“Retail is going to be a horrible business the next ten years in Australia.” That’s the stark assessment from Scott Galloway, NYU professor and founder of research agency L2.
Speaking with Which-50 about Amazon’s Australian arrival, Galloway said there will be examples winners in every category but overall it won’t be pretty.
“The media will publicise a small handful of winners who can combat Amazon and do well, but your retail ecosystem will be a shadow of what it is today in ten years,” Galloway said.
“You have an American company showing up with infinite capital that consumers will love. They will operate at a zero to negative 20 per cent profit margin and they will start taking share from everyone and taking oxygen out of the room.”
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Galloway, who will be speaking at Telstra’s Retail Innovation Summit later this month, argues Amazon — along with Google, Apple and Facebook — need to be broken up to “oxygenate the marketplace.”
“I think there is restraint of competition, abuse of monopoly power, and that the markets are failing,” he said.
“I don’t think it’s punishment, I don’t think it’s because they’re evil, I don’t think it’s because they destroy jobs, we need job destroyers. I don’t think it’s tax avoidance, everybody tries to avoid taxes. I think we need to break them up because they’re capitalists and we need to oxygenate the marketplace with increased competition.”
Looking specifically at Amazon, the markets are failing when a vague memo about working to bring down costs in the healthcare sector can wipe $30 billion off public stocks in one trading day, he argues.
“The key to capitalism is you have competitive markets, which mean no one player is too powerful and influential and Amazon can literally deny any company the mother’s milk of business — which is access to capital — just with press releases,” Galloway said.
When asked if China’s internet giants, known as BATX, pose a credible threat to the market dominance of Google, Apple, Amazon and Facebook, Galloway said that “doesn’t ring true.”
“These companies have not been that successful in going outside their borders,” he said.
Galloway says consumers won’t put up much of a fight against the four either. Instead, the two cohorts that will lead the battle against big tech, Galloway argues, will be parents and European regulators.
“Consumers talk a big game about supply chain ethics and then want a little black dress for $9.99. They claim to care about their privacy and then less than 1 per cent clear their cookies. So this revolution will not be consumer led,” Galloway said.
“I think it will be led by two groups. I think it will be led by regulators out of Europe and parents globally who are starting to observe their kids having more what I’ll call emotional stress and strain at the hands of social media platforms.”
And what should Australian businesses do if these regulators don’t step in? Avoid the media and retail ecosystems.
“There is a great business in helping companies try to figure out how to leverage these platforms,” Galloway said.
“There’s a lot of money to be made in startups in analytics and AI. There’s a lot of money to be made in services, basically servicing rich people. So it’s a great time to be in the business of building super expensive homes. Any business that services the 1 per cent is going to do well.”