GORILLA Games

Q3 2018 Update on
What Amazon Means For The Rest Of Us


INTRODUCTION

Let’s let Jeff Bezos set the stage once again:

One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’. I see that cycle of improvement happening at a faster rate than ever before. It may be because customers have such easy access to more information than ever before – in only a few seconds and with a couple taps on their phones, customers can read reviews, compare prices from multiple retailers, see whether something’s in stock, find out how fast it will ship or be available for pick-up, and more. These examples are from retail, but I sense that the same customer empowerment phenomenon is happening broadly across everything we do at Amazon and most other industries as well. You cannot rest on your laurels in this world. Customers won’t have it.

- Amazon 2017 Shareholder Letter

Amazon is in the news constantly, but rarely is the commentary focused on helping business owners stay up-to-speed on how they have been, are, or will be affected. That’s our goal for this piece—to keep you, the business owner, informed.

I bet we could all exchange stories on rising customer expectations vs. profitability. Amazon’s role in the daily struggle for other American operators is consistently resetting customer expectations. From speed and delivery fees to inventory access to consumption availability, they have and continue to set the bar higher for both themselves and for other companies.

Let’s dig in on where Amazon is acting like King Kong changing the landscape of a major metro, and where they, along with the rest of us, are struggling to figure out how to satisfy customers’ divine discontentment while operating sustainable business lines.

SELLING VIA AMAZON

With some exceptions, many branded manufacturers are reviewing quarterly results with increasing dismay at what the Amazon distribution network yields. Amazon is marketing its latest efforts to increase product visibility, brand storytelling, and customer relationship-building, but companies are spending more time talking about third-party seller pricing wars, fraudulent product listings, Amazon’s private label lines, margins, tax changes, analytics-oriented fees, and back door strategies for manipulating the e-commerce giant’s algorithms.

  • “Counterfeiters are listing their versions of hot-selling items on the same page and at lower prices. Amazon’s pricing algorithms see the lower price and then assigns the default “add to cart” option to the counterfeiter, elbowing brands out of selling their own goods.” - WSJ

  • “In exchange for payments ranging from about $80 to more than $2,000, brokers for Amazon employees in Shenzhen are offering internal sales metrics and reviewers’ email addresses, as well as a service to delete negative reviews and restore banned Amazon accounts.” - WSJ

  • “[There is] a massive opportunity for Amazon to more than double revenue from its in-house brands to $25 billion in the next four years… Some large brands are spending six figures each month advertising their products on Amazon’s platform even as Amazon’s private-label products are crowding them out.” - NYT

  • “Amazon launched a new section of its site called Amazon Storefronts… trying to be everywhere, but not as a faceless $1 trillion company. Instead, as 20,000 businesses featuring literal faces that can connect to you on a folksy, personal level.” - Vox

  • “‘There are other discount retailers that have developed their own lower-priced versions of J.Crew. Amazon wanted to work directly with the people who created the concept.’ J.Crew is selling merchandise directly to Amazon, making Amazon responsible for listings as well as the warehousing and shipping of products.” - WSJ

  • “The people who command six-figure salaries to negotiate multimillion-dollar deals with major brands are being replaced by software that predicts what shoppers want and how much to charge for it... Amazon’s algorithms, refined through years of monitoring customer behavior, are getting the Seattle-based company out of the guessing game." - Bloomberg

  • “With Amazon now actively reducing the total number of Vendor Managers, even a brand selling millions of dollars of product each year to Amazon may find itself without a Vendor Manager. Instead, that brand must use the Vendor Success Program (VSP), featuring automated reordering and computer-based contract negotiation.” - News Times

  • “Amazon collects state sales tax where applicable on its own merchandise, but it doesn't generally assess it on items shoppers purchase from third parties via Amazon Marketplace.” - The Street

  • “We didn’t embrace Amazon or other channels that weren’t hardcore outdoor, and we suffered because of it. A small, fledgling company really needs to have the attitude that sales is king.” - Outside

Outside of product, fulfillment, and pricing concerns, the options for marketing a product or brand to particular consumers are significantly expanding. And with that, the options to spend more money on Amazon are as well. The general thesis of spending marketing dollars on near-perfectly segmented audiences already in “buy mode” makes sense, but considerations around conversion data access, retargeting limitations, and product margins keep it from being an easy decision.

