(Mt) – Brock University Amazons Market Development Strategy Discussion

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Amazon.com Acquisition of Whole Foods Amazon announced on June 16th, 2017 that it would pay $13.7bn to buy Whole Foods, a grocer known for its organic produce. On the face of it, the purchase might not seem to upset the grocery cart, either for Amazon or for the supermarket business. Amazon controls a measly 0.2% of America’s grocery market; Whole Foods has just 1.2%, according to GlobalData, a research firm and consultancy. Nor is Whole Foods a juggernaut. It has about 450 stores in America, Britain and Canada, but American shoppers are now buying a wide range of organic foods at other grocers, without having to put up with Whole Foods’s steep prices or its hipster clientele. Nevertheless, the deal marks a new era for Amazon. It has run a few experiments in physical retail, including bookstores in Chicago and in New York. In Seattle it is testing a small grocer, Amazon Go, where consumers can pick up food without having to stop at any checkout counter. Buying Whole Foods is a venture into brick-and-mortar shops on a different scale. The deal is ten times larger than any the e-commerce giant has pursued to date (Twitch Interactive, a gaming site bought in 2014, for example, cost less than $1bn). That its first big deal in physical retail is a grocer underlines how successful the company has been in selling other types of goods online. Amazon has no need to buy a chain of electronics stores, for instance; it has already bulldozed into that category. Some clothing shops had predicted that consumers would never want to buy online—surely people would want to test a frock’s fit in stores, they argued. It turns out that many consumers do not. In 2016 a fifth of American clothes and accessories were bought online, according to Cowen, a financial-services firm. Selling fresh food through the internet is a different story. E-commerce accounts for just 2% of America’s food-and-beverage sales. Even as Amazon has raced into other segments of goods, it has only tiptoed into grocery. Amazon Fresh, a grocery-delivery service that it started ten years ago, is still in only a handful of cities. (Prime Now, its two-hour delivery programme launched in 2014, is already in 31.) That’s because grocery’s margins are low, even when sold in stores, and its goods devilishly hard to deliver. Bananas bruise, meat rots, ice cream melts and a gallon of milk, if packed at the top of a grocery bag, will crush the muffins placed below. Amazon has tried to attack these challenges, using machine learning, for example, to distinguish ripe strawberries from mouldy ones. But the acquisition of Whole Foods marks the start of something new, with the combined firms likely to have an outsized impact. The most straightforward next step is for Amazon to unleash its usual arsenal of cash and innovation to enhance Whole Foods’s existing offering. For example, it might improve Whole Foods’s delivery service, now run by a startup called Instacart, or deploy the “Amazon Go” technology that lets customers leave the store without checking out. Running Whole Foods, in turn, will help Amazon better understand and expand its overall grocery business, online and off. Whole Foods has a fantastic cold supply chain, which immediately gives the Amazon Fresh model a big boost, says Paul Beswick of Oliver Wyman, a consultancy. Whole Foods will also give Amazon more data on how consumers shop, how to spot promising local brands and how to expand private-label goods. Whole Foods’s store brand could in future be sold on Amazon.com. As with most of Amazon’s new ventures, the company will probably accept slightly lower margins and pursue a bevy of experiments, gathering data as it goes, then scale up the few that work. Years ago a deal that gave Amazon less than 2% of a 1 market might not have raised eyebrows. Now competitors know Amazon well enough to be terrified. The start of Amazon and its culture Amazon is a Fortune 500 e-commerce company based in Seattle, Washington. It has the distinction of being one of the first large companies to sell goods over the Internet. In 1994, Jeff Bezos founded Amazon, which launched the following year. If you’re of a particular age, you likely remember that Amazon started out as an online bookstore and then quickly diversified by adding other items, including DVDs, music, video games, electronics, and clothing. In 1999, just five years after he started Amazon, Jeff Bezos was named Time magazine’s “Person of the Year.” He received this honor largely because of the company’s success in popularizing online shopping. A timeline for Amazon’s development is as follows: 1994 – Amazon is founded. 1997 – issued IPO 1998 – announced entering sectors other than books 2002 – started to explore $99 prime membership service (annual fee for fast delivery) and launched the service in 2005. 2006 – launched AWS (cloud computing service) 2006 – launched FBA (fulfillment by Amazon – a platform for third party sellers) 2007 – launched Kindle; currently Amazon had 28 categories of products. 