COMPETING WITH AMAZON

Buying stuff over the web? Well, lots of people are doing that, many far more than me. I don’t particularly care for leaving my credit card number hither and yon. I also don’t have much use for leaving valuables on the outside of my house at the front door. So I buy most things with cash at a brick and mortar store. I am not religious about it. I am just set in my ways.

Still, when I consider the Amazon (AMZN) phenomenon, I wonder where that is going, and I have a small stake in the matter. One of the stocks I own (LOW) lost value when Amazon agreed to sell Sears Kenmore appliances. Another (GIS), however, is looking at an alliance with Amazon to sell its products, but just looking does not seem to be helping it much. Sears (SHLD) shares, however, did jump when Amazon announced a working relationship (Amazon Courts Consumer Packaged Goods Companies (AMZN, GIS)). I guess when people are talking about money they want something concrete.

The force behind Amazon is Jeff Bezos. Currently, he gives the impression of being unstoppable: This meme showing how much Amazon billionaire Jeff Bezos has changed over the years is going viral. So I suppose I should put all my worldly goods in Amazon stock.  Still, there is not much money to be had in doing what everyone else is doing. Therefore, I am sort of wondering. If all the other business people want to avoid becoming dependent upon Amazon, how are they going to sell their products? My guess is that sooner or latter investors and sales people are going to figure out that Amazon has not changed the world that much.  Even the web has not change the world that much. The web provides the opportunity to set up a virtual store, and that is what Amazon has done. Just the same, people still want to see what they are buying, ask questions, buy the product, and get what they have paid for to their homes.  The people who run the old brick and mortar stores know how to do all that quite well. They just need to figure out what they need to do to match or beat Amazon on price and still please the customer. My guess is that they will figure it out.

Necessity is the mother of invention.

(from here)

So at this point I am just wondering how much value some of my investments will lose before they get it all figured out.

Sigh! Do all paths lead to Amazon’s portal? No. Not yet, anyway.

21 thoughts on “COMPETING WITH AMAZON

  1. Ha, good pondering thoughts there Tom! Amazon’s buyout of Whole Foods I think I yet another step towards the Amazonation of things. It’s going to revolutionize the grocery market I’m sure.

    I am a frequent Amazon buyer but I do so always enjoy going in to small stores and dealing with the owners that are good at and love their craft. The convenience we get with on line shopping is displacing this and I’m not sure we can call that progress.

    Liked by 1 person

    1. Because we don’t always understand what we need, getting what we want is not always a good thing. The problem is seeing what we need and convincing us to buy that way. Amazon has one answer, but I doubt it is what everyone needs all the time for everything.

      Liked by 1 person

  2. True, most anything you’re looking for is at Amazon. But I find in many instances, that going to a smaller company saves you money. For example: for my books, 90% of the time, Thriftbooks.com and Abe Books is always cheaper.

    Liked by 1 person

    1. Success does attract imitation.

      One thing most people forget is that as a company grows larger it becomes more difficult to manage (less agile). Amazon is also diversifying by going into other lines of business, make the company still more difficult to manage. What big companies usually do to head off the competition is buy their competitors or sic the government on them. It will be interesting to see how Amazon deals with those smaller competitors.

      In time, I expect Amazon’s image will begin to suffer, but but that may be why Bezos bought The Washington Post. Among other things, he may be trying to head off bad publicity by purchasing his own stable of reporters.

      Liked by 1 person

  3. My husband has owned and run a small town jewelry store for 50 years—he has weathered recessions, wars, housing dives, even misguided business regulations from a clueless Government when it comes to small business….
    there have been many a lean year…
    but nothing is comparing to the internet and the shift in the public’s buying habits.
    It’s hard to compete with such…if not nearly impossible.

    He says that the writing is on the wall for his type of “mom and pop” business.

    First you had the mega stores like Walmart who would take on every other small individualized business by carrying absolutely everything under one roof—now you have grocery store chains trying to compete with the Walmarts by doing the same—buying a diamond engagement ring from say Kroger the grocery store over on aisle 9 when you get lettuce over on aisle 4 just seems to lack that romantic spirit—let alone the expertise found in the knowledge of one who sells and services diamonds for a living verses lettuce.
    He says Kroger’s employees have ruined more watches when folks take them there to get a battery changed—as the employees are not trained jewelers and have no idea what they’re doing. I don’t know, why would I take my jewelry to the place I buy my lettuce? Just saying…..

