this is 2070—and Amazon is a real estate company

Disclaimer: if you have stake steak in amazon, do not read this article, this is not financial advice—I firmly believe in consuming only the media which reinforces your worldview—consuming all other media creates decision fatigue and creates a loss of focus.

tldr; you will see amazon become the McDonals-Superstore as their margins continue to decline, they will have no choice but to vertically integrate and get into price wars with McDonalds for real estate and supermarkets for inventory.

Good will creates multi generational customers

Shopify has good-will, people like Shopify because it seems like they genuinely want the dtc-entrepreneur to succeed. Shopify is also severely limiting, it is sluggishly slow, does not allow you to customise the checkout process from the get go and does not offer for free everything that Klayvio does—and still I would want my kids to use it to sell stuff, never on Amazon.

Good will creates higher margins because people like to give more money to people they like

I will not hesitate to pay $1000 in Facebook ad spend for my kid’s shopify store—because I know—by spending a grand on Facebook ads, I will have a pixel which knows who wants to buy the product on top of which email addresses of every customer and possibly cell numbers I can text to all I want if my kid ran a FREE+Shipping offer to discover a new star business. I can even get their permission to send them direct mail. I will never pay $1000 to amazon ads because I will get 0 email addresses.

Good will attracts talented actors to the system

As you can see, if you know a thing or three about DTC e-com, you will never start off on amazon because you know better, you want to own your customers, your 1,000 true fans, you consider adspend as an investment, not a sunk cost.

bad will creates single-generation-companies

There is a growing number of sellers on amazon who have been suspended for no apparent reason, amazon is holding their money, they are having to call lawyers to restore their accounts. Do you think these people will want their kids to start their first e-com store on amazon?

bad will creates low margins and price wars—if you subsidise price you become a charity—charities are not marketplaces

People who still choose to sell on amazon will inevitably have to fight price wars with others because people who are inclined to making fat margins want to have actual LTVs, they want their cac to be lower than their LTV and the only viable way to do this is off amazon. On top of having to compete on price with amazon. Laughable.

bad will attracts bad actors to the system

Amazon is on an irreversible path of gathering a critical mass of bad will, especially among the most important people in the eco-systems, third party sellers. Wanting to eat everybody’s lunch, including your own third party sellers will attract similar actors to your platform—in the end—the consumer will bear the price and the consumer does not easily forget bad experiences.

Amazon is not showing any signs of course correction—this means they either do not understand this, or do not want to understand this and are already planning an exit with the real estate assets in 2070

This is in violation of the ‘law of category’—doing ads was a part of this—Bezos said he will never do this—he was probably persuaded by ‘data’—when data goes against first principles—data is wrong—not first principles

If you are a third party seller amazon wants to compete with you should slowly move away from amazon—surely move away from amazon

If you are an online retailer planning to move to amazon—first cultivate leverage over amazon so they worry about you leaving the platform—not you having to worry about them suspending you for a Byzantine reason—you can always de-risk this and assign wholesalers to sell on amazon

If you are an aspiring e-commerce seller you should learn from this and not start by selling on amazon from the get go—go the organic route—get your 1,000 true fans—this is worth it

If this continues only price sensitive customers will use amazon—amazon will have to compete directly with supermarkets for sales and McDonalds for real estate—I think amazon has already figured this out and is already buying real estate in tier 2 towns and cities, they expect these urban centres to grow and become the only viable choice for buying food and home and living items.

The growth of amazon is directly tied with fertility rates, infrastructure spending and them vertically integrating the entire business.

Author: Usman Gondal

https://www.linkedin.com/in/uag/

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