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The next retail age will be coined the “multichannel era”—a time when integration across web, social, and brick and mortar is crucial to success. Everything points to Amazon dominating that era as well.
Ayn Rand
Ultimately, then, why should Amazon, the king of online retail, get into multichannel retail?81 Because e-commerce doesn’t work, isn’t economically viable, and no pure e-commerce firm will survive long term.
the cost of customer acquisition continues to rise as consumers’ loyalty to brands erodes. You have to keep reacquiring them. In 2004, 47 percent of affluent consumers could name a favorite retail brand; six years later that number dropped to 28 percent.82 That makes pure e-commerce play increasingly dangerous. Nobody wants to be at the mercy of Google and disloyal consumers.
Overnight delivery firms FedEx, DHL, and UPS have raised their prices an average of 83 percent over the last decade. And
Many of my colleagues in academia and business believe that brand building will always be a winning strategy. They’re mistaken. Of the thirteen firms that have outperformed the S&P five years in a row (yes, there’s just thirteen), only one of them is a consumer brand—Under Armour. Note: it will be off next year’s list. Creative execs at ad agencies and brand managers at consumer firms may soon “decide to spend more time with their families.” The sun has passed midday on the brand era. Brands are shorthand for a set of associations that consumers use for guidance toward the right product.
Fewer and fewer searches contain a brand name.
Consumers are willing to price-compare several brands, and Amazon gives them just that opportunity. The death of brand, at the hand of Amazon, and
Amazon now has all the pieces in place for zero-click ordering—AI, purchase history, warehouses within twenty miles of 45 percent of the U.S. population, millions of SKUs, voice receptors in the wealthiest American households (Alexa), ownership of the largest cloud/big data service, 460 (soon thousands) brick-and-mortar stores, and the world’s most trusted consumer brand. That is why Amazon will be the first $1 trillion market cap company.
Amazon, we’ve been engaged in the practical application of machine learning for many years now.”97 How many years? If Amazon tests an AI-like offering anticipating all your retail needs—sending stuff automatically and calibrating based on what you send back or edit via voice (“Alexa, more Rogaine and less sunblock”)—the test will register an Amazonian increase in spending per household. The stock will become antigravity matter and triple to a trillion dollars in value. Facebook and Google own media; Apple owns the phone; and Amazon is about to molest the entire retail ecosystem.
55 percent of product searches start on Amazon (vs. 28 percent on search engines such as Google).108
Consumers no longer go to stores for products, which are easier to get from Amazon. They go to stores for people/experts. Will their strategy—or Amazon’s—eventually emerge victorious? Or
What’s clear is that we need business leaders who envision, and enact, a future with more jobs—not billionaires who want the government to fund, with taxes they avoid, social programs for people to sit on their couches and watch Netflix all day. Jeff, show some real fucking vision.
young Democrats were on Apple’s side, and old Republicans, government.3 That wasn’t what you might expect from either side, the former being for expanding the power of big government, and the latter for protecting the prerogatives of big business. But Apple, and the other horsemen, play by a different set of rules.
They sided with Apple, as the firm embodies their own maverick, antiestablishment, progressive ideals—and conveniently ignored the fact that Steve Jobs gave nothing to charity, almost exclusively hired middle-aged white guys, and was an awful person.
Steve Jobs became the innovation economy’s Jesus—and his shining achievement, the iPhone, became the conduit for his worship, elevated above other material items or technologies.
Steve Jobs punished careful thinking, and history recorded the results. Steve Jobs—not Bob Noyce at Intel or David Packard at HP—became the first person to found a company and then make it the most valuable company in the world.
also let Apple, under Tim Cook, focus on predictability, profitability, and scale. You can see the results on the balance sheet: if profits are a sign of success, in fiscal year 2015 Apple was the most successful firm in history, registering $53.4 billion in net profit.9
The Cupertino firm controls 14.5 percent of the smartphone market, but captures 79 percent of global smartphone profits (2016).
Luxury is not an externality; it’s in our genes. It combines our instinctive need to transcend the human condition and feel closer to divine perfection, with our desire to be more attractive to potential mates.
Here’s a list of the source of wealth for the ten richest people in Europe (who cares who they are, their companies are infinitely more interesting than they are): Zara L’Oréal H&M LVMH Nutella Aldi Lidl Trader Joe’s Luxottica Crate & Barrel12
I, and the employees of my start-ups, struggled through two decades of underpowered and overpriced products just so we could claim we were thinking differently.
only 1 percent of the world can (rationally) afford them—
iPhone accounted for only 18.3 percent of the smartphones shipped globally, but 92 percent of the industry’s profits.19 That’s luxury marketing.
