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  • Writer's pictureColin Stickland

Amazon. The New Tesco?

Updated: Dec 8, 2020

On the 6th November 2020, whilst the world was watching the US Election results, a potentially more significant event occurred. Scottish Mortgage, the Tech focussed Investment trust, made their first sales of Amazon stock, reducing their holding from 10% to 7.9%. This followed on from Jeff Bezos himself liquidating 1million of his own shares the previous week.

Is this the beginning of the end? I’m sure not, but it’s likely to be the end of the beginning, with growth and profit getting harder to achieve going forwards. This was always going to happen at some point. Amazon will continue to grow I have no doubt, but whether its earnings growth continues at the same rate is presentably being debated by many analysts

A decade ago, I was running my first e-commerce company. Back then, it was the rapid growth of Tesco that kept me awake at night. They were entering new categories, expanding product ranges, building increasingly larger new stores across the countries and starting their own E-Commerce business combined with Click and Collect functionality.

And yet today Tesco barely registers on the threat scale. Their E-commerce offer never gained traction, and their large stores full of choice became an albatross as customers found them time consuming and confusing to shop. Then profit targets became harder to hit and they faltered.

Amazon isn’t Tesco.

In truth, Amazon is not a retailer, but primarily a logistics company. Few people go to Amazon to browse for something new, they go to find something they already know about and get it cheaper or, more often, just quicker (Prime is its greatest invention).

Since time began, people have always been able to buy items cheaper somewhere else, but Amazon has surfed the shift to online shopping (cheaper and easier for everyone than visiting the high street) and become ubiquitous.

But over time strength and its size is likely to become its weakness, just as it was for Tesco.

As its product ranges expand exponentially thanks to Amazon Marketplace, then actually finding inspiration and choice on their website is getting harder.

Today, when you look for an item you increasingly see multiple versions of the same item from multiple sellers, and the alternatives offered become fairly generic.

A good bookshop, or any good retailer has always had the ability to curate a collection of items that inspire you or truly meet your needs that you cannot resist buying. My own heaving bookshelves are living proof.

Truly good retailers will continue to thrive if they build their own online presence, know their customers tastes and market themselves effectively using the myriad of tools and data available to them today, rather than just relying on a physical presence as they have been able in the past.

And for manufacturers, marketing will become more important than ever. Reaching customers directly and building a relationship with them so that you are not reliant on Amazon, Tesco or any other retailer activity to drive your sales.

The good news is that the Internet and Social Media make building that 1 to 1 relationship easier than it’s ever been.

So don't worry about Amazon. Worry about what you can do to grow your own business.

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