Sep 18, 2018

On the mind of every retail CEO: the Amazon threat

Erica Pandey, author of @Work

In Seattle. Photo: George Rose/Getty

In the last year, Amazon earned 50 cents of every dollar spent online in the U.S. At nearly $1 trillion, its market cap grew to triple the combined value of Sears, JCPenney, Best Buy, Macy's, Target, Kohl's, Nordstrom and Walmart.

Driving the news: As I learned at a conference in New York yesterday, Jeff Bezos' tech giant has quickly become the existential crisis facing almost every e-commerce and brick-and-mortar firm, whose CEOs are faced with a singular question: How do I beat — or even survive — Amazon?

Three top retail and e-commerce CEOs — Tobi Lütke of Shopify, Binny Bansal of Flipkart and Jeff Gennette of Macy's — fielded that same question at Recode's Code Commerce conference. Amazon seemed to be mentioned every few minutes even though the company sent no speakers to the event.

  • Venture capitalists and other conference participants seemed less interested in what retailers were working on than in how they were responding to Amazon.

What they're saying: It's "impossible" to beat Amazon at its own game, says Scott Galloway, a professor at NYU's Stern School of Business and author of "The Four," a critique of Big Tech, including Amazon.

But each of the CEOs argued that there are chinks in the e-commerce king's armor. Here is how they are attacking the threat:

1. Be friendly

Lütke says that Shopify champions its business clients while Amazon thinks "merchants don't matter."

  • Shopify's model is to provide small businesses the tech to sell online. It relies on the success of these brands — large and small — to succeed itself.
  • According to Lütke, Amazon conversely terrifies brands, who worry it will wipe them out with super-low prices, selection and convenience.

2. Know your (foreign) market

Amazon and Flipkart, its homegrown rival in India, are locked in a fight for the world's fastest-growing e-commerce market. But Bansal thinks he can win, relying on intimate knowledge of the country.

  • "We had to build out our own last-mile delivery system. The kind of logistics reach we have in the country is almost unfathomable," he says.
  • To defend against Amazon, Flipkart has teamed up with Walmart, which owns 77% of the Indian company.

3. Play to your (physical) strengths

Macy's physical presence gives it deceptive power, Gennette says. To put this in context, about 90% of U.S. retail sales still take place in physical stores, not online.

  • "All retailers, even Amazon, are going to need an omnichannel presence," Gennette says. "A lot of customers still want a guide that will help them on their way to their purchase."

Go deeper

Updated 22 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 8 a.m. ET: 6,294,222 — Total deaths: 376,077 — Total recoveries — 2,711,241Map.
  2. U.S.: Total confirmed cases as of 8 a.m. ET: 1,811,277 — Total deaths: 105,147 — Total recoveries: 458,231 — Total tested: 17,340,682Map.
  3. Public health: Nearly 26,000 coronavirus deaths in nursing homes have been reported to federal health officials —Coronavirus looms over George Floyd protests across the country.
  4. Federal government: Trump lashes out at governors, calls for National Guard to "dominate" streets.
  5. World: Former FDA commissioner says "this is not the time" to cut ties with WHO.
  6. 🎧 Podcast: The virus didn't go away.

More than 1 in 6 black workers lost jobs between February and April

Adapted from EPI analysis of Bureau of Labor Statistics data; Chart: Andrew Witherspoon/Axios

As is often the case, the staggering job losses in the coronavirus-driven recession have been worse for black workers.

By the numbers: According to a report from the Economic Policy Institute, titled "Racism and economic inequality have predisposed black workers to be most hurt by coronavirus pandemic," more than 1 in 6 black workers lost their jobs between February and April.

Coronavirus could lower GDP by $15.7 trillion

Reproduced from Congressional Budget Office; Chart: Axios Visuals

The CBO released projections on Monday for U.S. nominal GDP to be lower by $15.7 trillion over the next decade than its estimate in January as a result of the coronavirus pandemic.

What they're saying: It predicts that when adjusted for inflation GDP will be $7.9 trillion lower over the next decade and down by $790 billion in the second quarter of this year — a 37.7% quarterly contraction.