If Amazon Takes Over The World...

Tyler Durden's picture

Authored by Scott Galloway op-ed via The Wall Street Journal,

Four tech giants - Amazon, Apple, Facebook and Google - have added $2 trillion to their combined market capitalization since the 2007-09 recession, a sum that approaches the GDP of India. The concentrated wealth and power of these companies has alarmed many observers, who see their growth as a threat not just to consumers and other businesses but to American society itself.

After spending most of the past decade researching these companies, I’ve come to the conclusion that our fears are misplaced in focusing on what I call the Four. We should instead be worrying about the One: one firm that will come to dominate search, hardware and cloud computing, that will control a vast network of far-flung businesses, that can ravage entire sectors of the economy simply by announcing its interest in them.

That firm is Amazon. Jeff Bezos has been disciplined and single-minded in his vision of investing in the most enduring consumer wants—price, convenience and selection. Coupled with deft execution, it has made Amazon the most impressive and feared firm in business.

As for the other three, don’t be misled by their current successes. They are falling behind as the One marches ahead.

Google seems to have a commanding market position when it comes to search functions. As European Union regulators pointed out in their recent antitrust finding, Google has an astonishing 90% share in the category in Europe. Its share in the U.S. is 64%. But it’s a very different story in the narrower, and more lucrative, domain of product search. In 2015, more product searches in the U.S. began on Amazon than on search engines, including Google (44% vs. 34%), according to BloomReach. A year later, Amazon’s share grew to 55%. Amazon could reasonably be described as a search engine with a warehouse attached to it.

For years, Apple has been the undisputed king of hardware innovation. But the prize for the most disruptive recent device goes to the hands-free, voice-controlled Amazon Echo speaker and its buttery voice, Alexa. Research firm Gartner predicts that 30% of computing will be screenless by 2020. So far, Apple looks to have blown an early lead in the great voice race: With 700 million iPhones in use world-wide, Apple’s Siri still has the most share in voice overall. But Amazon’s share of voice on home devices—the next frontier—is 70%.

Today’s fastest-growing sector in tech is cloud computing. There are several big players in the field, including old and new tech: IBM , Microsoft , Google. The dominant player again is Amazon, with a business launched originally to support its internal computing needs. According to Synergy Research Group, Amazon’s cloud offering (called Amazon Web Services) enjoys more than 30% of the market, triple the share of the No. 2, Microsoft’s Azure, and will register $16 billion in revenue in 2017. Financial pundits, looking for something negative to say about Amazon’s recent quarterly earnings, highlighted that growth in the company’s cloud business had slowed to 43%. “Slowed to 43%” is not a phrase you read in any other equity analyst’s write-up of a large company in 2017.

Amazon’s consistent outperformance of the other three tech giants is distinct from its continued dominance of old-economy firms. With the acquisition of Whole Foods, Amazon will likely become the fastest-growing online and bricks-and-mortar retailer. The whole grocery sector—with $612 billion in U.S. sales in 2016—has been disrupted overnight by Amazon. In the months between the announcement and closing of Amazon’s acquisition of Whole Foods this year, the largest pure-play grocer, Kroger , lost nearly a third of its market value.

The late business professor C.K. Prahalad of the University of Michigan famously argued that the most successful firms focus not on one market but on one “core competence.” Amazon has proved otherwise. What Amazon has accomplished across industries is unprecedented, even among the most successful businesses. Nike does not have a cloud business; Starbucks is not developing original TV content; Wal-Mart has not filed patents for warehouses in the sky. Amazon has recently been granted patents for a floating warehouse and small drones that can self-assemble into bigger drones capable of transporting larger packages, reflecting the ability, one day, to operate intricate networks of fulfillment by air. Other firms are punished for straying from their familiar areas of strength; Amazon sucks value from sectors in which it has had no previous involvement just by glancing at them.

At New York University’s business school, where I teach, I have for years kept a close watch on which firms are winning the competition for the most talented students. A decade ago, the top recruiter was American Express , with investment banks vying for second position. Now the clear winner is Amazon: 12 students from my most recent class have opted for a life of rain and overrated coffee in the Pacific Northwest.

Why does Amazon’s ascent matter? Aren’t lower prices and greater efficiencies better for everyone? They are, in all the obvious ways, but that’s not a complete picture. Amazon’s seemingly boundless growth forces us to wrestle with difficult questions about the reasons for its dominance.

