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Amazon: Monstrous Monopoly or Mere Middleman?

The e-commerce giant reportedly makes another power play that could rock retail.

E-commerce behemoth Amazon is reportedly beefing up its brick-and-mortar presence, purchasing a vacant lot in Woodland Hills, Calif. – at the site of a former Toys ‘R’ Us store – to launch the first Amazon grocery store, according to CNBC.

“Amazon is opening a grocery store in Woodland Hills in 2020,” a spokesperson for Amazon told CNBC, adding that the new grocery chain will be “distinct” from the Whole Foods brand, which Amazon purchased in 2017.

On Monday, Amazon posted job listings (store leader, grocery associates and food service associate) for its very first grocery store. The job postings and confirmation from Amazon follow weeks of speculation about the retail site in question, located on Topanga Canyon Blvd. in Woodland Hills, a suburb of Los Angeles.

In October, The Wall Street Journal reported that Amazon had taken out a string of leases in the Los Angeles area to launch a new grocery chain. Reports claim the new grocery chain will be the polar opposite of high-end chain Whole Foods – and will cater to the budget-conscious, thrifty consumer who seeks low-cost food items (à la Food 4 Less or Walmart).

So, if Amazon is indeed aiming to dominate both ends of the grocery retail spectrum, should the consumer be concerned by the shrinking number of grocery retailers – or by Amazon’s potential monopoly of retail?

Maybe not.

Plot Twist

Just when it seemed as though Amazon’s retail reach (or overreach) had spread like an insidious, unchecked threat – NIKE laced up its sneakers, and kicked Amazon to the curb. 

On Wednesday, the sneaker heavyweight announced it would no longer sell its merchandise through Amazon ­– a kick to the gut to the e-commerce giant that could inspire other elite brands to follow NIKE’s lead and jump ship.

“Brands don’t need Amazon,” Randy Konik, analyst, Jefferies, told CNBC. “Amazon had a delivery speed advantage, but that advantage has compressed. With NIKE leaving the Amazon platform... it strengthens our view that retailers/brands won’t be displaced by Amazon.”

“The move shows us that strong brands realize that traffic driven to their own site (e.g., NIKE.com) is self-sustaining, more profitable and actually brand enhancing, while traffic and incremental revenue from Amazon.com is less profitable but also less brand enhancing,” adds Konik. “We believe many strong apparel (and even non-apparel) brands will continue to avoid or curb their relationships with Amazon in the future.”

NIKE began selling merchandise via Amazon in 2017 as part of a pilot program developed in an effort to allay NIKE counterfeit sales on Amazon.com. NIKE's termination of the deal after just two years could signify red flags.

The blowback could be bad for Amazon. Brand enhancement is the name of the game in 2020, and A-List, top-tier brands who want to secure qualified, direct, long-lasting relationships with their consumer base could forgo the Amazon route.

Sure, Amazon’s endless options, low prices, fast-and-free shipping and convenience are fantastic ­– but did we create a monster?

Perhaps this flex from elite, big brands like NIKE is the precise antidote retail needs – an inadvertent checks-and-balances system that will rein in the beast that is Amazon.

 

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