  • “Not all my clients like working with Amazon because it has been going directly to them, absorbing all their information without sharing anything back. People talk about the role of an agency in a world where Amazon becomes the dominant channel, and my answer to clients is, ‘You should treat us like having a lawyer in the room.’” - Digiday

  • “Thanks to the vast amount of data Amazon collects from its customers, it can target ads not only to basic demographics—say, women over the age of 35—but to a more precise segment of customers who are likely to be shopping for cellphones or barbecue grills.” - NYT

  • “Amazon bills Video in Search ads as “a premium ad experience” and says that a budget of $35,000 or more is required for advertisers interested in using them.” - Econsultancy

  • “About 70 percent of the word searches done on Amazon’s search browser are for generic goods. That means consumers are typing in “men’s underwear” or “running shoes” rather than asking, specifically, for Hanes or Nike.” - NYT

  • “1 in 6 search query results on Amazon is sponsored.” - 2018 Code Commerce

  • “[Amazon] is doing more outreach with Madison Avenue, striking deals with holding companies and agencies; it opened an ad platform last year, an application programming interface that lets marketing developers build easier ways to buy ads; and it is opening its Amazon Ad Platform to more brands.” - AdAge

  • “The "other" category grew 51% year on year to $945 million (£723 million). Amazon's advertising business is almost a unicorn by itself.” - Business Insider

  • “In 2018, we are estimating advertising revenue of approximately $96B at Google (ex-YouTube), $54B of ad revenue at Facebook, approximately $20B of revenue at YouTube, $7-$8B at Amazon, $2.5B of ad revenue at Twitter and $1.1B at Snapchat.” - MediaPost

SELLING OFFLINE

U.S. e-commerce is expected to top 10% of all retail sales by the end of 2018. But American shoppers still spend $9 out of every $10 offline. Translation: Brick and mortar still matters.

It would seem Amazon appreciates how hard offline sales can be. The rollout of Amazon Go stores has been welcomed by consumers, but extremely slow by the corporation’s normal standards, although that may be changing soon. And the Whole Foods ownership transition hasn’t been exactly smooth, with customers, employees, and suppliers growing frustrated over various changes in the quality and structure of respective relationships with the brand.

  • “Amazon Go drew giant lines when it opened in Seattle earlier this year. The store has a 4.5-star rating on Yelp, with customers raving about the concept.” - GeekWire

  • “I don’t know a ton of people who say, ‘I love the part where I wait in line and they ring up all my stuff.” - Chicago Tribune

  • “Many suppliers are angry that Whole Foods has added fees of at least 3% to restock shelves and run promotions for vendors who sell about $300,000 in products annually.” - WSJ

  • “For many suppliers, all of these changes are putting the retailer’s success far ahead of their own. It’s jarring coming from a grocer that used to be renowned for its nurturing relationships with product makers, and a lot of small vendors—the ones that have long helped Whole Foods stand out from the crowd—now say they’re completely shut out of stores.” - Food Dive

  • “Back in 2016, when everyone was hysterical about Whole Foods going down the tubes, it had an operating income of 2.9 percent, down substantially from the 5.5 and 5.6 percent it posted the two preceding years, but in the typical range for the industry… You buy groceries from Amazon? You’ll be buying from a tech business that cares as much about the data it collects on you as it does on the food it sells you, and makes its money somewhere else.” - New Food Economy

  • “Amazon’s heavily-promoted price cuts have attracted attention, but they didn’t necessarily bring a big boost to Whole Foods. Whole Foods sales since the acquisition have largely remained stable… The premium grocery store’s growth has been stagnant since 2015. New shoppers only account for 3% of its customers base.” - Yahoo Finance

  • "They were able to reduce costs and drive a higher demand. However, this created a bigger problem of shortages, which hurts the current positioning of Whole Foods on the service dimension." - The Street

  • “Now that Amazon has helped kill off Toys R Us, it wants to borrow the retailer’s iconic print holiday toy catalog. The online behemoth is interested in creating its own print catalog to mail out and also be handed out at Whole Foods… It’s just especially amusing that Amazon, having helped kill off these physical retailers, is trying to learn from them to make even more money.” - The Verge

Unless your brand distributes through Whole Foods directly, perhaps the more interesting discussion is what retail concepts—apart from an Amazon-integrated Whole Foods or checkout-less Amazon Go (well stocked with Amazon-owned brands)—are experiencing success. Whether it’s an inventory-free concept environment, a neighborhood depot of everyday basics, or a virtual store you still walk through, there are many models testing or holding on to proven brick-and-mortar approaches.