For one, Amazon, unlike any other firm its size, has changed the basic compact with financial markets.

It has replaced the expectation for profits with a focus on vision and growth, managing its business to break even while investors bid up its stock price.

This radical approach has provided the company with a staggering advantage in free-flowing capital. Google, Facebook, Wal-Mart and most Fortune 500 companies are saddled with expectations of profits. Many firms would be much more innovative if they were given a license to operate without the nuisance of profitability. Amazon has thus had enormous capital on hand to invest in delivery networks, especially the crucial last link for getting goods to the doorsteps of consumers, without having to worry that they don’t yield immediate profits.

Amazon’s strategy of break-even operations also means that it has virtually no profits to tax. Since 2008, Wal-Mart has paid $64 billion in federal income taxes, while Amazon has paid just $1.4 billion. Yet, while paying low taxes, Amazon has added $220 billion in value to the stock held by its shareholders over the past 24 months—equivalent to the entire market capitalization of Wal-Mart.

Something is deeply amiss when a company can ascend to almost a half trillion dollars in market value—becoming the fifth most valuable firm in the world—without paying any meaningful income tax. Does Amazon really owe so little to support public revenue and public needs? If a giant firm pays less than the average 24% in income taxes that the companies of the S&P 500 pay, it logically means that less-successful firms pay more. In this way, Amazon further adds to the winner-take-all tendencies plaguing our economy.

Because Amazon is more efficient than other retailers, it is able to transact the same amount of business with half the employees. If Amazon continues to grow its business by $20 billion a year, the annual toll of lost jobs for merchants, buyers and cashiers will be in the tens of thousands by my calculations. Disruption in the U.S. labor force is nothing new—we have just never dealt with a company that is so ruthless and single-minded about it.

I recently spoke at a conference the day after Jeff Bezos. During his talk, he made the case for a universal guaranteed income for all Americans. It is tempting to admire his progressive values and concern for the public welfare, but there is a dark implication here too. It appears that the most insightful mind in the business world has given up on the notion that our economy, or his firm, can support that pillar of American identity: a well-paying job.

Amazon has brought us many benefits, but we all must recognize that the rise of the One brings with it much more than free two-day delivery. “Alexa, is this a good thing?”

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Clock Crasher's picture

Technological Unemployment

Pros - Subsidized Shipping, More leisure time, Off set inflation with deflation

Cons - Collapse of human civilization as we know it.

The survivors will be living a virtually reality lifestyle domiciled in super cities living in a tiny coffin apartment, living off of Soma, Gruel and a VR head set. 

Either that or mass extermination of useless eaters.

Gaius Frakkin' Baltar's picture

Today was a perfect example of why we shop Amazon more and more.

I spent a couple of hours this morning trying to find a new chain for the polesaw that I bought at Lowes a couple of years ago. No one had it, so I tried the "same length" from a different brand and the fucker was too short. Waste of time, waste of money.

Searched Amazon and found exactly what I needed for half the price.

Retail is fucked.

greenskeeper carl's picture

The guy that wrote this, praising bezos for his 'progressive values' because he supports a universal basic income is a dumbass. It has NOTHING to do with progressive values. He supports is for the same reason as Faceberg - if people have money to sit around and do nothing all day, they will fuck around on Facebook, but shit on Amazon, or watch things on Amazon prime. They want it because they know it will make them more money. Progressives are so fucking stupid for falling for this shit.

El Vaquero's picture

I think that one thing is clear:  We need a different economic system in the face of ever increasing automation.  UBI is one idea, though I would argue that it is a VERY BAD idea.  We either give up on automation (a decision that may be forced upon us by circumstance,) or we come up with something new.  The problem with UBI is the same problem with communism on a basic level.  It fails to take into account that people respond to incentive.  Any system that fails to take this into account is doomed.

 

That being said, Bezos, who also owns the WaPo, is one evil cocksucker.  I'll use Amazon's bandwith to do product research, but I won't purchase anything from Amazon if I can help it.  

Fizzy Head's picture

I'm all for UBI if the top 10% are included and distribute all their wealth amongst all equally.....

those at he top that are blowhorning this are only protecting their wealth and power , just like a communist country.

