Amazon has rigged the game against everyone

Amazon earned a whopping $187 billion last year. Just to add a bit of perspective to how much Amazon is making its annual revenues exceed the GDP of an estimated 139 countries. Amazon’s goal is to earn a trillion-dollars per year.

Unlike most countries, Amazon is growing at astonishing rates. It is It is the most successful company in the world and Jeff Bezos is the richest man in the world.

Amazon’s Strategy is to control ALL sales

Keep this in mind – I think Jeff Bezos is a genius and the Amazon team is filled with the world’s best and brightest marketers and technologists. The Amazon teams are truly business champions. They are nothing less than a business dynasty that keeps getting stronger.

I respect them. I fear them. And I want to help local businesses kick their butts. That being said, know this, Amazon has rigged the game against everyone.

Amazon has rigged the game against local businesses.

Amazon has rigged the game against shoppers.

Amazon has rigged the game against the businesses that sell products on

In this rigged game, there is only one winner: Amazon.

Amazon's vision is to control all retail sales, data, technology, advertising, delivery, and logistics and it is willing to do whatever it takes to achieve its vision. When I talk about the game being rigged, I am not saying Amazon is doing anything illegal. Amazon is doing what any smart business should do and that is increase its market share. But the Amazon team’s genius does not take away from the fact that Amazon is a real monopoly and uses all the tricks that monopolies have always used

Amazon is a monopoly

Let’s explore Amazon’s retail strategy. Amazon enters a business and uses technology, robots, fewer people (no cashiers), and logistics expertise to make supplying stores and delivering products better, faster and cheaper. Amazon uses these innovations to initially lower prices to drive competitors out of business. Once it has control in a market segment, it gradually and systematically increases consumer prices. After achieving a market segment dominance, Amazon moves on to the next market segment. Amazon’s retail strategy is the prototype for all its businesses: media, entertainment, music, books, advertising, technology, logistics, shipping, and physical stores.

This is ALL good news for local businesses

Upon first glance, this would all seem to be BAD NEWS. Nope! It is all good news for local businesses and local shoppers. Once we understand Amazon’s strategy then it is possible to defeat the giant by changing how local businesses and local shoppers play the game.

First, we need to dig down and understand Amazon a little better.

Just the Facts

The classic TV Detective Show Dragnet, which starred the iconic Jack Webb, as Sargent Joe Friday, spoke the most famous line in every episode, “Just the facts, ma’am. Just the facts.”

Here are just the facts on Amazon. Amazon earns approximately $187 billion in annual revenues with only 67.2% coming from retail. Yup, a bit of a surprise. Amazon’s rapid growth is largely driven by its other businesses. It’s the fastest growing company in almost every business segment it is in.

  1. Retail.

    Amazon’s online strategy is very simple – control everything that is sold online and in stores. They are well on their way to achieving their strategy. Today, Amazon sells over 50% of everything sold online. Last year, they earned over $124 billion last year from online sales. That makes Amazon the most powerful monopoly in history. Besides selling stuff, Amazon makes money from the fees it charges businesses that post their products online, Amazon is paid a fee for storing inventory, a shipping fee, and a free for placing a business’ products of Page One of Amazon search.

    Sellers on Amazon are like miners who worked for coal companies in the 20s, 30s, and 40s. These exploitive coal companies offered miners credit at the “company store.” By the end of the month, miners found they had no money left. Just like the prices in the company store, sellers on Amazon have no control over fee increases that are a key part of Amazon’s strategy. This is important business strategy to remember because Amazon uses it in every aspect of its business – get shoppers and businesses dependent on Amazon, drive out competitive, and then incrementally raise prices, cut working hours, and replace workers with robots.

  2. Advertising.

    Amazon is the third largest advertising company in the world. It is on track to earn $14 billion a year from its advertising services. Only Google and Facebook are bigger. Ominously, Amazon is growing the fastest. Amazon is helped by the fact that 66% of all online shopping searches begin on Amazon. Amazon advertising is predicted to grow its revenues 3-times its current size over the next few years, which is nothing less than amazing in itself.

  3. Technology & Data.

    Amazon Web Services (AWS) is a $12.2 billion dollar a year revenue stream for Amazon. AWS offers its advanced technology and sophisticated data centers to companies and governments across the globe. Their advantage over most other data companies is that know when someone buys something. Google only knows when an online shopper clicks on an ad. Amazon knows when shoppers click and buy. Amazon has a powerful advantage over all other technology and data companies in the world.

  4. Communications & Media.

    Amazon has movies, TV stations, cable streaming, music, and direct communication with over 105 million US households. It will soon bypass ALL of cable television. Amazon is not bigger than one cable channel but ALL of them together. A staggering concept.

    FYI – like many of its businesses Amazon music is the fastest growing company in the music category. Just think of their marketing leverage with 105 million Amazon Prime Members to sell services.

    But we’re not done here: Amazon own the Washington Post and they just bought MSG Cable Network.

