"Amazon is an infrastructure company"

[BeccaPrice]

From this morning's Shelf Awareness:

"What makes the Kindle unique is what makes Amazon unique: its physical presence is a mere avatar for a stream of digital services. In the spirit of its parent, it is more infrastructure than device. And it is as infrastructure that it disrupts, as its biblioclastic name intends."
--James Bridle in his Domus magazine "design report" exploring the "open secret" that Amazon is "not a book company, or a retail company, or an Internet company; it's an infrastructure company." Check out the cool graphics accompanying Bridle's piece, particularly the stunning circular timeline of Amazon's life.

[charlesatan]

Great article!

(There's an extra http:// at the end of the link though, so those clicking it will get an error.)

[kennyc]

Yep. No surprise to me.

[fjtorres]

One particular bit points out just how far out of the conventional box Amazon operates:

Another example is provided by the warehouses of Amazon itself, which long ago grew to such levels of complexity that they require algorithmic management. Objects placed within them conform not to any human taxonomy — books alphabetised by author here, music CDs in another corner, DVDs over there — but to a mathematical equation, a computation of frequency that ensures goods are stored as close as possible to multiple sites of use and packaging. As a result, only an augmented human can find stock in its millions of seemingly randomly distributed square feet; if the inventory software fails, mere people are adrift among millions of scattered flotsam.

A lot of Amazon haters seem in denial about Amazon's operational overhead levels and ability to turn cost centers into profit centers, thinking that if *they* can't survive at those prices, then "clearly" neither can Amazon. But it turns out that Amazon is simply too alien an operation for them to grasp (dynamic, constantly changing warehouse shelving?!) so they think of them as "martians", evil invaders.

The last paragraph suggests he himself isn't wholly comfortable with the Kindle operational model, mostly because he sees the Kindle ecosystem as a "substitute" for the internet itself (a bit of a reach there) instead of an ultra-accessible subset of the commercial side of the internet.

If the Kindle restricts most of its users to content approved by Amazon — and it does — and if it walls up the reading experience and claims ownership over our highlights and bookmarks — and it does that too — is that forgivable in return for apparent access to all books, now, right now, forever? To what extent are we prepared to have our cultural experiences mediated or even controlled by technology? The answer, it increasingly appears, is quite a lot, and the Kindle, for better or worse, is the tool we have chosen to negotiate for us.

Here, like most of the anti-Amazon crowd, he vastly overstates the lock-in effect of walled gardens. Yes, the Kindle is a bookselling storefront first and foremost, an extension of the Amazon bookselling infrastructure; but for consumers it is not the *only* channel for "cultural experiences". There is more to culture than books, Kindle owners don't get all their culture through Amazon, and a lot of Kindle customers that don't even own a Kindle reader.

Kinda blew it at the end there.
(Probably just trying to throw a bone to the haters.)

[fjtorres]

TIME has another "Amazon is going to take over the world" story:

http://business.time.com/2012/07/16/...ver-the-world/

It does have a few interesting nuggets, including this one:

The Infrastructure of Commerce
Amazon’s most daring gambit, and the one that may position the company for the kind of earnings growth that the stock market expects, is its foray into business-to-business services. In recent years, Amazon has ramped up its so called “cloud computing” services, or its business of leasing out of server space in its large data centers around the world so that small businesses don’t have to risk such upfront capital investment. It has also greatly expanded its third party marketplace, where merchants all over the world can set up their own virtual stores on Amazon.com, and sell their products alongside Amazon’s — all the while leveraging Amazon’s large customer base and credit card processing services.

In fact, retailers who use Amazon’s third-party marketplace now account for 35% to 40% of all units that Amazon sells per year. Amazon takes a healthy commission off of each sale it makes — making third-party sales a higher margin venture than its core retail business — without having the risk of developing those products or holding the inventory. And the sellers get the advantage of Amazon’s vast distribution network and built-in customer base. Amazon’s reach into third-party businesses has become so great that The Financial Times wrote last week:

Indeed this new development has exponentially extended Amazon’s retail-industry influence in ways that a company like Walmart – the revenues of which far outstrip Amazon’s – could never dream of.

The italics are mine; it occurs to me that their self-pub services fall in that very same category of Business-to-business services, enabling small businesses to play on a more level laying field with the big entrenched players.

The bold-italic bit?
The other segment that caught my eye explains *why* Amazon's services are worth their cut of the revenue:

Reestablishing the Retail Relationship
Back when mom-and-pop retailers ruled the land, one-on-one relationships between purveyors and customers were easy to foster. Business owners knew their customers well — understood their tastes, how they shopped, and what they needed. As chain stores began to dominate, however, this one-on-one relationship was lost. There was no way those running a national retail operation to understand their customers on such an individual basis.

