Amazon only accounts for only about 5 percent of all US retail sales. And online retail as a whole has only 11 percent. So there are plenty of folks who believe that the transition to online retail will happen slowly, and that while Amazon is growing fast it will be long time before it reaches the top of the heap. They see what’s happening as just another twist in the long and winding tale of US retail, the latest installment in a story where department stores rose to replace clusters of small stores, malls and chains exploited the growth of the suburbs, and then Walmart and the big box category killers sliced off large chunks of the US retail market, leaving the big mall anchor stores alive but bleeding. On this view, Amazon is just another shark in a sea of predators, and not a very big or dangerous one at that.
They could not be more wrong. The current “Retail Apocalypse” is just the start. Online retail is entering a period of explosive growth; Amazon is quickly becoming entirely dominant in ecommerce; and these changes will have a massive impact on retail employment as 3-4 million of retail salespeople lose their jobs over the next ten years.
So this post is about three things:
- Why Amazon is winning online now and will continue to win right across the retail sector by exploiting the network effects that will make the biggest online player effectively the only online player. Amazon is systematically building strategic competitive advantage to become impregnable. 85 million US households already have Amazon Prime subscriptions.
- How online shopping is just entering the acceleration phase of technology adoption. Steady growth of about 10 percent annually in recent years will become 20 percent as Amazon’s tools and strategy provides reinforce normal adoption patterns.
- The impact on work. Workers in retail face a catastrophic future. 2.7-4 million existing jobs at bricks and mortar retailers (B&Ms) will vanish over the next ten years. They will be replaced by far fewer jobs at online retailers, and those new jobs will require different skills and will be located in different places. Amazon also has every intention of automating many of these jobs, as soon as possible, and B&Ms will respond by cutting wages and benefits for those that remain.