2009 – acquired Zappos (shoes) 2011 – entered video and entertainment sector 2014 – acquired Twitch (video games) 2015 – entered food delivery supply chain 2017 – acquired Whole Foods Amazon.com considers itself a completely customer-centric company. In fact, it has described itself as “customer-obsessed.” The company really believes that if it doesn’t listen to customers, it will fail. Amazon has stated that it wants to take advantage of any opportunity that presents itself to the company during a time of unprecedented technological revolution. Amazon not only believes in putting customers first but also in ownership from its team. “Ownership matters when you’re building a great company,” the company has said. “Owners think long-term, plead passionately for their projects and ideas, and are empowered to respectfully challenge decisions.” Getting a job at Amazon may not be easy (especially since the company prides itself on its high hiring bar). When making a hiring decision, management asks, “Will I admire this person? Will I learn from this person? Is this person a superstar?” While tech companies such as Google Inc. are known for the perks it gives employees, Amazon operates differently. The company believes that frugality breeds resourcefulness and self-sufficiency. As of early 2017, Amazon had nearly 269,000 employees worldwide. It is known for its technical innovations and boasts that its engineers handle complex challenges in large-scale computing. Software development engineers, technical program managers, test engineers and user interface experts work in small teams throughout the company to build an e-commerce platform that’s used by customers, sellers, merchants and external developers. The IT Department at Amazon.com also has a massive responsibility, as it oversees an enormous system that is extremely reliable. Amazon.com describes the IT group as “system, 2 database, and networking experts (who) build and operate highly reliable, scalable distributed systems with terabyte-sized databases and infrastructure that can handle a massive number of transactions.” Technology at Amazon.com is definitely on the cutting edge! Get your kicks on PHX 6 Among the things that Amazon relies on to keep ahead of such competitors are Mr Bezos and the culture he has created. Though like many billionaires he has developed outside interests—he has a firm building a spaceship and owns a newspaper, the Washington Post—he still dominates the company, and has made invention, long-term thinking and viewing the world through the customer’s eyes its catechism. An almost perverse pleasure in low margins inspires ventures no one else would think of, like AWS. The building names on the Seattle campus drive the message home: “Day 1 North” reminds employees not to be complacent, but always to act as if just starting out; “Wainwright” is named after the first person to buy a book through the site. The bulldozer is an obsessive curator of its own traditions. Mr Bezos is a notoriously testy boss, but also an inspiring one for the right sort of person. “He challenged me to create something like no one else challenged me,” says Vikas Gupta, who built Amazon’s payments software and now runs a startup. But the strengths the culture may offer are accompanied by a touchy, tight-lipped side that makes Amazon difficult to understand or to love. Amazonians will not tell visitors to its campus exactly where Mr Bezos works. They chatter freely about the consumer benefits of the firm’s devices and services but say as little as possible about the commercial logic behind them. The attitude is “everything we don’t talk about is a competitive edge,” says Mr Gupta. Another huge Amazon advantage is a global network of 96 “fulfilment centres”, warehouses both vast and clever that shuffle shipments from thousands of suppliers to millions of customers. PHX 6, one of four such centres in Phoenix, Arizona, is a conveyor-belted Grand Canyon with a roof. With 11 hectares of floor space it could easily hold 20 American-football fields. A slogan over the door reads, a bit creepily, “Work hard. Have fun. Make history.” Inside, “stowers” scurry about with yellow containers placing items seemingly at random on shelves— board games abut power tools—and recording their location with pistol-like scanners. “Pickers” wield pistols that guide them on the shortest path through the jumble, measure their progress and log in the items they pluck from the shelves. Amazon’s plan to deploy thousands of robots in its fulfilment centres will shorten the pickers’ journey (and perhaps, in the long run, their careers). Through algorithmic alchemy, orders are packed into right-sized boxes, stamped with address labels and hauled away by couriers from UPS, FedEx and others. Not all the stuff in PHX 6 is Amazon’s. “Fulfilment by Amazon” (FBA) allows independent merchants not just to sell their wares on Amazon’s website but also to ship them through Amazon’s supply chain. This helps the distribution centres pay their way. It also binds the merchants more closely to Amazon. Sellers tracked by Mercent, an e-commerce