Is Amazon spreading itself too thin?

By George Anderson, RetailWire

The following appears courtesy of RetailWire.com, an online discussion forum for the retail industry.

While many laud Amazon for its fast fail culture, others say the organization is involved in so many different ventures that it lacks focus. The most recent venture that has video gaming circles abuzz is Amazon's apparent move into game production.

According to a sponsored post on Gamasutra, Amazon is looking for people to work on "an ambitious new PC game project." New hires will join a talented team of individuals who have previously worked on successful games including Portal, World of Warcraft, BioShock and others.

An article on the Newsy site said one of the interesting aspects about the new project is that it apparently will be built for systems other than its own devices. The piece points out that when Amazon Game Studios first launched, it only worked on titles for Amazon platforms such as Fire TV and Fire Phone.

Paul Furio, a former employee who left the company to start his own gaming business, told Business Insider that Mike Frazzini, VP of Amazon Game Studios, is the right person for the job with his ability to "mitigate" costs while pursuing a big vision.

"All the pieces are in place to do what Amazon does best, only in games: build great brands that customers love, and build platforms that enable other developers to utilize amazing services," Furio said.

Discussion Questions: Is Amazon on the right track with its expansion into video game production? Do you share concerns the company is moving outside its core competencies by expanding into a growing list of businesses?

Comments from the RetailWire BrainTrust:

As Amazon moves into content production for made-for-TV movies, it is a logical extension to move into producing content for video games as well. The core competencies for content creation are very similar and it is possible that TV shows can spin off into games and vice versa.

Plus, increased appeal to a new demographic, continuing to contemporize the brand, etc.

Also, the cost is amortized by increased retention and acquisition of Prime members, who have much higher customer value than any other customer segments.
-Mark Price, Managing Partner, LiftPoint Consulting, Inc.

It seems like a big part of the future of retailers like Amazon is content. That's partly how it will differentiate on something other than price, and drive people to become Prime members. So this seems like a relevant move.

Interesting that there are concerns that the company continues to move outside its core competencies. I would ask the question: Given the lack of fundamental and consistent profitability in its core operations, just how deep are those competencies? Certainly Amazon is able to generate top-line results. Jeff Bezos is masterful at generating buzz. But profits? Not so much.

If it turns out that a lot of Amazon's profits come from its Prime membership fees (like warehouse stores), then all this content creation makes all the sense in the world. Otherwise, I remain stuck on the same question: How is Amazon going to find its way to consistent profitability?
-Paula Rosenblum, Managing Partner, RSR Research

Amazon's expansion into new businesses doesn't appear—so far—to have affected its core brand promise, which is to deliver a wide variety of products quickly at a competitive price. In fact, delivery speed is getting faster: I bought a pair of shoes on Amazon on a recent Saturday that showed up the next day (a Sunday) for about 10 percent less than I would have paid at Nordstrom. And of course, shipping was free.

Video games may be a logical extension of Amazon's streaming businesses, or they may turn out to be a misfire like the Fire Phone. Either way, Amazon is prepared to jump on the success—or pull the plug on the failure—quickly. So, I don't see it as a misfit with bigger volume opportunities such as grocery delivery.
-Dick Seesel, Principal, Retailing In Focus LLC

Looking at the history of Amazon, Amazon Web Services was one of the smartest moves in corporate history. However, I now see signs that Amazon is losing its touch with new businesses. The Fire Phone was a disaster that repeated many of the same mistakes (premium pricing, etc.) that Microsoft made early on with Windows Phone, and who know whether anyone is buying the Echo. If they continue on the path they are on, Amazon will reach an inflection point where the enterprise has become so big and diversified that it starts to be unmanageable.
-Martin Mehalchin, Partner, Lenati, LLC

Amazon's strategy is to touch customers in as many ways as possible while still making a profit. Not a bad approach if you think about it.

If it is successful, Amazon will redefine convenience, i.e., people will begin buying more and more from Amazon because they are on the site already, interacting with its hardware products or getting well thought-out suggestions.

The critics have it wrong—expanding markets is Amazon's core competency.
-Ryan Mathews, Founder, CEO, Black Monk Consulting

This is a very competitive and difficult business. Amazon has yet to deliver a profitable year, and needs to focus on doing what they do best, perhaps, rather than continuing to spend resources on trying to discover yet another way to spend money—without garnering the successful profits which elude them.
-Kai Clarke, CEO, American Retail Consultants

Read the entire RetailWire discussion.

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