The Amazon Ecosystem has now penetrated my 13-year-old's bedroom. It's scary. Keep an eye on Amazon's emerging Ecosystem which involves Echo, Dash, Prime, AWS and an IoT underpinning. The IoT underpinning -- part of AWS -- will be anchored by 2lemetry.com (a platform startup Amazon recently acquired). Interacting together, this mix of products and services might reshape consumer behavior in unimagined ways.
For Amazon competitors, this is not a lean-back moment. Amazon supposedly accounts for 60% of all retail revenue growth right now. All retailers need to proactively respond in untraditional ways because Amazon's growth (layered on top of its sheer size) is staggering.
Amazon's 25% growth on top of Amazon's $225 billion annual sales (GMV) is rapidly shifting market share percentages in categories from books to apparel to electronics. Below is what the $225 billion looks like compared to America's other largest retail websites (Walmart, Home Depot, Macy's, Best Buy, Costco, Nordstrom, etc):
But, my view is that this is not a battle of retailers. This is a battle of ECOSYSTEM versus retailer. Amazon's ecosystem is creating a growth flywheel. And this flywheel is now installed in my son's bedroom.
Amazon's Echo is in my boy's bedroom
Yes, my 13-year-old son has Echo -- part of Amazon's ecosystem -- "living" in his bedroom. Plus, he has the Alexa (Echo) App on his iPhone. He uses Echo as his wake-up alarm. He listens to his music through Echo. He listens to Audiobooks (Audible) through Echo. He consults with Echo as he does his homework. From our bedroom, my wife and I hear our son talking to Echo about topics like Mother's Day. When my wife and I let him, he will use his Echo to turn the light bulbs, fireplace and heat on and off in our house.
By inserting itself into our daily activities, Amazon may be "becoming" a $3 trillion company. Yes, that's debatable. But, we are dealing with uncharted territory. Again, Amazon is not a retailer. It's an ECOSYSTEM.
$3 trillion Ecosystem?
Now analysts are debating whether or not Amazon will be valued at $3 TRILLION as a company within 10 years (read here).
It's possible. Partly because it's hard to compare Amazon other companies. To me, the only other comparable is Alphabet (Google). These two companies are highly digital. They experiment to the Nth degree. They both spend about $10 billion per year on R&D. Both acquire 2 to 12 startups each year. And neither acknowledges traditional industry boundaries. They invent in areas like fulfillment, automotive, aerospace, and media.
Again, while Amazon competes with retailers, Amazon is NOT a retailer. It's not even a technology company. Amazon is an ecosystem.
It also operates with a "startup" mentality as it paves new paths with concepts like AWS. In fact, Amazon job applicants are told upfront that new employees must enjoy working in a startup environment (read Amazon is still a startup). By deploying a $10 billion R&D budget which fuels startup pods within Amazon.com, this "$225 billion startup" is trying to build the world's first trillion dollar company by building an ecosystem.
Amazon is an Ecosystem (not a Retailer)
Amazon is all encompassing. It's a Journey. It involves inputs like private label products, AWS, Echo, Dash, and Prime.
It is building multiple habit-forming touchpoints that interact with shoppers all day long -- like my son's Echo. Amazon create's Prime lock-in features ... like this photo-saving feature which comes (free) as part of Prime:
With a number of "free" or "early access" features, the 40% of Americans who now use Prime are less likely to abandon Amazon:
Free photo storage
2-day free shipping
Kindle "free" lending library
Early access to My Habit deals
Early access to Amazon Elements
Free access to the Washington Post
Ad-free music sharing
Prime Now -- free two-hour delivery on thousands of items
"Free" Dash buttons ($4.99 credit after your first purchase)
As an aside, Dash supports 100 brands now:
Then there are Amazon Basics and Amazon Essentials which are critical to the ecosystem. These private label products create with a different dynamic when compared to traditional retailers. With all due respect, this is not Target or Kmart because Amazon Private Labels live inside a $250,000,000,000 direct marketing powerhouse that is growing at 25% year over year. Prime members get special incentives to buy Basics and Essentials -- which are branded as Amazon (unlike so many Private Label brands sold by other retailers). Thus, Amazon continues to build awareness at a very large scale.
Prime members can also get a credit card which offers 5% back on Amazon.com purchases. That cash back seems high, doesn't it?
Amazon's name is everywhere. And all these benefits are interwoven -- along the Amazon technically-connected Journey.
The technical part of IoT is likely to play a big role in the marketing and messaging aspects of the Amazon ecosystem -- the Amazon Journey. Which brings us to AWS and 2lemetry.
IoT helps complete the Journey
Amazon quietly acquired 2lemetry.com (an IoT platform). It is now folded into AWS. Extending the AWS tentacles more deeply into the everyday lives of shoppers.
The ecosystem continues to unfold. Kindle. Third Party Merchants. FBA. Amazon Basics. Dash. Echo. 2lemetry. This AWS/2Lemetry business has big banks wondering if AWS will become bigger than Amazon.com itself.
If this Deutshe Bank prediction happens, what will Amazon do to product pricing on Amazon.com? That might be on of the big questions we face in the next five years.
We can't sit back and watch this unfold. We need to proactively respond and build our businesses differently than we've behaved in the past.
As Amazon ZIGS, find new ways to ZAG.
Think ExO. ExO = Exponential Organization. Build an organization that is modular, quickly incorporating third parties into your ecosystem on an as beneficial basis. Diversity of people and thinking (outside parties) and modularity are important aspects of corporate survivability these days. SeeCorporate Survival.
Add more alliances to your ecosystem. Do this wherever two non-competing companies can help each other. eBags has made smart moves on this front by positioning itself inside the travel world -- as a Switzerland of travel -- and as a category authority on Connected Travel Gear.
Leverage startups. In my mind, it is vital to "keep up" by embracing the $100 billion R&D startup world. That's how much money is invested in startups each year. That doesn't include the ones that are bootstrapped. 76% of the 360 technology startups acquired in 2012 had no professional funding, so keep your eyes and ears on non-VC-backed companies which have a reduced PR exposure. Iterate.ai is built to help you find them and add them to your own customized Collections of Startups.
Build your own IoT products and platform. Build connected products. But more imporantly build platforms, and interconnected ecosystems. Not just products. Iterate Studio has helped brands do this in Energy and in Consumer Products, like with eBags.
Pay attention to the up-n-comers. Watch for early threats. And find ways to partner with small up-n-comers. This is the day of hyper-adoption. When a startup catches on, it grows at unprecedented rates. This can be a threat to you, or an opportunity. Forrester's James McQuivey onHyperadoption.
Help out Amazon look-a-likes. Embrace startups that look like the Amazon winners. Instead of selling Echo, help the Echo lookalike from the startup world. Embrace the Dash lookalike. Retailers need to embrace them as insurance policies against Echo and Dash. Join hands with other retailers and partners to create your own unique Ecosystem. It should differentiate your services and help you compete with Amazon's Ecosystem.
Welcome to the Amazon Ecosystem -- or should we say, ECHOsystem.