In May, before the new round of growth in Amazon shares, a lot of noise in the US aroused research on how the company would "eat the whole world." The conclusions there are: it is impossible to compete with the prices of the retailer. The best analysis of the big data allows the store to keep all its competitors in check, and all other major vendors in the US market will simply gradually leave the race. The only company that can stop the complete monopolization of all online sales is Walmart (many hated). The parcel counts income and understands the business empire of Jeff Bezos →
For 23 years, Bezos moved from selling books from the garage to managing one of the four largest companies on the planet. More than $ 500 billion except Amazon are only Apple, Alphabet and Microsoft. If 5-6 years ago on the Internet people seriously told each other horror stories that in the future everything will be captured by the "corporation of good" Google, now all serious economists are betting on the online retailer. Amazon is everywhere: he and robots are now doing, and food releases. Her income for the past 10 years has grown by an average of 32% per year – an unprecedented figure for such a giant. It is expected that Amazon will become the first company in the world with a capitalization above $ 1 trillion. Only two organizations can prevent this in theory. Apple, if it releases any miracle device whose sales will outshine the iPhone, or the US Federal Antitrust Commission – if it decides to divide Bezos's business, as it did in 1911 with the Rockefeller Empire . The second option, by the way, is very likely: Trump threatens to start an investigation into Amazon, if the Washington Post, owned by Jeff Bezos, will not stop publishing exposing articles about him.
Bezos business is slightly more complicated than Apple, Microsoft or Google . He earns good profits not only from operations in the online store. Zach Kanter from TechCrunch says:
Amazon is the most impressive company on Earth, and therefore, I think its least understood.
Where does Amazon grow and why can it become the first firm to cross $ 1 trillion in capitalization?
Amazon grew very rapidly in the early 2000s, when no one offered SaaS-solutions of enterprise class. Like Google, it had to create its own infrastructure. IT-achievements of Amazon later formed in the platform of cloud-based web services AWS (Amazon Web Services). It gives other companies the computing power of Amazon, provides file hosting, leases virtual servers and so on. AWS services are used by Netflix, Reddit, NASA and another two thousand corporations and government agencies in 190 countries. Net profit goes off: for every dollar spent Amazon gets $ 6 . Sales of cloud computing are growing at 50% per year, and now AWS gives $ 14 billion in revenue every 12 months. This is more than ten percent of the company's total profit.
Microsoft and Google are trying to tear off a piece of the pie. But Amazon's position in this direction is very strong. According to rumors, only one AWS section (Amazon EC2) contains more servers than Microsoft, eBay and Facebook combined. Ahead is only Google, which has more than 1 million servers in 2013
Electronic devices and goods under its own brand
First, Amazon released only the Kindle reader (from 2007). Profits, she did not bring at all, even though she could sell under half a billion devices. This year, Bezos finally admitted that they were releasing the reader at a loss. All in order to attract users to books and magazines in their store. The revenue from this Amazon gets a little: $ 800 million a year – for such a corporation it's pocket money. New versions of Kindle, however, allow you to watch movies and TV shows from Amazon. Buyers of content pay $ 8 for the series or up to $ 20 for the film. The Netflix competitor turns out to be only much more expensive for those who do not have Amazon Prime subscription.
The company tried to release its smartphone and a couple of other products, but they did not take off. But the Amazon Echo column with the virtual voice assistant Alexa turned out to be very popular: it helps with trifles and makes the day more fun. The device is able to respond to commands, talk about the weather, include TV shows, play tracks with Amazon Music, manage all the systems of a smart home. With it you can start an alarm clock, turn off the light, close the front door, make lists of purchases or read "Wikipedia". The device appeared only a couple of years ago, and sales in full only go to the US. It is expected that this year will buy 10 million Amazon Echo. For comparison: iPhones in the States are selling 40 million a year. From such sales of a smart column, even Google was nervous. To compete with Alexa, the company launched an assistant Google Assistant and an inexpensive smart speaker Google Home.
The Jeff Bezos company produces products under the Amazon Basics brand: wires, notebook stands, backpacks, home textiles, small electronics, clothes and other basic things – with a design like popular brands, but much cheaper. If the internal algorithms of Amazon notice an interesting hot novelty – the store can immediately offer a cheaper alternative. The headphones, which originally cost $ 35, Amazon makes and sells for $ 15. Therefore, in the United States, all businessmen are panicking, not just store owners.
What if you release something cool and the Basics algorithm points to your output?
Media and content
And Kindle Fire, and Amazon Echo – work to ensure that people are attached to the content of Amazon. This idea in China was well developed by LeEco (LeTV). You release a smartphone / tablet / book reader or a smart speaker. And you do it so that the device works best with your online libraries of books, music and movies. And then you get profit from it. It seems like a trifle, bullshit is the dollar there, the dollar is here, and as a result, it rains almost a third of Amazon's profits!
The Internet site receives about $ 25 billion a year from media content. This is more than the profits of Gazprom, Lukoil, Rosneft, Sberbank and RZhD, taken together. Amazon buys the rights to films and programs, and also produces its TV shows, competing with cable networks. For $ 10 per month (or $ 8 per month for Prime users), you can subscribe to the Amazon Music service – and listen to popular tracks. There is also a separate section of Prime Music with a catalog of 2 million songs, which is available free of charge to customers with a subscription to Prime. Everything is tied to each other: music is best listened to with the Echo column, videos and tracks are on the store's website along with the goods, and if you subscribe to Prime – then you and other bonuses are given, so why not use them? Other companies of such a branched system can not offer: they have either TV shows, or music, or things for the house. Apple is probably worried that it's Amazon, not iTunes, that will eventually become the base platform for streaming and buying content in the US.
