Could Amazon Start a Revolution?

Last week, I was asked by our publisher, Kris Sayce, to buy some books. Naturally, his suggestion was to grab them off Amazon. Now, when I say ‘some’ books, the total number was closer to 60. More than your usual consumer is likely to purchase in one order. On top of this, some of these works were written in the 19th century. Not the easiest material to source.

But the kicker was the fact that Amazon is still fairly strict on what it ships Down Under. If you can get it down here, chances are you’re going to pay a premium for it.

This is all set to change though. As you’ve no doubt heard, Amazon is launching in Australia. Whether you see them as jolly Saint Nick or Satan is negligible. They’re coming either way — with local retailers expected to feel the brunt of the impact.

This is not new news either. Stories about Amazon’s impact have been gaining traction as the launch date draws closer. Even our own editors, Greg Canavan, Sam Volkering and Bernd Struben, have voiced their opinions on the matter.

Fair warning though — the rhetoric is glum.

The benefits of Amazon in Australia?

Let’s try and find some upside, shall we? Bernd prefaces his article with Joseph Schumpeter’s theory of ‘creative destruction’. I won’t go into detail, as Bernd highlights the need-to-know aspects. But essentially, new things remove the need for old things.

Now, when I said we were looking for the upside, I didn’t say it was going to be easy. There is opportunity for retailers willing to adapt. But this adaption will most likely come from short-term suffering. This is exactly what creative destruction embodies. Businesses will have to innovate to survive.

This is the result of a free market economy — something that we advocate for here at Money Morning.

It is also a system I imagine Adrian Turner would believe in. Turner is CEO of Data61, a data research institute partnered with the CSIRO. He recently wrote an article for the AFR where he voiced his views on a new revolution. His insights are similar to that of our own tech expert, Sam Volkering.

Turner outlines just how important the next decade will be — with $15-20 trillion of global domestic product up for grabs. He discusses platform economics; a major reason why Amazon achieved so much success. And he attributes Amazon’s success with platforms to its use of learning algorithms. That is, mathematical formulas that make decisions for us, based on big data and sustained learning.

Data that lets a business sell outcomes rather than product. Turner highlights General Electric, which now sells flight hours instead of just jet engines.

Turner believes we can compete though. We just need long-term vision.

 

So maybe a little creative destruction could spark some action. Amazon is going to bring change; there is no doubt about that. Hopefully, it will also inspire some businesses to take a leap of faith. Or at least provide opportunity for entrepreneurs willing to try. It might be nice to join the technology revolution.

Regards,

Ryan Clarkson-Ledward,
Junior Analyst, Money Morning


Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

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