When we talk about the shifting face of retail, we often refer to Amazon and the massive effects it has had on the ways people buy and the ways retailers supply. Such influence can sometimes make it seems as if Amazon is unbeatable—a game changer that has re-imagined the retail landscape in its own image, such that no other company could come close to competing with it. Although there might be some validity to that status when it comes to certain products, such as the books, both physical and electronic, that were among its first sales, it appears less and less true in some of the product categories into which Amazon has extended more recently.

For example, in the grocery sector, a wealth of smaller, locally oriented delivery services are seeking to undercut Amazon’s advantages by delivering ordered items more quickly, at a similar price, from a local store owner. Postmates couriers in 18 U.S. cities run out to pick up toiletries, groceries, and convenience products for local customers. As the service integrates its systems with those of the small retailers, it helps them gain an unprecedented level of logistical sophistication that enables the small companies to compete with their larger counterparts, to include even Amazon.

Instacart focuses specifically on groceries and allows shoppers to choose from a range of small and large, local stores from which to receive their deliveries. By starting with groceries, the company asserts that it has already succeeded in the toughest supply chain—“Once you know how to pick avocados, picking towels is a lot easier,” its founder explains. Furthermore, Instacart makes sure that its retailer partners consider it a collaborator, rather than a competitor. Small grocers enjoy sales increases of around 10 percent, and according to one specialty grocer, approximately half of the Instacart orders are from people who would not have shopped at the store otherwise.

In other areas, Amazon suffered a well-publicized failure in its attempt to introduce the Fire Phone, and some investors have begun to question whether it is spending too heavily, without providing enough returns. Moreover, its fights with authors whose books were strategically removed from the site put Amazon in the position of the big bad wolf. If local retailers can paint themselves as the more appealing characters in the tale, they may attract consumers’ sympathies, and their shopping dollars.

Discussion Questions

1. What new firms are customers using instead of Amazon, and what do they do?
2. What do these firms have in common, and how do their operations chip away at Amazon’s sustainable competitive advantage?
3. If you were able to get the same merchandise at the same price from Amazon or one of these firms, which would you use? Why?

 

Source: Farhad Manjoo, The New York Times, December 17, 2014