(The Big Disrupt) Amazon: The Retail Apocalypse Has Begun In Earnest

Much, maybe too much, has been written about the so called "Amazon effect" and, as Walmart, Kroger and Target have found out for the nth press release running, every word has been justified. And with the recently approved acquisition of Whole Foods and the subsequent price cuts across popular items, life will become even harder for big box retailers already under pressure to drop prices by German discounters Aldi and Lidl. 

Add to that Amazon already slashing prices left and right for Amazon Prime members and is already selling Amazon echos in selected Whole Foods stores, Amazon's plan to take over the massive grocery market has begun in earnest.   

However, Walmart, Amazon's principal competitor in the marketplace, haven't been sitting around twiddling their thumbs as they announced a partnership with Amazon's bitter rival Google to sell their products via Google's AI assistant Google Home as well as Google's e-commerce offering, Google Express.

  

This is a brilliant move for the Bentonville based big box retailer as it gets its expands its reach online as well as in the home in one fell swoop but take a closer look at factors surrounding the deal, the new relationship between Google and Walmart looks highly reactive. Despite Google's considerable strengths in language processing and machine learning, Google Home is a distant second to Amazon's Echo and with Walmart drawing a clear line between them and Amazon forcing vendors to take sides, A deal with Google was the only option worth entertaining. 

Nonetheless, the new Google relationship will almost definitely see Walmart continue to its impressive growth online which is currently at faster pace than Amazon. However, as Amazon continues to slash Whole Food's notoriously high prices, starch inefficiencies up and down Whole Foods's supply chain and then establish Amazon Prime as Whole Foods defacto loyalty program, it only a matter of time before Walmart and other start to bleed market share to the Seattle based company as Amazon will be able to match or undercut grocery retailers across whole food ranges while expanding and retaining its prime subscriber base at sky high rates with perks no retailer can match whether its NFL games or Amazon Prime Videos' growing selection of acclaimed movies and original tv shows. 

What this all means is we're at the beginning of a major disruption where we see large and well-run companies like Walmart bleed market cap and market share at levels unseen to one company. Indeed, the bleeding has already started with Walmart, Kroger, and Target losing billions in market cap in the last two months because a company that's barely a blip in their marketplace put a few well-timed press releases. 

Because of this, Amazon is a game changing antitrust case waiting to happen as it forcing CEO's in a growing number of industries from sports apparel to Pay TV to address the Amazon question. However, it's hard to see Amazon getting broken up as US antitrust law protects consumers, not producers. With that in mind, the FTC will have a hard time breaking up a company that's a deflationary force in just about every market it enters.  

Indeed, this is what makes Amazon so scary as they use their considerable resources to lower prices while spending heavily on improving its products and services forcing even market leaders like Netflix and Walmart to match them on both fronts. Unlike Amazon, most companies cannot do this for sustained periods of time and get away with it without Wall street punishing them every quarter which gives Amazon an edge in just about every market it feels it can win or compete in effectively. 

In sum, the last four days are the first steps into a world where one member of the four horsemen (Google, Apple, Facebook, Amazon) takes centre stage and the smart money is that Amazon stays there.  

(The Big Disrupt) Amazon: Is Amazon about to be broken up?

It's long been held that the first rule of business is that " the customer is always right" but of late the first rule of business looks like it needs a reappraisal that sounds something like "don't fuck with Amazon" 

with Amazon virtually sabotaging meal kit company Blue Apron IPO coming out party and wiping billions off the market caps off big box retailers with a few well-placed press releases, there has been a lot of talk that Amazon is becoming too powerful to exist in its current state which has led to predictions that the Seattle based behemoth may be broken up. 

Predictions of amazon's fractured future looks ominous as it even begins to make significant inroads on fellow giants Facebook, Google, and Apple (often described as the four horsemen) in key markets particularly cloud and voice where Amazon is beating them. Amazon is even threatening the Google and Facebook ad duopoly with  ad agency WPP and L'Oreal upping their ad spend on the platform as Amazon is quickly becoming the venue where consumers are searching and buying products on the net.  

However, the nature of US antitrust law means Amazon's dominance will largely go unchallenged as unlike the European antitrust tradition, US anti-trust law are geared towards protecting consumers rather than seller or producers from dominant firms who exercise their market power unfairly. 

However, this hasn't stopped Amazon running afoul of the Federal Trade Commission (FTC) which is currently under intense pressure to review Amazon game changing acquisition of high end grocer Whole Foods for just under $14 billion dollars. Whether the FTC succumbs to the pressure or not, it's hard to see what the FTC can do to stop or stall the acquisition given both companies represent a near negligible portion of the massive $700 billion grocery market and with Amazon almost certainly planning to lower Whole Foods notoriously high prices, the FTC have no real grounds to nip the acquisition in the bud. 

But the FTC, as Cleveland State University Law professor Chris Sagers pointed out in an article he wrote for Slate, can probe whether Amazon's dominance in is stifling innovation. Indeed, the FTC could have a field day probing the four horsemen on the grounds of stifling innovation as for all the idealistic rhetoric that comes out of Silicon Valley about disruptive innovation, it has suddenly become very dangerous for budding startups to even mildly challenge the four horsemen dominance, Amazon and Facebook in particular.  

Just ask Blue Apron, who at the time of writing are still trading below their IPO price and Snapchat who are hovering just above it how much it sucks going up against a company that can shamelessly copy your most innovative features or launch their own version of your service sending your stock in a tail spin because they have the reach, cash, and customer base to drive you and your direct competitors out of business before you've even started. 

Even successful and well-run companies such as Spotify and Netflix are feeling the heat of horsemen Apple and Amazon breathing down their necks forcing them spend more and more on content and attracting new customers like they're new players in the marketplace despite being market leaders by some distance.  It's now gotten to a point where startups are finding it hard to even compete without dealing with the four horsemen as they have by far the largest business ecosystems which means startups have often to compete against each other and the four horsemen while becoming part their large business ecosystems. 

The same thing is happening to companies that aren't even part of tech world such as CPG brands who increasingly have to do business with Amazon whether they like it or not even as Amazon embraces private label brands and takes a commanding lead in voice which poses a threat to the idea of brands altogether. We've seen similar relationships develop between publishers and the Google/ Facebook duopoly where publishers are increasingly being pulled into the orbit of Google and Facebook ecosystems just to get revenue they already lost to the duopoly in the open market. 

In sum, whoever Trump decides to lead U.S. competition policy will have tough time bringing a strong case against the four horsemen, particularly Amazon despite their dominance.