What’s the Amazon brand? Where’s the Essence? And how can Jeff Bezos be replaced?

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Having read the compelling biography on Jeff Bezos, ‘The Everything Store: Jeff Bezos and the Age of Amazon” by Brad Stone, I came away believing that Amazon is a long-term short and the main reason pertains to the Amazon Brand. I must qualify that it would be a very long long-term short. In the meantime, Amazon is likely to be a great investment vehicle since they continue to pioneer and are consistently upsetting the apple cart (although not yet the Apple Cart). Investing is a matter of time (and timing) and I’m no wizard in this regard. Unlike most stock market aficionados and analysts, I am not focused on the Amazon business model* and its profitability (or current lack thereof) per se. I look at Amazon with my own rose-tinted glasses of a brand marketer. Is Amazon creating a sustainable brand?

Amazon – The Classic U.S. success story

In many ways, Amazon represents the best of what America has to offer. A founder and CEO who thinks BIG. A spirit of innovation. A can do attitude.

A founder who, while exceedingly wealthy, remains hungry and is still deeply hands on. Bezos has a talent — apparently shared with Steve Jobs per the Isaacson biography — for reality distortion. He has vision. He has has made it his business to become the most customer centric organization on Earth. Behind his vision and 20% ownership, Bezos is all about the long-term which, in a stock market-run world, is an exceptional quality — dare I say, an asset. The issue is that the largest and most valuable part of Amazon lies in the form of the founder.

Amazon brand – the long term value

amazon brand long-term short, The Myndset digital marketing

However, Amazon and the Amazon brand is being constructed in a manner that I believe is not built to last (one of Jeff Bezos’ favorite books). Even if Amazon is built to grow fast for the foreseeable future, the issue is that all good things come to an end, especially when it comes to publicly traded companies. The cycle of growth will inevitably come to end, especially as/when distributor margins are tightened (ignoring the current margin-less existence that Bezos is affording the company in order to invest in the future). The question is what are the durable and meaningful values of the Amazon brand that will help carry it into the future. There are the five prime reasons for my less-positive position on Amazon’s long-term value:

  1. No Successor. The issue of a successor is a shorter term issue. There is — worse, there can be — no viable successor to Jeff Bezos. Bezos will have to step down at one point, if it doesn’t happen by force — as highlighted by the recent health scare while holidays in the Galapagos, this new year’s, just ahead of his 50th birthday. Beyond his brilliant mind, his vision and his ability to steer the company through twenty glorious (if at times perilous) years of growth, Bezos is irreplaceable. His brash manner, his indomitable spirit and his boldness are signature characteristics of the founder. For someone to be able to pursue the same approach will just not be possible. Taking the brazen decisions that have defined Bezos’ reign takes not just a certain profile, but a type of ownership structure and decision-making system. Moreover, is Bezos able/keen to find and foster a legitimate heir? Apple is an interesting parallel. Only time will tell if Tim Cook will be able to take Apple to the next level. For now, the jury is out.
  2. No Higher Purpose. The internal slogan of Amazon is defined as “Work Hard. Have Fun. Make History.” When I talk about the Marketing of the 5E’s, I refer to the Essence of a brand. This relates to having a higher purpose. The question is to what extent “making history” will be doing “good.” What is it about “making history” that resonates with its employees and customers? Making history by being the BIGGEST distributor or being the one to grow FASTEST to $100B, are not durable or empowering traits. Jeff Bezos’ Amazon has inscribed a powerful customer-centric creed. The Amazon philosophy is broadly speaking built around the concept that any investment must be geared to bring the customer value. Meanwhile, Amazon does not strive to serve a higher mission for the people. Bezos has personally invested in fabulous projects or entities such as the Space Origin, the Clock of the Long Now and the Washington Post. However, these investments are personal. Bezos’ position is that philanthropy is not what the Amazon shareholder is seeking. I believe that shareholder value will come from having motivated and engaged employees who are prepared to go beyond. Without necessarily talking about philanthropy, Amazon needs a higher purpose beyond making money and becoming big. Having a higher purpose taps into ethics and emotions which deep down craft our beliefs and drive our motivation. It is my conviction that the employees’ desire to overachieve and give more than the average is one of the keys of creating long-term shareholder value.
  3. Employee Fulfillment. From reading the Bezos biography and anecdotal evidence, there seem to be a limited number of employees at Amazon that are genuinely “happy” and/or fulfilled based on an accepted culture of life/work imbalance. By constantly extracting the most out of its current employees, the likely consequence of employment at Amazon is burn-out or burn through. Such a ‘regime’ is not sustainable over the long term. What I would be interested in seeing is how more value can be inserted into the daily workflow for the employee. Fun is good, but in down years, fun has a nasty way of being squeezed out of the picture. I think that work/life balance is indeed difficult to reconcile with creating cutting edge shareholder value. However, there needs to be more life inserted into the course of day’s work.
  4. Value. The search for diminishing costs and EDLP (Every Day Low Pricewill have its limits over time. Perhaps Bezos is creating the most efficient and effective distribution model existing. However, as a branding guy, the marketer’s role is to create value. Embedded in its EDLP strategy, Amazon seems to be all about subtracting value as much as possible, notwithstanding the exceptional and customized user experience.
  5. Product. In a market driven distributor model, margins are by definition thin. It’s all about volume. However, on its eCommerce site, Amazon is merely serving as an agent. Sure, there are good margins when Amazon serves as a marketplace. However, over time, having optimally negotiated and bilked its suppliers, Amazon will need its own products in order to extract higher margins. The Kindle is surely one of the answers. Certainly, in its arsenal, the AWS and Kindle are powerful arms. The question will be to what extent Amazon will be able to provide white label products and, along the way, substantiate its brand with hard core goods?

