Amazon’s Ruthlessness and Growing Power Across Industries Creates Powerful Enemies

Amazon is growing and growing and is getting more powerful every day. AWS, Amazon Prime with its Video component and the Alexa platform, Amazon Marketplace and Amazon Business, for example, are all very distinct businesses in different markets. They all benefit from being part of something greater. The power of cross-subsidisation is something we have talked about here numerous times. It drives a lot of what makes Amazon powerful today. (namely especially Amazon Prime and Alexa can thrive thanks to this, and Prime makes Marketplace go up etc.)

But there is also another side of the coin. Amazon as a company is starting to compete with giants in different industries.

Analysts at those companies are seeing the long-term threat of strong cross-subsidies as well. Accordingly, new strategies against Amazon are needed.

Here’s Bloomberg on the topic

Sure, Amazon is a global shopping mall. But it’s also making its own household products like baby wipes and batteries, becoming a silent giant in advertising, opening its own bookstores and grocery outlets, perhaps offering internet service, entertaining us with streaming music and TV, and tackling package delivery by land, sea, air and drone.

Amazon wants allies for its industry-spanning growth agenda, but it won’t be easy. Amazon has a reputation as a steamroller. Its success and suspicions about the company’s intentions may cost Amazon the customers or partners it needs to fulfill its manifest destiny. […]

Amazon wants shipping changes at FedEx to quicken the brutal path from digital clicks to home delivery. It sounds great, until Amazon pushes FedEx to spend big to handle a surge in orders that never materializes — or until Amazon competes directly with FedEx.

Repeat this pattern in other industries, and you can see a lot of business Amazon might lose because of its power, impatience and aggression.

I wouldn’t read too much into this regarding Amazon’s prospects. Just because you are competing with Amazon as an online retailer doesn’t mean it is in your self-interest to choose something else than AWS; in fact a decision against AWS in most cases would be just irrational and damaging in this context. ​Similarly, brand manufacturers can not just ignore a large channel just because it threatens their business long-term. (That is the insidious part of this dynamic.)

Just look at Walmart: the company is squeezing its suppliers for decades now. They grind their teeth, but they don’t leave Walmart. And they didn’t leave Walmart for the same reasons Walmart can push the margins at those companies down: Buying power. Reach. Customers. The same is true for Amazon.

But we can see one real and big effect of this growing opposition towards Amazon in India right now: eBay, Tencent and Microsoft just aligned themselves with Flipkart in its fight against Amazon.

Ebay and Tencent make sense. But why Microsoft? Amongst others, one reason most certainly is that this other Seattle giant is moving its business from software to services like Azure. Microsoft’s cloud service Azure of course is fighting against the market leader in its space: Amazon’s AWS.

Amazon and Microsoft never where true direct competitors until AWS and Azure. It will never be the sole reason to “just stick it to Amazon” but if there is some upside to an investment or a business move the additional benefit of making it harder for Amazon may just tip a decision towards that deal or move.

This time it is Microsoft and India’s Flipkart. But it’s happening every day, large and small.

This is, for the industry, a good thing. Not only will Amazon face more challenges and thus can not move forward completely unchecked. Some things, at the very least, become more expensive for Amazon to do. But realize also this: It means more investment into online retail in general.

Now, who else has lots of money and doesn’t want to see Amazon succeed in your market? Leverage that.

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