Amazon seeks to capture more of the value chain


Cross selling of products and services is a long established strategy for many companies when they have a broad portfolio of solutions for their clients. It makes sense that if you sell a car to a customer, then you also look to provide servicing and other products to the new owner. But what if this construct involves a supplier that is so large, it’s capability to provide additional products and services can be done at such a scale that challenges many of the other players in the market?

In the past few weeks, it has come to the attention of a few news outlets that a dedicated unit of Amazon – The ‘Pan-Amazon Team’, has been engaging with clients of their Amazon Web Services (AWS) cloud platform to consider various other Amazon products and services. This would include Amazons logistics and supply chains services.

As stated above, cross selling is not new and almost every company that has the opportunity and the ability to do it, does so. But very few have the ability to do this at colossal scale. AWS, has been and remains the dominant cloud service platform around the world. They have an unmatched customer base and although their larger customers also have accounts and operations hosted by the other major cloud vendors – Microsoft Azure, Googles Cloud – neither of those have Amazon’s logistics capabilities.

The technology giants such as Meta (Facebook as was), Apple and Google, all try and extend their revenue streams deep into customers bank accounts by consistently offering new services. But almost all of these are digital and in some cases, i.e. Google and Meta, provide a superficial quid pro quo in helping them to engage with their advertising technologies. But Amazon is different in that its size, scale and scope in the physical retail arena enables it to provide logistics services to clients, at least on a par with established logistics heavyweights. It is no surprise that they are also really good at identifying opportunities to do so with potential cross sold clients as they may know as much about the clients operations as the client themselves.

This helps to drive operating costs lower as most of the infrastructure is in place and also embed themselves deeper into customers fulfilment operations. The virtuous circle they always try and establish with new initiatives. Clearly, if this is the case, it’s a huge threat to incumbents. They do not access clients data to see what’s going on in terms of granular analysis (that would transgress contractual and privacy agreements). But their operational algorithms can watch network traffic and server usage and determine a lot though that, as well as partner connections into the network. This is also a necessity to ensure efficient AWS performance and capacity management. This is not to suggest that Amazon is doing anything illegal, far from it. If anything, it’s an illustration of their commercial nous and impressive ability to execute a strategy. But it does present a significant challenge to established operators.

Amazon also has to consider the possibility of legislative constraints. The oil majors, AT & T and Microsoft were all subject to anti-competitive investigations in the past. These investigations led to huge fines and in the case of AT & T, the break up of the company into smaller regional entities. But the process took years to conclude and arguably in every case was unsatisfactory for all concerned.

As technology continues to evolve and manufacturing and fulfilment is increasingly digitalised, companies should continually review their opportunities and challenges. Todays partner may become tomorrow’s competitor and vice versa, but the speed at which that transition may happen is likely to be faster than ever before. This illustrates the leverage tech companies now have, especially if they have a physical presence and operations as well… Conversely, these are lessons Walmart should probably be thinking about, with their huge physical footprint and operational expertise…

Quarterly operational reviews and annual strategic planning sessions need to evolve into a continuous market awareness process. For many years now, Ti has championed the notion that companies need to be more agile and adaptable to external events. As the above illustrates, this suggestion has never been more apt.

Supply chain strategists can use GSCi – Ti’s online data platform – to identify opportunities for growth, support strategic decisions, help them stay abreast of industry trends and development, as well as understand future impacts on the industry. 

Visit GSCi subscription to sign up today or contact: Michael Clover for a free demonstration: [email protected] | +44 (0) 1666 519907 

Source: Transport Intelligence, 11th October 2022

Author: Ken Lyon