    More and more folks come in with something they’ve bought on-line asking if they’d gotten a good deal. He just looks at them and then at the showcases full of similar products—things that are indeed of better quality and matched with his expertise of care—when they want him to fix whatever it is they’ve bought on-line and he tells them to take it back to where they bought it as “they” should fix it free of charge, as he would do…
    they then tell him “oh I can’t do that, I bought this on-line”
    but yet in his store they could have bought better and guaranteed, most often even cheaper, from him who would honor all purchases with care and work…..

    He said he’d like to leave his business for our son as it has been a family business since 1947 but that there is simply no future in such a business…you can’t compete with Walmart or Amazon….and simply fixing what they sell won’t pay the bills…

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    1. I have watches messed up that way. That’s why I got one that is solar powered.

      Frankly, with some adaption I think most of the Mom and Pop stores can survive. Think about what you just said. People like and NEED personal service.

      What matters is developing a good reputation in the local community and making certain that people understand what they are paying for. There is the base price, what Amazon charges, and then there is customer service, customization, and maintenance.

      Think about all the money people spend on service contracts. That is the kind of thing Mom and Pop stores provide, but they include it in the price. So people go to Walmart. They think they are getting a better price, but that is not always the case.

      Liked by 1 person

        1. True. A large part of that is education.

          We live in a society that devalues the whole idea of communities. Americans use to live and work in the same place with the same people. Business relationships use to be personal. Now we drive miles to work, and we hardly see our neighbors. So the idea of ordering something online does not seem much different from walking into a department store, grabbing what you want, and paying a clerk you don’t know.

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    1. My kids are experimenting with buying their groceries online. Amazon already sells some stuff that way. There are also local grocers who sell and provide home delivery for fresh produce and perishables.

      If you are taking care of a new baby and the older siblings, it beats getting everyone in the van just to buy a half gallon of milk.

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        1. That’s the odd thing. When they buy in quantity, I guess it doesn’t cost that much. My kids don’t waste money. Their mother would not stand for it.

          Like

  4. In Illinois, Amazon is building massive warehouses to speed up shipments. Local stores are closing and instead of retail clerk jobs, there are order filling and packing jobs.

    Plus UPS and Fed X jobs are booming.

    Now if Amazon would only buy American made products only, there would be no more need for unemployment benefits.

    Mom and pop stores are going to be extinct as dinosaurs in the future unless they provide a specialty service item or requirement for professional help for selection.

    In my humble opinion……..

    Regards and goodwill blogging.

    Like

  5. I think Wally Fry hit the main reason above: “Oddly, despite being “old school,” I rather enjoy on line shopping. Especially if I know exactly what I want. Boom….done and never leave home.”

    Three things: Convenience, Time, and Money.

    First two seem obvious and have been hit on above. But I think people who live in areas with a lot of shopping seriously underestimate how very very convenient and time saving it is.
    I lived on an Island for four years. During that time I bought the vast majority of non-food items online (I don’t think I would ever buy food exclusively, or almost exclusively, online).
    With Amazon Prime shipping is free, and it’s there in two days, at your doorstep. That’s cheaper than driving around (in the case of my Island I’d have to trek an hour out each way) looking for the item, and hoping for a sale.
    Now I live in an area with a lot of shopping. Sometimes I can get a good sale, but I’m still in the habit of buying online for the above reason. It might take me all day to top a deal I can find that will arrive at my doorstep, at the click of a button.

    That doesn’t mean I think buying the stock is ipso facto a good deal. I don’t know that one in particular but many stocks are severely overvalued. They have future expectations already considered in the price. It’s really hard (virtually impossible) to evaluate the true worth and prospective growth of an internet based company. Warren Buffet has made this point many times.

    Liked by 1 person

    1. Scatterwisdom notes this is a boon to Fed Ex and UPS. He’s right. It will also be a boon to drone manufacturers when they start distribution that way. Might want to invest in stock there, if it’s available. I know some private companies that are getting in on the ground floor (prior USAF, they have all the connections), but the FAA is a huge hurdle.

      Liked by 1 person

      1. Sorry for the train of posts…just thinking further.
        It was mentioned that mom and pop stores provide a type of community “service contract” included in the price. That’s true in an era where communities are close and stores stay in business. The mom and pop “service contract” is only as good the mom and pop store’s ability to stay in business…which is growing more tentative by the day. And you’re right, Citizen Tom, about the devaluation of communities. We have a similar pattern in industry. At one time, a person would expect to work for the local factory from the ground up, make an honest day’s wage and eventually retire with a pension. Now there’s no such loyalty either way. People leave on a dime, and their jobs are also nowhere near as secure…all part of the new economy. Heck, even the military is no longer a certainty for employment even if you do an outstanding job they have to make cuts.

