Why Amazon Is Vulnerable

 

Much of America is hyperventilating over the growth of Amazon and its perceived power to destroy all brands and retail establishments.

Why?

Because of social media, people tend to be docile followers who avoid critical thinking and readily believe everything they read and hear.

Also, there’s terminology confusion. Many mistakenly utter “brand” when they mean product or vendor; they treat branding as spraypaint, applied after building a product.

Wrong, wrong, wrong. Brand precedes product. Brand begets product.

A brand is intangible. It’s a customer-validated value proposition — not a SKU. A brand is your company’s foundation. A brand determines your company’s purpose and direction.

When a company has a strong emotional connection with its customers, it has a strong brand. Otherwise, it has a deficient brand or none at all.
 
Fawning Media

Another reason for Amazon hysteria: fawning media. They are guilty of creating, accepting, and perpetuating hyperbole. Judging by their tweets, many reporters are advocates for technology companies and their whiz-bang products — not skeptical, objective journalists.

Case in point: Amazon recently announced a new product, Meal Kits. It concomitantly filed a trademark application for “prepared food kits.” This product contains uncooked meals that customers cook before eating. Immediately, the stock price of Blue Apron, a new entrant into the business, tanked.

Gizmodo then published an article claiming that Amazon is so omnipotent that it can crush a company just by applying for a trademark.

Silliness in the extreme.
 
Glorified Warehouses

Amazon has become a major force in retail, even though Walmart still dwarfs it. Is it purely because of skill? Not exactly. The US Postal Service subsidizes $1.46 of every box Amazon ships. Is this fair to bricks-and-mortar stores? No. And, it’s illegal.

Amazon plans to purchase Whole Foods for $13.7 billion. That’s the end of grocery stores, right? Why automatically assume that Amazon will be a successful owner and operator of this elitist-centric grocer? Maybe, just maybe, this acquisition will flop.

Assume nothing. Remember the Fire Phone? It was to compete with the iPhone and create more loyalty from customers. Jeff Bezos had to write off $170 million for this huge failure.

What is the basic secret of Amazon’s success?

Most physical retail stores are glorified warehouses selling commodities. Salesclerks frequently are unfriendly, unknowledgeable, and unhelpful, thereby making shopping an unpleasant and time-consuming experience. This is why Sears is at death’s door (read Chapter 13 of Brand Is Destiny).

Amazon solved that problem by injecting convenience and economy into displaying, selling, and delivering commodity products. If you run a retail operation and cannot add value over Amazon, your business deserves to die.
 
Svengali-like Hold

Is Amazon the panacea for all situations? Absolutely not.

  • At the high end, where a lot of hand-holding and advice are necessary and desired, nothing will or can replace physical stores. Peter Marino, a NYC-based architect, designs multimillion-dollar spaces, like the Louis Vuitton store in Los Angeles. Solid proof.
  • Even at the low end, consumers require in-person help choosing products. To make a home repair, for example, I’ll go to Ace Hardware any day of the week before I’d even consider shopping online.
  • Dependence on one vendor, at some point, will make shoppers uncomfortable. Eventually, they’ll reject the Svengali-like hold Amazon has on them and seek other options.
  • In the history of business, not one conglomerate has succeeded. Ever. Too inefficient. Amazon is a conglomerate, with its fingers in too many unlike pies — books, clothes, food, cars, entertainment, tools, Internet services, pharmaceuticals, etc. Growing and managing this behemoth, at some point, will become unwieldy and impossible. No organization is that versatile. No CEO is that talented or agile, including Jeff Bezos, who won’t be there forever.

 
Inevitability

Is Amazon vulnerable? Of course it is. Jeff Bezos admitted as much to Charlie Rose of 60 Minutes on December 1, 2013:

Bezos: Companies have short life spans, Charlie. And Amazon will be disrupted one day.

Rose: And you worry about that?

Bezos: I don’t worry about it ’cause I know it’s inevitable. Companies come and go. And the companies that are, you know, the shiniest and most important of any era, you wait a few decades and they’re gone.

Rose: And your job is to make sure that you delay that date?

Bezos: I would love for it to be after I’m dead.

 
Parting Advice to CEOs

If you don’t want the leviathan from Seattle — or its competitors — to end your enterprise, you’d better create a strong brand ASAP.

If you believe that branding is dead or irrelevant, you don’t understand it and will suffer as a result.

If all you do is sell a commodity in a glorified warehouse, your company deserves to die — and will.

Finally, find Amazon’s vulnerabilities, and choose the ones your company can exploit.
 
POSTSCRIPT #1: Moody’s: Amazon Is the Weakest of the Big US Retailers

 

About the Author

Marc Rudov is a branding advisor to CEOs,
producer of MarcRudovTV, and author of two books:
Brand Is Destiny: The Ultimate Bottom Line and
Be Unique or Be Ignored: The CEO’s Guide to Branding.

 

© 2017 Marc H. Rudov. All Rights Reserved.

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