Amazon Has a ‘Basic’ Problem

The Wall Street Journal: “There is one major problem with the idea that Amazon will eat the entire universe … Amazon is good at identifying commodity products and making those as cheap and available as possible … But this system isn’t very compatible with big-ticket, higher-margin items. Could Amazon’s Lab126—famous for both the successful Echo and the failed Fire phone—ever produce something as premium as an iPhone or an OLED TV? Its success in electronics has come from driving their prices to the very bottom.”

“The same goes for Amazon’s other businesses. For example, could Amazon Studios, which has shown little ability to create hits, ever produce a franchise like Marvel’s Avengers or HBO’s Game of Thrones? … Amazon may be mastering commodity goods; its own Basics line went from about 250 products in 2013 to over 1,500 today. But making items widely available at low prices runs directly counter to the way higher-profit businesses work.”

“Consider the makers of high-end handbags, which limit who can distribute their wares and, as a result, who can buy them. Not surprisingly, many of those brands refuse to sell on Amazon at all … The bulk of our everyday goods and services may one day come from Amazon, and everyone from CVS to Uber should watch their backs. Even so, there will continue to be countless competitors that would never dream of branding any of their products ‘Basic’.”


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