Point/Counterpoint: Can Anyone Beat Amazon At Its Own Game?
Is Amazon.com an unstoppable powerhouse? As growth slows or plateaus at major chains, Amazon's upward trajectory continues. The world's largest e-tailer made the STORES Hot 100 Retailers list again this year coming in at #7 based on increased U.S. sales between '10 and '11. In fact Amazon has been included every year since STORES began the list in 2006. With worldwide sales approaching $48 billion, Amazon saw annual growth of 42.5 percent in the period reviewed. U.S. sales, in fact, accounts for only 55 percent of its sales volume.
Point: Ken Lonyai
RetailWire BrainTrust panelist Ken Lonyai, however, challenges the notion that no other company, even if they emulated Amazon's model, could muster the smarts and the resources to give Amazon a real run for its money.
Many pundits believe Amazon can take ownership of any vertical it desires, via its superior customer skills, accumulated data, algorithms, experience and supply chain. They accept Amazon as an unrivaled source of consumer insights and consider their team to be unmatched and incapable of replication. However, there are brick 'n mortar retailers that have many of Amazon's qualities and, if they choose to, can acquire the rest. To date, they are largely held back by lack of psychological/financial commitment to seize their category in the digital space, as they have in the physical. That can change.
Home Depot is a perfect possibility. Forgetting hard-core materials, the two compete in many categories. HD already has a vast distributed warehouse network (stores), a local delivery system, on-line real-time inventory status, a no-hassle return mechanism, a trusted brand and tons of customer data. If (yes, a huge if!) they chose to step up and enhance/refine/expand each aspect of the user experience and get bold and innovative, there's no reason to ever cede their space to the e-tail-only rival.
Counterpoint: Ryan Mathews
Taking the opposing position (at least for the sake of this exercise) is Ryan Mathews.
With all due respect to Ken but — as do many Amazon watchers — he has answered the wrong question. The issue isn't, "Can any retailer effectively compete with Amazon?" but rather, "Can anyone beat Amazon at its own game?"
What is "the game?" Let's look at the textbook category. The company became a major player in the textbook space, not just by disintermediating college bookstores, but also by redefining the activity of selling — and, more critically, buying and reselling — college texts. By diverting much of that activity to its Marketplace, Amazon has substantially boosted its category transactional volume, begun to build loyalty with a new consumer base and, in the process, focused on the most profitable piece of the transaction. They've redefined the economics of the category.
And that — redefinition of economics and supply chain — is Amazon's real game. The company doesn't need to drive others out of a category, it just needs to capture the most profitable segment of the deal. Amazon's prime mover advantage, scale and brand don't allow it to take over any vertical, just the ones that align with its strategy.
Could another company compete with Amazon? Not now. Amazon's real potential competitive threats are self-created: complacency, bureaucracy, greed, overreach and pressure from investors.