Plot a heat map of mobile operating systems, and the geography of wealth illuminates. Go to Manhattan. It’s all Apple IOS. Head to New Jersey, or out to the Bronx, where average household income plummets, and it’s Android. In L.A., if you live in Malibu, Beverly Hills, the Palisades, you have an iPhone. South-Central, Oxnard, and Inland Empire—you own an Android. The iPhone is the clearest signal that you are closer to perfection and have more opportunities to mate.
an iconic founder, artisanship, vertical integration, global reach, and a premium price. Let’s
Dying removes the icon from the inevitable judgment of everyday existence, including aging, and elevates persona to legend—ideal for a brand. Imagine what the Tiger Woods brand
it inoculates them from foolish acts that destroy their reputation and, worse, aging.
Pope Francis refers to as an unhealthy “idolatry of money” than our obsession with Steve Jobs. It is conventional wisdom that Steve Jobs put “a dent in the universe.” No, he didn’t. Steve Jobs, in my view, spat on the universe. People who get up every morning, get their kids dressed, get them to school, and have an irrational passion for their kids’ well-being, dent the universe. The world needs more homes with engaged parents, not a better fucking phone.
But for people who have discretionary income and aren’t worried about survival, the experience of living with a great work of craftsmanship is irreplaceable.
It’s how Apple makes products that repeatedly become icons—“objects that appear effortless … so simple, coherent and inevitable that there could be no rational alternative.”
Cognitive psychology shows that attractive objects make us feel good, which in turn makes us more resilient in creative challenges.23
Drexler
The stores, of course, changed the tech industry—and advanced Apple as a luxury company. The iPhone drove Apple’s share, but stores drove the brand and margin.
It wasn’t the iPhone, but the Apple Store, that defined Apple’s success.
Everyone in the room speaks the same language (literally and figuratively), wears Hermès, Cartier, or Rolex, has kids at Ivy League schools, and vacations in a coastal town of Italy or France or St. Barts. Fill a room with middle-class people from around the world, and you have diversity.
That’s why it’s easier for luxury brands to permeate geographic boundaries than mass market peers. Mass market retailers, including Walmart and Carrefour, have to hire ethnographers to guide them in local markets. But luxury brands, including Apple, define their own universe.
Apple is the only firm among the Four Horsemen, at least for now, that has thrived post the original founder and management team.
Apple realized it wanted off the tech train and moved away from the ethos of offering more each year for less money (Moore’s Law). Apple’s business today is to sell to people goods, services, and emotions—being closer to God and being more attractive.
don’t fight on other people’s terms. In other words, once you’ve made the jump to light speed as a tech firm, you need to immunize yourself from the same conquering weapons your army levied on the befuddled prey. There are several obvious examples: network effects (everyone is on Facebook because … everyone’s on Facebook); IP protection (every firm in tech over $10 billion is suing, and being sued by, every other $10 billion tech firm), and developing an industry standard—monopoly—ecosystem (typing this on Word because I have no choice). However, I’d argue that digging deeper moats is the real
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Apple has a key asset with a stronger immune system: 492 retail stores in 19 countries.
It’s not stores that are dying, but the middle class, and the stores serving them. Most that are located in, or serving, middle-class households are struggling. By comparison, stores in affluent neighborhoods are holding strong. The middle class used to be 61 percent of Americans. Now they are the minority, representing less than half the population … the rest being lower or upper income.44
ask: In addition to big, tall walls, where can I build deep moats? That is, old-economy barriers that are expensive and take a long time to dredge (and for competitors to cross). Apple has done this superbly, continually investing in the world’s best brand, and in stores. Amazon, also going for moats, is building a hundred-plus expensive and slow-to-get-built warehouses. How old economy! A good bet is Amazon will open thousands before they are done.
old-economy barriers that are expensive and take a long
least two or three of them now compete in each other’s markets, whether it’s advertising, music, books, movies, social networks, cell phones—or lately, autonomous vehicles. But Apple stands alone as a luxury brand. That difference presents an immense advantage, providing fatter margins and a competitive edge. Luxury insulates the Apple brand, and hoists it above the price wars raging below.
Apple stands alone as a luxury brand. That difference presents an immense advantage, providing fatter margins and a competitive edge. Luxury insulates the Apple brand, and hoists it above the price wars raging below.
a much better product and lower price. Education, on the other hand, has largely remained the same for fifty years and has increased prices faster than cable, and even health care.
As the world rushes to STEM, the future belongs to the creative class, who can envision form, function, and people as something more—beautiful and inspiring—with technology as the enabler.
1.4 billion Chinese, 1.3 billion Catholics, and 17 million people who endure Disney World each year.1,2,3 Facebook, Inc., on the other hand, has a meaningful relationship with 2 billion people.
The company owns three of the five platforms that rocketed to 100 million users the fastest: Facebook, WhatsApp, and Instagram.