The federal reserve is what need to go, to name one. It's all for not tho cuz the majority of Americans are scared to stand up to these corrupt few.

Stuck on Zero's picture

It's just a matter of time before Amazon is hit with a massive viral attack that releases customer information and kills the supply chain system.  The bigger a company gets the more people target it.

Clock Crasher's picture

I'm taking (sometimes massive) discounts and convenience anywhere I can get it.

Ebay is not bad as well depending on what you're looking for.

Retain is dead.  Evolution of how business gets done.

Be brave everyone.

DownWithYogaPants's picture

If you know what you are doing Ebay beats the living snot out of Amazon on price.  But you do have to figure things out occassionally. 

Ur like going to Amazon and finding what you want then find the comparable one on ebay for 30% or more less.

Infnordz's picture

Ebay is crap compared to Amazon (marketplace); I had to tell ebay fucking obvious stuff about how a basket should work (haven't they used Amazon ever?!) because I had repeated WTF failed payments.  As for PayPal it seems to fail everywhere for my well-supported, good-credit, credit card, so I shun most vendors using it exclusively!

Ebay lost out big time for my significant purchase for a whole year, because of their basket/payment Fuck-ups!

 

Amazon just works; it has more stuff which ebay doesn't and I've seen cheaper prices than ebay for branded and generic goods!

I much prefer to try buy direct from vendors when cheaper, after trusting them on Amazon, but it isn't worth it for those which use Amazon as a payment channel, and a lot of the small vendors only operate via Amazon.

stayhumble's picture

Yea what is more disgusting than Amazon is the lack of thought and effort reatial puts into their businesses. And most of the times the employees are brainless, a good example for me is home depot. Every time I go in I make it a point to ask the nearest employee where to find a product whos location I already know based off of their website. 9/10 times I have been dirrected to the wrong isle, sometimes the wrong end of the store. Humans are asking for this subconsiously as none of them want to put the work into making society better themselves. They want to vote for some politician who pinky pinky promises he will make everything better. What a fucking disgrace. 

Kassandra's picture

Totally right. I hate to admit that I buy necessary things off Amazon, after spending much time, in person, looking elsewhere for an item I need. If I could find it locally, I would not go to Amazon. But I can't. So I do. I feel I am contributing to the downfall of local markets, but they seem to be doing a pretty good job all by themselves.

My time is valuable, something I cannot get anymore of..

Infnordz's picture

Bulk buying is much easier on Amazon and web based shops (to save loads), and often not available or easy from shops.

I only use shops for consumables (especially perishable/chilled/frozen goods) and some clothing, or other things I need fast or to try/handle before purchase.  Even some discount shops now do web ordering and delivery.  The smarter shop chains have decent web based retail and delivery, including to local branches.

Trogdor's picture

Add to that the fact that whenever you go looking for a certain item, you're bound to end up having to deal with some dolt who thinks having a pulse is all it takes to do his/her "job" ... and it's just as likely to NOT be in stock.

Last week I was in the hardware section of Lowes - ended up helping 4 people find what they needed while the vest-clad millennial stared blankly at his phone.

Retail IS fucked - and it's a damn shame.

greenskeeper carl's picture

I've noticed that with gun stuff too. I have a Blackhawk holster for my G19 that I love, and wanted one for my 43. Couldn't find it anywhere, and I know they make them for that gun too. Amazon had them, in stock, and it was cheaper than similar models at every store I checked. Showed up at my house in 2 days. I even found the foam to repair my subwoofer. It dry rotted from just sitting in my truck for 6 florida summers, and after playing it for about 5 hours straight at a party, the foam came apart. JL wants a ton of money to 'refurbish' the thing. A new one costs 600$, and I bought the foam surround kit on Amazon for 20$, did it myself, and the speaker works like new. Even turned the gain on the amp up a little bit.

jaxville's picture

  I am sorry to have to agree with your assessment.  You could have taken it a little further once you found what you were looking for on amazon.  You could have taken a little more time to find the manufacturer or distributor and dealt directly with them. Sometimes it isn't easy because amazon does not want that to happen and they place hurdles. 

  I use amazon all the time but I have not bought a thing through them for over a year now. 

DemandSider's picture

Typical "free trade" neoliberal Luddite. Look where just about every durable good you buy is made. You'll find it isn't USA, "robots" or otherwise.

