Today’s Amazon looks unstoppable.
The online book buying company founded by Bezos can now be said to be the most dominant and diversified enterprise in the world. At present, their goal is to become the first enterprise in the world with a market value of $1 trillion.
People in the scientific and technological circles have already reached a consensus on the greatness of Amazon, but this is not the case in the eyes of the public. There are still many misunderstandings about this company, so it is necessary for us to study it deeply.
Amazon’s empire today
Unlike most of the Fortune 500 companies, Amazon is characterized by diversification. Most companies only rely on one or two explosive products, butAmazon owns an entire army.. Supporting this "military empire" are "five pillars": Amazon website, Amazon AWS cloud service, Alexa smart speaker, Whole Foods Supermarket and Amazon Prime service.
One of these five businesses is enough to amaze the world; So once they are combined, the final "completed body" must be the largest commercial ship in the world.
In order to better understand this behemoth, you need to know about this "five pillars" first.
1. Amazon Mall: the world’s number one e-commerce supermarket
In the eyes of westerners, Amazon is the most monopolistic enterprise in the world, and its position can almost be said to be unshakable. Take a simple data: last year, their revenue was $136 billion, with a double-digit growth rate.
What is even more frightening is that this company is expanding their market territory almost every year. At present, Amazon has won the top 10 major markets in the world. In addition to the earliest North America and Europe, Japanese, China and Indian in Asia also have their footprints. At present, they are establishing a new "base area" in Australia.
More importantly, the train of e-commerce is still roaring forward. Thanks to the strong logistics system construction and the blessing of third-party sellers on the platform, Amazon has actually become a full-category online mall. According to 2017 data, Amazon accounts for 44% of the US e-commerce; And they have increased by at least 13% every year for the past five years.
This growth is not limited to the United States. In Amazon’s total revenue in 2016, 35.5% was contributed by overseas markets; In 2015, this figure was 34%. In the end, the double harvest in domestic and international markets contributed to the soaring of Amazon’s stock.
But there is one project that needs to be pointed out in particular, and that is Amazon Besi.. For sellers who have done business on this platform, Amazon Basics is definitely an ugly word. The platform was originally a gathering place for Amazon’s third-party sellers, but Amazon officials secretly collected the sales data of these sellers, found the most popular products, and then launched "counterfeit products" on their own main platform.
I have seen dozens of products "fortunately" copied by Amazon; I have also witnessed many friends being suppressed by Amazon in this way. exactly,Besides consumers, the only thing Amazon cares about is its main platform.This dirty trick against third-party sellers also indicates Amazon’s future business thinking: now, all third-party sellers on Amazon Besi have been replaced by Amazon’s own business-yes, Amazon only wants to monopolize consumers, and they don’t even want to leave any profits to others.
This kind of thinking is not only aimed at sellers, but also at buyers. For sellers, of course, entering Amazon will get considerable benefits, but Amazon is like junk food. Occasionally, it may taste great, but long-term consumption will bury health risks for itself. Brands are scrambling to squeeze into Amazon, which is nothing more than taking a fancy to hundreds of millions of consumers on the platform; But what they don’t know is that this kind of attempt is actually to quench thirst by drinking poison. Although entering Amazon can bring short-term benefits, in the long run, it is more likely to lose money.
The market is dead. Because the platform builder has become a market competitor.
Excessive support for self-operated products objectively reduces consumers’ choice space, and also makes Amazon’s bargaining power continue to rise. So for consumers, this is not a good thing.
2. AWS: the world’s first network service company
Although Amazon’s e-commerce business is already extremely powerful, in contrast, AWS’s performance is even more eye-catching.
The purpose of Amazon to build AWS is to better serve its own market. They need AWS to empower Amazon.com with excellent image and information processing capabilities. Only in this way can Bezos be Bezos, and Amazon’s products can maintain their consistent modular style.
AWS is growing, and Amazon Mall is constantly cutting prices. Obviously, this is to crack down on competitors in the same industry, and one of the final results is to make AWS more competitive in the market.
"Your profit is my opportunity"-Jeff Bezos
Today, 42% of websites are supported by AWS. This figure is even more than the combined market share of cloud services of Microsoft, Google and IBM.
However, considering that AWS is easy to use and reasonably priced, this result is not surprising.
Similar to the e-commerce business, the growth trend of AWS shows no signs of slowing down at all. At present, this business has accounted for 10% of Amazon’s total revenue, and the revenue in the third quarter of 2017 was 4.6 billion US dollars, a year-on-year increase of 42%; Net profit reached $1.2 billion, an increase of 12% over the same period in 2016.