  • “If the marginal cost of acquiring customers is greater than the marginal value of the lifetime value of those newly acquired customers the business model is unsustainable. This may well be the achilles heel of brands like Blue Apron and Wayfair. As many once online only brands are learning, it's often cheaper to acquire a customer in a physical location than to pay the marketing tollbooth operators (Google, Facebook and, increasingly, Amazon) to target and convert the best prospects.” - Forbes

  • “Americans are spending more on everything from jeans to handbags to home furnishings as rising wages and lower unemployment boost disposable income. The spending spree is helping retailers recover after several difficult years. Last week, Walmart Inc. said its quarterly sales rose at the fastest pace in more than a decade.” - WSJ

  • “Our customers know real value vs. perceived value… We sell consumable basics… 75% of homes in the continental US are within 5 miles of a Dollar General.” - a16z Podcast

  • “Basics are Amazon’s forte. What it’s not good at? Selling clothes that customers find fashionable.” - Quartz

  • “Best Buy is like an arms dealer. They’re indifferent to what brand you buy as long as you buy it from them.” - Bloomberg

  • “... Embrace digital and bridge clicks and bricks. Nordstrom’s new “Scan & Shop” feature within its Catalogs app links the print catalog to digital and m-commerce. On Instagram, where Nordstrom enjoys a robust following of close to 900,000, the retailer uses Like2Buy to make its feed shoppable. Nordstrom has also extended its social media investments to emerging platforms such as Wanelo. Meanwhile, the company recently announced plans to add a fulfillment center in Pennsylvania, since nearly half its customers are within a two-day ground delivery radius.” - Gartner L2

  • “Grocery stores don’t want to partner with Amazon… They need a counterweight to Amazon. Grocery stores need Instacart… If Amazon wins grocery, the retailers are terrified.” - @Ryan_Caldbeck

  • “Instacart’s largest-growing markets are not markets where Whole Foods has a dominant share… Cities like Chattanooga... ” - @SarahHalzack

  • “Recent moves by Amazon are an indication not of domination but convergence towards the same drivers of retail success in prior generation. ‘Everyone eventually becomes their parents.’” - @SteveSI

  • “I’m afraid of this obsession around the word “experience” for retail. It’s important but the most important is the products. People still want special items at unique locations, with great service… Today, product has to be special. The product and the [sales] process. Otherwise I would order online and not wait at the register, but instead wait less than 24 hours for delivery.” - Business of Fashion

  • “Bonobos, Casper, Madison Reed, and a slew of others that have realized the power of the in-person experience and inventory-less stores have also worked permanent or roving retail showrooms into their core business strategies. It demonstrates a larger trend among the digital-first brands responsible for transforming consumers’ shopping habits and turning some of the country’s formerly vacant shopping centers, and what The New York Times calls “zombie malls,” into resurrected retail spaces.” - True Ventures

  • “With… Jet’s new push into New York, Walmart is trying to reach beyond its core base of big-box stores in rural and suburban America and compete for higher-income urbanites.” - NYT

  • “Walmart has applied for patents for intellectual property that creates a “virtual showroom”… The technology would give home shoppers with VR headsets and gloves the ability to browse through a (presumably uncrowded and meticulously clean) virtual store, pick up merchandise, and instantly add it to a queue for home delivery.” - Quartz

  • “It's in second- and third-tier communities where we'll see the biggest changes, much like we did in the airline industry. Rather than these communities having a Wal-Mart and a Target and a Macy's and a Sears and a K-Mart, it may just be one or two of the five.” - Bloomberg

