Amazon might not be as unstoppable as its critics believe.
“Despite fears of Amazon’s growing invincibility, the company’s eventual hegemony over American shopping is not assured,” Farhad Manjoo wrote for The New York Times. “It might not even be likely.”
Manjoo says the key to Amazon’s weakness is that it hasn’t mastered mobile.
Startups like Postmates, WunWun, Instacart, and Curbside have all used smartphones to change the way we shop, offering more speed and convenience than ever before — and, often, speed and convenience than Amazon.
Overall, mobile commerce grew three times faster than e-commerce year-over-year this summer.
Amazon hasn’t done much to make its mobile experience distinct from its desktop experience. It basically just ported its website into an app.
Meanwhile, startups are carving out new, discreet experiences using mobile apps as a point of differentiation.
Lee Hnetinka, founder and CEO of New York City-based startup WunWun, thinks his company undercuts Amazon in several different ways.
WunWun is a delivery service app that lets customers purchase goods from local stores and then delivers them within an hour for free. Hnetinka says operating without warehouses and inventory makes it much more nimble than Amazon.
“We’re also empowering merchants,” Hnetinka tells Business Insider. “We’re empowering them to compete with Amazon.” He says he doesn’t “wake up everyday thinking about how [WunWun] can kill Amazon,” but he’s not afraid of the competition.
The giant companies that want to disrupt Amazon
But a rush of mobile-savvy startups isn’t Amazon’s only problem. There are big companies with deep pockets ready to challenge Amazon in other ways, too.
Walmart has been steadily increasing its digital efforts and has nearly caught up to Amazon’s steep discounts.
Then there’s Google, which has ramped up its inclusion of paid product listings. These listings show products right in Google searches. Amazon-Google is one of the most underreported, but important, rivalries in tech.
Google makes its money when people do commercial searches for products, but consumers often go straight to Amazon.com to do searches for stuff to buy instead of doing that on Google. To fight back against Amazon’s growing power and ubiquity, Google has tried to improve its shopping results. As these results improve, Amazon is hurt.
Amazon and Google compete in many other ways. Amazon just launched a new mobile ad network that could threaten Google. Google is expanding Express, a delivery service that goes right at the heart of Amazon’s e-commerce business. With Express, Google partners with local stores, and if you order something through Google, it will deliver it that day. The service is currently live in more areas that Amazon’s offerings.
Amazon’s relentless expansion
If Apple is famous for its focus, Amazon should be famous for its lack of focus.
At the same time that new companies are cutting into Amazon’s core, Amazon is expanding into new product categories where it has less strength.
In the last year, the company that launched as a book seller has made four forays into hardware, with a TV streaming box, the Fire smartphone, its Square-killer, Local Register, the Fire streaming stick, and Echo, a voice-controlled speaker that can play music and answer questions like Siri. It’s now making its own line of premium products, like diapers and baby wipes.
Amazon also launched a local services marketplace, an unlimited e-book subscription service, Amazon Pantry for grocery delivery (and an accompanying bar-code scanner), its own in-house delivery system for same-day and grocery services, and a music-streaming offering, while also continuing its experimentation with drones and pouring millions into its original video content.
Some of these new offerings make more immediate sense than others. Some are bigger risks than others. All of them cost money.
CEO Jeff Bezos’s strategy has been to forgo profits and endure slim margins while prioritizing expansion and customer experience. It takes nearly every dollar of cash that it generates and pumps it right back into the company.
Amazon’s strategy has always been to focus on the long-term and make bold decisions and investments that it thinks will help it gain market leadership.
“I’ve made billions of dollars of failures at Amazon.com,” Bezos admitted at Business Insider’s recent ignition conference. “None of those things are fun. But they also don’t matter.”
Companies that don’t continue to experiment and embrace failure, ultimately find themselves in desperate positions, he says, where they need to make “Hail Mary bets at the very end of their corporate existence.”
This is important because Amazon, unlike the startups trying to disrupt it, can afford to lose billions. Instacart, WunWun, Postmates, and Curbside can not afford to lose money.
Amazon doesn’t entirely have its head in the sand on this stuff, either. Just today, the company announced “Prime Now” for free two-hour delivery in New York City. That’s a sign that Amazon recognises new startups are creating new challenges.
“Some of these investments will pay off, others will not,” Bezos wrote in his original letter to shareholders, “And we will have learned another valuable lesson in either case.”
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.