Jeff Bezos Is Brilliant, but Amazon's Dominance Is Not Inevitable

The online retail giant has built an impressive economic moat around its business. But there are enemies on the banks of the water.

Thumbnail image for 615_Bezos_Amazon_Kindle_Reuters.jpg

REUTERS

CEO Jeff Bezos is a magician. At a time when investors scrutinize quarterly earnings reports with a microbiologist's fussiness, Bezos has persuaded Wall Street to accept minuscule profits or worse in exchange for an ever-rising valuation. He's done it by building a business that's so grotesquely complicated and hard to duplicate that Wall Street essentially considers it a near monopoly.

And maybe it is a near monopoly. But as Bloomberg's great piece on Amazon's $14 billion warehouse spending spree points out, there are enemies on the banks of the moat. EBay has introduced same-day delivery in some cities. Wal-Mart has 4,700 stores in the U.S., which means its product is never more than a few miles away from hundreds of millions of American households. Meanwhile, upstart Instacart "guarantees delivery of goods in less than two hours ... faster than Amazon's new grocery business," Danielle Kucera reports.

It's easy to imagine that Amazon, the biggest online retailer at a time when e-commerce has doubled in four years, will eat the retail industry. But it's unlikely that its software and constellation of fulfillment centers represents the final development in a turbulent century in retail innovation.

Reach back just 30 years ago to the 1980s, where a little upstart from Arkansas came out of nowhere and ate the retail industry:

Screen Shot 2013-08-21 at 6.22.07 PM.png

... and that was the end of Sears. Soon, it would be the mark the long demise of JC Penney. Retail royalty can change in a hurry.

I don't know who the Walmart of today is. Maybe it's Amazon, Instacart, some company we haven't heard of, or, well, Walmart. Bezos can spend as much as he wants because his company produces prodigious cash flow and because Wall Street will let him. He does spend as much as he does because he has to. Amazon is amazing. But its dominance is not inevitable and must be protected at very expensive costs.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Saving the Bees

Honeybees contribute more than $15 billion to the U.S. economy. A short documentary considers how desperate beekeepers are trying to keep their hives alive.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Business

Just In