Of all the big internet giants, I think Amazon will be the hardest to disrupt.
Androind could eat away at Apple. Google's search could in theory be disrupted. Facebook seems more vulnerable by the day. Microsoft is a dead man walking.
But Amazon has this entire subsystem of distribution centers filled with inventory risk. People focus on the website, but I think the real magic is everything that happens behind the scenes. The barriers to entry are enormous.
I once created a comparison shopping service. When we talked with users, we heard over and over, "I just go to Amazon. I trust them. I don't shop around online." Or, "I have Prime, so I'll save money on shipping anyway." It made the entire space seem pointless.
An internal Amazon company motto is, "it's still day 1." That's their view -- that it's still the early days of the internet. That's why they reinvest so heavily, because it's still early days.
I recently went to two malls in my area that, when I last visited them a decade ago were bustling with shoppers.
In one mall, I walked through a Macy's that may have had only 5 shoppers (I'm reserving "customers" as we weren't one until we actually bought something) in the entire store. The tile floor of the store was crumbling, wallpaper was peeling, everything felt old and ancient. I didn't want to be there.
In one mall, there was an entire wing of the mall that was almost completely abandoned and probably 30-40% of the mall was vacant store fronts. The food court I used to spend hours in consisted of a McDonald's and a Chinese fast food place. I remember years ago when it hosted a dozen different places, all with long lines. Getting a table to eat at required a friend to go reserve a table for you. These days? 3 people eat big macs in an empty large echoy room. It used to be the social center for the town, today it's nearly abandoned.
Amazon and other online shopping venues decimated these brick and mortar shopping venues. And it's not clear that it's generating the same amount of raw revenue in return either. It's definitely annihilating retail jobs in a way that Walmart could never hope to approach, yet it's rarely if ever discussed. At best, retail Macy's jobs are being replaced with contract warehouse work at a local fulfillment center, but automation and the loss of the requirement to interface with the customer means these places only require a fraction of the employees to move the same volume of inventory.
I don't know if the pendulum will ever swing the other way. My wife for example, buys clothes almost exclusively on-line. It's almost unthinkable that she does this, you want to try on clothes after all. But she overbuys a little, and only goes to the physical store to return items that don't fit or she doesn't like. The once proud storefront has been turned into the return counter in the customer service center. Why? "I don't like dealing with all the crowds and it's such a hassle to go there to see if things are on sale, I'll just check the web site every few days instead."
About the only brick and mortar we hit with any regularity these days is Costco, and that's largely because their wine selection is cheaper than online and very nearly always well selected and we can buy bulk toiletries and cleaning supplies at a discount.
> Amazon and other online shopping venues decimated these brick and mortar shopping venues
Brick and mortar stores are still just fine (or better thanks to Yuppies). Malls are getting decimated by Amazon and cultural trends against malls. The 80s suburban world where malls are the place to hangout is fading fast.
I think this is spot on. Many of the brick and mortar stores are scrambling, but finding ways to be just fine They have a certain customer base and actually are being forced to provide better service and value. I shop at Macys now more than I ever did because I can buy items online and deal with a live person at the store if I have any issues. I can't say that I ever shopped there often before getting on there mailing list.
Best Buy is being forced to step-up their price matching policies because of the "show-rooming" trend, supposedly leading to better deals for buyers.
Malls have made a huge comeback among the young people in my city, after the central city was decimated by a large earthquake.
One of the statistics that kinda blows me away, on Boxing Day, the largest mall in the city (which is still tiny by American standards) is visited by over 25% (>100000 people) of the population of the city.
Macy's with 5 shoppers is nothing. If you want to see how bad it can get, check out DeadMalls[0], where they classify and document malls that are already dead or otherwise dying.
Rackspace just moved their HQ into one of these dead malls[1], which is highly interesting.
Omigosh, I love exploring dead malls. They're so eerie and surreal. The one I recently went to was ornate - huge tile floors, brass highlights, gigantic hallways, and giant fountains. Yet there were drips in the ceiling, a thin layer of dust on the floors, and half the lights were off. There were maybe a dozen people in the mall. Half the store fronts were filled with fake placeholder things. It was like uncovering a zombie Pompeii.
I encourage everyone to check out their local dead mall, especially one that you visited when you were a kid. Lots of strange nostalgia to be had for sure. Bring rollerblades or a skateboard if you want to get adventurous.
I've never been to a dead mall, but I think I know what the feeling would be like. I remember some years ago going to a Kmart (I don't remember why). I think besides one person running the cash register, and a janitor, I was the only person there. The shelves were fully stocked, it was pristine, and eerily silent.