But Amazon changed that. According to Greg Girard, a retail industry analyst for IDC, Amazon’s greatest strength is that “it’s customer relationships are inherently one-to-one, more akin to what telecoms and banks have with their customers.” While brick and mortar stores are black boxes — customer behavior inside the store is effectively invisible to managers — Amazon is able to collect endlessly useful information about shoppers, and use it to sell more stuff by targeting customers through email and the website itself. Says Girard:

This relationship, and what Amazon can do with it, is invaluable, and puts Amazon in a prime position to turn the growing role of ecommerce into revenue growth for itself.

To their business partners--big, small, and tiny--Amazon is a direct *marketing* conduit to a large customer base. A *front-end* counterpart to the back-end enablers like UPS, Paypal, VISA, MASTERCARD, etc. (And that is in *addition* to their own backend services listed above.)


Viewed that way, Amazon looks a lot more like EBAY (with its Paypal subsidiary) and a lot less like a Walmart, Sears, or Best Buy.

Seen as an infrastructure play, Amazon expanding into local repositories for next day or even same day delivery looks inevitable.

(And even more likely to take them into UPS territory--via partnership, merger, or... competition?)

Hmm...
How are FedEx finances?
Or... We know USPS has all those under-used facilities... maybe Amazon will take over USPS?

[Santos]

Very good article. Thanx for sharing

[ApK]

Originally Posted by fjtorres

maybe Amazon will take over USPS?

Why on Earth are you laughing at the end of that?
I think it may end up being a highly prescient comment.
And it may even be a good thing.

[fjtorres]

Originally Posted by ApK

Why on Earth are you laughing at the end of that?
I think it may end up being a highly prescient comment.
And it may even be a good thing.

Because, while it makes a ton of sense, Congress woud have to sign off on that kind of commercialization.

Right now those folks can't agree on whether the sun came out this morning.
And that is before the Alliance for MainStreet Fairness astroturfers have had their say. ($$$$)
http://en.wikipedia.org/wiki/Allianc...s#Organization

It'll be a cold day in... the amazon basin... when that happens.

[Andrew H.]

Reestablishing the Retail Relationship
Back when mom-and-pop retailers ruled the land, one-on-one relationships between purveyors and customers were easy to foster. Business owners knew their customers well — understood their tastes, how they shopped, and what they needed.

This quote makes me wonder whether the author really remembers what most mom-and-pop retailers were like. In the smaller town (pop. 50,000) where I grew up, most mom-and-pop retailers had a poor selection and jacked up prices; they got away with this because you had no where else to go.

Until the chain stores came, we didn't have a proper bookstore; we had a book-and-card shop with a very small book selection. The person behind the counter could tell you where to find birthday cards, but she didn't know anything about science fiction, which was what I was looking for. (They only had maybe 50 sf titles).

When the chain stores opened (Waldenbooks and B.Dalton), things changed dramatically. They may not have known my personal tastes, but they carried *so many more books.* Quantity - as Stalin said - has a quality all its own. And the students and other people working at these mall bookstores knew a lot more about sf than the book-and-cards ladies did.

So I'm a little jaded on the whole mom-and-pop idea. I don't really need someone who knows my tastes. I'm not sure that I know my tastes; they seem to change. What I want is information and selection; I can usually go from there.

(I also don't find Amazon's suggestions to be that helpful; I suspect that their algorithms are off because they know that I liked a particular book, but don't understand what it was. I think that there is a lot of room for improvement.)

[tubemonkey]

Originally Posted by Andrew H.

I don't really need someone who knows my tastes. I'm not sure that I know my tastes; they seem to change. What I want is information and selection; I can usually go from there.

(I also don't find Amazon's suggestions to be that helpful; I suspect that their algorithms are off because they know that I liked a particular book, but don't understand what it was. I think that there is a lot of room for improvement.)

I hear ya. I totally ignore the recommendations I get from places like Amazon and Netflix. I don't need them. For example, Netflix is frequently way off and recommends movies and shows I hate. Like you, I want information and selection. I'll take it from there.

[dandev]

Originally Posted by Andrew H.

(I also don't find Amazon's suggestions to be that helpful; I suspect that their algorithms are off because they know that I liked a particular book, but don't understand what it was. I think that there is a lot of room for improvement.)

I'd actually prefer non-improvement. I find it comforting when computers don't quite get me.

[RainingLemur]

Couple of good reads here. Thanks.

[StoryEnthusiast]

Originally Posted by dandev

I'd actually prefer non-improvement. I find it comforting when computers don't quite get me.

Me too. Please leave me alone, Mr. Computer.