software company, use FBA for 16% of their sales, up from 8% in 2012. Amazon’s original idea was to have few warehouses and to put them far away from population centres, thus avoiding the need to collect sales tax in the states with the most business. Now it is positioning infrastructure like siege equipment near big cities, speeding delivery and cutting its costs. In North America Amazon can offer same-day delivery to 23% of the population, says Marc Wulfraat of MWPVL International, a supply-chain consultancy. By 2015 it will be 28%. Spending on fulfilment centres in Europe and Asia as well as America tripled between 2010 and 2013, says Colin Sebastian of Baird, an investment bank. In Britain and parts 3 of America Amazon has been experimenting with making last-mile deliveries itself, a practice that may expand along with its logistic network. Relentless.com The world saw a website selling books and assumed that Amazon was, and always would be, an online bookshop. Mr Bezos, though, had bigger plans. Books were a good way into online retailing: once people learned to buy books online they would buy more and more other stuff, too. The website would be able to capture much more data about what they looked at and thus might want than any normal shop; if they reviewed things, that would enrich the experience for other shoppers. He saw a virtuous circle whereby low prices pulled in customers and merchants, which boosted volumes, which led to ever lower prices—a “flywheel” that would generate growth for as long as the company put the interests of the customers first. Early on, Mr Bezos registered “relentless.com” as a possible name; if it was a little lacking in touchy-feeliness, it captured the ambition nicely. A phone to shop with. The latest manifestation of that ambition was unveiled in Seattle on June 18th: Amazon’s first phone. The Fire Phone is designed to stand out in a market crowded with sleek devices in various ways, such as with a sort-of-3D screen, but none is more telling than its Firefly button. This uses cloud computing to provide the user with information about more or less anything the phone sees or hears, be it a song, a television show, a bottle of wine or a child’s toy—including how to buy it from Amazon. If it works as promised, it will turn the whole world into a shop window. The Fire Phone takes pride of place in an expanding family of devices with which Amazon has both anticipated and responded to shifts in the way consumers read, shop and divert themselves. Offering iPad-like tablets, e-readers and a television set-top box for streaming videos has brought the company into more direct competition than ever before with Apple and Google, which also offer suites of hardware, digital content and services. Amazon’s hope is that its signature selling points—features and quality that belie their relatively low pricing—will attract consumers to its devices just as they have to its online shops. Then they will end up shopping for other stuff, too. There is a lot of other stuff for them to buy. According to Internet Retailer, a magazine, Amazon now carries 230m items for sale in America—some 30 times the number sold by Walmart, the world’s biggest retailer, which has its own fast-growing online business—and there is no sign of let-up. Amazon’s total revenues were $74.5 billion in 2016, but when one takes into account the merchandise that other companies sell through its “marketplace” service the sales volume is nearly double that. Though by far the biggest online retailer in America, it is still growing faster than the 17% pace of e-commerce as a whole. It is the top online seller in Europe and Japan, too, and has designs on China’s vast market. In 2016 Amazon was the world’s ninthbiggest retailer ranked by sales; in 2018 it is number two according Kantar Retail, a research group. On top of its online-retail success, Amazon has produced two other transformative businesses. The Kindle e-reader pioneered the shift from paper books to electronic ones, creating a market that now accounts for more than a tenth of spending on books in America and which Amazon dominates. Less visible but just as transformative is Amazon’s invention in 2006 of cloud-computing as a pay-as-you-go service, now a $9 billion market. That venture, called Amazon Web Services (AWS), has slashed the technology costs of starting an enterprise or running an existing one. 4 And Amazon enjoys an advantage most would-be competitors must envy: remarkably patient shareholders. The company made a net profit of just $274m in 2016, a minuscule sum in relation to its revenues and its $154-billion value on the stockmarket. Even after a recent slump its shares still cost more than 500 times in 2016’s earnings, 34 times the multiple for Walmart. Its core retail business is thought to do little better than break-even; most of its profits come from the independent vendors who sell through Amazon’s marketplace. Matthew Yglesias, a blogger, memorably described Amazon as a “charitable organisation being run by elements of the investment community for the benefit of consumers.” The company’s ascent