The foundation of most websites is based on Amazon’s infrastructure.
3. Alexa: the world’s number one voice assistant
In 2014, Amazon’s "Monster Family" was added.
For those who have no need to buy books, Amazon is not in a hurry.Because they will always find a way to include you in their network, so in the end you will realize that,The goal of this company is to win all customers.
And Alexa is the concrete embodiment of this ambition. With the sudden explosion of Alexa products, Amazon spies can finally sneak into your home.
Want to know why I say this?
Just ask a simple question: "How do you buy things?"
Alexa exists to replace all products, and its goal is to make you buy everything smoothly and seamlessly. Compared with voice communication, the mode of clicking and ordering is too primitive.
"Hey, Alexa, we’re out of toothbrushes and toilet paper … by the way, buy another cotton ball!"
For Amazon, the subtlety of Alexa lies in choice.
In the past, most users would choose their favorite brands when shopping in Amazon official website; But now, the appearance of Alexa will change this habit. As the above example shows, when a user wants to order Alexa to buy some daily necessities, he will generally only declare to the latter that he wants to buy a certain type of product, without emphasizing the specific brand of the product. So over time, users will find that almost everything they buy comes from the same platform-Amazon Besi.. Since Amazon Besi has become the sales platform of Amazon’s self-operated products, this consumption habit cultivated by Alexa will eventually enable Amazon to successfully defeat other well-known brands on its own platform.
I know that many users love Echo mainly because of Alexa’s wonderful voice. But I have to tell you that this is just a means for Amazon to achieve its goal, and their real goal, as I said above, is to be the only provider of your daily necessities. At present, Alexa’s work is progressing smoothly. According to the data provided by Amazon, in the third quarter of last year alone, they sold more than 20 million Echo sets. I can’t imagine how much this number will increase on holidays …
Further, what if Amazon decides to provide you with food?
4. Whole Foods Supermarket: the 10th grocery store in the world.
Oh, wait, Amazon bought Whole Foods Supermarket for about $13 billion in 2017. So now, things become more interesting …
In a word, Amazon has bought a complete sales network with complete functions and balanced supply and demand.
Amazon’s ambition to covet the food retail industry has long existed, but because of transportation problems and food preservation problems, Amazon’s previous efforts ended in failure. The acquisition of Total Foods is a new opportunity for Amazon. Thanks to the complete supply chain of Whole Foods, Amazon can greatly reduce the supply risk and provide various food products for online customers. Of course, there will be some bad situations, for example, some ham and cheese can not be sold online; But this is just as well. Amazon will choose to significantly reduce the prices of these products in physical stores to clean up the inventory.
The addition of the whole food will also make more new scenes in the interaction between users and Alexa, such as:
"Hey, Alexa, I want a gallon of milk, a loaf of bread, two barrels of yogurt and a jar of peanut butter. In addition, my recipe also includes pizza crust, ketchup and pepperoni. Please add these to my shopping cart! "
Similar scenes can lead to more possibilities. A realistic and reasonable imagination is that Amazon uses AI to recommend many dishes for you according to your favorites, and you are responsible for checking the dishes tonight, while Amazon will automatically place an order for you. Buy ingredients. What do you think? Is it interesting?
Now you can see why the market value of major supermarket chains evaporated by $13 billion after the acquisition was completed …
5. Amazon Prime: the second video service platform in the world; The sixth music streaming media service platform in the world
The last of Amazon’s five pillars business is a bit complicated. On the one hand, Amazon Prime provides free 2-day delivery service in the United States, on the other hand, it is a streaming media entertainment content platform.
This is an excellent "flywheel connector". Research shows that the average spending of Prime customers is twice that of non-members.But if Amazon decides to reduce the membership fee to $7.99/month, they may earn more.
The reason lies in Prime Music and Prime Video. Both of these services provide unlimited free streaming services, which enable all authorized and original content of Amazon to compete directly with services such as Spotify and Netflix.
Although there is less original content on the Prime platform at present, and the quantity is less than those of Amazon’s competitors, the key point is-free. As we all know, free services can firmly bind users to Amazon’s product ecosystem.
If you can get 2-day free mail service without using Netflix and Spotify, I guess you will definitely check more products.
