Amazon vs Toys R Us: A Train Wreck Waiting To Happen

Today's Wall Street Journal (subscription required) and Pittsburgh Post Gazette features a story on Amazon and Toys "R" Us, the high hopes they once had, and where they are now.

John Eyler, then CEO of Toys "R" Us, testified, "We are at a point in the relationship with Amazon where we have no trust whatsoever in dealing with this organization." If it sounds familiar, it should: it's a variation on the same refrain you used to hear from companies dealing with Microsoft, and more recently, Google. These companies have had, at different times in their maturation, a sense of "manifest destiny".

This is all well when you're only playing with yourself; but when you get others involved, it is important to understand how early naivete can lead to disillusionment. Versioning is a discipline well-understood in the technical world but particularly useful in cases like Toys "R" Us. Amazon, in my view, could have done a better job of illustrating the roadmap for its business partners, particularly in highlighting potential hurdles in years to come.

While candid discussions like that might have torpedoed some relationships they were attempting to build, I think those relationships would have been doomed in any case. Now, much of what Amazon has build into their retail services platform may have been based on the business logic of a partner profile that may never quite fit.

Versioning is something Microsoft does quite well. They spend a disproportionate amount of resources working with their partners, and while much of this effort gets pooh-poohed today, it was of tremendous use to companies like Starz when I worked with them in the mid-90s to contemplate their own future. Starz' early involvement with Microsoft gave it the insight to negotiate VOD and IPTV rights to films released by Sony Picture Entertainment and Disney, and perhaps more importantly, making it impossible for latecomers like Netflix to get the same access to content.