HoyeruNew's picture

BS,. Human civilization collapses when the current structure is past its life, chaos come around for a while and a new structure emerges in the place of the old.

Im sure The Romans were terrified when the Roman empire collapsed and they though just as YOU that the world  was ending but we all know that didn't happen. The collapse occurring in the current structure shows  it is past its usefulness and is going down because it doesn't work anymore. A new society with a diff structure will take its place, that is whats really scaring you cuz you might not have a place there with your BS "Capitalist thinking" which boils down to  "making profit" and accumulating "wealth".

bigdumbnugly's picture

BUT.....  sexbots all around.

DemandSider's picture

Eventually, manufacturing and store front retail will be mostly gone, Then, A PRC Amazon clone will monopolize web retail. Capitalist USA brought a gun to a nationalist economic war.

Gaius Frakkin' Baltar's picture

Manufacturing is already gone, that's why local retail is pointless beyond being a showroom for Amazon. Local retail should be selling local and regional products, not the same shit from China.

tion's picture

Locals won't/can't pay for local and regional products most of the time =/ Dirt cheap imports have completely warped the perception of value.

DemandSider's picture

Thankfully, Herbert Hoover, on his last day in office, signed into law The Buy American Act of 1933, which not only required FDR to recycle his Keyensian spending during The New Deal, it continues to preserve American manufacturing even today. Just get on to eBay and search "U.S. made underwear", or boots, or gloves, etc. You may be surprised at what you will find of American origin, and it's usually of higher quality than CommieMart, etc.

 

P.S. Consumer manufactured goods are largely gone from chain stores, but, having worked in manufacturing for 2 decades, not only are many sectors hiring, but the pay can be much better than average.

Ace Ventura's picture

A word of caution on those supposed 'U.S. made' goods. As with everything else nowadays, the labeling rules have been tweaked to allow for plenty of wiggle-room. So now something which had all its parts physically made in China....can be 'assembled' in the US, and labeled 'Made In USA'. Then you get into the realm of what exactly consitutes 'assembly'. Well, you can see where it leads.

Crazy Or Not's picture

Amazon already has taken over ... its the online OBOR
(One Belt One Road)

Megaton Jim's picture

In an economic downturn, who the fuck is going to have money to buy shit? Amazon will go down faster than a $2 whore!

moorewasthebestbond's picture

Break 'em up and sell off the pieces in bite-sized chunks... just like the USA does with the container ships full of shredded automobiles it sells to China... well sort of.

Duc888's picture

 

 

....better prices on Ebay.

Mr Pink's picture

This.

I only go to Amazon to read reviews on some products then I go to Ebay and save some money

gregga777's picture

"Today’s fastest-growing sector in tech is cloud computing. There are several big players in the field, including old and new tech: IBM , Microsoft , Google. The dominant player again is Amazon, with a business launched originally to support its internal computing needs."

While the graduates of American business schools were busy self-dealing, self-enriching and looting a multitude of retailers, IBM, Hewlett-Packard and Microsoft, Amazon was busy making their businesses obsolescent. Like it or not it's certainly creative destruction on a colossal scale.

TradingTroll's picture

Creative destruction or bad money drives out good? My bet is on the latter.

You see, Amazon's friends have printing presses so what appears to be capitalist endeavours is actually more communist in essence.

HopefulCynical's picture

Spot on, this point. Bezos actual objective is to obtain the same death grip on end-user consumer retail that his tribe has on finance, media, education and government.

But - and you need to hear this, all of you - a few stragglers boycotting Amazon will accomplish nothing. When you can get 100 million working age people to agree to avoid Amazon, even if it means higher prices, you might have something.

In the meantime, work on ways to force your Senator and Congresscritter to vote to Audit The Fed, and then End The Fed. Taking the rubber checkbook away from the globalists is the single most powerful thing we can do, as things stand right now.

pigpen's picture

Break up the tech monopolies. Tax avoidance, job destruction under the guise of progressivism.

Destroy digital advertising model. Every American should download brave browser on any device or operating system. Automatically blocks all advertising and tracking.

Run all of your social media apps including YouTube out of brave bruiser. Get your kids and mother in law to change to brave tonight.

Render digital advertising worthless. What is digital advertising worth of you can't deliver image and I don't view it?

