It wasn’t long ago that Amazon was a sleepy little online book seller with aspirations to rule the universe. According to CB Insights, the company now represents four percent of all retail and 44 percent of ecommerce. Since its IPO in 1997, the stock is up a modest 8,000 percent.
Amazon is an enigma. We are mesmerized by its expanse of business models, impressed by its speed and envious of its scale. We are also threatened by its effort to dominate. You get the sense the company is just getting warmed up. According to Morgan Stanley, it will achieve a rate of revenue growth never seen before for a company of its size (16 percent per year by 2025).
Where will Amazon go from here? It already represents the most complex company in the history of mankind, featuring at least a dozen profit centers. In addition to expanding its core footprint, Amazon will grow into businesses we can’t even fathom. Almost every business will be impacted by the Amazon of the future.
Here’s a glimpse of where it’s headed and what it means for vendors, customers and competitors:
1. Prime as the hub of the wheel
Amazon Prime was first framed as an incremental improvement in its value proposition, in the form of free shipping. That has since evolved into the linchpin of the Amazon empire. Jeff Bezos claims that Prime has over 100 million subscribers, making it the most successful loyalty program of all time. Amazon will only magnify its use of Prime as a barrier to entry.
While sellers of everything from throwaway fashion to antiques prefer independent, direct-to-consumer channels, Amazon is the 800-pound gorilla. Sellers complain about their inability to control MAP (minimum advertised price). It’s for this reason that companies are pursuing their own dot-com sites where they control distribution. Leveraging Prime should be central to the strategy for any new providers entering the market.
2. Fuel for small businesses
While Amazon’s consumer business gets all the buzz, its foray into business-to-business is equally disruptive. It is believed that Amazon aspires to dominate services like warehouse robotics, logistics, infrastructure and cashless checkout.
For small businesses, Amazon is providing a novel offering with Launchpad, a service designed specifically for startups. One would expect Amazon to offer more financing to new ventures which will augment various ecommerce services.
Web Services is the company’s cash cow and will be for some time, as the economy migrates to asset sharing and usage-based pricing models.
3. Home delivery and supply chain logistics
Among the most astonishing of its patents is the creation of an “airborne fulfillment center” where products will be delivered by drone from a blimp line contraption. Holy crap, George Jetson. Amazon will find ways to embed technology into third-party logistics (3PL) and freight businesses much in the way it has with Whole Foods.
Amazon is already putting tremendous pressure on the supply chains of its competitors, setting expectations that products be delivered within 48 hours. Ecommerce providers are building networks in efforts to satisfy coast-to-coast demand.
Amazon Go stores are like test kitchens for stores of the future, void of almost any labor. There is tremendous opportunity for technology partners who can develop retail technology.
4. Artificial intelligence
Alexa and Siri are going at it like a couple of sorority sisters fighting over who gets to use the bathroom first. While Siri is embedded in the iPhone, Alexa offers unparalleled access to Amazon’s ace in the hole: zero-click. Zero-click will revolutionize shopping, providing users the ability to replenish much-needed supplies seamlessly through verbal commands. Amazon has even developed an “Alexa Fund” for startups, targeted at game-changing AI investments.
5. Healthcare
Amazon appears poised to enter healthcare, perhaps beginning with a bold move into pharmacy services. With healthcare inflation unchecked, pharmacy is an industry it could disrupt quickly. It has also joined forces with Cardinal Health and other distributors in an effort to extend reach in medical devices to hospitals and others.
6. Geographic expansion
According to CITI Research, Europe has been the company’s primary geographic expansion target with international sales approaching 40 percent of volume. However, the company will grow in emerging markets such as Asia and the Middle East. There are opportunities for providers to position as niche players in these markets.
7. Acquisitions
Being acquired by Amazon would be a dream come true for many, and some will get their wish. The company has dramatically increased acquisition activity, with 10 deals in 2017 including GameSparks and Blink (home security). As its platform expands, Amazon will bolt on new businesses that can leverage its backend.
Amazon is poised to become the most valuable company in the world. Others will be well-advised to create differentiating strategies. Ride Amazon’s coattails, or get out of the way.