  5. Delivery.

    Amazon has planes, trucks and now an Uber-like delivery service. Their vision is to overtake USPS, UPS, FedEx and all other parcel delivery companies. Just think about this, Amazon already controls 50% of all online sales and now they’ll use their own delivery service to deliver those products and items.

  6. Physical Stores.

    Amazon owns and is expanding Whole Foods. Next it is rolling out 3,000 Go stores which they will expand to 15,000. Amazon’s Go stores are small footprint stores that will be everywhere: lobbies of office buildings, airports, train stations, strip malls, gas stations, and anywhere else Amazon can place them. Additionally, Amazon has rolled out the first 12 out of 1,500 small footprint chain of Amazon grocery stores that are completely different than Whole Foods.

  7. Logistics.

    Amazon has warehouses across the globe from which they manage inventory and delivery of tens of millions of products every day. Their efficiency is the stuff of corporate legends.

How Amazon Rigs the Game

How Amazon rigs the game? Amazon uses money from its other businesses like advertising, data service, and technology to finance market growth in other market segments.

Here’s an example. When Amazon bought Whole Foods the first thing it did was lower prices. Amazon/Whole Foods competitors didn’t have the money to match the price cuts. Then Amazon offered Whole Foods free delivery and special deals to its 105 million Prime Members. Amazon doesn’t run Whole Foods like Kroger’s runs its grocery stores. Amazon runs Whole Foods as a fully integrated part of its entire business. It allocates monies to any of its businesses it wants to grow, ensure market share and drive out the competition.

Amazon is not wrong in what it does. It is just that Amazon, using its monopoly power, thoroughly rigs the game.

Amazon uses magic to rig the game

Magicians know that to get away with a trick they must distract their audience’s attention. Neuroscientists Stephen Macknik and Susana Martinez-Conde found that magicians to get away with a trick did the following: they use illusions, they separate perception from reality, they divert attention, and manipulate perception.

Amazon Magic - what you see is not what you get

Amazon magic. Amazon uses magicians’ trick in business. They divert shoppers’ attention and manipulate their perceptions. Amazon makes shoppers think that are getting MASSIVE SELCTION and FREE DELIVERY.

False. Massive selection and free delivery are just very good magic tricks. There is ZERO reality behind them. It is all sleight of hand by Amazon.

Let’s pull back the curtain on Amazon’s NON-FREE free delivery magic trick

Free Delivery. Hopefully, your mother and father taught you that nothing in life is free. Least of all delivery. Imagine how many shoppers actually believe that there is such a thing as “Free Delivery.”

Last year, Amazon loss $7.2 billion on its “free shipping” and offset this loss with the $6.4 billion revenues from its Prime Memberships, whose members pay to get Amazon’s NON-FREE delivery.

Here’s the sleight of hand. Amazon is losing $800,000 on its “Free Delivery” it is using “Free Delivery” as a powerful form of advertising. Amazon is forcing all other businesses to offer “free delivery” because it knows other businesses can’t allocate money from other businesses to cover the expense. Amazon is offering its NON-FREE free delivery in order to drive its competition out of business.

Let's be clear – few, if any, other businesses competing against Amazon can afford to lose a billion dollars a year to offer this NON-FREE “free delivery”. Business can learn from Amazon by shifting dollars from advertising to customer benefits like “free delivery.” Most businesses do not understand the Amazon strategy of investing in its customers rather than advertising.

How local businesses turn Amazon's NON-FREE “free delivery” against it

The hottest trend in e-commerce is BOPUS - Buy online and pick up in-store. Boom! Local businesses kick Amazon’s free delivery game to the ground by letting local shoppers shop online and pick-up in their stores. Amazon is shipping from China and its warehouses, while local businesses are five minutes from most shoppers. Shoppers overwhelming state that they want to buy online and pickup in-store. BOPUS is better than Amazon’s “free delivery” trick.

Local businesses can immediately implement BOPUS with My Local Bee. BOPUS is just the first step local businesses can take to fight back against Amazon. Then, My Local Bee shows local businesses how to work with other local business to offer real FREE LOCAL DELIVERY.

My Local Bee’s Free Local Delivery. Few local businesses can afford to invest in free local delivery by themselves, but by working together with My Local Bee, the cost of “free delivery” is spread across all local businesses in the community. My Local Bee’s “free delivery” works just like insurance or a health club. Insurance works because everyone doesn't get sick all at once. Same with gyms. Not all members show up at the same time. My Local Bee charges all participating local businesses a low monthly fee to participate in its free delivery services. This enables local businesses to offer free delivery by spreading the cost of a full-time delivery service across all the local businesses in a local market.

Let’s pull back the curtain on Amazon’s “Massive Selection” magic trick

Massive Selection. Amazon is absolutely using magic to convince people that it offers a massive selection. When you find out the facts, you’ll be surprised at how tricky Amazon really is.

Here’s an example: when a shopper does a search on Amazon what appears are the products that Amazon was paid to put there. Using its marketing magic Amazon convinces shoppers that the items and products on Page One represent “Massive Selection,” and that the products they find are the best prices and genuine.