  • “... Jeff Bezos, had understood this when he pioneered the idea of one-click shopping. But many retailers have built their businesses around the opposite idea, like expansive stores that take hours to wade through and commissions that encourage employees to push certain products.” - NYT

  • “The 125,000-square-foot outdoor development, which replaced several run-down blocks of 1950s-era storefronts, lacks the identifying characteristics of most malls: a vast parking lot, department stores, a reliance on retail chains. A centerpiece of Caruso’s projects is a green space for public gathering—the essential ingredient in his malls’ success, he says. People come for pleasure, then make unplanned purchases that are called, in retail lingo, conversions.” - WSJ

  • “The cost of doing business as a retailer is all the costs you had in the past and then some. The biggest challenge is to continue growing in a retail environment that is fundamentally stable.” - WSJ

  • “About that retail revival. It might be less powerful than investors think…” - WSJ

SELLING ONLINE OUTSIDE OF AMAZON

Amazon may be close to representing 50% of all domestic e-commerce sales, but they are far from the only option. The trouble with other options seems to be that they are also gorillas, just smaller and stuck in some stage of adolescence in which they can be fairly unpredictable. And then there are the fledgling options. From a brand’s perspective, such options can generate short-term revenue, but, not unlike Amazon distribution, any long-term revenue reliability is far from secured.

  • “Amazon's e-commerce sales in the U.S. are expected to reach a staggering $258.2 billion this year, up nearly 30 percent from a year ago… That means Amazon is expected to capture nearly half of the U.S. e-commerce market by the end of 2018… EBay is expected to end the year with about 6.6 percent of the U.S. e-commerce market, Apple with 3.9 percent and Walmart with 3.7 percent. Next in line are Home Depot, Best Buy, QVC Group, Macy's, Costco and Wayfair.” - CNBC

  • “‘We launched, and then all hell broke loose a little bit within the outdoor industry. I didn’t expect the reaction to be quite so vehement,’ Moosejaw Chief Executive Eoin Comerford said in an interview. About a third of the premium outdoor brands have left Walmart.com.” - WSJ

  • “If the furniture retail industry is facing an apocalypse, then Wayfair is the lead horse.” - Forbes

  • “The new system, introduced earlier this month, has led to a decline in sales at some companies that sell their products on walmart.com… Some suppliers weren’t warned of the change in advance… Under the new system, suppliers will have to stock their products at more Walmart warehouses around the country to keep sales steady…” - WSJ

  • “The liquidation [through Amazon] wasn’t really successful, and we don’t really have a good answer [why]. Intuitively, we know the same product was for sale on our own website and it sold out.” - Digiday

  • “Keeping a good share of their product assortment exclusive to the retailer’s brand ecommerce site is the best approach to motivate customers to visit their site on a regular basis.” - Luxury Daily

  • “Farfetch and peer Yoox Net-a-Porter have been able to thrive by occupying a niche that Amazon has yet to conquer: luxury fashion… Unlike typical retailers, Farfetch does not own the inventory it sells, but rather serves as a conduit for brands and boutiques.” - CNBC

  • “Luxury brands such as Gucci and Yves Saint Laurent sell on Jet’s platform, but not Amazon’s. Jet is leaning into this advantage.” - Glossy

  • “Net-a-Porter last year sold its most expensive single piece — a nearly $150,000 Panthère de Cartier watch—on WhatsApp.” - Business of Fashion

  • “32% of respondents prefer to buy online versus in-store, yet 74% are more likely to make a purchase if they can return/exchange in-store.” - Packaging World

  • “Consumers perceive Amazon to be a good convenience shopping site that lacks a personal connection. It scores well on ‘fast shipping,’ ‘easy transactions’ and ‘easy website,’ but lags on ‘easy to reach a live person,’ ‘makes me feel valued’ and ‘rewards my loyalty.’ According to the data, customers do not feel as emotionally valued by Amazon as they do by other online players like Etsy, QVC and Wayfair.” - Pymnts.com

Direct e-commerce is becoming easier, even for companies with no mass market brand recognition or technical coding abilities on staff. And it obviously provides the most direct control over margins, inventory, product positioning, and analytical understanding of who ultimately buys. The purchase process has become progressively streamlined for consumers, but there are still challenges for brands in how to set up conversion marketing profitably and fulfill on the backend.

