Amazon's ambition knows no bounds.
Since its founding in 1994, Amazon has reinvented B2C retail in a way that was unimaginable to most people. Its total revenues were expected to exceed $100 billion in 2015, with over 80 percent of that coming from product sales. The US retail market approached the $5 trillion mark in 2015. In light of that, and using the most recent US Census numbers available (from 2013), we can estimate that Amazon today has less than one fiftieth of the US retail market, and less in countries around the world. But its technical prowess promises years of growth ahead, in a market where just about every retailer is simply overmatched online — and that’s where the trendline is moving.
It's Not Just B2C
Amazon's reach isn't limited to the B2C world. Just a few months ago I wrote an article on B2B e-commerce and who will likely grow to become the dominant player. No surprise that Amazon came up again.
Amazon recently shuttered Amazon Supply to double down on the over $7 trillion B2B market with Amazon Business. While Amazon isn't yet breaking out its B2B revenues, we’ll assume they are currently in the single-digit billions.
Once again we find Amazon with a tiny market share in a very big market — bigger than B2C — yet holding a technical advantage that no other retailer or technology company can currently match: Amazon Web Services (AWS). Is there any other retailer that is focused on developing a cloud computing infrastructure that others will leverage? And is there any other technology company besides Apple that can really be considered a retailing juggernaut?
Changing the Rules
Amazon has so changed the rules of the game that it's conceivable it will continue to flourish for the next couple of decades on the strength of the fact that no other company can even come close to doing what it is doing. And let’s not forget that it is exploring leasing 20 jets to either supplement or start its own air freight business. Is there any company, retail or technology, that is doing anything remotely close to this?
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While the common wisdom is that Amazon is overextending itself and chasing a market that it has no business in, I wouldn’t agree to this assessment until the initiative fails, given the company’s track record. While it's hard to recommend buying the stock at a price as of today of $630 and a forward PE of over 115 (disclosure — I am a shareholder), it reached those numbers because over the last seven or so years, Amazon has shown the ability to not only grow its revenue consistently, but has also shown it can make money. And let’s not forget that the Harvard Business Review as recently as November 2014 named Jeff Bezos as the best performing CEO in the world.
Can't Stop, Won't Stop
A recent article stated Seattle is the next Detroit. Residents of Seattle might take umbrage at the thought, given the urban blight that emerged in Detroit in the 70s and into the 21 century. However, the comparison is actually complimentary as it compares Seattle to Detroit in its heyday from the early 1900s and into the 60s, when the automotive industry developed to become the dominant economic engine in the world. The same comparison holds true today with Amazon and its emergence as an e-commerce and cloud computing power.
The economic world is changing in dramatic fashion and only a few companies (Facebook, Google, etc.), if any, can lay claim to a role comparable to Amazon’s. While its dominance has been emerging for several years now, the company appears to just be hitting its stride. And so we return to the question, can anyone slow or stop Amazon?
No company or companies appear capable of effectively competing with the cloud computing and e-commerce colossus currently. Until that happens, it's impossible to imagine Amazon deliberately slowing its growth.
Seattle is irrevocably changing, and hopefully avoiding Detroit’s long term fate in the process. But so is the worldwide economic landscape, and I suspect Amazon will have an oversized influence for a very long time to come.
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