First, go out and continue building. Amazon has launched Amazon Food, a food delivery service, in India, at the very time when local giants are retrenching as a result of managing the paralysis from Covid-19. This is from Sun Tzu’s Art of War playbook: attack from the flanks and strike enemies, forcefully, even when they are already weakened. Swiggy (what a name, people) and Zomato are challenged as they need investors’ money to run their game plans; Amazon has a forest of money it has for itself. I do expect within the next few quarters, this Amazon’s decision to strike now, to be consequential in market positioning. No retreat – go out and continue building. The human spirit is stronger than any pandemic.
Amazon is joining India’s online food delivery market just as top local players Swiggy and Zomato reduce their workforce to steer through the coronavirus pandemic and months after Uber Eats’ exit from the nation.
The e-commerce giant, which has invested more than $6.5 billion in India, today launched its food delivery service, called Amazon Food, in select parts of Bangalore. The company had originally planned to launch the service in India last year, which it then moved to March but pushed it further amid the nationwide stay-at-home order the Indian government issued in late March.
Also, my hypothesis that Facebook Shop has a real chance on Amazon, if it waives the average of 10% commission fees which Amazon charges vendors, was well received. Yet, some members of our community think that the fee could be immaterial, as Amazon has a solid logistics system, and most vendors and buyers will not switch, for Facebook Shop. To address that, I am providing more insights on the basis of my call.
To begin, I do hope that the company which offers the highest composite value, on price and service, to customers, to emerge a winner. The fact is simple: Amazon won modern American retail against physical stores by abstracting local sales tax which it was not required (originally) to collect. That gave it an advantage and made buying things on Amazon artificially cheaper.
Think about it, a big television set at a price of $500 on sales tax of 10% will cost $550 in Walmart since Walmart as a physical store would be required to collect the $50 sales tax. But Amazon was not required to collect that tax as part of the U.S. Government’s original incentive to stimulate online commerce. Magically, buying on Amazon would cost you $500. Because of that sales tax, Amazon became very popular as people shopped therein to save money. (Naturally, people were expected to self-report during tax filing and pay the sales tax. Of course, people do not do that).
The Facebook Shop plans to waive the commission fee Amazon collects from its vendors and merchants. If that happens, it means the price they list on Facebook will be cheaper. It is key to understand that a 10% differential is huge and many people can endure some pains to save that money. After all, people waited for 5 days to get their items from Amazon via US Post just to save the sales tax if they had bought from physical stores with immediate delivery. Yes, even if Facebook is not optimized for retail, people will be open to bear some pains to save 10%. That is partly why Facebook Shop is a threat to Amazon commission revenue in the marketplace.
An interesting write up . An average consumer is interested in value and prompt delivery of services. Yes Amazon is currently dominating the logistics globally , however nothing is permanent .
There is huge savings to be made in a 10 % savings in transacting with Facebook vis avis Amazon.
I see a lot of economic sense in saving 10% of gross sale by a publisher who has been selling through Amazon.
Of course 10% of $1 billion is One hundred million Dollars. It’s enough to compensate for other pains.
In the current digitized world any thing is possible and the customers will remain the winners. We are watching!
Amazon won modern American retail against physical stores by abstracting local sales tax (typically 5%) which it was not required (originally) to collect. To save that sales tax, Americans were open to wait for 5 days to receive purchased items via U.S. Post. If Facebook Shop waives the 10% (average) commission fee which Amazon charges vendors, other things being equal, prices will be cheaper on Facebook. Based on this, I concluded that many people will absorb some pains and even poor service, from Facebook, to save 10% just as Americans many years ago were fine with a five-day wait to save 5%! This is the premise when I wrote that Facebook Shop could be a threat to Amazon revenue.
Register for next edition of Tekedia Mini-MBA (June 22 - Oct 22, 2020) here. Four months, online, and costs $140 or N50,000 naira .