Competing with Amazon

By Adam Raphael

Recently I was given a wigging by a Professor of Strategic Management for failing to promise to deliver his copy of the Guide as quickly as he would like. His irate email was provoked by a message saying his ordered copy of the 2017 edition would be dispatched within five working days. I blame Amazon for this row because its hyper-efficiency makes it impossible for anyone to match its delivery times. I replied to the good professor saying that we were considering investing in a fleet of drones. Until they became operational, he would have to be content with saving more than £4.50 by buying direct from us.

This sassy response, I admit, doesn’t pass any sort of sniff test. Five days is too long for delivery, but the Guide is in the hands of Royal Mail and our distributor. If everything goes to plan, an ordered copy should arrive in three days. But that is not good enough in today’s market place. Expectations of near-instantaneous delivery which Amazon has inspired are an issue for all sellers. But the problem goes way beyond delivery.

Recently the Financial Times carried a story about a model helicopter bought from Amazon which was last seen out heading out into the North Sea. When the customer complained, Amazon first asked to inspect the errant quadri-copter, but when it was pointed out that this was not possible, it requested that all the remaining bits—controllers, plugs etc to be returned. No sooner had this been done than the customer received a full refund of more than £500. Amazon didn’t suffer that loss. Its marketing clout is such that it would have forced the manufacturer to bear it.

It is little wonder that conventional retailers across the world are terrified by this online juggernaut. The fear that is haunting them was summed up by a recent spoof article allegedly written by Jeff Bezos, Amazon’s boss which was headlined: ‘My Advice to Anyone Starting a Business is to Remember that Someday I Will Crush You.’ This is too near the truth to be a joke. Amazon is so powerful that it is already has had a devastating impact on conventional retailers in fields from books and clothes to fashion and electrical goods. Over the past year, for example, retail employment in the USA has fallen by more than 30,000 as shopping malls throughout the country have closed, matched by a near equal rise in delivery couriers. But this is only the start of a retail revolution whose consequences worldwide will be immense. Amazon’s recent take-over of the upmarket Whole Foods chain has rightly sent a chill through supermarket operators across the developed world.

The problem for anyone trying to take on this retail gorilla is that Amazon has spent the past 20 years and hundreds of billions of dollars constructing fulfilment centres clustered around major cities in much of Europe and America. That near-impregnable wall makes it difficult, if not impossible, for anyone in the short term, and possibly in the long term to compete successfully with it.

Customers love Amazon’s convenience and speed; it is the slickest retail operation on the planet. All this is great for its shareholders. Yet the gains in its share price have not been shared by Amazon’s low-paid casual staff judging by reports about poor working conditions in its warehouses. Amazon, like other big online companies, is also not paying its fair share in taxes. The issue of monopoly is particularly troubling. Should any one company be permitted to have so much power? At some point, governments may have to intervene, not on behalf of consumers, but to protect other retailers.