Humanising Newsletter #012 - The Post Bezos-Era

• 7 min read

What will define Amazon's post-Bezos era? Will embedded finance, Shopify and social commerce provide the platform and infrastructure to challenge them?

Humanising Newsletter #012 - The Post Bezos-Era

This week I've been geeking out on my next pair of Nike trainers (or sneakers for my American friends). This pair will be the star in my collection. My collection made up of worn-out trainers and stiff shoes that have found a new home by the back door. I'm not a sneakerhead with a keen eye for classic trainers. I am the father of two young boys living in lockdown, getting everything delivered to the house and constantly taking the recycling out to the bins. The trainers I've got my eye on are the new Nike "hands-free" trainers with hinge thingy. The shoe is designed for adaptive athletes and has a campaign being fronted by Paralympian Bebe Vio, but it also has secondary benefits for people like me.

This is a great example of products being designed with people-focused creative teams obsessing about the user problem. Making them relevant across segments with different desired outcomes is good strategic thinking. On that note, let's dive into this week's newsletter

Smarter ways of working

My colleague at 11:FS, Vanessa Lea, wrote an interesting blog post about product partnerships. Partnerships are something we're seeing a lot more of, not just in fintech but across industries. Vanessa argues that customer growth can come from creating customer experiences that combine two separate products. When viewing the problem through a Jobs to be Done lens, we're able to identify opportunities that cut across product categories.

Vanessa gives the example of Starling Bank offering its business banking customers access to Pensionbee so they can set up company pensions. These Jobs to be Done are related but belong to different product categories. When brought together, they create new channels of growth and customer delight for both brands.

The article is definitely worth a read. πŸ‘‰πŸ‘‰πŸ‘‰ Check it out here πŸ‘ˆπŸ‘ˆπŸ‘ˆ

One of the members of the JTBD community, John Gauch, wrote up his experience of creating a growth strategy for an online education business serving health and fitness professionals. I know there are lots of JTBD enthusiasts keen to read how other people use the framework so I thought I'd share it in this newsletter.

Humanising the news

The big news of the week is Jeff Bezos is stepping down as CEO of Amazon and moving into an Executive Chairman role. Over the past 20 years, he has defined e-commerce and built a huge retail, logistics and technology business. But can Amazon be as successful in the next 20 years? A ludicrous question, I hear you say! Bezos is leaving Amazon in the strongest possible position. Here's a short summary of why (for a more in-depth analysis, this is worth a read).

  1. Amazon focuses on the customer. Low prices, huge choice, convenient customer experience and bundled services are big pulls for customers. By continuously being focused on delivering value for its customers, Amazon has become the go-to destination for many areas of people's lives.
  2. Amazon applies tech economics to a business that deals with physical things. Software businesses can create high margins at scale because of zero-marginal costs. Amazon doesn't have this luxury, but has driven costs down through continuous investment in infrastructure, allowing them to keep prices low and convenience high for its customers. Bezos envisioned this virtuous growth cycle early on, and it has been a key part of his strategy since.
  3. Amazon has built deep moats. The marketplace platform, the logistics network and AWS have been designed to operate at scale. The "Everything Store" has become everyone's store because of the infrastructure they have in place. There will always be competitors, but few can compete, because Amazon has made the barriers to entry so high.

It's hard to imagine a competitor could come into the market and disrupt Amazon's business the way Amazon disrupted incumbent retailers. Amazon is a classic example of what Clayton Christensen called a low-end disruptor. It entered the market offering cheaper products at a lower level of performance i.e. self-service online rather than in-person service in a physical store. Amazon removed the cost of physical stores and leveraged the internet to reduce the transaction cost of distribution. Over time this allowed Amazon to push everyone else out of the market.

As we entered the Twenties, Amazon's stock was booming even during a global pandemic. As we re-emerge from the pandemic, there are other trends that the pandemic has accelerated. Here are some challenges Amazon will face as Bezos moves upstairs and Andy Jassy takes the reins.

Embedded finance

Amazon's one-click check-out was transformative when it was launched because for customers, making payments was hard. Today, fintech has become the fourth platform (Matt Harris, Bain Capital) which means every company can be fintech company (Angela Strange, a16z). Any business can embed frictionless payments into their digital store. And it's not just payments. Banking, lending and insurance are being unbundled and served to the customer at the point of need. What's more, businesses can use platforms like Shopify and Stripe to set up a business out of the box allowing entrepreneurs to do what they're best at, selling.

Sidebar: This is a massive trend and definitely worth digging into. My colleagues at 11:FS produced a 6-part video series about embedded finance and banking-as-a-service.

