Issue No. 263: The End of Conglomeration


Monopoly is not a suitable term for what Amazon is in the process of accomplishing. A monopoly is defined as the exclusive possession or control of the supply or trade in a commodity or service. There is no term for a corporation becoming the supply or the trade.

I am not anti-Amazon but it’s becoming easier to see how this current administration could bend precedent to break up a web-based conglomerate.

Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. 

Yale Law Journal: Lina M. Kahn, Amazon’s Anti-Trust Paradox

Amazon is trading at near all-time highs, with a market cap in excess of $700B. Historically, Wall Street investors and consumers have been tremendous fans of Amazon, Main Street businesses have not. This is an important distinction.

Until the 1970’s and 80’s, anti-trust litigation has focused on structuralism:  a focus on relationships of contrast between elements in a conceptual system that reflect patterns underlying a superficial diversity. 

After Reagan’s Anti-Trust Explosion of 1982, things began to shift from structuralism and toward consumer sentiment. That year, AT&T and IBM faced anti-trust litigation that forced changes in each respective company by 1984. As you know, Amazon Web Services (AWS) and Prime Memberships have helped the public company to minimize losses. Thus far, Amazon has been immune to these pressures. Due to the successes of AWS and Prime subscriptions, the direct-to-consumer side of the business has operated as a loss leader. As Kahn points out. this loss leading metric has blinded regulators to the hazards of Amazon’s business strategy.

[My] analysis reveals that the current framework in antitrust—specifically its equating competition with “consumer welfare,” typically measured through short-term effects on price and output—fails to capture the architecture of market power in the twenty-first century marketplace. In other words, the potential harms to competition posed by Amazon’s dominance are not cognizable if we assess competition primarily through price and output. Focusing on these metrics instead blinds us to the potential hazards.

Yale Law Journal: Lina M. Kahn, Amazon’s Anti-Trust Paradox

The 1982 anti-trust guidelines introduced by Reagan and his administration set a meaningful departure from ninety years of legal precedent; these guidelines were re-emphasized in 1968. The actions of the Reagan administration in 1982 reflected a new focus. Lina Kahn went on to say: “The law against vertical mergers is merely a law against the creation of efficiency.” With the election of President Reagan, this view of vertical integration became national policy. This has been known as the Chicago School approach.

The Chicago School approach to antitrust, which gained mainstream prominence and credibility in the 1970s and 1980s, rejected the structuralist view. In the words of Richard Posner, the essence of the Chicago School position is that “the proper lens for viewing antitrust problems is price theory.”

To pursue an Amazon anti-trust case, President Trump will have to reverse the revered national policy of the Reagan Justice Department. It can be implied that the Reagan administration’s shift from structuralism and towards price theory was meant to emphasize middle-class consumerism. But no one could have foreseen Amazon’s role in building a modern monopoly over America’s consumer web. Frankly, their version of a monopoly is altogether different. Here is an illustration for you:

Web Smith on Twitter

Thought more on $AMZN’s anti-trust concerns. Here’s a (short) history of U.S. monopolies being broken: 1. Standard Oil owned oil. 2. U.S. Steel owned steel. 3. American Tobacco owned it. 4. AT&T owned communications. Amazon owns just 4% of retail. And 43% of eCommerce.

The 4% / 43% figure doesn’t begin to tell the story. No one could have predicted how effective an internet-based conglomeration could be. Or the impact that Amazon’s sales could have on commercial real estate woes. Or how Amazon lobbies for potentially detrimental state / local tax benefits. Around the country, real estate brokers are in a panic as warehouse / office park leasing have fallen off a cliff. In addition, Amazon’s HQ2 campaign is leading to a growing criticism from those who believe that Amazon may have too many tax and cost benefits and at the peril of middle-class workers and retail entrepreneurs.

Trump’s deep-seated antipathy toward Amazon surfaces when discussing tax policy and antitrust cases. The president would love to clip CEO Jeff Bezos’ wings. But he doesn’t have a plan to make that happen.

Jonathan Swan, Axios

Amazon built its business around the belief that as long as consumer prices were low, anti-trust laws wouldn’t apply. Lina Kahn went on to say: “Due to a change in legal thinking and practice in the 1970s and 1980s, antitrust law now assesses competition largely with an eye to the short-term interests of consumers, not producers or the health of the market as a whole; antitrust doctrine views low consumer prices, alone, to be evidence of sound competition.”

The health of the retail sector has been on decline for quite sometime. Retail business owners, real estate brokers, lenders, and commercial developers didn’t foresee how much of an effect Amazon and eCommerce would have on their adjacent sectors. Where there was originally confusion and apathy, there is now a shared disdain for the Seattle eCommerce giant. Main Street business owners, politicians and pundits have taken notice. And this is the audience to whom President Trump speaks.

Under the current interpretation of antitrust laws, Amazon seems to be getting a free pass. So I should say that antitrust laws in, their current state, don’t prohibit conglomeration. They don’t prohibit a single company from being involved in all these different lines of business. But what they are supposed to prevent is a company that enjoys a dominant footprint in one area of the market, using that footprint to leverage its way into other markets, and so I think that’s the area where Amazon potentially should be facing scrutiny.