  • “Even as Amazon has pushed the envelope on selection, service, convenience, and price, coaxing us to buy more commodities online, we are increasingly discovering and buying conspicuous consumption goods directly from indie brands, splitting our dollars across many different sites.” - Namrata Patel on Medium

  • “Shopify is the absolute game-changer. At least 75 percent of the digital brands I talk to today are on Shopify and many of them are now saying we don’t need to invest that much in tech.” - Recode

  • “Smart Campaigns are designed for small and local businesses that don’t have dedicated marketing staff and may not even have websites. Smart Campaigns will be the default campaign type for new advertisers in Google Ads… Early results show Smart Campaigns are three times more effective at reaching a business’s target audiences than AdWords Express campaigns.” - Search Engine Land

  • “The 78-year-old entrepreneur is seeking out mom-and-pop shops—like the local butcher, toy store or pharmacy—and trying to outfit them with e-commerce capabilities, including next-day delivery.” - Bloomberg

SUPPLYING THE MARKETPLACE

If you’re exclusively a manufacturer, selling your offerings only through third parties, it may be tempting to think you have no dog in the fight. Reality has proven that every movement matters. You feel it in payment terms, margins, inventory demands, and competition for exclusive goods distribution.

  • “The Amazon and Alibaba effect have significantly compressed consumer order fulfillment delivery time expectations. Now, more than ever, planning and execution processes must be more tightly coupled. Yet even while our data shows a portion of respondents understand the importance of prioritizing both short-term execution and strategic long-term planning, too often we see manufacturing companies focused on one and not the other.” - Manufacturing.net

  • “Vendors who kept shipping goods to Toys “R” Us hoping for a reorganization will receive at least 22 cents on the dollar for the $800 million they are owed.” - WSJ

  • “Target has also been able to tap into new and growing markets with the launch of exclusive brands like Wild Fable and Original Use, which specialize in trendy clothing for 20-and 30-somethings, and Hearth & Hand with Magnolia.” - Washington Post

  • “Fast fashion has taken more out of the retail ecosystem than Amazon has out of apparel… The more times you turn your product, the more likely your revenues are going to grow or outpace your competitive set.” - 2018 Code Commerce

MOVING MARKETS

Despite your chosen sales channel(s), when it comes to the sales calendar and supply chain, Amazon influences your market. They are changing the seasonal sales events calendar, when inventory is ordered, and how the overall economy functions.

  • “There could… also be a halo effect around Prime Day, as other retailers take advantage of shoppers' spending mindset. ‘Other retailers are increasingly jumping on the Amazon Prime Day bandwagon with competing sales of their own.’” - AdAge

  • “‘July is a clearance month straight up...’ Unfortunately for small brands, Prime Day is becoming more of a pay-to-play event...” - Retail Dive

  • “The local deals are part of a larger contract Amazon signed in January 2017 with U.S. Communities, a purchasing cooperative that negotiates contracts with suppliers on behalf of its members, which include a number of municipalities and government agencies. The five-year contract, which can be renewed for up to 11 years, is valued at $500 million a year. The U.S. Communities contract was last held by Independent Stationers, a group of independent suppliers around the country.” - Washington Post

  • "In the past year, Target, Walmart and many vendors on Google Express have all started offering “free” two-day delivery… To compete on cost, the vendors must typically ship goods via ground transportation, not faster-but-pricier air. The latest to offer free two-day delivery is Overstock.com, which uses three company-owned distribution warehouses in Pennsylvania, Utah and Kansas, plus a network of thousands of vendor partners who ship directly to customers… Amazon now operates more than 75 fulfillment centers and 25 sortation centers... Walmart can reach 98% of the U.S. with ground shipping in under two days... [Target] adopted a completely different strategy. Over 90% of its orders that arrive within 2 days are shipped from 1,400 of its 1,800 stores.” - WSJ

  • “Evidence that the algorithms used by Amazon and other online retailers, with their constantly adjusting prices, may mean greater fluctuations in overall inflation in the event of swings in currency values or other shocks.” - NYT