Make this a political movement. Destroy the tech monopolies.

Cheers,

Pigpen

Trogdor's picture

When Mozilla jumped into bed with the Zio-Demon Soros, I went looking for a new browser. I tested Brave, but Holy Moses it was slow. Ended up going with Pale Moon - an early branch of Firefox that is developing along it's own path. It can still use a lot of the Firefox Addons (and has custom-written ones for others).

Not saying it's better for everyone, but it seems to run really well overall - much better than the current version of Firefox.

Rhetorical's picture

I'm using brave right now but dont think for a second that brave isnt going to monetize your website views for cash. Look up their crypto currency, yes brave the browser has a cryptocurrency for use in their browsers ads. Its called brave attention token I believe. 

That being said 2 months ago brave the browser was fucking awful and in the last month or so I've noticed a massive improvement. I still think their bookmarks section could use some work but I havent messed with it to much to make much of a statement on it.

gregga777's picture

"In 2015, more product searches in the U.S. began on Amazon than on search engines, including Google (44% vs. 34%), according to BloomReach. A year later, Amazon’s share grew to 55%. Amazon could reasonably be described as a search engine with a warehouse attached to it."

True. I rarely bother searching for any products outside of Amazon.CON. Now if they'd just sell guns and ammunition…

ilovetexas's picture

Simple. Join Amazon! 

Let it Go's picture

Screw Amazon! Almost every day we see articles about how Amazon is buying this or that company or expanding into another business sector. Any company stupid enough to hire Amazon to act as their agent and paying this competitor to ship their products to customers are adopting a destructive strategy akin to cutting their own throat so they can breathe more efficiently.

Amazon is not our friend and of that, we should take note. A backlash is growing and in the end Amazon will pay a price for all the jobs it is destroying as people simply stop buying from them. More on this topic below;

 http://brucewilds.blogspot.com/2017/07/amazons-engulf-and-devour-strategy.html

Infnordz's picture

How is that sensible when a product can only be found (easily) on Amazon, because of small merchants, or if it is quite amazingly cheaper/faster-delivery because of Amazon bulk purchase, caching, or better price merchants?

I've bought stuff which was shipped from continental Europe, China, and Japan to the UK; like how the fuck can I do that as easily without some kind of transnational market place?!

BTW  I don't buy much stuff from the USA because of some rip-off prices, hideous fees for parcels, and import tax!

I do prefer to bypass Amazon and buy direct from a retailer to save costs and see more range, some of these retailers discovered via Amazon, but this isn't always possible, and often not worth the extra hassle for rarely bought stuff.

poetic justice's picture

What royalties is Amazon paying to Brazil to use the name "Amazon"? Or is it that the name "Amazon", was never copyrighted by Brazil?

 

buzzsaw99's picture

they don't have enough money to take over the world.  not nearly enough.

TradingTroll's picture

All this fawning over these CIA front companies is nauseating.

It's obvious these dotcom leftovers would be in the trash bin along with Pets.com if it were not for the support of these companies by arms of the government.

This'll work for awhile...until governments need more and more tax revenue, then even these companies will run into trouble.

AC_Doctor's picture

Yeah, because living off always newly iissued debt works so well while when you lose money quarter after quarter...

cherry picker's picture

I won't buy from Amazon.  Sometimes it cost me more but I buy local when I can to keep these small businesses going as they spend their money here, Amazon doesn't.

Google and Facebook are leeches is all.

Apple and Microsoft are not to be admired. 

Many love all off the above and kneel to them because of the almighty dollar.

If and when NK knocks out the power, none of the above will survive for long....

az_patriot's picture

Moar Doom Porn.

It won't happen.  The spread of the Amazon empire will be curtailed.

Racer's picture

I have had a lot of problems with ordering stuff from amazon so am increasingly looking for dealing with companies directly and am much happier doing so, knowing that a mega corporation SLUG is not taking the profits of the individual. They wriggle out of corporation taxes that Amazon and other slugs slither out of....

Amazon, Apple and Google et  al are slimy SLUGS

 

koan's picture

Imagine holding an unpopular political opinion and getting banned from Amazon.

aloha_snakbar's picture
If Amazon Takes Over The World

 

Only is we let him... he is nothing without us...

Pollygotacracker's picture

Amazon...the river of no return.