Amazon store in the US every month attends 150 million customers. Of these, 80 million are subscribers of the Amazon Prime system. It unites all the company's services: subscribers receive bonuses and advantages in each of them. Many films, serials and books become free, the delivery in the store is two days, special discounts are given for the goods, and in July the Prime Day holiday takes place with the most favorable offers, more profitable than on Black Friday. Bonuses are offered even on third-party sites, controlled by "Amazon". For example, gamers on Twitch, taking Prime, receive one free subscription to their favorite tape drive.
In America, the service is very popular. The number of clients annually grows by 40%. Now 55% of households in the United States are connected to it, and they all pay $ 99 each time in a pocket to Jeff Bezos. On subscriptions Prime earns $ 8 billion a year. For comparison, the HBO cable network with its "Throne Game" and other serials, receives on all subscriptions one and a half times less, $ 5 billion. And if HBO has to pay actors, invest in creating special effects, etc., then Amazon receives money for Already created infrastructure. Of $ 99, the profit is $ 98. For premium TV shows or popular films, subscribers still have to pay.
Two-thirds of Amazon Prime customers are also subscribed to Netflix. But Prime is growing much faster, and in the next two to three years, the cult phrase "netflix and chill" is predicted to become less relevant. Experts predict that in the end, users will abandon Netflix in favor of cheap products and fast delivery. There are two options for saving the competitor: foreign customers (Prime has almost all subscribers in the US, Netflix has half in other countries) and original TV shows of a very high level.
What do not they have?
Companies do not like to get out of their comfort zone. Facebook buys other social networks – Instagram, Whatsapp. Google programs gadgets and works on IT. Shareholders, as a rule, do not like to invest billions in unfamiliar industries. But the management of Amazon rules the way it wants. Experts say that the company does not have any brakes at all: it already owns everything that could potentially bring profit in the future.
The following Amazon assets already exist:
- The main American Internet outlet (it is very loved by the clients of Bandera) – 6pm;
- Woot.com store: discounts up to 80% on just a few items every day;
- Jewelery line with Paris Hilton;
- The online platform of Twitch;
- American "Film Search" – IMDB;
- The seller of audiobook Audible;
- Clothing and footwear store Zappos, etc.
On "pocket money" Jeff Bezos bought the Washington Post, one of the largest in America, paying $ 250 million in cash. And the most famous project of a billionaire is the Blue Origin program, which should help a person colonize space.
A couple of months ago, the Internet giant bought a Whole Foods healthy food network for $ 14 billion. Amazon has its own fleet of 40 huge airplanes and thousands of trucks. She makes smart robots – so that they can find the right products in her warehouse and send them to the address. At the end of last year, the company launched stores without cashiers. And delivering things around the city in 30 minutes will be unmanned drones, working on GPS. In the beautiful bright future of the "Amazon" can not remain a place for employees …
The lion's share of the profits of Jeff Bezos, of course, falls on his huge online store. Starting with the sale of books in the garage, it has grown to a gigantic size, and threatens to become a monopolist in the field of online sales. That's what CNBC analysts write in their forecast of the record $ 1 trillion worth of Amazon:
The Internet has changed everything. Now the more the company – the more profitable and profitable it is for the customer.
Amazon is lucky to become the biggest seller on the Internet amid the crisis of dotcoms, and now the company is likely to miss its chance. From the most impressive: the store is able to monitor and adjust prices to always offer the customer as cheap option as possible. And as we have many SEOs trying to guess the algorithms of "Yandex", so in the USA sellers try to adapt to the algorithms of "Amazon" – to make their goods one of the first in the search field. As WSJ writes, there appeared whole services of price optimization, "repricers". They automatically change the prices for your goods, so that they like "Amazon". The systems there are so complex that WSJ journalists compared them to trading in the stock market. The result is always profitable for buyers, and the profit to Jeff Bezos, who earns on commission and on delivery.
Such a system creates a vicious circle: the biggest sales – the lowest prices – Even more customers – even more sales. The store's profit is growing at 23% per year, and already reaches $ 38 billion per year. Amazon accounts for 43% of all online sales in the US, and by the end of 2018 the store intends to increase this figure to 55%. Here is what the founder himself says:
"I am often asked what will change in the next 10 years. But this is a bad question. It is much more important that it will not change. On this you can build your business strategy. In our retail, we know that buyers want low prices. And I know that it will be like this in ten years. They want a quick delivery; They want the biggest choice. I can not imagine that in ten years the client came to me and said "Jeff, I love Amazon, but I would like to see prices are a little higher." Or, "I love Amazon, but the delivery is too fast." "
Even if the current growth rate slows down to half, in ten years Amazon will cost more than $ 2 trillion, and Bezos will exceed $ 300 billion. In $ 1 trillion the company can reach already in this decade. For businessmen who want to compete with Jeff Bezos, this sounds menacing. But to us this is only a plus: the more Amazon, the lower prices are on it.
Already, the electronics on Amazon – video cards, laptops, smartphones – is much cheaper than in Russian online stores. There the most favorable prices for quality toys, cosmetics, branded clothes and shoes. And the best delivery from Amazon to Russia is with Bandera. Register with this link and get a 7% discount on the first delivery of your purchases from the USA.
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