If you’re a regular reader, you are familiar with my Bezos Law. The law states that for every industry Jeff Bezos enters, costs go down. Now a Morgan Stanley analyst named Brian Nowak has outlined what it takes to protect a business from the type of disruption caused by the Bezos Law.
Nowak theorizes that a set of factors he calls BRIAN, can protect a business from being overtaken and disrupted by Amazon. The factors are listed here by Business Insider:
- Bespoke products that are unique and require lots of customization. Examples of industries include luxury goods and intimates. Morgan Stanley also lists grocery, which is curious given Amazon’s recent acquisition of Whole Foods.
- Regulatory hurdles, or industries that make products which are thoroughly scrutinized by government authorities before they can be sold. Tough regulation around a product makes it harder for Amazon to enter a market, Nowak said. Examples include pharma/healthcare and commercial airlines.
- Industry/business models with lower gross margins, lower order frequencies, and so on. “This is not to say Amazon can’t invest in capabilities (and, as seen with the proposed WFM transaction, acquire) to try to work through these difficulties…but as a baseline, we believe industries of this nature are likely to be more challenging,” Nowak said. Examples include dollar stores and DIY auto parts.
- Attention post-sale would require in-person customer service for training and installation. So far, industries such as home improvement are a “competitive moat” against Amazon.
- Nuances. Amazon is less likely to push into an industry in which purchase transactions are complicated. “The scripting and payment/reimbursement mechanisms in the pharma industry are foreign to Amazon,” Nowak said.
These factors aren’t going to work for every industry, and other factors may exist, but as an examination of Amazon and the type of disruption that can be caused by the e-commerce site, the analysis is helpful.
Read more about my Bezos Law here.
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E.J. Smith - Your Survival Guy
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris.
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