Business

Amazon Discovers That Even Paranoids Have Competitors

Former Intel CEO Andy Grove warned of the “inertia of success” in his book “Only the Paranoid Survive” (1988). It’s what venture capitalists often call a competency trap. Companies that succeed at one thing can be wiped out by technological and market changes if they don’t evolve.

This is how Amazon explains:‘s

recent bids for iRobot,

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maker of the Roomba vacuum cleaner and One Medical, a network of primary care and telehealth providers. Contrary to what some of its critics claim, Amazon isn’t trying to pry into every nook and cranny of your home and health records. It is only striving to keep up with rapidly changing markets and technology.

Amazon has about 170 million Prime subscribers, who pay a membership fee for free one-day delivery on many products, video streaming of select TV shows, movies and live sports, and other benefits. Despite its huge reach, Amazon’s retail divisions lost $2.4 billion in the last quarter — a sharp increase from profits of $3.5 billion in the same period last year.

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Since CEO Andy Jassy took the reins in July 2021, he has sought to reverse the decline in earnings by streamlining the company’s retail operations and closing distribution facilities. Amazon’s workforce has shrunk by about 100,000 in the second quarter of this year.

While many progressives label Amazon as a monopoly, it probably doesn’t feel that way to Mr. Jassy. The company is quickly losing ground to Walmart.

The profits from Amazon’s dominant cloud service help support its struggling retail business, but such internal subsidization cannot continue indefinitely as cloud computing becomes more competitive.

Just because Prime members haven’t canceled their subscription doesn’t mean they won’t if they discover they can get better value elsewhere. Walmart’s membership service costs about $40 less per year and also offers free next-day delivery, plus gas discounts. The company recently struck a deal to offer its members a free annual subscription to the streaming service Paramount+ (worth $59). As if that wasn’t enough to keep Amazon executives up at night, Walmart is pioneering drone delivery and launching its own healthcare network.

Then CEO Jeff Bezos made news on CBS‘s

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“60 Minutes” in 2013 when he previewed a drone delivery service that aims to deliver packages to customers’ homes within 30 minutes. After nearly a decade and over $2 billion in spending, the project is just now getting off the ground. Amazon plans to launch a trial service this year in Lockeford, California, with a population of 3,572. Walmart, for its part, is expanding its up-and-fly drone delivery service to up to four million homes in six states. Alphabet‘s

drone delivery service also leans on Amazon’s.

Hence Amazon’s $1.7 billion bid for iRobot, which is a naked game for the company’s artificial intelligence and robotics expertise. Amazon’s Astro home monitoring robot — currently available to consumers by invitation only for $999 — has been widely panned by tech reviewers. Privacy allegations claim Amazon wants to use Roomba to map people’s homes, but that’s paranoid.

Amazon just doesn’t want to let it catch the next big wave in technological innovation. In 2014, the company belatedly launched a relatively primitive smartphone, which it discontinued a year later. The company took a $170 million write-off on the project. It was equally late to enter the restaurant delivery market and struggled to compete with companies like Grubhub and Uber Eats. It ended its service in 2019, although it recently announced it would offer Prime members free Grubhub subscriptions for a year.

Progressives believe that Amazon and other big tech companies only need to put money into trying to outperform competitors. No doubt they would like it to be so.

Earlier this month, Amazon shut down its in-home health and telehealth business it launched in 2019 after a few companies signed up for the service. Amazon has apparently realized that it is easier to forge its way into the healthcare market than to build its own service from scratch.

One Medical would provide Amazon with a network of 188 primary care clinics and more than 8,000 employer-customers who pay for their employees’ access to the network. Employees can book virtual and in-person appointments for basic medical procedures such as Pap smears within 24 hours. Here again, Amazon is trying to compete with Walmart, which last year acquired a telehealth provider and has 27 clinics in four states.

But Amazon also has to contend with its nemesis in Washington, Federal Trade Commission chair Lina Khan. Ms. Khan made her name in progressive circles by arguing in a 2017 Yale Law Journal article, “Amazon’s Antitrust Paradox,” that the “aggressive pursuit of company growth at the expense of profit” was anticompetitive, even if it affected consumers. benefited.

The FTC launched a review of Amazon’s iRobot and One Medical acquisitions earlier this month. Ms Khan no doubt realizes that it would be very difficult to split Amazon, but she could instead try to prevent it from buying companies that could help it evolve like its competitors. Maybe that’s too cynical, but only the paranoid survive.

Journal Editorial Report: How Many Other States Will Sign Up for an Electric-Only Future? Images: AFP via Getty Images Composite: Mark Kelly

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