In this crazy, topsy turvy world that we’re all living in at the moment, there are a few things I’ve been keeping my eye on that I thought I’d share with you. Most of these things are not making headlines across the country because our media no longer tells us the truth. The media tells us ‘a story’. The media doesn’t tell us ‘the story’.
Amazon is in trouble
No way, you say. There is no way Amazon is in financial trouble. Amazon is just too big to fail. Well, I’ve got news for you. Amazon just posted its first financial loss since 2015. Back in 2015, Amazon wasn’t the powerhouse that it is now. This year, Amazon is running on fumes. Here’s why, and why it matters to you.
It can all be traced back to around 2006 when DHL decided to conquer the United States and go head-to-head with FedEx, UPS, and USPS. For those not familiar with DHL (other than they sponsor soccer teams and Formula One race cars overseas), they are an international shipping company. When cargo needs to come to America from points all across the globe, DHL is the preferred shipper. DHL gets it to a distribution point in the states and drops it off. Then FedEx, UPS, or USPS handles what is known as ‘the last mile’ fulfillment activity.
Around 2005 or so, DHL decided they wanted to do ‘the last mile’ in America as well. After about 3 or 4 years, they gave up on that dream, and went back to their core business of just flying the cargo from around the globe to the US.
I’m sure some you out there are wondering why I’m telling you such an inspiring story about an international shipping company that threw in the towel and called it quits. Because Amazon decided to do what DHL couldn’t; Amazon decided to handle their own last mile fulfillment obligations. Now they are learning first-hand why DHL pulled out.
Looking back at history, Amazon started in a garage selling books. It then expanded to selling other company’s products and built a massive distribution center. Then they expanded into a second distribution center, then a third, and then a 295th. Amazon also formed AWS (Amazon Web Services) and started hosting cloud backup services and websites from all over the world. Then they started buying big cargo planes to deliver goods between their distribution centers. Then – here’s where it gets tricky – they started buying vans and hiring drivers to do last mile fulfillment from their vast network of distribution centers they’d built across America.
During the pandemic, when everything was shut down, Amazon made all of the money. Not just some of the money, all of the money! The leadership at Amazon carried out an incredibly ambitious expansion plan on the assumption that people would never go back to the old way of buying goods and services in person. They were wrong. People did indeed go back to the traditional way of shopping in-person. And, more and more are converting back every day! Amazon is now realizing they don’t have the sales to support that 295th distribution center they added during the pandemic, and a bunch of the other ones along the way. So what went wrong and why am I telling you this?
You own, manage, or work in a jewelry store. When you sell a ring to a customer 1,000 miles away, you don’t buy a plane, build a warehouse, lease a van, and hire a driver to get that ring to the customer. You ship it via USPS, FedEx, or UPS.
In order for Amazon’s business model to survive, they needed everyone, and everyone’s friends, to buy exclusively online, exclusively from them. Amazon initially took a serious bite out of Walmart and other retailers and grocers. That helped them to build out their infrastructure. Walmart and the others didn’t take it lying down. They counter-punched and took their share of the pie back – plus some. The share they all took back was what was funding that 295th distribution center. Ouch.
Amazon, like Facebook, YouTube, and Twitter, don’t produce their own goods or content. They rely on others to produce the goods that they distribute through their network. Now, there are about a bazillion other networks and platforms doing the same thing that are taking small bites out of Amazon every day. The only difference is, the new networks use FedEx, UPS, and USPS, and don’t have to fuel up huge cargo planes, pay for the massive warehouses, and pay thousands of drivers to handle that last mile of the delivery.
According to many of the top rating services, Amazon is on shaky ground. My point though, is this; is your business still hitched to Amazon’s wagon? Do you have a ‘B’ plan in the event Amazon doesn’t right their ship and sinks? If you sell through Amazon, have you explored some of the other online platforms? Do you still do all of your shopping online at Amazon.com? What will you do if they suddenly go offline? This is something to take seriously.
About 6 or 8 months ago I sounded the alarm on Facebook and everyone thought I was crazy. Now, try to find a positive story in the business coverage of what Mark Zuckerberg and his team are doing right now. All of the news is bad. About that same time I sounded the alarm on Twitter. Guess who else is struggling hard right now? Every single day I see someone on social media ask a question looking for something or the other. Every single day I see the answer is, ‘have you checked Amazon?’
I’ve never had an Amazon account, and I’ve never ordered anything from them, but it doesn’t matter whether or not I like or support these companies. My point is there are countless people out there that are still depending exclusively on these platforms. I’m just asking you to step back and really understand what is happening and then make your own informed decisions.
The owners and managers of the above mentioned companies have made some seriously questionable business decisions. Those questionable business decisions are what are driving all of the negative business coverage and stock market struggles. I fully expect one or more of them to fail in 2022. If all of your eggs were in that company’s basket, how will that affect you and your company’s future?
The questionable decisions these companies have made have opened the door to dozens of competitors that are doing it better. Keep an open mind to what they are offering.
With inflation out of control, gas at an all-time high, and baby formula shortages across the country, it’s likely you missed the news on Amazon’s struggles. We’re heading into unprecedented times, and, times like these require thinking differently.
Hang onto your hat cause it’s looking like this summer is going to be a bumpy ride.