It is estimated that there are currently 63 million families in the United States who are Prime members, accounting for about 35% of the total population. Prime service increased Amazon’s recurring revenue by $1.9 billion in the first quarter of 2017, and doubled the purchase volume of almost every household-but this is not enough. For the number of members, Amazon’s principle is only four words: the more the better.
Amazon has "five pillars of business", any of which is enough to stand tall.
But the story is not over yet, and Amazon still has broad future development opportunities.
Amazon’s growth opportunities
Looking ahead, Amazon’s strong leadership and foresight are enough to make them invincible in the competition. The five main businesses all have great development potential and will usher in strong growth in the future.
However, Amazon is not satisfied with this. They are investing heavily in the next potential opportunity. Let’s take a look at them one by one:
1. Expand the market territory of Amazon Besi.
As mentioned above, Amazon Besi is the ultimate answer of Amazon Empire. Control the end-to-end service and you win everything. At present, although Amazon has invested a lot of resources in this business, they still have a long way to go.
As of December 14, 2017, Amazon Besi had 1,500 products.However, with reference to the 480 million products of Amazon official website, the improvement space of Amazon Basics is full of imagination.
2. divest AWS business
I have always believed that Amazon is on the cusp of regulation. Although unlike Facebook, Google and Twitter, it is often at the forefront of public opinion, Amazon has approached the red line of supervision in many fields, naturally because of alleged monopoly.
As people and legislators gradually deepen their understanding of the Internet industry, it is only a matter of time before relevant departments get involved in Amazon. Prior to this, Amazon should pre-empt the AWS cloud service and stay away from the attention of antitrust agencies. After all, AWS is the only one of Amazon’s five branches that does not focus on business and logistics; This business is also the most suitable for independent development among the "five pillars".
Once the business divestiture is completed, the possibility of government intervention will be greatly reduced. What’s more, we all know that no matter what Amazon does, its share price will rise. Therefore, it can be predicted that the total market value of the new company and Amazon parent company after AWS independence is likely to exceed the current figure of 604 billion US dollars.
3. Expand the offline retail industry
Amazon seems to have made up its mind to build an offline physical retail store. Although the one-click online shopping model has made them earn a lot of money, they are also very aware of the importance of offline shopping experience. Some people think that once the physical retail store is completed, Amazon.com will become an important hub for users’ offline conversion rate and sales promotion; And Amazon’s offline stores will in turn boost the turnover of Amazon official website.
I basically agree with this statement. After all, Americans really like to try on clothes in offline stores. In my previous article, I also mentioned that if you really want to build a physical store, then the goods in the store must have at least one of the following two characteristics:
4. Increase the proportion of video content
Have you seen The Big Sick? This is a movie made by Amazon Studio, and the producer is Kumail Nanjiani. For a long time, I thought it was one of the most wonderful movies I have ever seen.
In 2017, Amazon spent $4.5 billion on original content. They saw the defeat of NetflixHope, and the weapon is the original video program on Prime Video. Yes, Amazon has realized that streaming media is the future of video entertainment content.
As Amazon constantly updates its own video library, their evergreen content will not only please old customers, but also continuously contribute new members to Amazon Prime.
In a contentFor the king’s world, Amazon has successfully owned users’ hearts, brains and wallets.
5. Pay attention to the food industry
After winning Whole Foods Supermarket for $13 billion, the market value of American grocery industry reached $800 billion, which is six times that of Amazon’s global sales.
This contrast is obviously meaningful. However, if Amazon wants to succeed in this vast market, it must concentrate on properly allocating resources. I believe that if the decision is correct, Amazon has the opportunity to quadruple its sales in the next few years.
6. March into the pharmaceutical industry
The pharmaceutical industry is a big business in the United States, and Amazon certainly knows it. It is reported that Amazon’s actions in the pharmaceutical industry have aroused the concerns of major pharmaceutical companies such as CVS and Walgreens.
It is estimated that by 2021, the US prescription drug market will reach $610 billion. This market is close to the food retail industry. Considering that Amazon has the best logistics system in the world, if they choose to enter the pharmaceutical industry, it will be as easy as taking a walk in a nearby park.
Once there are generic drugs of Amazon brand, how many consumers will go to those inconvenient and expensive pharmacies?
It’s time to push some pills.
Other elements to consider.
I wrote in my previous article about how technology giants beat start-ups in the way they are best at; As I mentioned before, Amazon is definitely an expert in this respect: few companies are as ready to deal with all kinds of subversive changes as they are.
leadership
Amazon is one of the best managed companies in the world.
