Best Buy has announced its new marketplace that will offer 2x the product assortment. The electronics seller will now have a larger selection of computer products, licensed sports merchandise (a Fanatics fan shop), and small appliances. musical instruments, and indoor and outdoor furniture. Why will this work now?
Andy Jassy is driving efficiency within Amazon, which should be facing the innovator’s dilemma; yet, Amazon’s culture, technology, and people (or the lack thereof) will ensure its future.
When Amazon founder and current CEO Jeff Bezos announced that his successor would be Andy Jassy, I admit I thought he had made a mistake. However, Bezos was three years ahead and could see the future. I thought Dave Clarke or Jeff Wilke should have taken over, yet in hindsight, neither was a good fit, and Bezos was hedging the future with someone who built a software business from nothing to billions rather than taking the logistics infrastructure builder or consumer-focused leader that would have been prescient.
The Day Two Version of Amazon
Following the founder of a generational company is hard, I would say borderline impossible. I simply look at what happened at Alibaba, with Daniel Zhang, and how hard it was to follow Jack Ma. We will never know how much input Zhang really had, as Jack Ma was persona non grata with the Chinese government regarding Alipay’s impact on the financial sector in China. Alibaba has a different corporate strategy than Amazon, but the similarities between the situations strike a tone for me. Daniel Zhang stepped down and then abruptly left Alibaba Cloud, and was supposed to manage a fund.
The more things change, the more they stay the same. My LinkedIn feed contained posts about Amazon mass terminating vendor (1P) agreements. These businesses have been given sixty days to move their businesses to sell via Amazon’s third-party seller platform. Why are these terminations news, and what impact will the terminations have? While I am sympathetic to these brands that have been bad news in Q4 before Prime Big Deals Day and the festive season, it could have been much worse.
The viral screenshot of the Amazon Vendor Central email sent to select vendors.
Amazon vendors must be reminded that selling via 1P is seemingly a privilege, not a right. Amazon uses supply and demand and exclusivity better than any e-commerce platform. The business model has been replicated by venture capital and private equity with little or lower margin. The business model only works for Amazon due to contribution profit. Using different parts of the Amazon business, such as advertising and logistics, combined with volume, will generate margins that make sense.
Over the last two weeks, I have been seeing signals that make me concerned about the next twelve months. As someone who has looked at patterns for a large part of my career, these signals individually can be seen as news, but combined, they highlight a challenging year ahead. What happens in Q4 and in 2025?
What am I seeing? I am seeing customer spending patterns change worldwide and large incumbents laying off staff. These incumbents are large-cap companies that rarely do layoffs, which tells me companies see a problematic financial time ahead. Yes, in most cases, these companies overhired but laying off 1000 or more people is about cost savings or shuttering businesses. Is this an early sign of the artificial intelligence impacting employment? I think not.
Over the last few weeks, I have been thinking about the battle between Amazon and Temu in multiple e-commerce markets. Who is winning, and when will this end? This will not end like Wish, as Temu has access to much more capital than Wish ever had. The question should be, how does this battle between two horizontal marketplaces end?
In multiple markets, such as South Korea and China, consumer-to-manufacturer (C2M) marketplaces take market share away from dominant horizontal marketplaces. What is this all about? Which horizontal marketplace can offer Chinese factories/manufacturers access to consumers who want to purchase their goods?
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