has left a trail of enemies and sceptics, including competitors crushed—or forced to sell out to Amazon—by its ruthless pricing practices. It has been attacked for driving workers at warehouses too hard and of avoiding tax in America, Britain, France and Germany. The French culture minister has accused it of “destroying bookshops”. To Stephen Colbert, a comedian whose publisher, Hachette, is warring with Amazon over pricing, Mr Bezos is “Lord Bezomort”. Amazon is sometimes a bully, but it does not yet threaten competition the way that its Seattle neighbour Microsoft did when it enjoyed a near-monopoly of operating systems for PCs. For every shop it obliterates another finds itself selling to places it never imagined it could. Ward Gahan, who runs BiddyMurphy.com out of an Irish gift shop in South Haven, Michigan, marvels that through Amazon he is shipping tweed caps to São Paulo. And Amazon’s success means that competitors are keenly plotting ways to best the company. “We wouldn’t be here if it wasn’t for Amazon,” says Tom Allason, founder of Shutl, which uses local courier networks to deliver packages from retailers even faster than Amazon can. It was bought by eBay, an Amazon rival, late in 2016. Following the Prime directive. The company sees ample opportunity for putting this infrastructure to work. Digital natives are entering their prime shopping years. When Walmart, with a poorer clientele, sells almost three times as much to its average American customer every year as Amazon does to its, there is plenty of room for Amazon to grow further. One way to narrow the gap is to sell more “consumables”, such as toiletries and food. These account for nearly half of spending by internet-connected American households, but are thought to be a much smaller share of Amazon’s sales. Sanford C. Bernstein, a research firm, thinks its potential American market for non-perishables is $150 billion. Then there is Prime, the flypaper on Amazon’s flywheel. Some 25m subscribers pay an annual flat fee ($99 in America, £79 in Britain) to belong to this souped-up loyalty programme, which offers shipping at no extra cost as well as increasing amounts of digital content. Scot Wingo of ChannelAdvisor, a company that helps online sellers, reckons that people with Prime spend around four times what others do and account for half of all spending at Amazon. Many Amazon activities that look tangential to shopping have been designed to make Prime even stickier. In April it paid HBO, a television company, an estimated $200m-250m for a package of shows which Prime members can stream at no extra cost. On June 12th it added more than a million songs. Amazon produces programming of its own for the Prime audience, including several kids’ shows (mothers are good customers). If they own Kindle e-readers or tablets members can “borrow” a book a month. A slow reader need never pay for one. And Amazon is very keen that they should own such devices. The shift from desktop to mobile shopping is a “big second wind to the whole of e-commerce,” says Sebastian Gunningham, the head of Amazon’s marketplace, and its devices are intended to catch as much as possible of that wind. 5 From the original Kindle, on which you could buy e-books, it moved to the Kindle Fire tablet, on which you could buy anything, and now the Fire Phone. As with every phone and tablet, the user can download apps from all sorts of other people, though those of Amazon’s rivals look under-represented. The gadgets do pretty much anything that phones or tablets from Apple or Samsung do, and have nifty wrinkles—such as a direct video link to technical support, on the Fire and the Fire Phone—which others lack. They are also pretty cheap—Amazon does not propose to turn a profit on them. It does, though, integrate them thoroughly into its other services, making them little wardrobes that open out into the Narnia of everything it has to offer. The Fire Phone comes with a year’s free Prime membership, encouraging people to become accustomed to Amazon’s streaming—and its free deliveries. Outside the realm of e-books, Amazon has yet to make a great impression in the world of devices. Tablets from Apple and Samsung easily outsell the Kindle Fire—perhaps because, unusually for an Amazon emporium, its app store offers a smaller selection than do the others. “We struggle with whether hardware and streaming media will have value long-term,” says Eric Sheridan, an analyst at UBS. But the feature-packed Fire Phone shows that Amazon is not giving up. As Eric Best of Mercent says, “the battle for the shopper will be won on the phone”; Amazon thinks owning a bit of that battleground matters. Amazon’s competitors are increasingly turning all sorts of devices into windows that display the wares of all sorts of other shops. Google sells mobile “local inventory ads” which point shoppers to nearby stores—an online-retailing option that avoids the need for fulfilment centres and delivery vans. It has enriched search results for shoppers with Amazon-like images and prices. Mr Best says he has noticed a slowdown in the growth of Amazon’s marketplace sales