From Korva Coleman’s interview of Lina M. Kahn, NPR

In 1890, the father of the Sherman Act, Mr. John Sherman (R-OH) stood on the floor of the Senate and declared the following:

If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessities of life. If we would not submit to an emperor, we should not submit to an autocrat of trade, with power to prevent competition and to fix the price of any commodity.”

When the gentleman from Ohio made this statement, he couldn’t envision a future where one man presided over a corporation responsible for a great deal of production, transportation, and the sale of any necessities of life. Sherman also couldn’t envision the internet, a virtual destination void of political governance or etiquette. Amazon’s strategy continues to be the forging of an anti-trust proof conglomeration – loved by consumers and feared by both incumbents and challengers.

Anti-trust law is overdue for change. The language no longer matches the time. And while Amazon may not be the most deserving of this scrutiny, they are the most likely target.

The laws will change to address the modern day concerns of retailers, logistics networks, newspaper publishers, ad firms, shipping companies, grocers, auction houses, book publishers, movie studios, software companies, hardware manufacturers, credit lenders, payment services, and internet service providers. In our modern American economy, any business that touches the internet has been affected by Amazon.

Bezos is aiming to possess the entire board upon which a monopoly can be formed  — the consumer internet. And populist politicians will eventually conclude that no corporation should be able to own the consumer internet.

Read more of the issue here.

By Web Smith | | @2PMLinks 


Issue No. 262: Next Two Years | Part Two


The past is prologue, or so they say. While Part One (see 6-10 here) focused on the great stories of the last two years, Part Two focuses on what can happen within the next two years.

5. A 2PM “Top 50” Shopify retailer will acquire its eCommerce agency.

Somewhere a founder is saying, “Wait, we can do that?” And for a small handful, it can make sense. This simple question may persuade a top 50 retailer (see database here) to acquire their go-to eCommerce agency. There is a particular type of brand that this would make sense for. Here are the qualifiers. The digitally vertical native brand:

  • has a trusting and transparent relationship with their agency.
  • is focused on building the brand before the thought of hiring engineers
  • has founders with a non-technical background
  • is a company that does not employ an existing CTO
  • is a brand is doing $20M+ in online retail

The relationship between Glossier and Dynamo stretches back to when the beauty brand was first founded. In 2014, Dynamo took on Glossier as a client, helping to launch the brand in the U.S., developing its website and eCommerce platform and acting as what agency co-founder Bryan Mahoney called its “in-house tech department” in a post on the brand’s “Into The Gloss” blog in 2016. After helping to launch Glossier, Mahoney moved to New York to become its VP of engineering. Following the acquisition, Mahoney has been named CTO at Glossier.

Josh Kolm, Glossier Acquires Dynamo

4. Walmart will acquire another DNVB by the end of 2018.

Let’s face it, selling to Walmart is no longer a substandard exit. There’s a coolness factor at Walmart, these days. In the new commerce economy, it’s something to be proud of. Whether it is Outdoor Voices (no. 76) or Homage (no. 75) or Bevel (no. 79), I expect Walmart to drill down on their mission to attract more millennial consumers to the brand. These were just three of the brands that could make great sense for Marc Lore’s acquisition machine.

From Member Brief No. 5.

According to eCommerce CEO Marc Lore, Walmart continues to search for M&A opportunities that differentiate its online offering and attract millennial shoppers. He added that the company is “definitely still in acquisition mode,” and the acquiring of specialty brands can “help us get the fundamentals right” on both Walmart and He noted that future acquisitions will range from $50M – $300M.

3. Google wants to compete against Amazon.

Brands just want commerce to be easy for them, what’s adding one more node to the omni-channel operation. Google Shopping Action is a service by Alphabet that could be the answer to the shopping simplicity that Amazon has trademarked. Google’s understanding of the online retail consumer may be superior to Amazon’s. And this is good news for the search engine’s collective of launch partners.

[Google Shopping Action] has partnered with major retailers like Ulta Beauty, Target and Walmart by allowing them to list their products across Google search through the Google Express shopping service.

“The consumer is much more demanding,” said Daniel Alegre, President of Retail and Shopping Global at Google at ShopTalk. “In their minds they expect Google to understand the question really well and know so much more.”

Google Shopping Actions features a universal shopping cart and instant checkout with saved payment credentials across and Google Assistant. It enables one-click re-ordering, personalized recommendations and basket-building based on a customer’s purchase history and loyalty.

Daniela Forte, Multi Channel Merchant

From Member Brief No. 5.

Google to let users buy directly from search results. In what seems like somewhat of a competition with platforms like Shopify, Shopping Actions is a new Google feature which allows users to purchase items directly from search results.

  • Retailers can list their products on Google search, the Google Express shopping service, and Google Assistant on home devices and mobile.
  • Google provides a universal shopping cart across platforms
  • Shoppers can save their payment credentials and make purchases from retailers with instant checkout.
  • Google charges retailers a cost-per-sale fee.

