The "Amazon Distraction" Effect
Despite hundreds of magazine profiles and a dozen books on Amazon I am surprised by the lack of recognition for Jeff Bezos as a master strategist. Jeff Bezos has an uncanny ability to experiment while inducing his competitors to respond with reactionary "strategic" missteps. I call it the "Amazon Distraction Effect”.
Amazon’s willingness to take calculated risk blazing new trails in so many business segments is admirable. Even more magical is the alignment Bezos has earned from his investors giving him license to experiment, sometimes fail, learn, and evolve. Just look at Amazon’s stock multiple as a real measure of investor faith in his vision.
What I find stupefying and inexplicable is how competitors have responded to Amazon. Competitors in almost every market have sought to mimic Amazon business initiatives rather than rely on and improve their own competitive strengths. The competitive responses to Amazon are often poorly conceived and have long term consequences with great cost. It’s almost as if Jeff Bezos has figured out a way to channel Sun Tzu’s lessons from The Art of War
Numerical weakness comes from having to prepare against possible attacks; numerical strength, from compelling our adversary to make these preparations against us.
Amazon's biggest and least discussed impact on the competitive landscape is its ability to take their competitors off their game. In a recent Chain Store Age article Jeremy Han debunked several pervasive myths about Amazon that others occasionally act upon.
Some of my favorite examples of competitive folly…
Overpaying to Acquire a New Business Model
Walmart’s desperate acquisition of Jet.com for $3.3 billion is a great example. A company that had yet to come close to making a profit on $1 billion in sales.
Adopting Infinite Aisle Strategies
Any number of companies have sought to replicate Amazon’s marketplace SKU count with an infinite aisle strategy of adding products to their portfolio as fast as possible. Chasing the long tail of products has profound implications for a company’s day-to-day operations from supply chain requiring bigger distribution facilities and a larger inventory commitment to curating product information and developing a complex pricing strategy (or not).
Convincing Others to Teach them Their Business
Target and Toys R Us are case study examples of the danger of “partnering” with Amazon. Both companies outsourced their early website presence to Amazon which gave Amazon early credibility, a source of income, and taught them valuable insights about retailing.
There are any number of ways to compete against marketplace platforms and even use them for your benefit. Distributors, particularly publicly-traded ones, seem most prone to reactionary responses to marketplace competition. Traditional B2B distributors can only squeeze suppliers so much, add so many private-label products to their portfolio, place vending machines on customer premises, or cut local branches to achieve short term tactical metrics. The long term play is identifying historic strengths and modernizing them while boldly investing in new, related sources of value that differentiate from the marketplace experience. Marketplaces will eventually capture an overwhelming portion of transactional business. B2B distributors who survive 10 years from now will be the ones who figure out how to provide products with unique service propositions. Too many distributors are mimicking Amazon's moves with the thought that they are doing what they think their investors want. The battle is one of "AND" not "OR".