  • “From 2008 to 2017, as online purchases accounted for an ever-growing share of total retail sales, the average duration of prices of goods sold at large U.S. retailers like Walmart fell from about 6.5 months to about 3.7 months.” - Bloomberg

  • “[Companies] need to have their own recurring revenue bundle… For any of you who own the Restoration member card, 95% of all transaction volume goes through the Restoration Hardware membership card… One bundle in apparel. One bundle in grocery. The lead dog will roll up a bunch of suppliers… Consumers want less choice. They just want to be more confident in their choice.” - 2018 Code Commerce

  • “Amazon scored higher than both regional and national banks on consumer loyalty, coming in second behind the USAA.” - Fox Business

  • “Amazon terrifies me as a company… I'm not even sure what business the company is in anymore. It's a platform that can be used pretty much to disrupt any business.” - CNBC

DISTRIBUTION & LOGISTICS

Unless you sell a service or digital product, getting something from Point A to Point B is always a challenge. Amazon has instilled the expectation that the “thing” should be ready and waiting, and, wherever it is in the world (or sky - see below), should be in the customer’s hands in two days or less. Thus, the ongoing distribution demand chaos. Amazon is desperately trying to come up with ways to improve its ability to meet its own customer delivery promises. The larger logistics industry is trying to understand if and how to compete and/or partner. Companies are struggling with what inventory levels must be kept on hand, and which warehousing solutions are viable and profitable.

  • “Alongside life, liberty and the pursuit of happiness, you can now add another inalienable right: two-day shipping on practically everything.” - WSJ

  • “It’s less about price and more about service. The cheapest price to get it there isn’t going to play anymore.” - Commercial Carrier Journal

  • “In a video by Amazon, a woman said she likes getting diapers delivered to her car because it meant her toddlers could nap without being disturbed by the doorbell.” - The Verge

  • “It seems that the biggest remaining issue in the last mile is the actual point of actual delivery. Do you leave the package with the doorman? What if nobody is home? Do you take it back to the delivery station?” - Jeffrey Towson

  • “No longer needing to purchase its inventory from suppliers, Amazon is now renting out its platform, and thus its fulfillment expertise, to small online retailers for a 10 per cent to 25 per cent fee depending on package size, shipping distances, etc.” - Financial Times

  • “The e-commerce giant is seeking to assist hundreds of new small businesses to employ tens of thousands of delivery drivers across the U.S. by providing discounted vehicles, fuel, insurance, uniforms and access to “sophisticated delivery technology,” the Seattle-based company said in a statement Thursday. Startup costs can be as low as $10,000, Amazon said, with an entrepreneur running 40 trucks making $300,000 a year.” - Bloomberg

  • “Amazon uses fake packages to catch delivery drivers who are stealing… Shrinkage—the industry's term for losses attributable to theft, error, or fraud—cost retailers nearly $47 billion last year.” - Business Insider

  • “Amazon has a problem that they are not keen on discussing externally: their warehouses are full, which has historically presented a problem during the busy holiday season. Amazon has tried to negate this by scaling storage costs during the busy season and by limiting replenishment of products that go unsold by third party merchants, in an effort to optimize warehouse spacing.” - Logistics Management

  • “Flex operates year-round, not just during the holiday season, which suggests there’s another reason for it: It’s cheap. As the larger trucking industry has discovered over the past decade, using independent contractors rather than unionized drivers saves money.” - The Atlantic

  • “Under the old regime, a driver making 40 cents a mile might drive 750 miles in 15 hours, averaging 50 miles an hour and making $300. His paperwork would claim 11 hours at 68 mph. Now, however, his time is electronically tracked and the 11-hour limit is strictly enforced. At 50 mph, he makes only $220. To keep even, his pay would have to rise to 55 cents a mile.” - Bloomberg

  • “Amazon is hoping to capitalise on the turmoil on the high street as it circles Homebase stores in a bid to expand its delivery empire.” - Telegraph

  • “Amazon received a patent for product-distribution warehouses that float in the sky and are carried and held by blimps.” - Supply & Demand Chain Executive

