Apple, Amazon and how they're more alike than apart

Apple, Amazon and how they're more alike than apart

Following up on the thesis that Amazon manages profit the way Apple manages supply chain, here's a look at where both companies are more similar than they are different. From Horace Dediu at Asymco:

At an even deeper level, Apple and Amazon are much more alike than they are different. They are both hired for similar jobs (convenience, ease of use and a controlled, predictable environment for average users interacting with technology). They both focus on delighting customers and controlling all the variables which come into contact with that delight. They both have long-term views and are driven by vision rather than competition.

Where they differ is in others’ perception of sustainability. Whereas Apple is perpetually given an expected lifespan of less than a decade, Amazon is expected to have an indefinite lifespan. This is because Amazon is seen as having no competition and Apple is seen as having infinite competition.

Dediu also disagrees with both assumptions, and for smart reasons...

Source: Asymco

Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, Review, The TV Show, Vector, ZEN & TECH, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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There are 12 comments. Add yours.

Jim Gramze says:

What about how Apple makes stupendous profits and Amazon barely breaks even? Doesn't that matter?

Carioca32 says:

As strange as it sounds, Amazon was designed not to turn up a profit, but it can do so at any time it chooses.

Jim Gramze says:

Yes. I read Rene's linked article above your comment and I did not understand that Amazon is basically putting all their profits back into their business, and a huge one it is. I was clearly wrong there.

So there is a major difference between Apple and Amazon, where Amazon reinvests everything perpetually and Apple much more so hoards cash. I would like to see Apple move toward making their own parts and becoming self-sufficient rather than pouring money into their competitor's pockets. I do wonder how much of Samsung's net profits comes directly from Apple. Funny, if one had reason to boycott Samsung would that not also include boycotting Apple?

richard451 says:

ugh. yet another blogger spreading the ignorance of Amazon not turning a profit. Crazy how this spreads. There has to be something/one behind this campaign.

The biggest difference between the two companies (in my opinion)? Bezos owns over 20% of the company where nobody associated with Apple holds over 1% It's how Bezos can do things like offer free shipping back when such a thought was crazy.

Rene Ritchie says:

You're calling Horace Dediu ignorant without providing any reference to prove your claim? Relatively speaking, how much net profit does Amazon generate compared to Apple?

richard451 says:

Here is Dediu's thesis; "It’s with this thinking about inertial navigation that came to consider the idea that Amazon has a flexible business model which, though unprofitable today, will be profitable some day."

The financial statements to the investors and SEC prove this statement to be false. The proof is on Amazons investors page (pretty easy to find). If his core argument is wrong, how can anything else he says be taken seriously? The guy is just regurgitating ignorance and it's amazing to me.

Comparing profit margins of an internet retailer to a hardware/software manufacturer is a bit silly. Perhaps the next comparison should be with Apple and Ford or Apple and Monsanto?

Rene Ritchie says:

So in your view if Amazon made $1, they're "profitable" in the sense that Dediu, Siegler, Thompson, Evens, et. al are discussing?

Jim Gramze says:

This is straying off topic, but I have major issues with Amazon's "free" shipping. We do have Amazon Prime at my wife's insistence, but I find that almost nothing I want through Amazon has this free shipping which is the major benefit of Prime. That is extremely annoying to me and I also find cheaper prices elsewhere for the same products Amazon lists, and often with free shipping which I always get from places like Apple.

So there's a difference. Amazon sells Prime for free shipping and much of what is offered on their website does not ship freely, and Apple does not advertise free shipping and yet the things I buy from them ship freely. Odd, that.

Dev from tipb says:

Dediu based his entire argument on the unsupported assertion that Amazon has a monopoly, when the reality is far more simple. Amazon is seen as less vulnerable because it operates efficiently in markets that have traditionally been less vulnerable to disruption, and operates in more of them. Apple, by contrast, sits on piles of unused cash, nearly all of which is generated directly or indirectly from 4 products.

The iPhone, iPad, and iPod are all monsters, but we have dozens of examples in our lifetime of unassailable positions in consumer electronics disappearing seemingly overnight, from the Sony walkman in the 90s to the Blackberry in the 2000s, and today, I suspect, the Nintendo DS and its ilk. To lose in consumer electronics takes missing a single nimble competitor developing something irresistibly cool in private during one product cycle. Apple, to their credit, has been flawless in this regard for the past 6 years, but that does not mean they are not horribly, horribly vulnerable.

Amazon is not quite as dominant in any single sphere, but they are very strong in markets that require a competitor to build up significant infrastructure in public view. Amazon will see the barbarians coming long before they get to the gates, and can defend accordingly. They can still screw up, of course, but the nature of their businesses lends them an ability to prepare that consumer electronics can never enjoy.

Which brings us to the flip side of the profit equation. Wall Street fundamentally believes money should always be working. Amazon's low net profits are seen as a deliberate choice by Bezos to plow money into expansion and R&D. Not only Amazon's labor always at work, so is all their capital. Investors think a company that focused is unlikely to misstep when they see competitors start to ramp up, and so view Amazon as unlikely to be disrupted anytime soon.

Apple, by contrast, is being punished for their impressive cash hoard, because it signals to those same investors that Cupertino lacks financial vision. The unused capital suggests Apple is *more* ripe for disruption, because they are not utilizing every last weapon at their disposal to prepare against it. It may not be fair, as it is certainly easier to build out retail or cloud infrastructure than to develop new products in a lab, but, fairly or not, when you combine this perception with the fact that 70% of Apple's revenues come from a handful of iOS devices, investors will perpetually see Apple as vulnerable.

Rene Ritchie says:

That's probably the sanest comment on the issue I've yet seen, and I don't disagree with any of it. Well stated, and thanks!

Carioca32 says:

This is basically an answer to MG Siegler's article. I think people are a bit fixated on this Apple x Amazon thing.