Massive Selection is a Magic Illusion

Here’s the research to prove that Amazon’s massive selection is magic illusion. Amazon knows that few shoppers ever get past the first page of Amazon. On Page One Amazon presents three to five choices of what seems like the same item or product. What shoppers don’t know is that the items or products Amazon only puts products on Page One are the ones that paid well to be featured on Page One.

The Dark Secret

Here’s a dark secret: the companies that can afford to pay Amazon to put their products on Page One are often the sketchiest companies with suspect products. This was discussed in a recent article in The Atlantic[ii] “Amazon May Have a Counterfeit Problem,” as was the frequently heard complaint from Amazon sellers in the article, “Why does Amazon allow Chinese sellers that ship from China?[iii] when 99.99% of the products are fakes?”

Whoa! Now that is a powerful trick to make shoppers believe that all the vitamins, the clothes, the shoes, and the beauty products they are buying are genuine, real, and certified.

Shoppers think they are buying real products from real local companies when in fact a significant percentage of Amazon’s massive selection is supplied by phony companies selling knockoffs and fakes, and whose products are mysteriously shipped from China and other countries to Amazon. These companies sell official-sounding products for less because they are fakes.

As your mother used to tell you, "If it sounds too good to be true it probably is”

Here’s a great personal example. I wanted to buy a portable tire inflator. I found one at a great price but couldn’t find where it was manufactured. I took a chance and ordered it. I received the tire inflator and it worked once. It was so poorly made it literally fell apart the first time I used it.

There was ZERO customer service. I had to go to the local auto parts store to buy an American made tire inflator that works perfectly. I paid ten dollars more but got 100% satisfaction.

Fakes and Poor Quality are not Real Selections

The fake companies that are a key part of Amazon’s massive selection often have American sounding names but in reality, they are simply front companies with fake products. These companies go so far as to create phony miniature models of a store, take a picture, and post it online. Try and return some of these products, and the shopper finds itself in a maze of delays. As the Atlantic article pointed out, Amazon does not CARE about customer complaints because the unhappiness of a single customer doesn’t impact Amazon’s bottom line.

Local businesses turn the tables on Amazon by taking three steps

Step One - People. Understand how Amazon rigs the game. Amazon’s rigs the game by replacing PEOPLE with technology which allows them to undercut local businesses on costs. Think cashierless stores.

Local businesses need to make local shopping about PEOPLE and a few Amazing Deals.

Step Two – A few AMAZING deals. Local businesses need to use their My Local Bee tools to bring customers and new shoppers into their stores with a few AMAZING deals. When local businesses offer shoppers a few AMAZING deals each week shoppers wake up from the Amazon magic trance.

Local businesses need to become famous for a few Amazing Deals each week.

Step Three – Work Together. Local business win against Amazon when they put their products up on the My Local Bee site with the products and services of other local businesses. When local businesses work together, they become the local alternative to Amazon. Alone no local business can effectively fight back against Amazon but working together local business turn Amazon’s strength against them.

Amazon’s Hidden Strategy

It can be said with 99.99% certainty that most people think Amazon’s strategy is e-commerce. Wrong! Amazon has a powerful and extremely sophisticated hidden strategy.
Amazon's hidden strategy is to control the ATTENTION of all shoppers. Attention! Yes, it wants to control the attention of every person in the world. Amazon wants people to make Amazon the first thing everyone in the world thinks about when they want to buy ANYTHING.
Just think about it – communications, advertising, online, physical stores, logistics, delivery – it all grows when you control the ATTENTION of shoppers.
Few local businesses really understand that Amazon is killing off their business because it is winning the customer attention war.

Local Business Can & Will Win

It is not only possible but highly likely that local businesses can upend Amazon. Why? Because, in the end, people don't just shop for price. People like the experience of interacting with other people and prospering with them.

You win when you stop playing the rigged game

A great example of business winning against Amazon is Trader Joe’s. Trader Joe's sells more than double per square foot than its competitors like Whole Foods, which is owned by Amazon. Trader Joe’s is winning because it is NOT playing in Amazon’s rigged game.
Amazon CANNOT be defeated when local businesses are playing its rigged game.

Local businesses need to stop playing Amazon’s rigged game.

Yeah, Amazon can set up 15,000 Go stores everywhere staffed by robots. A robot will make your coffee, fry your hamburger, and take your money – but there is no human experience. Life isn’t just about buying and selling. It is about human life and the unique experiences people have when they interact. Just ask Trader Joe’s what a great strategy people really are.

A big part of shopping is human interaction. It feels good to say hello to the local barista, buy a blueberry muffin made by the local baker, and ask for advice from the guy who owns the local hardware store. Amazon’s grand vision, while good for its profits, isn’t good for America. Main Street and Local Retail are good for America and always have been.

Nielsen Neuroscience. Jack Neff and E.J. Schultz. Ad Age. October 12, 2015. Smart Insights. 2017. BloomReach, 2016

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