        Getting back to the topic, I’m actually surprised we still have malls with all the overhead required for that.
        Lots of people like the shopping experience, but they don’t want to pay for it.

        It’s not a good thing, it’s a detriment (long term) to rely on Amazon for the reasons listed.

        Just one more thing I’ll add, another benefit of internet buying….
        If you’re a very well known person, it’s kind of nice to not have to venture out too much also. Every time we go out in the community it’s kind of stressful. We have to watch what we say, what we buy, everyone is watching. It’s a weird feeling.

        Liked by 1 person

        1. Don’t apologize. Enjoyed the comments.

          Hope I did not sound like I am against the concept of Internet shopping. I probably did not explain myself well enough, but I think companies like Amazon have natural limits. So long as people have a choice, different people will have different needs and preferences. Even the same people will have different needs and preferences at different times. One thing Amazon almost completely lacks is the ability to help us form bonds with the people in our locale.

          Are there people on the Internet I highly enjoy chatting with? Can those contacts be quite valuable? Yes, but we still need to form close contacts with the people in our actual neighborhood. Local retailer can do that better than Amazon, but they have to care about their customers.

          Like

        2. “Hope I did not sound like I am against the concept of Internet shopping.”

          Not at all, and I definitely share your concerns. I know I sound like an advocate here but I’m just pointing out the advantages. I actually think the impact of internet shopping is huge (the impact of large superstores has also been huge…I’ve lived in those little places where Walmart took over and became the only store in town).
          It’s a big problem. This topic (kind of like the healthcare topic), is huge. There’s a big downside.
          On the flip side, look at the impact of the ‘new economy’ on restaurants.
          They’ve exploded since mothers have entered the workforce en masse (and with the breakup of the family unit). People each out far more often. Today I’m going to stock the pantry and fridge for some new people who are coming to the area, I’m also making a meal for some friends who are leaving. The concept of group dinners/taking care of one another is a bonding thing. But it’s bad for restaurants who are missing out because I made friends a meal.

          And then there’s our marketing director. He just resigned because he’s able to now work from home. His wife also quit her job as a teacher a few months back. They make stickers and sell them online. I guess business must be seriously booming.
          I’ve started a home business of sorts.
          I don’t sell anything (yet), but I make a whole lot of home made items. I etch glass and slate, creating custom coasters, glasses, vases, trivets and so forth. Everyone tells me I should sell the stuff but I’m so tapped out on making them as gifts I’ll wait until my husband’s gig here is over, and then maybe.
          🙂
          Okay, stream of consciousness ramble over.
          Thanks for tolerating me. LOL!

          Liked by 1 person

        3. Interesting observations. Never considered the possibility that making stickers would allow someone to work from home.

          It is amazing what can happen in a generation. What I am hoping to see is that significant numbers of states will start supporting education vouchers. The movement is starting, but I think it is still taking hold. With President Trump in office, there is a good chance it will catch fire. I believe this is where the battle for the soul of the nation will be won or lost.

          Consider that people are starting to look at the fight against Obamacare as a lost cause. The problem is that most people are so poorly educated that they don’t understand what they are losing. Yet the absurdity should be obvious. We are going to put the same people who cannot competently run our schools in charge of something more complex, our healthcare?

          Imagine 10 – 20 years from now. What could happen if large numbers of adults, either home-schooled or educated in private Christian schools, start participating in our political system and in the economy. Doesn’t what we see depend upon our point-of-view? Would they not have a very different perspective? My guess is that people better educated in the Bible would put more value on personal relationships. I expect they would demand the localization of government functions and support local businesses. Because they would better understand the trade-offs, they would see that nationalization means giving up control to unaccountable people.

          Still, I can only speculate. Only God knows His plan for our future.

          Like

    2. It’s really hard (virtually impossible) to evaluate the true worth and prospective growth of an internet based company. Warren Buffet has made this point many times.

      True. The quality of the people who run an Internet company is highly important. However, for the same reason, trying assess the value of any company involves guesswork. The only way to reduce the guess factor is with research, but research has its limits. The true worth of a company depends upon the people running and the people they hire to make it work. The quality of people is awfully difficult to quantify.

      The personnel issue is one reason there are few profitable companies in third world nations. The people in such countries don’t understand business. It is also why Socialism is slowly killing us. We are indoctrinating our children into Socialism and not teaching them how business is properly conducted.

      Like

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