How Amazon Became Common – The Big Picture

“I constantly remind our staff not to be afraid, to wake up terrified every morning. Not of our competition – but of our customers.” -Jeff Bezos, 1998 Amazon shareholder letter.

We all know how lopsided FAANMG stocks have gotten this year, but a bigger story is brewing: the companies themselves…seem to have lost their way. What once made them great has faded into their historical legacy, with less innovation and much less joy for its end users.

With the exception of Netflix and Facebook, they are no longer run by their founders. Many are experimenting with new business lines and products that may increase revenue in the short term, but at the expense of user experience, loyalty and costs. These behemoths have become victims of their own success, seemingly forgetting what made them great in the first place.

At least 3 giants — Amazon, Facebook, and Google — have every real business moving away from their core founding principles. Grabbing short-term profits may cost them substantially in the long run. Microsoft and Apple still seem to have built their giants; Netflix falls somewhere in the middle.

Let’s use Amazon as an example, but we could easily run the same exercise for six behemoths.

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I’ve been an Amazon customer since my college roommate gave me a gift certificate in 1998. Between my home and office, I spend an obscene percentage of my discretionary budget on Amazon. For the past 20 years, they have been the default choice for use. And it’s not just Amazon Prime: I replaced my old AppleTVs with Amazon Firesticks; I have Alexa all over my home and office; I subscribe to Amazon Music.

Generally speaking, I’ve been a satisfied Amazon customer – at least until the pandemic. That’s where the signs of change began to appear. Here are the biggest areas of contention:

advertisement: I needed a simple lithium battery for the car key I searched for the exact product number “CR2450 Lithium” and bought the first result, a Duracell. But it wasn’t 2450, it was a paid space. This has happened increasingly in recent months.

I doubt Amazon’s algorithms will eventually figure it out, but in the meantime, it reveals that advertising dollars and not customers are the retail giant’s new priorities. As Juozas Kaziukenas of Marketplace Pulse observes, everything on Amazon is an ad:

“Ads have replaced product recommendations and personalization on Amazon and other retailers’ websites. They’re no longer trying to guide product discovery, instead letting ads lead the journey.”

This was useful at one time; Now, it’s messy and invasive and boring.

Third Party Sales: The proliferation of third-party sales versus Amazon as your retailer has led to a general decline in quality. Products are worse, shipping times are longer, prices are higher, customer satisfaction is mixed. This is my experience – your mileage may vary. But it’s undeniable that Amazon is now filled with third parties that often sell fake items or questionable quality, sometimes at exorbitant prices.

Schmucks selling crappy products that are potentially fake? That’s what eBay is for.

Extended warranty: Why does Amazon give me an extended warranty for every single $20 product I put in the cart? WhoTF needs an extended warranty on a $25 iPad cover?

Between college and grad school, I worked at a retail electronics store. The highest profit SKU in the entire store was the extended warranty. The reasons for this are simple: If you already have a repair and warranty department to handle general warranties, you don’t need anything to repair or replace out-of-warranty items. This leaves a lot of room for profit.

Consumer Reports has looked at extended warranties repeatedly for decades by surveying consumers. Many people who buy extended warranties never use them. There are arguments over what is covered. Generally speaking, few are happy or very happy with extended warranties. They are bad for the consumer but good for the retailer’s bottom line

The biggest problem is that warranties are treated as insurance and every insurance claim involves pushback. How much time do you want to spend arguing with an underpaid foreign phone representative about repairing a disposable $50 piece of electronics?

Extended warranties are suckers, a sign that retailers disrespect their customers. hard pass

Pricing and Inventory: How many times has this happened to you during a pandemic: You need a product and go to Amazon, but they either don’t have it in stock or it’s at a silly price. For the longest time, Amazon was the low-cost provider; Today, this is no longer true.

They seem to have lost their biggest advantage: the friction of setting up a new account. Lack of inventory, high prices and a general deterioration of the user experience have sent many consumers scrambling for alternatives. Its beneficiaries during the pandemic include Walmart, Target, Chewy, Instacart, Google Wallet and more.

Once it was a huge advantage for retailers to have your credit card + address information on file; Because of the decline of the whole Amazon experience, people set up their competitors’ accounts

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FAANMG companies are going to be revenue monsters for a long time. Will they still be innovative geniuses and Wall Street darlings? It’s hard to see it continuing indefinitely.

Amazon couldn’t maintain a 50% market share of online retail growth forever; I suspect 2020 will accelerate the growth of online businesses of its retail competitors. Firms’ decision-making in terms of advertising, third-party sales, pricing and general user experience is accelerating the loss of market share.

I still use Amazon a great deal, but less than I once used; The tendency is to look elsewhere rather than assuming Amazon has the best selection and lowest cost.

I wonder how many people are having similar experiences…

in the past:
Which companies won or lost your affection during the pandemic? (January 12, 2022)

2021’s Surprising Laggard: Amazon (January 5, 2022)

Unprecedented Access to Bezos + Amazon Execs (Jun 15, 2021)

Amazon.Bomb, May 31, 1999 (June 3, 2019)

HQ2: Understanding What Happened and Why (February 19, 2019)

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