since Google became more active in selling stuff; Amazon claims not to see any such trend. Turkish delight, too. Whereas some see Google as Amazon’s biggest worry, others tout Walmart, which has e-commerce sales that are growing faster than Amazon’s. Then there is Alibaba, a Chinese e-commerce giant soon to receive an infusion of cash through a share offering. It is planning a marketplace in America called 11 Main and is part-owner of ShopRunner, which promises two-day delivery from 100 retailers. A new wave of online-only shops like Wanelo (“Want, need, love.”) could pose a challenge. Or perhaps the threat will come from firms like Instacart, which lets people make deliveries in their spare time. Mr Bezos has always insisted that Amazon will continue to be “customer-focused” rather than “competitor-focused”. In the letter he sent to shareholders when Amazon went public in 1997—and has had republished every year since—Mr Bezos warned that because of this focus the company would take a long-term view. If you ask Amazon officials about ventures that appear not to be prospering, like its push into Alibaba’s Chinese home base, they echo the boss. “We thought it would take us five years” to succeed there, says Diego Piacentini, the international chief. “We’ve figured out it will take us 15.” But long-termism takes investment. In its early days Amazon danced around retailers because its lack of stores made it “capital-light”. Its empire of warehouses and data centres changes that. Now its pitch to merchants and technologists is that it will build physical assets so that they don’t have to. Amazon still uses less capital than traditional retailers, observes Matt Nemer of Wells Fargo Securities. But it is no longer capital-light. The flywheel is ever heavier— but must spin as fast. The focus on Amazon’s meagre profits, though, can exaggerate the impression that its shareholders are simply waiting for it to start releasing all the revenue made possible by the dominant position it has achieved. In the past five years it has produced $10 billion of free 6 cashflow, a less distorted measure of profitability than net income, which was just $2.9 billion over the same period, says Mr Nemer. That is still not much for a company worth $154 billion on the stockmarket. But investors are counting on Amazon’s growth to increase it. If you look at Amazon’s share price in relation to its sales (including those through the marketplace) it looks like a bargain, according to a recent note by Wolfe Research, an equity-research firm. And investors know Amazon’s managers share their interests. Shares are the main way Amazon pays top employees; the highest salary—Mr Piacentini’s—is $175,000. Though it may look bent on world domination, it often passes on ventures it thinks will not pay off, like moving into South Korea. “The cost to be a relevant e-commerce player would be too high,” says Mr Piacentini. AWS will be “way more global” than Amazon’s retail operation. In a television interview in 2016 Mr Bezos admitted that Amazon “will be disrupted one day”, though not, he hoped, during his lifetime. It is hard to imagine it happening soon. That is not because Amazon always makes the right bets. The skeleton of an Ice Age bear displayed in Seattle, which Mr Bezos bought on Amazon’s abortive auction website, commemorates the failure. But the bets he has placed on customers, patience, technology and scale appear to have paid off. And he has followed through on them relentlessly. The pandemic is playing to almost every one of Amazon’s strengths As the coronavirus pandemic has forced people to stay inside, few companies have proven themselves as essential as Amazon. From groceries to cleaning supplies, shipments from Amazon have become lifelines for many who are steering clear of supermarkets and other physical retail stores. Company executives have likened the surge in demand to the annual holiday shopping crush. But e-commerce isn’t the only sector where Amazon is booming. Amazon sells access to audiobooks and original television programs that are helping to entertain reluctant shut-ins. And with more people staying home, that’s more time they have to engage with Amazon’s AIpowered smart speakers. The breadth of Amazon’s sprawling business interests, and its increasingly central place in America’s fragile supply chain, underscores the company’s hold on consumers — and its potential to solidify its dominance in the coming months. The longer this crisis goes on, the more formidable Amazon will become, according to James Bailey, a management professor at George Washington University’s business school. “Every crisis creates a void,” said Bailey. “And whatever force fills that void, inherits power.” Amazon isn’t the only company that could benefit. The crisis appears to be lifting the entire e-commerce industry, according to Bank of America research, which showed the sector grew 16% in March compared to a year ago. Those consumer habits could persist even after the crisis passes, marking a potential tidal wave of change benefiting Amazon’s bottom line for years to come. But thanks to its