Wired magazine has a great article about the recent exodus/exorcism of Kindle from their shelves in Dumped by Walmart, Amazon Should Fear Other Frenemies. This is part of a bigger shift taking place in consumer electronics and bleeding over into other categories as well. When Apple opened their retail stores, they started the process of cutting out long term partners Best Buy and Walmart by adding retail operations to the mix. When Amazon got into the eReader business, confused product manufacturers found their partner becoming their competitor.
For both Apple and Amazon, these seemingly erratic moves make sense for their business for one particular reason, providing a consistent experience that drives brand loyalty and growth. We’ve gone through decades of splitting up the actors involved in delivering an experience, starting with Ford Motor Company dismantling their River Rouge plant where they used to feed in iron ore on one end and drive out finished cars on the other end. Now the automotive industry is messy disaggregation of smaller firms all depending on the retail channels of the Big Three. Johnson Controls, a spinout of Ford, now provides interiors for most of the automotive industry.
Starting with the development of their own trackpad for MacBooks, Apple started spinning more and more functions and components inside, becoming even more vertically integrated in the quest to deliver a unified and compelling experience. But what does this mean for their former collaborators turned competitors, ranging from retailers like Best Buy to component suppliers like Synaptics or Samsung? For Apple, and now Amazon, as they find components of the user experience becoming more critical, they become candidates for spinning in, leaving former partners scratching their heads and gawking at their balance sheets wondering where the revenue went.
When does it stop? Does Samsung open super stores? Does Walmart start to sell wPhones? Is Apple’s next move to buy a carrier or launch their own network as rumored with the original iPhone launch? When does it make sense for Apple to start processing their own Bauxite ore into aluminum or Amazon to manage their own paper pulp forests for books? What does this mean for consumers and for the market diversity required for the darwinian pursuit of innovation?