A vignette of ancient wisdom (popularized in a famous Aesop’s fable about a man and his son and their donkey) says “Please everyone, and you will please no one”.
Amazon has been a company that almost continually challenged this received wisdom. But, maybe, they are reaching their limits.
Amazon has shown an unmatched willingness to persevere, create new markets, or expand into many markets. From its very inception, Amazon — the name chosen to expand beyond books — Amazon has been committed to this goal. In my class, I often show the slide below to students to emphasize how (a) Amazon wants everyone to be their customer and (b) is willing to compete with the smallest firms. If you are selling anything online, you will soon either compete with Amazon or depend on Amazon to sell it for you.
This is not my observation. As the slide shows, Bezos has made this point in his interview with Wired magazine in 2011. Nevertheless, this fact was not obvious when Amazon was a “small” company in 2011. Over time, like a snowball gathering mass, the all-pervading nature of Amazon has become common knowledge, after their astounding growth. Every year, I teach 300+ students. In the last three years, I had exactly one student who declared in class that she wasn’t an Amazon Prime member.
A simple idea really. Sell to everyone. But Aesop’s fable shows, it is challenging to realize it in practice.
What stops a firm from realizing this? Usually, there are institutional and cultural barriers. Walmart tried selling to everyone. However, they could not quite make the leap from the rural and exurban markets to urban markets. Chicago passed an ordinance preventing Walmart from entering the South Side. Walmart then opened in Evergreen Park, a block south of the boundary. As late as 2017, NYC stopped Walmart. Walmart entered NYC in 2018 (through its “tech” acquisition, Jet). Walmart in Washington DC has had a chequered history since its entry in 2012. Surely, some local NIMBYism and valid labor considerations were behind these difficulties.
I wrote about Amazon HQ hiccups on this blog. Despite all the hiccups, Amazon has had an easier time with its retail expansion than Walmart. With Fulfillment Centers (FC) in each state and armed with the cachet of Whole Foods Inc., among the upper-middle class, Amazon’s geographic and demographic penetration is considerable. CIRP estimates that there are 112 million Amazon Prime members in the United States as of December 2019. As a comparison, only 100 million people voted in the 2018 US elections (which was, by the way, the highest turnout in midterm elections in the United States since 1966).
Amazon tests the very premise that a firm can run multiple lines of business and successfully sell products to everyone. Would Amazon become a gigantic Chaebol in the future?
—
Getting messier by the day
Recently, Amazon threw its support behind the current BLM protests (rightly in my view, both morally and economically). Even though one can quibble with the size of its donation ($10 million), such engagement can bring a difference to society. Firms also gain from the halo effect in participating in social progress.
Bezos in 2020 is a less reticent person compared to the 2011 Bezos. So there he was, batting for Amazon’s support for the cause. He wrangled with many users. To one particular customer, Bezos wrote:
“There have been a number of sickening but not surprising responses in my inbox since my last post. This sort of hate shouldn’t be allowed to hide in the shadows. It’s important to make it visible. This is just one example of the problem.
And, Dave, you’re the kind of customer I’m happy to lose.”
(See here for the customer’s note and Bezos’s response. Warning: Vile Language).
It is the first time that Amazon has declared that it didn’t need a customer’s business. So, some customers clearly do not deserve Amazon’s famous “customer obsession”. We are reaching the limits of customer obsession.
We are going to see more of this on platforms and retailers, just as how the Premier League and the top-flight clubs try to curtail the hooligans amongst their fans. They desire the worship of the fans without their illnesses. Amazon — whether it wants it or not — is now a part of the vast conversation we are having about the role of businesses in a better society.
Update: Within hours of writing this post, Amazon announced that it is halting law-enforcement use of its facial-recognition software, adding its voice to a growing chorus of companies, lawmakers, and civil rights advocates calling for greater regulation of the technology.
Here is Amazon’s own blog post:
We’re implementing a one-year moratorium on police use of Amazon’s facial recognition technology. We will continue to allow organizations like Thorn, the International Center for Missing and Exploited Children, and Marinus Analytics to use Amazon Rekognition to help rescue human trafficking victims and reunite missing children with their families.
We’ve advocated that governments should put in place stronger regulations to govern the ethical use of facial recognition technology, and in recent days, Congress appears ready to take on this challenge. We hope this one-year moratorium might give Congress enough time to implement appropriate rules, and we stand ready to help if requested.
This is not a new identification.
Firms will eventually see establishing justice as their virtue. I did not say it. Adam Smith wrote this in the Theory of Moral Sentiments (1759).
The most sacred laws of justice, therefore, those whose violation seems to call loudest for vengeance and punishment, are the laws which guard the life and person of our neighbour; the next are those which guard his property and possessions; and last of all come those which guard what are called his personal rights, or what is due to him from the promises of others. (Theory of Moral Sentiments).