[UPDATE as of 11:41am PT on Thursday: Amazon Has a Ton of White Label Products and Is Hiding Them! (and Why Bezos Is the New Jobs) by Jason Calacanis. ]
By Jason Calacanis
Just heard an interesting piece of gossip from a very credible source: Amazon is going to open retail stores and will start making its own branded merchandise.
That would seem absolutely insane if we hadn't witnessed Bezos doing the following insane -- and wildly successful -- things:
1. Explode the tablet space by offering a below-cost $199 tablet.
2. Explode the video space by giving Amazon Prime subscribers instant streaming of 10K+ free movies and videos.
3. Explode the book space by giving Amazon Prime subscribers 5K loanable ebooks for free.
4. Explode the shipping space by offering folks free, unlimited two-day shipping for an Amazon Prime subscription of $79.
5. Destroy the hosting business by offering servers by the hour on EC2.
This rumor has been out there before, and of course Amazon has played with same-day delivery and local groceries in the form of the defunct Amazon Tote and the still-going Amazon Fresh services.
Let's assume the rumor of Amazon launching big, Costco-like stores is true. What would it be like for folks in Oakland, Los Angeles or New Jersey to drive to a huge mall complex, past Target and Walmart and into an Amazon store?
The first scenario: the store could just be a showroom with display units of appliances and "geniuses" running around showing you the top 25 vacuums in action. Or the top 10 juicers actually making juice.
It could be Consumer Reports meets the Apple Store on crack!
There wouldn't have to be any inventory, you would simply play with the stuff, talk to a professional and swipe your Amazon Prime credit card (or Amazon phone) and have it at your house in the next 24 to 48 hours.
Remember, Amazon has been experimenting with same-day delivery in some markets with some items. And no inventory might solve its sales-tax problems. I mean, do you have to pay sales tax if you're selecting the product in the store but technically buying it on your tablet?
Tax certainly is going to be a big consideration here.
Second, Amazon could keep small items like books, DVDs and electronics on site for instant gratification. If you like the pulp, you could buy a copy of a physical book and get an ebook sent to you.
Third, Amazon could entice you into the space with a physical library.
Yes, Amazon could buy up used DVDs and books and just have them there for unlimited use by Prime subscribers. Ever go to the local library and try to borrow a popular movie or CD? Exactly, the selection is pure garbage.
Unlike digital assets, which require consent of publishers to loan out (thus the small number of books in Amazon's Lending Library), you can rent out used DVDs and books all you want as long as you bought them. That was the magic of Netflix's by-mail model, and the kryptonite to their streaming service, which suffers from a serious lack of inventory.
Fourth, if Amazon is pulling a Walmart and gearing up to make its own products, it would have even more leverage over pricing of top brand products. What if you make designer diaper bags (yes, we buy awesome Skiphop stuff all the time) and Amazon starts knocking off your work? What if Amazon only keeps inventory at their stores of its own cheaper stuff, relegating your stuff to being only available for delivery? What's the consumer going to do: take the Amazon-branded stuff right now at 20% off or wait two days for a better product?
Bezos gets off on destroying channels.
So did Steve Jobs with the soup-to-nuts iTunes ecosystem -- which, as I told everyone four years ago, would include a TV.
Under Larry Page's vision it's clear Google is going to make entire ecosystems: from the Chrome AND Android Operating Systems to the App Store and on to Motorola mobile phones and tablets. And from Google TV devices to YouTube, which is now funding content creators.
The name of the game is f@#$k the channel. Jobs didn't care what anyone thought about him taking every ounce of value from the music channel, from hardware to content, and it's making everyone bold.
Heck, Google bought Zagat!
Don't be surprised if Google buys the New York Times some day and says it's not content, it's a platform! All Google would have to do is make all the writers freelancers with revenue sharing and turn the editors into "curators" to keep up the illusion that it's not a media company!
What's amazing about Bezos' run of disruption is that he's doing it all with massive predatory pricing.
Technically, isn't selling a product like the Kindle Fire for less than it's worth illegal? If you are doing it to create a monopoly it is, and that's why Amazon is doing it. But Amazon is not creating a monopoly in tablets -- it's in shopping!
Is giving away 11K movies, 5K books, free two-day shipping and selling a tablet at a loss predatory pricing? What if you add retail stores with libraries and white-labeled product sold at a loss or break event?
Probably not, but maybe (if you intend to kill competitors).
Either way Amazon's behavior is awesome for consumers.
Now this does suck for Walmart, but no tears for their billions made off the backs of crushing the mom-and-pop industry. How awesome would it be to watch Walmart be Walmarted by Amazon anyway?!
Go crush 'em, Jeff!
Google is giving away Android, GMAIL, Google Docs, Chrome OS and the Chrome Browser in order to drive AdWords revenue and stick it to Microsoft and Apple.
Should that be illegal, too?
I hope not because I love those products!
Business is just too complex today for the government to stop product dumping. Certainly they can't stop it if it is benefiting the consumer -- and it clearly is.
Why should we care if big companies want to make one side of the business operate at a loss -- be it the the Kindle Fire, Chrome or Facebook's new phone -- and make it back on another product line?
In today's world, the way to know if you're winning is how much of the ecosystem's revenue you're destroying. I mean, Airbnb and Dropbox are seriously disrupting entire ecosystems in hospitality and IT. The number-one thing the IT business does is set up email and file servers. Email is all in the cloud by Google for free and file sharing is free by Dropbox. Who needs an IT person?!
We're entering the Galactus phase of company building, where entire galaxies are appetizers.