existing advantages in scale and efficiency, Amazon stands to emerge from the pandemic stronger than many of its competitors, experts say. In light of the pandemic, Amazon could pull in as much as an additional $4 billion in revenue this year, though added costs of managing the pandemic may cut into Amazon’s profits. Amazon’s expanded importance is even being felt in Washington, where CEO Jeff Bezos, a frequent target of President Donald Trump, has been communicating often with the White House since the outbreak began. With Amazon doing its part to smooth an already turbulent economic situation, Trump needs Bezos more than ever. But now that it’s been laid bare, the 7 world’s dependence on Amazon may only reinforce questions policymakers were asking before the current crisis about whether the company is too powerful. Prime positioning. The most visible changes in demand for Amazon services have, unsurprisingly, taken place in its core online retail business. The company that built its reputation on ultra-fast deliveries is now experiencing uncharacteristically long wait times to ship many products, including hand sanitizer, toilet paper and digital thermometers. Amazon spokespeople including Jay Carney, senior vice president of global corporate affairs, have compared the volume they’re witnessing to peak holiday shopping periods. Last week, Amazon said in a blog post that it’s nearly finished hiring an additional 100,000 workers to “help meet demand.” But these boom times aren’t without further challenges. For example, Amazon has had to battle price gouging on its platform. Amid questions from lawmakers and attorneys general about the practice, Amazon has said it is using a mix of manual and automated reviews of its platform to catch thousands of price gougers, and reporting them to the authorities. “Amazon has zero tolerance for price gouging,” the company said in a blog post last month. The crunch is affecting front-line workers, too, some of whom anticipate Amazon could need even more hands as workers continue to fall ill or need to quarantine themselves. More than a dozen Amazon facilities have now been hit by the coronavirus, and some workers have staged walkouts to protest what they say are insufficient protections on the job. “It’s getting backed up,” one employee who works at Amazon’s facility in Staten Island, JFK8, told CNN in an interview. “There’s not enough employees to move this stuff.” The worker, who spoke on condition of anonymity for fear of losing his job, said so many of his colleagues have taken paid or unpaid coronavirus leave that the fulfillment center now resembles “a ghost town.” The complaints about Amazon’s safety protections reflect the enormous pressure the company is under to keep delivering packages during the crisis — and how vital the platform has become. Powering the internet. For all of the focus on Amazon’s e-commerce business, it’s the company’s cloud services unit that makes most of the company’s profit. Financial filings show that Amazon Web Services — which runs the websites of many consumer-facing businesses — accounted for 63% of Amazon’s operating income last year. Now, as usage of popular digital applications has grown amid the pandemic, that’s meant added usage of the Amazon cloud platform that supports them, too. “You’re seeing surges in things like Slack, Zoom, Fortnite, Netflix — all clients of AWS,” said Justin Post, an industry analyst at Bank of America. “The activity levels for some of their clients are through the roof.” Like many of Amazon’s subsidiaries, AWS declined to comment for this story. But the range of businesses Amazon owns demonstrates its reach. It has invested tremendously in Whole Foods and a separate grocery delivery service, Amazon Fresh, Post said, both of which are now poised to benefit massively from a population that’s increasingly avoiding brick-and-mortar supermarkets. Filling the downtime void. Just as Amazon faces an unprecedented kind of demand for physical goods, it also stands to benefit from a growing appetite for digital services as people seek to stay sane indoors. Amazon owns Audible, the audiobook marketplace. Last month, Audible made a selection of hundreds of audiobooks accessible for free as part of its response to the pandemic. 8 Since launching Audible Stories on March 19, 2020, traffic to the site has spiked. The new offering has received “millions of daily visitors” from around the world, Matthew Thornton, the head of global corporate affairs for Audible, told CNN. Meanwhile, a surge in digital entertainment may be boosting YouTube and Netflix, but also Amazon’s Twitch, the popular online platform where users can watch livestreams of other people playing video games. In recent weeks, the company confirmed to CNN, traffic and viewership on Twitch have risen across the board, particularly on channels linked to music and sports. With the cancellation of live sports, numerous professional basketball and football players have taken to streaming themselves playing games including “Call of Duty” and “NBA 2K.” Before the pandemic, Twitch was already among the 10 most