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From Bloomberg, a story suggesting that Jeff Bezos' prediction may be coming true - that eventually Amazon would be disrupted in the same way that is caused so much disruption.

"The idea seemed absurd in the middle of the pandemic. Amazon’s online sales had exploded as people avoided stores. Restless consumers, buoyed by stimulus payments, were on a shopping spree. Between 2019 and 2021, Amazon’s online store sales grew 57% to more than $222 billion; subscription sales, which include its prized members’ service Prime, surged 65%; and its share of  consumer retail spending surged to overtake it biggest rival, Walmart Inc. It became more of a utility in consumers’ minds than an online store. What would we have done without online delivery? Without Amazon?

"At the same time, retailers that had been lagging behind in e-commerce were forced to catch up — and fast. Nearly everyone from luxury names to department stores ramped up online. Walmart, for one, expanded its online assortment, opened its marketplace to international sellers, rolled out curbside and in-store pick up, and ramped up online order fulfillment out of its stores. In the first nine months of the pandemic, its online sales grew at twice the rate of Amazon’s, albeit off a far smaller base, according to data from retail technology research firm YipitData."

Now, Bloomberg writes, "Amazon no longer seems unassailable. This year saw the world’s largest e-commerce company at one point lose a trillion dollars in market value as growth in online shopping slowed sharply and its forecast for the all-important holiday quarter disappointed. Prime memberships have flat-lined following the pandemic surge. And the firm is in the midst of its biggest-ever employee cull, targeting about 10,000 jobs across the devices and retail businesses.

"Inflation-squeezed shoppers are more cautious about what they do with their wallets, and less willing to spend on novelties like $20 for an avocado chopper or $25 for a few wands that remove histamines from a glass of wine. Instead of impulse buys, people are spending more on groceries and other necessities — Walmart’s sweet spot. Amazon’s prices are still generally cheaper than Walmart, but Walmart does price matching all year around and its annual Walmart+ membership of $99 compares with $139 for Prime. With some back of the napkin math, a pack of toilet paper may end up cheaper to buy from Walmart than Amazon.

"The dramatic shift in sentiment coupled with more aggressive online competition have seen Amazon fall back in the battle for consumers’ wallets as Walmart leverages its advantage as the country’s largest grocery store. So long as we’re in an inflationary environment, Walmart’s lead in groceries and Prime’s increased cost put Amazon on the back foot, according to Tom Forte, a senior research analyst with D.A. Davidson.   Research firm Insider Intelligence estimates that the brick-and-mortar giant will generate roughly $39 billion in online grocery sales this year, and widen its lead over Amazon through 2024."

KC's View:

First of all, let's stipulate that, as we've long said here on MNB, there is no such thing as an unassailable business model.  (Bezos always has known this.)

I take issue with some of the Amazon Prime vs. Walmart+ comparisons.  Sure, Amazon costs more, but the Prime value proposition also is far greater, with discounts extending to Whole Foods and all sorts of benefits including access to Prime Video and live sports events.  If all you are worried about is the cost of toilet paper - and granted, that is the bottom line for a lot of folks - then maybe Walmart+ makes more sense.  And cents.  But this underlines the key difference between Walmart and Amazon that I've always emphasized, that Walmart just wants to sell you more stuff, while Amazon wants to be inextricably intertwined in every aspect of your life.  (Nothing wrong with either approach, but they are very different.)

This is something that Tom Furphy and I have discussed in recent Innovation Conversations.  Amazon has some decisions to make - there is a lot of upside, as well as some risk, for Amazon to continue  investing in grocery.  But that's one of the retail categories where Amazon has not dominated, and so it makes sense to keep pushing.

(By the way, Amazon's lack of dominance in grocery is one of the reasons that Kroger and Albertsons probably shouldn't be using it as a reason for them to merge.  Just sayin'…)

Retrenchment and rightsizing makes sense at this moment for Amazon, but it has to continue innovating in customer-centric ways at a faster pace than the competition.  That's always been the secret sauce for the company, even when it flies in the face of conventional economic wisdom.

I keep coming back to something that an MNB reader wrote in some time ago.  It used to be that Amazon obsessed about customer satisfaction at any cost, but lately it seems that it obsesses about customer satisfaction "at an appropriate cost."  That's a lot more than a semantic difference … if accurate, it would represent a cultural shift of significant magnitude.

I'm also going to come back to my previous prediction - this story simply reinforces for me that it is better than 50-50 that Jeff Bezos returns in 2023 as the Amazon's CEO.