Decoding: Banking as a Service
Banking as a Service (BaaS) is changing the financial services game for good. We’ve interviewed some of the industry’s biggest changemakers in our brand-new ...

Business in a box

Shopify has also boomed during the pandemic. Their business goes way beyond standing up a website with a checkout. Shopify is a platform with a strong API-first strategy, meaning it doesn't have to build everything, it plugs into the best providers to offer a range of services related to the Jobs to be Done of running a business. Shopify packages this all up in a slick customer experience that offers a range of financial services including working capital, a business bank account with a business debit card and Buy Now Pay Later (BNPL) functionality for end-customers buying products. Warehousing, shipping and fulfilment can all be taken care of by Shopify, which also integrates stock with Facebook and Instagram shops.

It has gotten to a point where business owners can outsource the complexities of running a business to a company like Shopify. As a result, business owners can focus more on product development, branding and building strong direct customer relationships. Sellers on Amazon Marketplace are heavily commoditised and have little to no opportunity to do this.

Social commerce

Social Commerce has been a natural progression for social media businesses. Social networks are important channels of discovery for new products. It's also a key channel to build an audience so it makes perfect sense to make the product available to buy at the point of discovery. What makes this so effective is that people don’t want choice, they want someone to recommend something or curate their lifestyle. The blend of social networks and social commerce means that shoppers come for the lifestyle and pay for the product. That doesn’t work on a commodity platform like Amazon.

Niche Brand Building

With all this infrastructure in place, embedded finance, business in a box and social commerce, the long tail of taste preferences and subcultures can be served to a much greater effect. Small to medium-sized brands can go direct to customers. Their strategy is different. They are content-led and they build community. They focus more on the purpose of their business and craft of producing the product more than the product itself. Brands selling, coffee beans, bags, beauty products, organic food and personal training are doing so by creating desire around a lifestyle. They create a feeling of connection and belonging through strong narrative and purpose. They are tapping into a void of emotional and social Jobs to be Done that are hard to be fulfilled by Amazon's relentless drive for efficiency.

The DTC of Super Brands

Bigger brands are copying the strategy of more niche brands. One of the world's largest brands, Nike, pulled its products from Amazon in 2019 to capitalise on the DTC opportunity. This article looks at the impact of this decision one year on. In Q2 2020, sales were up 83%, with 100 million visits to its website and a top 10 most downloaded shopping app. Discussing the results, Nike CEO John Donahoe, said: β€œThe accelerated consumer shift toward digital is here to stay.”

Acquisition of Amazon Marketplace Sellers

In the news this week, groups of investors are buying small, successful Amazon marketplace sellers intending to create the next Unilever or P&G. The thesis is that Amazon Marketplace is a petri-dish to prove where demand is in the market. Bringing the best of those sellers together creates economies of scale and a stronger negotiating position with manufacturing suppliers and... with Amazon.

Of course, no one in their right mind would bet against Amazon at the moment. Over the past 20 years, it forged a path that everyone had to follow or went insolvent ignoring. The moats Amazon has built are significant. Yet, logistics, fulfillment, payments and ecommerce have been modularised and sewn together to become a compelling alternative to Amazon marketplace. Instead of defining the next 20 years, Amazon will have to be much more responsive to the trends outlined above (and many more I've missed).

Bezos's departure feels significant because of the timing. The pandemic moved the rest of the digital laggards online, a domain defined heavily by Amazon and Bezos. The question is: who will shape the next 20 years of a post-digital world?

Things to get excited about

I've been a big fan of Nesta's FutureFest over the years. I went to the first one at Shoreditch Town Hall back in 2013. It was very different from the typical conference. It was much more interactive and performance-driven. The speakers were also alternative and that has continued over the years. With the pandemic forcing all conferences online, Nesta has launched their Future Player with this year's talks free to access. They've thrown in some selected talks from past years, too. It covers themes like tech, climate, health, identity and creativity. Speakers range from Richard Ayoade and Louis Theroux to Jeremy Hiemans and Kate Raworth.

πŸ‘‰ πŸ‘‰ πŸ‘‰ Check it out here. πŸ‘ˆ πŸ‘ˆ πŸ‘ˆ

The other thing that got me thinking this week was a new plugin for Chrome called Bendi that aims to help shoppers make sustainable choices. This is an MVP and focused just on the kids' clothes sold at John Lewis. Even though it's early days, two things stand out. Firstly, it's well designed and doesn't clutter the page of products. Secondly, the methodology section for scoring is an interesting read with a lot of thought behind it. Iterating and working towards a common standard will be one of the biggest challenges in scaling this.

Making sustainable choices will undoubtedly play a growing role in our purchasing decisions, so I'm keen to see how this space develops in the years to come.

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