popular video streaming services on the entire internet, according to the market research firm Sandvine. Now, facing higher demand, the company has had to downgrade its video quality in Europe, following in the footsteps of YouTube and Facebook. Amazon’s influence will likely exert itself in other ways, too, some more noticeable than others. Having exhausted Netflix’s catalog, Americans may soon gorge themselves on Amazon’s original television series, or buy more e-books for their Kindles. Cooped up inside, those with Amazon smart speakers may now be setting cooking timers more often, or asking their devices to play more music — giving Amazon even more behavioral data and speech samples it can use to hone its services to anticipate our every need. Playing to Amazon’s strengths. What makes Amazon particularly suited for our current moment isn’t just its ability to serve people’s needs remotely, or its massive customer base. It’s that those things help make Amazon the most well-oiled retail machine on earth, creating positive feedback loops where the more efficient it is, the more attractive it becomes. Consumers have little time or money to waste; that was certainly true before the pandemic, but is even more so now. That means the crisis may very well cement Amazon’s power further — and at the expense of rivals that are less efficient or can’t outlast the crisis, said Kevin Arquit, an antitrust lawyer at the firm Kasowitz Benson Torres. “It plays right into Amazon’s strengths,” he said. Pound for pound, Amazon is better equipped than its competitors to weather the pandemic, Arquit said, because its wealth, scale and supplier relationships translate into the most valuable trait of all in a crisis: resilience. As smaller or less nimble businesses close up shop, in some cases for good, it’s large incumbents like Amazon that will likely win out, he said. Until a few weeks ago, Amazon’s staying power wasn’t being hailed as essential. Instead, it found itself on the front lines of a very different battle — one in which policymakers like Sen. Elizabeth Warren were accusing large tech platforms of abusing their dominance. Warren and others have called for Amazon to be broken up and to face tough new regulations designed to rein in the power of Silicon Valley. She has specifically targeted Amazon, saying that by sharing its marketplace with third-party sellers, it is playing as both the umpire and the owner of the home team. Those concerns haven’t gone away. In fact, amid the outbreak, some policymakers may be even more attuned now to Amazon’s power over Americans’ lives. In their recent letter to Amazon, nearly three dozen states and the District of Columbia wrote that despite the company’s efforts to curb price gouging, it had failed to de-list “unconscionably priced critical supplies” that Americans need, such as hand sanitizer. Federal lawmakers have expressed similar worries. Paul Gallant, an industry analyst at the firm Cowen & Co., said in an investor note Wednesday that the pandemic has temporarily blunted the onslaught of criticism that faced Big Tech just 9 months ago — and that many dominant platforms are now likely “benefiting from new public awareness of how difficult remote life would be without them.” But, he warned, the federal government’s scrutiny of large, dominant tech platforms continues — on Capitol Hill, at the Justice Department and the Federal Trade Commission. Those investigations may result in reports or even lawsuits that may not be favorable to those businesses, he said. With Americans relying more on Amazon than ever, it’s a reminder of how pervasive its influence is, and how limited the constraints are on its growth. ” This [pandemic] will move the status quo to even more demand for online shopping, which obviously benefits Amazon, the largest player,” said Arquit. Questions 1. What’s the strategic motivation for Amazon for acquire Whole Foods? Which type of diversification (related or unrelated) can we call this move? How do you evaluate such a move? 2. What can you mention about Amazon’s organizational culture? Would you be happy to work for this company under this culture? 3. Why does Amazon allow independent venders to sell their product through Amazon and ship through Amazon’s supply chain? 4. What is Amazon’s market development strategy as shown in this case? 5. Looking at Amazon’s business expansion, from books, to AWS, to FBA, to Market place, to Whole Foods…..considering that Amazon is going to open the second headquarter in Virginia, what do you think Amazon will become in the future? Why there is a strong protest against Amazon’s selection of the location of HQ2? 6. The White House has repeatedly mentioned its concern about the growing power of Amazon. How should Amazon prepare for the looming problem – possible imposition of anti-trust law on Amazon? 7. Amazon has long targeted Walmart as its main competitor. Analyze how this pandemic helps Amazon or/and Walmart in their struggle against each other. Picture in the next 10 years whether Amazon would topple Walmart. 10

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