  • “Amazon will file a patent for a floating warehouse because they know that the media trolls patents and then write about them… Why do they not advertise? Because they don’t need to… [Amazon] sees that the Wall Street Journal and Forbes pick up on their floating warehouses so files another patent for defending against projectiles fired at their floating warehouses. This is all true.” - 2018 Code Commerce

  • “On-demand warehousing is a game changer for the supply chain. It makes better use of underutilized warehouse assets for companies that need a home for inventory on a flexible basis.” - Supply Chain Management Review

  • “Today’s visualization, which uses comprehensive data from MWPVL International, examines the estimated 124 million square feet of active space in the U.S., as well as the 40 million in Amazon’s construction pipeline.” [See Visual.] - Visual Capitalist

TALENT COMPETITION

Ask an operator in almost any industry what their major pain points are and, with few exceptions, talent recruitment and retention will be the first topic on the list. While competing with an employer of 575,000 people, so large it can invest in independent healthcare solutions and fund career training unrelated to its own direct bottom line, may seem daunting, it’s not impossible - even if your city becomes the future Amazon HQ2.

  • “A group of more than a dozen Amazon Twitter users in the last two weeks started responding to critics of the company on the social media site, sharing upbeat tales of their working conditions and pay at Amazon’s distribution network.” - Seattle Times

  • “In the years since Amazon opened its doors in Lexington County, annual earnings for warehouse workers in the area have fallen from $47,000 to $32,000, a decline of over 30%.” - The Economist

  • “Since the early 2000s, Amazon has quietly received more than $1.5 billion in government subsidies, in exchange for bringing new jobs to cities and states across the country.” - Wired

  • “Amazon now occupies 33 buildings in Seattle, a total soon to grow to 40. By comparison, the federal government operates 55 buildings in the District of Columbia. Amazon estimates it has generated $38 billion in economic activity in Seattle between 2010 and 2016… income growth has not been robust enough to compensate for the city’s declining affordability.” - Brookings Institute

  • “Their impressions of Amazon’s hardline approach to the tax range from apprehension to derision to schadenfreude. Some consider the clash a sign that Amazon will invest more heavily in its second home while others fear a future in which Amazon plays hardball with their city.” - GeekWire

  • “[In HQ2] the company anticipates to create as many as 50,000 jobs paying an average of $100,000.” - The Economics Review

  • “In 2016 the average employee turnover in retail was 65%... In 2016 the median hourly wage of the country’s nearly 9 million retail workers was $10.37, below the poverty threshold for a family of four… If we assume that payroll is 10% of sales — which is not atypical in retail — and if retailers use half of their tax savings (about 1.15% of sales) to increase wages, employees’ hourly wages would increase by 11.5%, putting them slightly above the poverty threshold.” - Harvard Business Review

  • “More than 48 million people have registered globally on websites allowing them to sell their labor… entering a global marketplace with endless competition, low wages, and little stability.” - The Atlantic

  • “In the three years between 2015 and 2017, at least 30 director or higher level executives went straight from Microsoft to Amazon. Google, the next most popular poaching ground for Amazon, lost just 5 executives to the e-commerce company during those three years.” - CNBC

ADOPTING THE GORILLA MINDSET

As a company, you don’t have to be Amazon to succeed. In fact, unless you have billions of dollars and data centers of intelligence, it’s probably a delusional objective. But being a strong, profitable market force doesn’t have to equate to being the gorilla. You can still dominate your niche if you are willing to put in the work.  

From where we sit, the most universal takeaway is this: the consumer’s dollar is always in play, and attached to the highest possible expectations. Once upon a time, brands only had to worry about things like shelf position, brand recognition, packaging, and their distribution channels. But the consumer’s dollar was really only in play once in a store or on the phone with a need. We’re now two decades beyond that state and, while at the time that may have seemed complicated, it is idyllic in comparison to how hard each company needs to plan, position, and scrutinize each move it makes in the modern marketplace.

“Formerly, being a customer was a role one assumed upon physically entering a store or ordering something from a company. Amazon promises to create a newer type of environment, a hybrid of the digital and the physical, that lets us permanently inhabit that role: the world as Everything Store, which we’re always inside.”

- Real Life