There are many reasons for this conclusion. Amazon follows a result-oriented corporate culture and encourages employees to take risks. The company pays attention to consumers, welcomes constructive criticism, and its employees have a sense of ownership.
Of course, you may think that the above words are exaggerated, but if you have a chance to observe them carefully, you will find that Amazon is really practicing the rules they have made.
Besides, Jeff Bezos did some other things. One of the most important things is the emphasis on commitment. Bezos requires employees to be firm and have strong mobility.
As you can see, whether it is the acquisition of Whole Foods or the announcement of its entry into the pharmaceutical industry, Amazon can gain immediate market recognition in almost every action. In the eyes of the public, Bezos has never missed it.
The ruthless, safe and reliable image carefully created by Bezos allows Amazon to transcend the temptation of short-term profits and always leave enough room for future development.
Of course, this also allows Bezos himself to hold a 17% stake in the company and become a veritable helm of this huge ship.
automation
Have you seen Amazon’s warehouse? If not, I suggest you watch the relevant videos.
The operational efficiency and automation level of Amazon warehouse are unmatched by others. Here, everything will be accurately measured, which enables them to try their best to reduce costs while still ensuring the high quality of products. In the case of large-scale production, this means higher unit economic benefits.
artificial intelligence
I just want to say: Amazon has the best AI experts in the world.
Whether it’s those guys who study Alexa, engineers who do millions of A/B experiments every day, or experts who focus on product recommendation system … Let’s just say that in terms of data processing ability and machine learning, the only one that can compete with Amazon is Google.
strategic acquisitions
Although Amazon has become the world’s top technology company.However, their bank accounts are slightly smaller than those of other competitors in the industry: $22 billion in deposits prevents Amazon from making aggressive acquisitions.
However, after the acquisition of Total Foods last year, Amazon’s stock soared by 32%. This fully demonstrates the market’s trust in Bezos. Based on this reality, if Amazon decides to invest this $22 billion for a strategic acquisitions in the future, the market is likely to give positive feedback again.
Here are six areas where Amazon may make strategic investments:
1. Video industry
As a result, Amazon has invested more and more in Prime Video, and the competition with Netflix has become more and more fierce. The acquisition of a video production company is in line with business logic for Amazon, and there are many potential candidates who meet the standards.
At present, Amazon seems to be unable to afford Netflix. However, if this acquisition really happens, the consequence will be to completely kill cable TV and make Amazon an entertainment content industry.The czar.
With Disney taking Hulu and time warner Inc. taking HBO, these two acquisitions are hopeless. If Amazon can win one of them before them, it will definitely be a huge victory.
Amazon’s most realistic goals at present should be the smaller film studios and the original video producers on YouTube. As we all know, YouTube is full of various and different styles of video content. If Amazon can attract all those video producers with different styles, then Prime Video can meet the needs of most users in terms of content.At the same time, the organic combination of long and short content will also hit Netflix and YouTube indiscriminately.
2. Music industry
Like video, Prime Music is also an important driving force for the expansion of Prime subscription service. Therefore, there is no doubt that investing in music is in line with the development plan of Amazon executives.
But unlike video, the price of buying a music company is lower, but the profit may be more considerable.
As the most commonly used music streaming service platform in the United StatesPandora’s market value is only $1.33 billion. If it is acquired, Amazon will usher in a big change. The giant can make a big fuss between distribution and licensing agreement, and either one will give them more subscribers.
Another potential acquisition target is SoundCloud, a streaming music platform that is rumored to be bankrupt almost every few months. However, although they haven’t found a clear business realization idea, joining Amazon will be a win-win result for both parties.
Because SoundCloud is an interesting plug-and-play component, it fits well with Amazon’s existing platform foundation and user habits.
Up to now, SoundCloud has received $467 million in financing. However, it is not worth the price now. This affordable acquisition can reward investors and boost Amazon’s greater success.
Not only that, SoundCloud can also provide Amazon with the opportunity to enter the podcasting industry..
3. Giant entity Shangchao
In stark contrast to the booming e-commerce industry, the traditional retail industry is increasingly depressed. However, if Amazon decides to enter the physical retail industry, then direct acquisition is obviously more cost-effective than self-built stores. The cooperation with Target will be a mutually beneficial cooperation, which is equivalent to a fatal blow to the common rival of the two companies-Wal-Mart.
