-and-Pop shop, can you hold out?

In 2017, retailers shut or announced plans to shutter more than 6,700 stores in the United States, a new record, according to Fung Global Retail & Technology.

If you can’t beat them as a supplier, you’ll need to bend to Amazon’s will. As a worker, Amazon’s growing workforce of blue-collar warehouse staff and delivery drivers don’t appear to be particularly cushy jobs.

As options elsewhere are shrinking, the fight against Amazon looks like it has just begun.