more households will have Amazon Prime memberships than cable
television.^84
In addition, the cost to build out a robust multichannel offering—
which is rapidly becoming the table stakes for survival in retail—is
painfully difficult and expensive. Cue Amazon, whose infrastructure is,
effectively, building the cable pipe of stuff into the world’s wealthiest
households. Seventy percent of U.S. high-income households have
Prime.^85 Amazon’s storefronts will effectively be warehouses that
support Amazon’s, and other retailers’, last-mile problem.
The cost to get you that little black dress from a warehouse to a
truck to a plane to a truck to your house, where you’re not home, come
back the next day, where you try it on and decide to have a guy in a
brown uniform take it back to his truck to a plane to a truck to the
warehouse, is (very) expensive. Amazon’s fulfillment costs have grown
50 percent since Q1 2012.^86 That’s not sustainable, unless Amazon can
garner membership fees and charge others to use its infrastructure...
which is exactly where the company is headed.
At the apex of its power, Walmart never had its own planes or
drones. Overnight delivery firms FedEx, DHL, and UPS have raised
their prices an average of 83 percent over the last decade. And since
the advent of tracking thirty years ago, there hasn’t been much
innovation in the overnight space. In sum, these guys are sticking their
chins out, and the biggest stone fist is headed their way. DHL, UPS,
and FedEx are worth a combined $120 billion.^87 Much of this value
will leak to Amazon over the next decade, as consumers trust Amazon
more, and the Seattle firm can boast the largest shipper in the United
States and Europe—itself—as its first client.
“Alexa, How Can We Kill Brands?”
Amazon’s voice technology, Alexa, may shake the ground below both
retail and brands. 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