The Amazon Invasion
In the year 2020, America is under seige. Not by a foreign power but by an international corporation. Amazon has grown exponentially ever since it became profitable after years of red ink. One by one, the traditional retail stores and chains filed for chapter 11 replaced by the online shopping of Amazon.
- June 2017
Rise of AMZN stock
How did we get here? It started with the free shipping offer by Amazon Prime members. Until that point, some people prefer shopping in stores. They did not want to pay the extra 10 percent or so for shipping and handling. With free shipping, it opened the door for almost all to try it. After a few orders, they are hooked. How easy it is to click on a few buttons and place an order and receive that item outside your door in 2 days?
The problem with most retail stores is that they can't stock a large number of items on their shelf. They must pick and choose the most popular items. If a shopper wants something not on the shelf, they needed to go online and order it anyway. The shopping model presented by Amazon remove that hinderance. They have a warehouse full of items that you might want to buy. It is run and operated by robots who are very efficient. Once an order is received, the system locates the item, retrieves it, package it, labels it and ships it via FedEx or UPS. The item is tracked until it is delivered. With the new technology of drones, the delivery process is made even shorter. The drone picks up the package and deliver it to the door of the customer in a matter of hours.
The purchase of Whole Foods by Amazon back in 2017 was a seismic shift. No longer is Amazon just an online entity. It is competing with retail stores on their turf.
The Amazon model has transformed how we shop. In the 1960s, there were strip malls and shopping centers and mom and pop stores. In the 1980s, large indoor shopping malls were the norm. Large chain stores were the anchors and movie theater complex also attracted teenagers. With the invention of the internet and world wide web, and streaming video, and smart phones, the transformation is complete. People, especially millennials, prefer shopping online, texting, and watching videos from the confort of home. Social media has replaced human contacts.
Invasion or a Fad?
How is this like an invasion? Remember how the Beatles came to America and took us by storm? Their music was everywhere... Amazon is the equivalent of the Beatles in 1960s. Now with beehives of drones, they invade us in our daily lives.
The Amazon model has a basic flaw. That is the concentration of power in a few rather than a free enterprise environment. There is nothing new here. In the early 20th century, we had robber barons controlling everything from finance to railroads to oil and gas...In the 1970s, it was information technology with IBM and telephones with AT&T. In the past, we instituted anti trust laws to break up these giant companies for fear they will be so dominant. Amazon, and Google and Facebook is the new wave of companies that may be too big.
Picking Winners and Losers
A recent article in the Wall Street Journal expose the fact that our Government US Postal service provide a discount to Amazon that is unavailable to other smaller retailers. They are given a discount of $1.46 per package for shipping. In a way, our tax dollars are subsidizing this very profitable private corporation. At a time when local retailers and shops are struggling, why is our government picking winners and losers? A package should cost the same to ship from one place to another no matter who is the sender.
It is human nature that is both good and bad. When it comes to shopping, humans want and expect change. Nothing stays the same. Here today gone tomorrow. Remember Kodak, or Pan Am or Lehman Brothers?
A time may come when shopping may be obsolete. What does it mean to shop? Some other activities are also in doubt. Vacations may be replaced by virtual reality systems. Dining out may be replaced by eating in. Driving replaced by self driving automobiles. What's next?
© 2017 Jack Lee