It was like I was in a research lab's clean room or something.
I wonder if this could lead to a rebirth of the high street? Malls going away. Small speciality stores that sell things you wouldn't buy online. Butchers, greengrocers etc with seasonal stuff that is nice to see before you buy. I might be extrapolating my buying habits too far...?
It depends on which city you live. The malls in urban area are really crowded. I'm talking about bay area. Malls need to adapt to change. by the way, amazon is not the only online business. There are 100s or may be 1000s of online stores today. ALL of them compete with Amazon. That is why we don't see a profit for amazon.
I want to read a good book examining the possible long term effects of the advance of digital technologies (web, mobile apps, cloud computing, etc). I don't think all those jobs are going to be replaced any time soon if at all.
PS: I'm also glad that the thought of a destructive internet has gone from "luddite talk" to "idea worth examining". I've read Paul Krugman talking about this a while ago for whatever is worth.
> I don't think all those jobs are going to be replaced any time soon if at all.
Again, anecdotal, but I wonder if this frees up parts of the workforce to explore other employment they might have not pursued otherwise.
Something I've noticed is that there seems to be a revitalization in the last few years in more..."traditional"...employers (meaning not in the tech industry) all populated by the kinds of folks you'd probably expect to see in the tech industry: chocolate makers, independent sandwich shops, bike shops, etc.
It's almost like the megacorps in the retails world have ignored certain market segments that are now populated by tons of small boutique shops.
Some malls are dying, some are thriving. Antidote is not data. There is one mall I've gone to the theater in a few times in recent memory, and it is swamped, I've almost get run down by shoppers at all times of the day, weekdays and weekends. Parking takes a long time to find. That's the only time I would go to that mall. I'd never shop there. Way too many people, only the theater for me. I've also been to dying malls. I've seen a few of them die over the years and are now dead.
There are so many places where malls are thriving. A few years ago, I used to live in a different city, and at Christmas time I'd have to take a different road to work, because just driving by the mall made my commute twice as long, if not more because of the traffic. On a weekday. Taking the long way was much quicker.
Also I think during the boom time they simply built too many malls. Don't know about the US, but even in Germany they build more and more malls while the malls next door are going bust (still building more as we speak). It's crazy.
Macy's keeps itself upfloat with Bridal and Baby registries. If there is a registry (which by the way, registries are rude), it's with at least Macy's. Seriously, why does everyone register with Macy's overpriced garbage?
The stuff on everyone's Macy's registry can be purchased elsewhere for half the price or less. I've looked.
Extremely well said. Amazon remains one of the most bizarre companies in the world, and I mean this as a huge compliment. The only other company I can think of that's managed like Amazon is Berkshire Hathaway (and maybe Exxon). I am talking in the sense that they are built for the loooong run. Not five or ten years from now, but decades from now. Five years - an eternity for most companies - is a blip on the radar for these guys. It's fascinating to watch.
What do Amazon (consumer goods), Berkshire (investments, many in "boring" companies), and Exxon (energy) have in common? They're all massive businesses with no product cycle (and mostly no recognizable "product" at all). They are unlikely to be quickly undone because not only does their business planning go on for decades, their customers do too. This is not a sufficient condition for corporate longevity (see: Hostess, Lehman, Enron), but it might be a necessary one.
>Androind could eat away at Apple. Google's search could in theory be disrupted. Facebook seems more vulnerable by the day. Microsoft is a dead man walking.
>Microsoft is a dead man walking.
Why is the company with arguably the most diverse sources of income the one that is a dead man walking?
Weak, myopic leadership which has consistently led to a lack of innovation or even (IMO) basic competence. Their profit mostly comes from windows and office, both products that are extremely old, vulnerable, and in a state of decline.
Microsoft has some other sources of revenue but nothing really innovative or capable of huge amounts of growth.
They might have diverse sources of income, but the majority comes from Windows and Office. For at least the last decade I was watched as many new companies have been run with mac/linux. This doesn't mean much when they are little five person startups, but as the years go by those startups grew and now we have some very large companies that are not based upon Microsoft and plenty of medium size ones. This creates a feedback look of employees that don't train people how to write microsoft a check each quarter, but how to use linux servers etc. It is hard to ignore this as a long term trend. In fact it is so weird/odd/rare that stories get posted here on HN about the reasons why startup X choose to be a MS shop. Saying I am going to use github, amazon and google apps wouldn't get any interest, it is simply what people do these days.
