Amazon Reinvents the Wheel (of Retailing)

Quartz: “The wheel of retailing, first proposed in 1958 by Harvard business professor Malcolm McNair, describes a cycle in which retailers start out by offering low-cost products to attract customers, often through an innovation that allows them to undercut more established competitors. As they grow and attract more customers, these retailers raise prices, allowing them to widen their margins and expand. As they raise prices, they become vulnerable to lower-cost competitors, starting the cycle anew.”

“Thus far, Amazon has avoided getting caught in the wheel by constantly expanding into new sectors. By moving beyond books and into general merchandise, then onto fields as diverse as web services and entertainment, Amazon remains a perennial upstart, never taking on the characteristics of incumbents. The company has also never enjoyed the fat margins described by the wheel, instead sacrificing profit for continual growth.”

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