Mele’s Musings

Advantage: Amazon

Sometimes being the biggest really is the best competitive advantage.

Picture: Bloomberg.com

Article excerpt:   Acing the competition with free shipping, low prices, broad selection and new technology, Amazon is growing faster than e-commerce as a whole. How can other online retailers stay in the game? Amazon.com Inc., already the dominant online retailer with more than double the 2007 web sales of its nearest competitor, is widening its lead. Its sales last year grew at nearly double the rate of U.S. e-commerce—38% vs. 22%—and in the first half of this year Amazon’s North American web sales grew by 33% while online retail as a whole grew by only 12%, according to comScore Inc. Several factors drive this growth. They include Amazon expanding into new categories beyond books and music—more than a dozen in the past year. The e-retailer’s free shipping offers and low prices encourage frequent purchases by 81 million active Amazon shoppers. And thousands of other retailers are helping expand Amazon’s selection by selling on Amazon—even though it means paying a commission and handing over customer data to a competing e-retailer.
The rest: internetretailer.com

Musing:  Amazon’s approach to online retail has shifted over time, from bookseller to mall, but one thing is certain – their focus on growth, frugality, and customer data has paid off for them.  You wonder whether or not anyone will be able to supplant them.  Even more interesting is what happens if Amazon decided to move into the physical space.  The article is a fascinating view into the company.  But they do have one Achilles heel, at least at this point – service you can touch.  No one is questioning that Amazon does a great job, and will continue to be a leader – particularly in price and selection.  But what they will always have trouble with is customer service.  Not that they have bad service – they just cannot offer high-touch service, or offer in-home services, etc.  If they do, however, look out.