In From Healthcare To Payments: Supposedly ‘Amazon-Proof’ Industries Are Turning Out To Be Vulnerable CB Insights wrote:

"As Amazon continues eating up industries as varied as grocery, logistics, and apparel, startups and investors are looking for a place to hide. Where won’t Amazon go? What sectors are Amazon-proof?

Analysts, business leaders, and journalists are hunting for the safe spaces. But are the “safety zones” they’re spotting really safe? When it comes to most industries, the question isn’t whether Amazon will enter or not; it’s how the internet giant will enter, and how big the impact will be."

One example highlighted by CB Insights is PayPal. Most would say that PayPal and Amazon are not in competition, especially given the colossal difference in payments volume between PayPal and Amazon Pay. But what Amazon Pay is now, is not what it is going to be in the future - as CB Insights puts it "As Amazon keeps making it easier for customers to both store and spend their money in the Amazon ecosystem, more of them will — extending the company’s infamous network-effect cycle further into financial services." This is why we wrote Amazon Cash Is a Bigger Move Than It Appears.

The worry for PayPal is not whether Amazon will launch directly competitive products, but if financial products offered by Amazon will attract people and businesses either way. As more businesses choose to sell on Amazon instead of opening their own online stores, the need for PayPal decreases. As more of them do so successfully, Amazon's working capital loans are more used than PayPal's equivalent.

Amazon growth cycle

The famously quoted Amazon's growth cycle which revolved around selection, customer experience, traffic, and sellers, all to drive lower cost structure and lower prices, has created a unique bootstrapping ground for Amazon's new ventures. The number of Amazon Prime customers has allowed launch of Amazon Video, and the creation of Amazon Prime Day, which then allowed to kickstart Amazon Echo devices. On the vendor side growth of the marketplace has allowed services like Fulfillment by Amazon (FBA) and Amazon Lending to grow.

Amazon has gotten to the point where the number of customers and businesses it deals with directly is so significant, that it can launch what otherwise would have been a separate businesses much easier than any other company. And the few who continue to think of Amazon as a retailer miss those activities.

The growth cycle is old news, it is what allowed online retail to grow. The cycle today revolves around Amazon Prime customers alone.

But it is important not to forget that Amazon is looking for industries (Amazon Web Services cloud hosting), or owning whole categories (Amazon Echo devices); the threat brands fear with Amazon copying them is largely unsubstantiated. Sure there is a chance Amazon's private labeling department might launch a competing product, but despite this happening a handful of times, Amazon's focus is on much bigger things. More about this in Brands Shouldn't Fear Amazon, The Threat Is Millions of Marketplace Sellers.

This is exciting for everyone benefitting from Amazon's success - sellers, vendors, and even customers. But for everyone else the challenge is how to grow given.. Amazon.

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