Key Takeaway
While tech disruptors are becoming more and more frequent, it’s rare that we witness disruption quite as significant as that of Amazon. The giant has impacted far more than the e-commerce and logistics industries, from Alexa’s hold over the voice-enabled product space, to healthcare and pharmaceuticals, and its most recent disruption: HQ2 in Long Island City and Arlington, Virginia.
Amazon recently announced, in a big reveal, that it will be opening a second and third headquarters in Long Island City, New York and Arlington, Virginia. This will have a major impact on the local economy as the company will be hiring by the thousands to fill new positions – many of which require highly skilled tech talent. And they’ve been given attractive rewards in the form of tax abatements and low cost leases for making their choice.
As the force that is Amazon continues to grow, its influence extends beyond new geographies. Since it emerged onto the scene in the 90s it has completely change the way we buy products, the way they’re delivered, and more importantly what we expect from a retailer. Today the giant is impacting a number of industries in ways many leading players might not have seen coming.
Smart home
Amazon’s Alexa has been a prime competitor taken off from the start, turning our homes into smart, voice-activated tech hubs. Now, Amazon continues to bring low-cost voice-activated products, like its latest microwave, to market, fueling the Alexa ecosystem.
Notable here is the brand’s AmazonBasics product strategy – not just to win against incumbent competitors with their low-cost, smart products and appliances, but to fuel competition and innovation by “nudging third parties into developing their own hardware.”
Alexa’s much more significant impact, however, has been on the way we shop. The tool learns user preferences and remembers previous purchases, making re-orders and new product recommendations as easy as saying “Alexa.” As a result, switching product brands or types has become more of a hassle, and customers aren’t searching through brands and products visually online as they did before.
Product packaging
Perhaps one of the more fascinating outcomes of the Amazon Effect has been its impact on product packaging innovation for products that sell primarily through its site. Navigating the world of the Amazon warehouse is a skill in itself, and those that wish to maintain space there have had to actively change their product design to better suit Amazon’s specific warehouse needs.
For instance, P&G recently announced a new design for its classic Tide bottle of laundry detergent, which now looks a lot more like boxed wine. The new “eco-box” is “designed for e-commerce” and makes it easier to store in large warehouses and to meet Amazon’s requirements.
“The name “Eco-Box” is a nod both to eCommerce and the lighter shipping footprint these packages are designed to drive,” P&G said in a press release. “Products sold online typically need to be packaged with a second or third layer of packaging like cardboard boxing and bubble wrap that’s then discarded by the consumer. To address this, P&G designed the Tide Eco-Box to ship as efficiently as possible on its journey from a manufacturing site to a retailer’s warehouse to a consumer’s front door.”
P&G is reportedly testing similar innovations with their dish soap and body wash packaging. However, for companies with less control over their supply chains, Amazon is actually making aggressive moves to “work directly with producers and sellers to create packaging that better adapts to its logistics needs.”
They recently completed a pilot with Hasbro, and are incentivizing companies who are making adjustments to comply with their packaging recommendations, giving those brands a significant competitive advantage when selling on their site.
Healthcare + pharmaceuticals
It was a big deal when Amazon got deep into the grocery business with its acquisition of Whole Foods. But it was a bigger, and perhaps less expected, deal when it began to dip its toes into the pharmaceutical space.
Raconteur reports that by purchasing startup PillPack for $1B, Amazon has set the stage for rapid change in the way pharmaceuticals are sold. It’s moving toward a focus on better user experience and better design, especially when it comes to educating consumers on how to appropriately consume medications – something the industry has been severely lacking.
In response, brick & mortar pharmacies are adapting new offerings, better care and better consumer experience practices in order to compete with the growing threat of e-commerce. “The reality is that, even if pouch packaging is strictly limited to online-use through non-NHS providers when it takes off in the UK, it represents Amazon’s mission to make the life of their customers easier, from retail to medication consumption,” said Ruchin Kansal, healthcare leader of digital business strategy at IT services specialists Virtusa.
What’s perhaps most jarring about these advancements, particularly when it comes to Amazon’s Basics strategy, is the potential for an engine with the data and production power Amazon has to decimate the playing field and collapse entire product industries.
With this expansion into private label, Amazon is no longer an impartial, democratic distribution partner. It’s a direct competitor to those brands.
For instance, in 2009 Amazon quietly released private label AA batteries on its site, at a cost that was 30% lower than leading brands like Energizer. The result? “In just a few years, AmazonBasics had grabbed nearly a third of the online market for batteries, outselling both Energizer and Duracell on its site.” When one of the largest sales channels for this type of product not only comes out with its own cheaper version, but it offers free shipping and has the capacity to better target your customers, what is a brand to do?
Amazon is not only undercutting their competitors in price on some of the mass-produced AmazonBasics items, they’re leveraging their data and their position as the largest sales channel to get into customers’ heads, and beat brands at their own game.
According to the New York Times, “Amazon is utilizing its knowledge of its powerful marketplace machine — from optimizing word-search algorithms to analyzing competitors’ sales data to using its customer-review networks — to steer shoppers toward its in-house brands and away from its competitors, say analysts.”
Debate remains, however, over who will win out in a Amazon-monopoly scenario. Perhaps consumers see more fair pricing and a better experience, but will it be at the cost of brand choice and fair play?
