In 1994, when Jeff Bezos was thinking of a name for his new company, he registered the URL Relentless.com, before changing his mind to Amazon. While the firm is still largely viewed as a book retailer, Bezos’s plan was always for the company to relentlessly take on sector after sector until it became The Everything Store. As Shel Kaphan, his former deputy revealed, the choice of books “was totally based on the property of books as a product” – i.e, vast selection, and easy to store and ship.
Today Amazon dominates the book industry ecosystem. It has at least 90% of ebook sales in the UK, and has achieved this through unbeatable price and selection, combined with exceptional customer service. As publishing commentator Mike Shatzkin wrote, Amazon “has service offerings which range from ‘extremely difficult’ to ‘impossible’ for any other publisher-retailer combination to match.”
Amazon’s website states the firm’s mission is to be the company where “customers can find anything they might want to buy”. With the book market sewn up, where else might Amazon be able to achieve similar dominance? The firm has its fingers in some interesting pies: Amazon Studios is commissioning and producing TV drama, reports suggest the company is planning to release an Android-based games console and it is trialling a range of "Kindle Kiosks" at airports and shopping centres in the US, suggesting a desire to move into the physical retail space.
In these sectors, however, Amazon will face competitors who can offer the same thing, just as well and just as cheaply. It will be up against firms that have the scale to make big investments in infrastructure, marketing and R&D, and who can match Amazon on selection, price and convenience.
If we’re trying to identify markets which Amazon can dominate, we need to look elsewhere. When Bezos told CBS that Amazon was working on delivery by umanned drones, it prompted media hilarity. But while the drones are an attention-grabbing gimmick, Bezos is deadly serious and firmly on track to offer same-day delivery: first in the United States, then around the world. And that will be the real game changer.
It’s retail where same-day delivery will be Amazon’s killer competitive advantage. Book buyers love the firm because of its selection, its prices, its customer service and its convenience. People who buy clothes, food, toys and office supplies tend to like these things too.
Can anything stop Amazon achieving a dominant market share in all of these areas? One thing that might put the brakes on is government intervention. While authorities have tended to look benevolently on Amazon and its methods, rejecting attempts to blunt the retailer’s edge, the French Senate recently passed an “Anti-Amazon” law. France has a fixed book price law, which the Senate feels is infringed by Amazon’s offer of free shipping and a 5% discount.
That type of law restricts Amazon in places where goods have set prices, like France, but those are the exceptions, not the rule. For the most part, retailers are free to compete on price, and thanks to same-day delivery, Amazon’s retail rise should continue to be relentless.
Journalist Nicholas Clee wrote in the New Statesman that “the story of the publishing industry in the last twenty years is largely that of what Amazon has done to it”. Retailers everywhere, beware.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.
