Aug. 24, 2015

The Amazon Experiment: Consumer Socialism at What Price?

By Marc Platt

Let us not forget that Henry Ford revolutionized America in the 20th century with his assembly line and focus on his employees working as a team. Jeff Bezos has done something similar with his revolutionary tech giant Amazon, a company that caters hard core in the favor of its customers.

The recent (August 17, 2015) New York Times article is quite critical of the company and its internal practices that make it seem that they are extra hard on their employees who either don’t fall into the company line, or may be tentative in the fulfillment area that Bezos and his team obviously consider the lifeblood of their organization.

Amazon is valued at $250 billion for a reason. They are certainly the most over-achieving retail outlet in the world, experimenting with fulfillment by-way-of-drones among other things that carry the company forward.

Scott Galloway is a Clinical Professor of Marketing at NYU Stern School of Business where he teaches Brand Strategy and Digital Marketing to second-year MBA students and has said that Amazon “can’t survive as a pure play retailer…You may think that Amazon is the most innovative company in retail over the past 10 years and that might be true, but if you look at the last five years, it’s been Macy’s from a shareholders standpoint and Amazon has the lowest return of every major retailer in the last year,” Galloway said.

It is apparent that Jeff Bezos is willing to spend big dollars in the fulfillment area in hopes that Amazon is the last man standing. Galloway thinks the other retailers will have to follow Amazon’s lead with this long-term strategy: “A multi-billion dollar investment at last mile of incredible fulfillment infrastructure, hoping that other retailers have to follow them and run out of oxygen because no other outlet has access to the same cheap capital.”

Galloway has also noted that Amazon has an Achilles heel with their shipping costs having exploded nearly 40%-per-year “What they took in for shipping was nearly $3 billion, but they spent nearly $7 billion on transportation costs,” he said. “This is not sustainable.”

Despite Galloway’s interpretation, Amazon is still raking in big bucks. They are “Social Capitalists,” redistributing their profits taking a loss in one area for the overall good of the operation. Amazon does everything humanly possible to keep the customer satisfied, possible at the expense of their over-worked employees.

The New York Times article brought up many troubling “Inside Amazon” issues, but those will likely take a back seat to the public, who has come to expect this top-rate customer service model that will likely force a sea change among the other companies who want to compete.