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The Amazon-Walmart Showdown That Explains the Modern Economy - The New York Times
Neil Irwin @Neil_Irwin JUNE 16, 2017

The decision by Amazon and Walmart to compete for my grocery business — as well as for space in my closet — is a tiny battle in a war to dominate a changing global economy.

And for companies that can’t compete on price and technology, it could cost them the shirt off their backs.....[Amazon's purchase of high-end grocery chain Whole Foods places it] on a collision course with Walmart to try to be the predominant seller of pretty much everything you buy.

Each one is trying to become more like the other — Walmart by investing heavily in its technology, Amazon by opening physical bookstores and now buying physical supermarkets. But this is more than a battle between two business titans. Their rivalry sheds light on the shifting economics of nearly every major industry, replete with winner-take-all effects and huge advantages that accrue to the biggest and best-run organizations, to the detriment of upstarts and second-fiddle players.....in turn...this has more worrying implications for jobs, wages and inequality.

Amazon vs. Walmart

Both want to sell everything!!!!

Walmart is buying Bonobos, an omnichannel innovator. Its website and online customer service are excellent, and it operates stores in major cities where you can try on garments and order items to be shipped directly. Because all the actual inventory is centralized, the stores themselves can occupy minimal square footage. The acquisition helps Walmart build expertise in the very areas where it is trying to gain on Amazon.

Walmart and Amazon have had their sights on each other for years, each aiming to be the dominant seller of goods via omnichannel.

Amazon's purchase of Whole Foods helps it to understand the grocery business which has a whole different set of challenges from the types of goods that Amazon has specialized in heretofore.

A Positive Returns-to-Scale World
The apparel business has long been a highly competitive industry in which countless players could find a niche.....any shirt-maker that tried to get too big rapidly faced diminishing returns.It would have to pay more and more to lease the real estate for far-flung stores, and would have to outbid competitors to hire all the experienced shirt-makers. The expansion wouldn’t offer any meaningful cost savings and would entail a lot more headaches trying to manage it all....in the digital economy, rather than reflecting those diminishing returns to scale, show positive returns to scale: The biggest companies have a huge advantage over smaller players. That tends to tilt markets toward a handful of players or even a monopoly....The apparel industry...is moving in the direction of being like the software business (high fixed costs, zero variable costs, enormous returns to scale)..... the reason why Walmart and Amazon are so eager get into the shirt business is because retailers know that they need to figure out how to manage sophisticated supply chains connecting Southeast Asia with stores in big American cities so that they rarely run out of product. They need mobile apps and websites that offer a seamless user experience so that nothing stands between a would-be purchaser and an order....Larger companies that are good at supply chain management and technology can spread those more-or-less fixed costs around more total sales, enabling them to keep prices lower than a niche player and entrench their advantage....large companies will invest in automation/robotics...the future of clothing/apparel might be a handful of companies with the very expensive shirt-making robots---and everyone else shut out in the cold.

What It Means for the Economy

A relative few winners are taking a disproportionate share of business in a wide range of industries....in turn may help explain why the income gap has widened in recent years. How much on income inequality is driven by shifting technology — as opposed to changing corporate behavior, or loose antitrust policy — is an open debate.
increasing_returns_to_scale  winner-take-all  fixed_costs  variable_costs  Amazon  Wal-Mart  Whole_Foods  retailers  economics  Bonobos  shirts  mens'_clothing  omnichannel  apparel  digital_economy  automation  robotics  competitive_landscape  market_concentration  barbell_effect  income_inequality  antitrust  market_power  corporate_concentration  grocery  fresh_produce  supermarkets  large_companies  UX  inventory-free  global_economy 
june 2017 by jerryking
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