Must-Read: Ben Thompson: Building Infrastructure

Must-Read: Ben Thompson: Building Infrastructure: “I think the best way to think about physical retail going forward…

…is to start with what Bezos said about Amazon’s own initial foray:

The store is very different from any bookstore that you have gone into. It has a very small selection, very highly curated, only about 5,000 titles and they’re all face out on the shelves, and they’re picked based on the data that we have at Amazon from the website. If you come to the Amazon physical bookstore with a specific title in mind that you want to buy there’s a very good chance because we have such a curated selection that you’ll be disappointed. But why would we build a store that’s designed to — if you already know what book you want to buy we already have this thing called Amazon.com that’s very very good at satisfying that need, and so this is about satisfying a completely different need. It’s about browsing and discovery and having a really fun space to wander around in….

Because the design of the store starts with the assumption that Amazon.com exists, it can be totally optimized for, in Bezos’ words, ‘browsing and discovery and having a really fun space’ with little space wasted on holding inventory…. Physical retail has its benefits… the ones Bezos listed… demonstrating highly experiential and differentiated products. What will be critical, though, are business models and cost structures that start with the presumption of the Internet and its associated business models, and that is why Gap and the other merchants who built businesses around geographic limitations are (like newspapers before them) very much in trouble….

The other Bezos quote I promised you….

When I started Amazon all of the heavy lifting infrastructure to support Amazon was already in place. We did not have to invent a remote payment system. It was already there. It was called the credit card…. We did not have to invent transportation, local transportation, the last mile. There was this thing called U.S. Postal Service and UPS which was not invented for e-commerce but if we had had to deploy last mile transportation 20 years ago it would have cost hundreds of billions of dollars of capital. It would have been impossible for a company like Amazon to even conceive of doing that. Same thing deploying computer infrastructure…. And how did the Internet grow so fast? Even there the heavy lifting infrastructure had already been done for another purpose which was the long-distance phone network….

AWS and… Stripe… are building a new layer that enables entrepreneurism…. This new layer is about ongoing usage: AWS and Stripe’s value to entrepreneurs is less about reducing costs than it is controlling them on one side and enabling significantly more focus and specialization on the other…. The way organizations build, deploy and scale modern applications has fundamentally changed. Organizations must continuously bring new applications and features to market… rapid innovation…. freely experiment, quickly prototype and rapidly deploy new applications that are massively scalable…. Twilio, Stripe, and even AWS are bets on the idea that Software is Eating the World to the extent that mucking around with global communications networks is not worth whatever slight cost savings you might gain from forgoing Twilio’s margins — that your developers’ time is better spent building differentiation than it is redoing what Twilio has already done…

June 2, 2016

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