The Austrian-American economist Joseph Schumpeter (1883-1950) is famous for his use of the concept of Creative Destruction. It describes how capitalism advances: new products, technologies, and business methods displace established ones. The innovations that create wealth and improve productivity also destroy older businesses and jobs. For Schumpeter, this continual upheaval was the central engine of capitalism. Amazon represents how the same company can be both the instigator and victim of creative destruction within a very short time frame.
Amazon was founded by Jeff Bezos in 1994 in Bellevue, Washington, and began selling books online in July 1995. After going public in 1997, it expanded into music, electronics, clothing, and other merchandise, pursuing rapid growth despite years of losses. Its marketplace for independent sellers helped turn it into an enormous digital shopping center, while Amazon Prime, introduced in 2005, encouraged customer loyalty through a subscription offering fast shipping. In 2006, Amazon launched the cloud-computing services that made Amazon Web Services a major business; the Kindle followed in 2007, and the Alexa-powered Echo in 2014. The acquisition of Whole Foods in 2017 extended its reach into physical grocery stores. In 2021, Andy Jassy succeeded Bezos as chief executive, with Bezos becoming executive chairman. Amazon’s expansion transformed retailing and computing while attracting criticism over working conditions, market power, and its treatment of independent sellers. Today it has a market cap greater than $2.7 trillion.
Amazon thus is the perfect example of a massive instigator of creative destruction. It resembles Mel Brooks’s fictional corporation Engulf and Devour. Yet chinks in its business model are becoming visible. Many of the threats are invisible to the individual customer. I’ll discuss them below. Here’s one that directly involves its customers.
I’ve been a regular user of the company for more than 20 years. I’ve been very satisfied with its service, but about a year ago strange things began to happen. Deliveries would go astray. I started to get messages that my order could not be delivered even though it had arrived. It was sent back to wherever it came from, or I was told that another attempt at delivery would be made. None of these second attempts ever succeeded. Then deliveries that had arrived locally were sent back with no claim of a second attempt. I was given a refund for each item. If I still wanted them, I had to reorder them. Sometimes this second order would suffer the same fate as the first. On one occasion, I had to order the same product four times before I got it.
I can only guess why this bizarre practice started happening in 2025 when prior to this it had never happened once. Around that time, Amazon started to phase out using UPS for its last-mile delivery. Amazon now delivers the vast majority of its packages using its own network.
Here’s my guess about what’s happening. Again, it’s only a guess. I suspect that Amazon doesn’t have enough drivers and/or vehicles to handle the daily volume of deliveries required. When I spoke to an Amazon representative about the problem, it disappeared for a few weeks.This respite was only temporary as the problem resurfaced a few weeks later. It may be that the local delivery people kept an eye out for my stuff for a short time before returning to standard operating procedure.
If the above explanation is correct, I don’t know if the problem is local or systemic. It may well be that the delivery service in Lubbock is understaffed or underequipped. Other locales may not have this problem. So I have no way of knowing whether this problem is unique to my location or is a general problem resulting from Amazon’s change in last-mile service.
Here are some other problems Amazon faces. I have no knowledge of how pervasive they are. The first relates to what I have just described above. Deterioration of the shopping experience: Amazon’s appeal depends on making purchases easy and dependable. Failed deliveries, unreliable merchandise, questionable reviews, and search results crowded with advertisements can undermine that advantage. The danger is that extracting more revenue from each transaction eventually drives customers away.
Competitors eroding its convenience advantage: Walmart’s stores double as nearby delivery centers, making it a particularly serious rival for groceries and everyday purchases. Walmart reported global online sales growth of 23% in its latest quarter. As alternatives become equally convenient, shoppers have less reason to make Amazon their automatic first choice.
Some time ago I wrote a piece stating that Walmart was in big trouble. Their attempts to match Amazon’s convenience and efficiency were not up to par. But they have greatly improved both the convenience and efficiency of their delivery service. One no longer has to go to a Walmart store to rapidly receive virtually everything they sell. Groceries and items that require refrigeration rapidly arrive. This improvement in service threatens Amazon’s model.
The cost of defending its cloud business and pursuing AI is challenging. Amazon Web Services supplied approximately 60% of Amazon’s operating income in the second quarter of 2026. Competition affecting that business therefore matters disproportionately. Meanwhile, investment primarily related to AI pushed Amazon’s trailing annual free cash flow to negative $7.6 billion. The risk is that expensive computing capacity becomes obsolete or produces insufficient returns.
If consumers ask an independent AI assistant to find and purchase products across retailers, they may bypass Amazon’s search pages and sponsored listings. This could weaken both its advertising business and its control over the customer relationship-even when Amazon still delivers the purchase. Retailers are already wrestling with this shift.
In Schumpeter’s terms, the central vulnerability is that the company that made shopping easier can itself be displaced if someone else makes it easier still.
