Walmart, the top-ranked company on the 2017 Fortune 500 list, is in the general merchandise industry according to a Wikipedia listing of the world’s largest companies by 2016 revenues. The industries that other Fortune 500 companies such as Apple, Exxon Mobil, and General Motors are in is also accurately identified by the Wikipedia listing.
Now, let’s look at how Amazon, the No. 12 company on the Fortune 500 list with almost $136 billion in 2016 revenues, is identified. Amazon, according to the Wikipedia list, is in the Internet industry. Founded in 1994, Amazon, which is formally known as Amazon.com, Inc., is certainly best known for its pre-eminence in e-commerce transactions completed on the Internet. In 2017, Amazon was responsible for about 42 percent of U.S. online sales and about 52 percent of the U.S. cloud storage market.
Calling Amazon just an Internet industry company, though, is becoming increasingly inaccurate because the Seattle-based company is in the midst of a remarkable transformation. For 20 years, people have been asking Amazon founder and CEO Jeff Bezos, 54, whether he would ever open a physical store. For 20 years, he said “no” — and he is now changing his answer.
Bezos’ and Amazon’s flexibility is part of the reason “Why Amazon Is The World’s Most Innovative Company Of 2017” according to Fast Company. Bezos told the magazine that Amazon is making dramatic changes precisely because it wants to be innovative in finding solutions to previously unsolvable problems. In an 8-day period in late January, 2018, it opened a cashier-less grocery store to the public for the first time and co-founded a health-care company “free from profit-making incentives and constraints” so their employees’ costs will drop.
“Our job is to invent new options that nobody’s ever thought of before and see if customers like them,” Bezos, the world’s richest person, told Fast Company. “Our customers are loyal to us right up until the second somebody offers them a better service. And I love that. It’s supermotivating for us.”
Lots Of New Jobs
Amazon’s plans for the future are so ambitious that it announced in late 2017 that it wanted to build a second corporate headquarters where about 50,000 employees would work, and was seeking bids from cities that wanted to be the site of the $5 billion office complex.
Fully aware that Amazon has invested $38 billion into the $330 billion economy of Seattle, the site of its only current headquarters, from 2010 through 2016 and 40,000 people work there, 238 places bid for the headquarters project. On Jan. 18, Amazon announced the 20 finalists — Atlanta, Austin, Boston, Chicago, Columbus (Ohio), Dallas, Denver, Indianapolis, Los Angeles, Miami, Montgomery County (Md.), Nashville, Newark, New York City, Northern Virginia, Philadelphia, Pittsburgh, Raleigh, Toronto, and Washington, D.C.
As of late 2017, Amazon had 541,900 employees. Walmart is the only American company with more. The company had fewer than 100,000 employees as recently as 2012, and added about 200,000 jobs in 2017 alone. Amazon is so large that it has the ability to revitalize a large city’s economy.
“Amazon now occupies a mind-boggling 19 percent of all prime office space in (Seattle), the most for any employer in a major U.S. city,” The Seattle Times reported.
Amazon’s expansion has impacted industries as well as communities. The company has had an online grocery business, AmazonFresh, since 2007, but in 2017 it dramatically expanded its involvement in the grocery retail business with its $14 billion purchase of Whole Foods Market, which has 477 stores in 42 states. The purchase was ranked as one of the top business stories of 2017 by several publications and had an immediate impact on the industry.
“Amazon is terrifying for its competitors in part because its low-margin business pulls each industry it dominates into a kind of deflationary whirlpool,” The Atlantic magazine reported in its article “Why Amazon Bought Whole Foods.” “If Whole Foods follows the Bezos playbook, shoppers can expect prices to fall, and investors will expect revenue to rise. Indeed, news of the partnership sent grocery competitors’ stocks plummeting. Stocks for Kroger, Costco, and Dollar General all fell more than six percent within the hour.”
By the end of 2018, Amazon’s new grocery stores could be part of the company’s innovative cashier-less stores. As Wealth Authority reported in its analysis of the grocery retail business, Amazon is working on an experiment called Amazon Go that enables shoppers to pay for their groceries by scanning their smartphones when they enter an Amazon store and “using mobile sensing technology to keep tabs on the items they remove from shelves,” reports CNBC.
Amazon’s first cashier-less store opened in downtown Seattle on Jan. 22.
An Interest In Health Care
Amazon’s purchase of Whole Foods can also help at least a couple of its other business in 2018, according to The Atlantic magazine article.
One of Amazon’s most successful business ventures in recent years has been Amazon Prime, which offers a wide variety of products and services for $99 per year or a monthly fee. An Amazon Prime member has access to e-books, music, streaming videos, groceries, household products, and pet-care products as well as free shipping.
The Atlantic speculates that Whole Foods products could be part of the Amazon Prime package. It also said that business analysts believe the Whole Foods stores could be part of Amazon’s distribution business.
“Amazon is trying to become Walmart — not just an online megalith, but also a physical retail powerhouse with dynamic pricing and stocking strategies — faster than Walmart can become Amazon,” the article says.
During its 23 years, Amazon has had a business strategy that Fast Company magazine calls “continuous evolution.” A company that was an online bookstore for the first four years of its existence has launched innumerable businesses as this timeline shows. The list of businesses, by the way, does not include The Washington Post, which Bezos bought but is not part of Amazon.
Now, though, the company may be preparing for its biggest challenge — the health-care industry. According to CNBC, Amazon is leaning strongly toward selling prescription drugs online. The article says it has researched this opportunity — a $560 billion per year market — for years and has consulted dozens of experts on this possible move.
Amazon also co-launched a new health-care business on Jan. 30 with Berkshire Hathaway Inc. and JPMorgan Chase & Co. The three companies’ initial goal is to cut their employees’ health-care costs, but the headlines about the business suggest that the joint effort has far more potential.
“Can Amazon Transform Health Care? It’s Not A Crazy Idea” is the headline for this Bloomberg View article. “Can Amazon, Berkshire Hathaway, and JPMorgan Revolutionize Health Care?” is the headline for this Slate magazine article.
“The new partnership has the potential to be one of the most ambitious employer efforts to date to control health expenses,” this Bloomberg Markets article says. “While the companies provided few details, their combined clout and expertise in technology and finance could be used to bring drastic changes to the way prescription drugs are paid for, according to analysts.”
Regards,
Ethan Warrick
Editor
Wealth Authority