Target has 1,828 branches in North America, although in Amazon’s view, these stores may be too big.But this is not a big problem. Target’s distribution ability, storage space and sales ability are the key to attracting Amazon. Especially, considering the market value of Target is only $37.58 billion.Amazon can afford such an acquisition.
Add another fact: Target’s old customers are also Amazon’s ideal customers..
4. Fashion industry enterprises
Amazon is expanding into the fashion industry. Different from many other products, clothes in the fashion industry are not only fit, but also glamorous.
It is precisely because of this that the significance of clothing stores lies not in function, but in feeling; The driving force of sales is not the clothes themselves, but the try-on experience. Putting on beautiful tops and tight jeans is the fundamental reason why people are willing to pay.
So, if Amazon decides not to buy a full-category retailer,Instead of focusing on the fashion industry itself, Nordstrom is a good choice. This luxury clothing store has 349 branches in North America, and its market value is only $8 billion, which is similar to that of Whole Foods.
In addition to Nordstrom, Kohl, Macy, J.C., and Penney can also be included in the shortlist.
Don’t forget Amazon Besi, their goal has always been to turn all good products into their own. Through such an acquisition, Amazon designers can get closer to customers and quickly iterate on fashion trends across the country.
Realistically speaking, Amazon’s fashion ambition is still difficult to see, but we might as well give them two years to see if this online shopping giant can also win a place in the fashion world..
5. "Wild Ace" shared travel
This seemingly wild idea is not wild at all. Considering the huge potential of the taxi industry and Uber, it is definitely an ideal choice to win Lyft now. Let me explain to you why:
At present, the unit economic benefit of carpooling business is not good. Because of the dual characteristics of localization and globalization at the same time, the war between taxi companies can occur in every city in the world, and in the end, it is difficult for both sides to make a profit.
But what about brand advertising? How much value will it bring to your brand if the advertisement in the taxi can attract passengers’ attention?
From this perspective, Lyft is likely to become Amazon’s "sales engine".
In South Africa, Uber drivers often put a screen in the car that can play advertisements, so as to bring higher customers to Uber. Amazon can also learn from this promotion form, whether by signing a cooperation agreement or direct acquisition, Amazon can make a fortune. By understanding the positioning information of passengers, Amazon can promote their Prime Music and Video services in the local area, and also promote the sales of the online shopping platform itself. In other words, Lyft can become Amazon’s "high value-added old driver".
In addition, Amazon can also increase the bet on the Prime service, so that members can get more discounts when using Lyft to take a taxi. This will not only further tap the potential of Lyft, but also increase the number of Prime users.
Even if you think that "car ownership is dead" and "driverless is the future", it will not affect Amazon’s income in this field. To be exact, the popularity of self-driving cars will give Amazon more space to plan and arrange passengers’ "car life".
6. The telecommunications giant of Wild Ace
Imagine what would happen if Amazon won the Sprint? I know it is the smallest compared with other telecom giants, but Rao, Sprint also has 50.4 million customers.
Another important message is that Amazon itself is a platform for many users to buy mobile phones. Think about it, if Amazon says that you can get a month’s free phone service on Sprint by buying a mobile phone on the platform.Guess how many people will be willing to "take the bait"?
Because you have free advertisements on your own platform.. Amazon can easily carry out mobile sales services..
Sprint is currently valued at 22.76 billion, which Amazon can still afford. This acquisition will have a significant impact on the existing competitive landscape of the telecommunications industry. Considering Amazon’s consistent style-lowering prices and reducing profits-users are likely to flock to Sprint, which will certainly increase the added value of this acquisition and effectively attack competitors.
grade
In fact, it is difficult for me to give Amazon any score except A+, but considering some unstable factors of the company itself and the potential impact of decentralized blockchain start-ups,I think the grade A is more reasonable.
In fact, Amazon has only two weaknesses: one is the potential regulatory risk, and the other is the high operating cost. Although I haven’t mentioned the latter in this article, it is still a topic worth discussing.
As of now, Amazon still does not have it.Profit. And that’s why Bezos can’t get an A+ from me. Although the market is still saying that "it doesn’t matter whether it is profitable or not", we all know that the climate may change at any time. Once the capital market changes dramatically and Amazon is affected, their stocks are likely to be turbulent.
But even so, I am still optimistic about Amazon. Welcome the future monopolist, he is Mr. Jeff Bezos.
tag
Amazon is really a great enterprise.
This "five-headed dragon" occupies a dominant position in almost all his fields. Never go against Bezos, you won’t get good results.
