© Jaroslaw Kilian amazon_85513510
© Jaroslaw Kilian

If you want to understand Amazon’s grand plan, you could do worse than read this article. The founder of a tech start-up for Tech Crunch explains that while many elements of Amazon could be copied by a large company such as Wal-mart, the e-tailer is well-defended. The writer argues that its success lies in “the fact that each piece of Amazon is being built with a service-oriented architecture, and Amazon is using that architecture to successively turn every single piece of the company into a separate platform — and thus opening each piece to outside competition.” So, whereas vertical integration in the past has often led to inefficiency, Amazon’s structure demands it to be lean, effectively “future-proofing the company against inefficiency and technological stagnation”.

He adds: “Fulfillment and shipping is Amazon’s largest cost centre and, with a huge human component, it is the one that is most susceptible to bloat.

“The level of discipline required to operate a multi-tenant, externally facing service like FBA yields tremendous benefit to the Amazon’s internal operation — this isn’t some hacked-together, homegrown tool that is hard-coded to Amazon’s own needs and thus nearly impossible to improve.”

Not only that, but it is the hardest division to replicate, he notes. And yes, “It seems obvious to me that Amazon will move into small-parcel shipping (UPS/FedEx/USPS) within the next five years”. A useful read.

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