Where I work, it is all Macs (100 people or so), iPhones and iPads - everything is Apple. 100 person company is tiny (by Microsoft standards), but consider 100 companies with 100 people each - suddenly it is not small anymore. Add to it some mid sized companies, and departments from big companies that slowly replace windows with Mac/Linux, it looks pretty bad.
Microsoft's death won't be sudden like Myspace's. It will be slow and will spread over decades. Unless wake up. Purely from a engineering view, they are still a formidable player, and they invest in R&D more than anyone else. If they want, they can still make things happen.
An internal Amazon company motto is, "it's still day 1." That's their view -- that it's still the early days of the internet. That's why they reinvest so heavily, because it's still early days.
MS people I spoke with as late as the late 90s still considered themselves to be a 'startup' (though not using that term), but were quick to point out that they could get disrupted in any market - they were playing in many fields, but weren't dominant ("yet", in their minds). I think this was perpetuated by the sr mgt in anticipation of the anti-trust trials - 'look, we're not some big monopoly - we're a scrappy startup that could fail/lose big at any time!'. I'm not sure anyone believed it, but also not sure that anyone in the mid 90s might have foreseen a time when MS wasn't a dominant player, but here we are.
They're still big, and they matter, in some markets, but very few people are afraid of them any more, or even care what their plans for the future are. People fear Google, Apple, Amazon, etc. MS is, if not totally dead man walking, in grave danger of becoming that without anyone (including their mgt) even noticing.
You should probably buy some MSFT at the open tomorrow and fund it with a short position in AMZN. For posterity's sake, the closing price of both companies today was:
8/8/2013
AMZN: $295.74 @ $135.12 billion market cap
MSFT: $32.89 @ $273.97 billion market cap
I wonder if people will still go by default to Amazon if they're not the cheapest.
For instance, Newegg always sells for a few dollars more than Amazon. Heck Amazon even sells for a couple of bucks less than their own subsidiary, Zappos.
I seriously doubt that Amazon's retail operation has demonstrated that they can retain customers while raising prices.
Unless I missed some news/data. Would be glad to hear comments.
I'm just one person, but I shop Amazon all the time due to the sheer convenience of doing so...regardless of price.
Why? Free shipping (I get mine free, but $80 is well worth it because I buy a lot of stuff), always 2 days shipping, excellent service and a huge variety of goodies to buy. I also have their rewards card which returns $... Free coupla hundred bucks every six months, no sweat.
I mentioned convenience as an opener to this reply, and I'll close with it. In a world wherein lots of things become more and more of a PITA, Amazon delivers easy and pain free, every day (I don't work there, so I can say that).
Some of the stuff we sell via Amazons marketplace is the cheapest on the marketplace but by no means the cheapest online. This stuff doesn't come with the same kind of shipping service that Amazon provides either, people feel safe buying through Amazon though in that the very worse outcome they can come out with is their money back.
So other sites need to not only be cheaper but also build up the same level of service and trust to get a large amount of people away from Amazon.
Amazon is significantly more convenient than other sites. I was about to buy my textbooks today using Bigwords and got a total around $220. I went ahead and added everything to the shoppings carts of 4 different websites. Just to compare, I added the same books to Amazon and got a total around $250. That's a big difference so I got ready to make the purchase on the 4 sites, but I couldn't remember my log ins for 2 of them and the other 2 wanted me to create a new account. That did it for me, I went with Amazon. Not to mention I would be guaranteed shipping in a few days while some of these sites take up to 2-3 weeks + slow media mail.
Unless we are talking about a really big difference, for me it's not really worth it the time spent in comparing prices.
Even if not the lowest, I know that that Amazon is big, fast, cheap and I have previous positive experience with them, so most of the time why bother ?
I agree with the OP, definitely difficult to see Amazon being challenged in the short/medium run.
Androind could eat away at Apple. Google's search could in theory be disrupted. Facebook seems more vulnerable by the day. Microsoft is a dead man walking.
But Amazon has this entire subsystem of distribution centers filled with inventory risk. People focus on the website, but I think the real magic is everything that happens behind the scenes. The barriers to entry are enormous.
I once created a comparison shopping service. When we talked with users, we heard over and over, "I just go to Amazon. I trust them. I don't shop around online." Or, "I have Prime, so I'll save money on shipping anyway." It made the entire space seem pointless.
An internal Amazon company motto is, "it's still day 1." That's their view -- that it's still the early days of the internet. That's why they reinvest so heavily, because it's still early days.