Amazon’s Superpower

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Unintended consequences of Covid-19 are that it’s easier to find a captive audience and we now regularly spend time waiting in lines. In the spirit of making lemonade out of Coronavirus lemons, I decided to conduct a quick, socially distanced, unscientific poll outside a Brooklyn Trader Joe’s where my husband was queued up. My question was, “What kind of a business is Amazon.com?” Of the 11 people who took out their earbuds and talked to me, nine of them said basically “online retail.” Another said, “A company that should be broken up because it is anti-competitive,” and one said, “Too big a part of my life because Alexa knows everything about me.” While all of the answers above are correct, it is the third quote that is most apt.

The Empire Strikes Back

Indeed, the scope of Amazon’s empire now extends far beyond online retail. In a recent HBR podcast, Harvard Business School professor Sunil Gupta discussed how Bezos has upended traditional corporate strategy through diversification into seemingly unrelated categories. Gupta said, “In business school, we teach that traditional strategy is about focus, obviously, Jeff Bezos missed that class.” Bezos, at the 2016 Code Conference illustrated this holistic game plan, “When we win a Golden Globe, it helps us sell more shoes.”

[callout]Amazon’s culture of experimentation combined with a high-risk tolerance and the deepest of pockets, make it a formidable foe for fashion, retail, pharmacy and the expansion of its life ecosystem — which is methodically transforming our personal life ecosystem.[/callout]

Cut to four years and a pandemic later, the notion that Amazon’s ambitions reach well beyond retail, or even film production is clear. During the BOF 2020 Voices conference, Doug Stephens, author and @RetailProphet declared, “In the years following the pandemic, Amazon will not simply be shipping groceries and apparel items to your home, it may be your child’s tutor, your checking account, your credit card, it may be your healthcare provider… in fact, it can use products and services to draw consumers into its life ecosystem.”

Disruption at the Drugstore

Amazon’s ecosystem expanded recently as the behemoth announced its latest consumer offering in online pharmaceuticals. Amazon has been signaling this move for years. In 2017 the company made critical hires in the life sciences.  The next year they joined Berkshire Hathaway and JP Morgan launching a joint healthcare initiative, and most critically, they purchased the online pharmacy PillPack, adding their pharmaceutical licenses to its arsenal. In 2020, as the pandemic was raging and impacting its warehouse facilities and creating a PR nightmare, Amazon responded by opening employee testing and health clinics. It later introduced a wearable health monitoring and subscription device named Halo. CVS, Walgreens, and others in that lane have been anticipating this move and adjusting strategy for some time now. The chains increased health and wellness services, improved their online functionality, and redesigned stores. Still, with Amazon’s recent announcement, the CEO’s of the large drug store chains watched their stocks plummet at the announcement, and must be wondering how to avoid the fate of Barnes & Noble or worse, Borders.

The Amazon Narrative

Now Amazon will have a new media channel delivered directly into our ears with the announced purchase of the podcaster Wondery. The plan includes integrating Wondery with Amazon Music into a single audio app. This combination mimics Spotify’s model, and the popular assumption is that Amazon is challenging Spotify’s audio dominance. While that is certainly true, the potential for Amazon is far more substantial. Amazon’s ability to yoke its diverse holdings together supports the notion of a life ecosystem with media and entertainment as a branch. Amazon’s Media holdings currently include: Prime Video, Prime Gaming, Audible, Amazon Music, Amazon Publishing, The Amazon Bookstore, and Twitch, all developed before the Wondery purchase. Media integration possibilities could create a new consumption model. A podcast or game can be spun off from a television series (if we can still call them that?), which can inspire a book, which can be read in print and or heard in Audible. A gamified version could be developed and played on the gaming platform, or in Twitch. Amazon’s Kindle and/or Fire could offer hardware assists to the process, and it can all be summoned through Alexa and purchased or subscribed to via Amazon.com. As I re-read the passage above, my instinct was “that’s a little too much,” but the brilliance of Amazon lies in ignoring that doubt.

Is Banking Next?

While Amazon’s early stockholders were willing to forego profit for nine years, Amazon is making plenty now, and it is dabbling in finance. While Amazon has not aggressively moved into this sector, it is currently offering a banking-as-a-service- (BaaS) feature by partnering with Goldman Sachs in providing lines of credit to third-party sellers on the Amazon Marketplace. The financial services model dovetails with Amazon Web Services (AWS) as a part of a cloud-based e-commerce infrastructure system or infrastructure-as-a-service, (IaaS). While Amazon’s financial services are currently limited to sellers, the company could make a move into consumer banking services. Professor Sunil Gupta in the aforementioned HBR podcast quoted Jeff Bezos’s philosophy of “work backward and skill forward” or, if the company recognizes a customer need, it will build the skills to meet it.

Fashion’s Future

Amazon has skilled-up to meet a customer need in its retail/apparel business. It is perfecting its predictive analysis abilities using a combination of computer vision and machine learning, then applying it to the apparel search-journey. The company presented examples of academic research on recent developments.

  • One example uses a vision-linguistic framework to refine a product query. A voice search for a black dress will produce results, but the shopper can then ask for a different neckline or polka dots for example, and the technology would solve for a result.
  • A second presentation describes a complementary fashion retrieval function where the site can be searched for a complete outfit plucked from various sellers in the vast Amazon marketplace. A shirt from here, shoes from there, a hat from another, voila, an outfit in your basket.
  • In a similar vein, a third study presents a technology that can synthesize product images from different suppliers into outfits shown on a virtual model, generating a customized virtual photoshoot from all of Amazon’s available suppliers.

The question of whether these innovations will extend Amazon’s reach beyond apparel to the high fashion or luxury consumer is still debatable. At the BOF Voices 2020 conference, Roger McNamee, venture capitalist, early Facebook investor, and activist warned, “Amazon goes past trendsetting to something scarier; they are picking the winners. In their world, everybody wears the same clothes, but fashion has a superpower, you are connected to culture.” McNamee continued, “You have the ability to influence culture. People in fashion create the trends.”

Your Personal Life Ecosystem

I hope McNamee is right, but Amazon’s culture of experimentation combined with a high-risk tolerance, and the deepest of pockets, make it a formidable foe for fashion, retail, pharmacy, and the expansion of its life ecosystem, which is methodically transforming our personal life ecosystem. The fact that Amazon has what appears to be an amorphous corporate strategy may confound my survey participants, but it is something we should strategize for. Bezos has a grand plan that he is revealing, opportunity by opportunity.  The pandemic clearly accelerated his plans opportunistically. Amazon’s evolution to a business that extends far beyond online retail is its true superpower.

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