Amazon: How Big is Too Big?

Technology is fundamentally altering every aspect of our daily lives. From social media frenzies to streaming wars, technology companies are increasingly competing for both our time and money. Technology companies are revolutionizing our economies, the way we communicate, and ultimately our behaviors with the way we interact with the world around us.

In the last twenty years, technology companies have been integrated into almost every aspect of our lives. But what happens when most of what we buy, eat, watch, and do on the internet is Amazon based? We’re quite a ways from that happening, but it’s important to assess just how big Amazon has become in such a relatively short amount of time.

Amazon World?

bn-vg005_amazon_p_20170922133613-1.jpgAmazon is valued as a trillion dollar tech titan. To put their growth in perspective, Amazon is trading at over $1,800 a share. If you had invested $1,000 into Amazon’s IPO in 1997, starting at $18/share, you’d have over a $100,000 now.

Founded in July 1994, it has only taken 25 years to go from selling books online to becoming the largest tech company by revenue and market capitalization. Amazon is the most valuable public company in the world, which makes Jeff Bezos (55) the richest man in the world. 

Amazon didn’t make its first profit until 14 years after the company was founded. Their customer-centric business model has been one of its key ingredients in scaling the company into the behemoth it is now. As our attention spans decrease, our instant gratification increases. Amazon capitalizes on this behavior with two-day and now one-day delivery services as they continue to gobble up other companies in all different kinds of industries. They own Wholefoods, Zappos, Ring, PillPack and 40 others.

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Much like David and Goliath, Amazon has taken some risky, yet calculated moves in challenging industry-leaders. However, it seems as if Amazon has morphed into Goliath.

They’ve revolutionized the e-commerce industry. ~50% of all online purchases are made through Amazon. They have also become dominant players in cloud services, smart-home devices, and now digital media to expand their advertising business.

There’s no doubt they are disrupting long-standing industry models, which in most cases increases competition and is good for the consumer, but there’s a difference between healthy competition and monopolistic business strategies and practices. Referred to as the Amazon effect, they have disrupted brick & mortar retail, grocery, entertainment, and soon to be healthcare industries. Many merchants and small business owners feel that the only way they can really get to market and compete in the internet age is by selling on Amazon. Selling on Amazon doesn’t come cheap, they take a hefty 15% from sellers. 

Amazon now has its eyes on disrupting the controversial healthcare industry. With the acquisition of PillPack, the online pharmacy, and prescription delivery service, it is Amazon’s way of getting its foot in your door relating to healthcare. They’ve also launched a joint venture called ‘Haven’ with J.P. Morgan Chase (the largest bank in the U.S. by total assets) and Berkshire Hathaway. It will be led by Dr. Atul Gawande, and their mission is to “to deliver simplified, high-quality, and transparent health care at a reasonable cost.” It has been quite a mysterious venture, not much information has been released. However, Amazon has been spending millions on lobbying efforts and have quietly been making healthcare strides. HIPAA recently allowed Amazon’s voice-technology the ability to transmit and receive health information. The venture is technically ‘non-profit,’ but when the most valuable company in the world and the biggest bank in the U.S. collaborate, you know there’s more to it than just a charitable cause. 2019 will be a big year for Haven. 

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Amazon has created a lot of jobs with a high minimum wage hovering at $15/hr. But that didn’t come about until after their harsh working conditions were documented and political leaders like Bernie Sanders, Elizabeth Warren, and Alexandria Ocasio-Cortez called out Amazon and their unfair working conditions and pay structures. What’s most ironic is Jeff Bezos tweeting to its competitors (Walmart) to increase their minimum wages.

Bezos: “Today I challenge our top retail competitors (you know who you are!) to match our employee benefits and our $15 minimum wage,” the billionaire entrepreneur said in a letter to shareholders.

“Do it! Better yet, go to $16 and throw the gauntlet back at us.”

In which a Walmart Executive Dan Barlett fired back: “Hey retail competitors out there (you know who you are😉) how about paying your taxes?”

Amazon paid $0 in federal income tax in 2018 for the second year in a row. But when a company like Amazon is raking in $11 billion in profit, it’s concerning they actually received a $129 million tax refund. It’s legal tax ‘avoidance’ at the highest level, and even if it’s not illegal, it raises a question of morality. 

Amazon has disrupted brick-and-mortar, grocery, and soon to be healthcare industries, but they now also want to become the government’s one-stop shop for contracting. It is already a key cloud computing provider for over 1,500 local government agencies across many of the country’s biggest cities. Amazon also sells its facial recognition software, called Rekognition, to government agencies like ICE deportation. And it’s raised a lot of eyebrows, over 25 prominent AI Researchers from Google, Microsoft, Facebook and others wrote a formal letter to Amazon to stop selling its software to government and law enforcement agencies.

Amazon Alexa and other smart speakers are listening and recording all the data they’re collecting from their smart-home devices.  Some employees are even hired with the task of listening to conversations to analyze Alexa’s responses and help improve the “technology’s grasp of human speech.”

If Amazon continues to sell its facial recognition software to the government, they will soon be able to track you by facial recognition. Amazon is by far the biggest leader in cloud storage. They are kind of like the landlords of cyberspace. 

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Amazon’s AWS is one of their smallest yet most profitable sectors. In 2018, AWS not only contributed 11 percent to the company’s total revenue, but AWS was also responsible for 68% of Amazon’s total gross profit. Companies are increasingly spending millions on cloud services. For example, Capital One spends more than $250 million a year to AWS, with that cost almost doubling in one year. Many other big players rely on AWS services including NASA, Apple, Comcast,  Unilever, GE, NSA, and the DOJ.

Amazon’s recent one-day shipping announcement gives them yet another competitive advantage over their biggest rivals Walmart and Target. Retail giant Walmart is even trying to position itself as a technology company. They are investing aggressively in robotics, e-commerce,  and virtual reality (VR) for training. Time and time again Amazon acts like its a small player looking out for the consumer and continues to take heavy ‘losses,’ but then makes cut-throat business moves or deploys lobbying campaigns that give them unfair advantages.

For example, Lina Khan a professor at Columbia Law School documents how Amazon uses their platform to direct buyers towards products its sells and away from products its competitors sell. After all, it is their platform and algorithms. She also found that Amazon uses the same techniques to undercut sales to successful third-party vendors.

Amazon has aggressive international expansion plans. It has its eyes on India and China, countries with huge consumer market potential. They recently launched a new AWS region in Hong Kong. Bezos’ calculated, controversial business strategies have gotten him this far, and we’ll see if they can last. But so far, Amazon is eating the lunch of other tech companies in the U.S. 


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