When Amazon eats, others starve

Marc Andreessen, the founder of Netscape, coined the phrase “software is eating the world”. If software is eating the world, then ecommerce is eating traditional retail for breakfast, lunch and dinner.

While this devastation of traditional retail has been going on for some time now, it seems to have hit a climactic juncture in the last couple of weeks with Amazon swallowing Whole Foods whole, and now Nike bowing down to Amazon and finally agreeing to sell its wares on the platform. Much has been said about this being a strategic move in the fight against counterfeit goods and greater brand control, but the reality is that even the mighty Nike is no match for the fact that e-retailers are not only eating traditional retail, but are also starting to snack on the web traffic of mighty mono brand sites like Nike.com. Goldman Sachs estimates Nike could earn up to US$500 million more in the US alone. 

While Amazon is merely a proxy for the bigger macro trend of ecommerce, which in APAC includes another massively influential player, Alibaba, it is still quite fascinating to tally up a few of Amazon’s latest moves, which are powering its share price to new highs.

Amazon’s Alexa and its downstream product line of echos, taps, dots, shows, looks and dashes demonstrates just how omnipresent they want to be in your life. When you start calculating the consumer data capturing capabilities of these devices and think about how Amazon could use this data to seamlessly entice you to buy even more stuff (willingly, I might add), you start to see why a certain prescience global ad industry chief is already starting to crow about the data dangers and competitive advantage Amazon will have, and he isn’t wrong to do so. Very recently, I myself saw a jaw dropping demo that inputted my Alexa data directly into a CRM platform that could then trigger purchase behaviours in key retail locations. And no, I am not sharing the name of this company here.

When you combine Alexa with Amazon’s other recent efforts like Amazon Prime Wardrobe, which pretty much takes all the friction out of buying fashion online. Add this on to the slightly scary notion of a fully machine-operated apparel factory that produces clothing “on demand” just like Dell's pioneering build to order (BTO) model for PCs. See the patent drawing below:

Then combine this BTO wizardry with Amazon's recently created eight Private Label fashion brands, and it then becomes clearer why Amazon can impact the stock prices of entire industry sectors—the Whole Foods deal alone wiped out about US40 billion dollars in the grocery sector.

My next thought will be about the impact they could have on the marketing and advertising sector graph. It is becoming apparent that Amazon, Alibaba, and other online retailers are the publishers of the future and should feature more on media plans—it is high time for marketers to start having conversations with their agency partners and commerce specialists, if they haven't already. Smart traditional retailers, such as Walmart with its acquisition of Jet.com, are similarly embracing ecommerce as they evolve for the future.

Ken Mandel is president of innovation and commerce with Publicis Media APAC