2. Apple Pay becomes the new one-click.

The ad wasn’t well received but the technology has been. With online retail shifting from desktop to mobile, faster than ever, Apple Pay is vying to become the go-to ‘face’ for many of the growing number of vendors that are pursuing mobile-first strategies.

Here is the problem that Shopify is hoping to solve with their bet on Apple Pay for online retail:

A general manager of financial services at Shopify, told Karen Webster in a recent conversation, is that the checkout experience “is a weird three-page mess that really hasn’t evolved over the now almost three decades people have been shopping online.”

Granted, the UX has gotten a bit nicer, and some streamlining efforts have been baked in, but at its base, Hashemi noted that it’s the same bad experience: The customer has to enter their shipping data, billing data and card information “over and over again, and multiple properties.” “This is a checkout process that just desperately needs to go away,” Hashemi stated.

1. Spotify will release a hardware collaboration by the end of 2018.

Screenshot_2018_02_20_12.02.37Spotify benefits from its platform agnosticism. If you try hard enough, you can use their service on any hardware device. That doesn’t mean that they aren’t experiencing hardware drama that could stall an IPO. If you ask your Alexa to play a song, it will use the Amazon Music service by default. If you ask Siri on HomePod, it will use Apple Music. If you ask Google Home, it will default to Google Play. Needless to say, Spotify has read the writing on the wall. The streaming service is afraid of being completely cutoff from the hardware ecosystem and will likely land a hardware deal with an incumbent speaker manufacturer by the end of Q3 2018.

Spotify wouldn’t necessarily need to build its own audio equipment from the ground up. The music app could instead partner with an established speaker maker like Bose on such a product. If this were the case, Spotify would have a hardware product where its services are at the forefront instead of an afterthought. Meanwhile, its hardware partner—a company similarly being left out of the smart speaker conversation—would have an additional avenue to compete against products by Amazon, Google, and Apple.

Christina Bonnington, Slate

Read more of the issue here.

By Web Smith | | @2PMLinks 


Issue No. 259: Walmart’s Next Acquisition


Over the weekend, 2PM released the first executive member brief. It covered quite a bit of ground in an in-depth report on Walmart v Amazon eCommerce called Walmart Ventures.

Here is a small excerpt:

The competition between Walmart and Amazon has never been stiffer. Consumerism has always been about the heart, until Amazon made it about efficiency and logic. But for items as intimate as what you wear and what you sleep on, is logic enough?

Walmart is betting on the heart again by focusing on brand affinity, representation, and reinvigorating consumer faith. By using eCommerce as the tip of the spear, their brick and mortar presence will innovate along with it.

It’s no secret that I tend to believe in Marc Lore’s vision for a modern Walmart. In my recent report, I focused on Walmart’s brand-equity growth by means of DNVB acquisition (Modcloth, Moosejaw, Bonobos, etc). And 2PM Executive Member Taylor Holiday called me on it:

Solid stuff as always Web. The question I have that this post ignores a little is related to logistics power. You touch briefly on the convenience element that Amazon focuses on and I wonder how Walmart will seek to combat this? The thing I believe would be super super interesting would be Walmart could combine the DNVB style slick brand launch with convenience of a logistics super power. Imagine Allswell style brand with Same Day Delivery. Now that would be interesting.

Taylor Holiday, Managing Partner of Common Thread

In my report, I made two tables available: (1) Walmart’s existing acquisitions and (2) Walmart’s target acquisitions. To Taylor’s point, in discussing Walmart’s appetite for acquiring sexy DNVB’s (or building them from scratch), it’s easy to overlook that they’ve also acquired Parcel (2017). Walmart is working on building that logistics super power. And if they can’t finish the job, another $1B+ acquisition is on the way.

Walmart on Parcel’s acquisition: 

New York City is the top market for both Jet and, and because of the density of the area – along with the proximity of our fulfillment centers – it’s the perfect place for high-impact innovation. Born and bred in New York City, Parcel has developed unique expertise delivering to customers in a distinctly challenging and essential market. This acquisition allows us to continue testing ways to offer fast delivery while lowering our operating costs. We plan to leverage Parcel for last-mile delivery to customers in New York City – including same-day delivery – for both general merchandise as well as fresh and frozen groceries from Walmart and Jet.

As further proof that logistics is on the minds of Walmart executives, look no further than last night’s Oscar’s campaign.

The star of each 60-second spot is the same as for Walmart’s current ad campaign – the retailer’s signature blue shipping box – a nod to corporate priorities in the battle to catch Amazon in e-commerce. 

Jack Neff, AdAge

And if I had to project Walmart’s war room strategy, a Postmates acquisition comes to mind. Nationally, it’s one of the most trusted of the last mile platforms and it’s proven that it can operate in many of America’s largest markets. Couple this with the company’s recent emphasis on grocery delivery and you’re looking at quite a bit of shared virtue. Walmart’s grocery business is of its highest priorities.

Assuming that Parcel’s acquisition was a test, the Postmates acquisition could be the beneficiary of Walmart’s single-market experiment. After DoorDash’s recent $535M raise, this is an acquisition that makes sense for the gritty and resourceful Basti Lehmann and company. And it’s a purchase that is in Walmart’s price range. Paging Marc Lore.

Read more of the issue here