Certainly, to talk of Amazon’s demise might be completely inappropriate near term. Any “short” on Amazon is a long term issue. What will delay that decline? Two of the keys will be Automation (removing the human component) and Innovation – (AWS, 3D printing, drone delivery…). For now, Bezos is alive and kicking. Momentum is good and the market opportunity is vast. So, for the near term, the Amazon prospects remain good — Don’t rush out and short the stock just yet. However, the Board and brand team at Amazon should be plunging into the five strategic questions above with gusto.

*This article published in October 2013 by former Amazon employee, Eugene Wei, is rather insightful and a worthy read.

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6 Comments, RSS

  1. frederic abella

    Wow ! Nice and deep one… again. Thank you Minter 🙂

    It is inspiring. It sustains one of my paradigm for a long term company : Change is a constant. One can’t predict the next champion, the next Microsoft, the next Ford,… 10 years ahead.

    As we always agree on the importance of the WHY, I won’t tell the story again 😉

    I fully agree the internal slogan is not enough and I like your explanation .

    Your proposition of automation by removing the human is a proof there is a limit to cost reduction or optimization. Zero. One day there will be nothing to reduce anymore.

    On the value creation side, I see 1. open AWS and APIs 2. a huge marketplace 3. the Kindle or others devices.

    1. With API and AWS, Amazon created one of the most powerfull computing ressource. It creates value for every creator or startup, and I think because of the entrepreneuship momentum and the huge need of finding new models, it is a long term value creation. Nobody can’t compete in this field with Amazon.

    Amazon doesn’t create direct value on its own, it creates the possibility for others to create great value. And Amazon takes his percentage. As for the gold rush, the only every time winner is the shovel seller.
    That is the platform model value creation as explained by Henri Verdier in his book “L’âge de la multitude”, where, amongst others, he details Amazon position.

    And I won’t detail the ideal position it makes for Amazon. It is at the very start point of new ideas, and so has the possibility to invest in or buy promising startups.

    2. The huge marketplace is quite the same as AWS. Amazon makes it easy for everybody to sell products. As eBay is at the center of the second hand commerce, it facilitates shop, payement,… and so Amazon is at the center of the commerce community at a worldwide level. As Amazon optimized everything, delivery, IT ressources, services,…, it is very hard to compete.

    Again Amazon doesn’t create direct value. It creates the possibility of value. That is why everybody comes to Amazon to start a shop.

    3. For the devices, I can only see the same model as Apple, except the kindle software is available on every device. I am a bit short here. But as you mention it, where is the WHY? Why should I buy at Amazon except it is easy, with a very good customer service, and quite of a monopole. But nothing to believe in.
    If a challenger comes with something disruptive, or a great inspiring value, Amazon may be swept away on this domain.
    By the way, one impressive point on books is the community of reviewers. It is a really great and well managed asset.

    As a conclusion, again I agree with you Amazon is fragile, without a WHY and an only today inspiring leader. I would like to see your analysis of Google or Facebook. They look quite the same to me. Too big to have a WHY.

    Hopes it helps your thinking 😉

    [Sorry for my english 😉 I wish it could be as good as your french.]

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