Amazon Without Bezos: Business as Usual?
The end of an era, or business as usual? Whatever the future may bring, it’s hard to disagree that Jeff Bezos is stepping down as chief executive at the height of Amazon’s powers. Pick a metric.
In Q4 Amazon easily blew past the $100bn mark, registering $125.56bn in earnings for the quarter, up 44% on 2019 non-pandemic peak. Even with Covid-19 costs of around $4bn a quarter, Amazon was already well-positioned to exploit the global pandemic. There have been hiccups and disruptions along the way, but many of Amazon’s rivals have suffered far worse.
Surely, the bottom line must’ve suffered due to these costs? Definitely, but it didn’t stop another record results year, with 2020 profits registering $24bn. These profits continue to be reinvested in the company, helping to build the infrastructure and technologies that have placed Amazon in such a dominant position.
The UK currently has an e-commerce growth rate of 34.7%, and Amazon is sitting comfortably with a 30% share that continues to increase. Traffic numbers are high, with Amazon the most prominent retail destination. And while mobile commerce growth may be driven by social shopping, Amazon is proving itself no slouch. With 41 million downloads in 2020, it has comfortably the #1 most-downloaded shopping app worldwide.
Bezos hands his successor, Andy Jassy, a company in the best shape of its 26-year existence. But the former head of Amazon’s Web Services will still have significant challenges ahead.
Amazon’s public reputation continues to accumulate tarnish year after year. Despite being the UK’s favourite shopping brand, there are suggestions that this is driven almost entirely by the necessity and the convenience it provides. Surveys report that only a minority feel a genuine connection with the brand. Despite overwhelming success, Amazon’s 2020 has been dogged by controversy, scrutiny and action against it by regulators both in the US and abroad.
Continued criticism about the conditions faced by its workers has been brought into even sharper focus by the company’s ‘severe’ opposition to unionisation. The European Commission has already uncovered evidence that Amazon has used seller data to its advantage. In the US legislation is being prepared to tackle Amazon’s role as a marketplace used to sell fake and unsafe goods to the public.
Retail concerns continue, and Amazon has struggled in some of the areas it’s looked to for growth. Indeed, before the pandemic, this growth was becoming more difficult to find in its core business. The future may require expensive investment in its entertainment output to encourage customer loyalty in the face of Apple, Disney and Netflix. The growing global influence of China is a reminder that Amazon has yet to corner that market. It may ultimately prove to be the source of rivals or new business practices that threaten it in the future.
Or perhaps the end will come from the inside? There is growing political momentum towards breaking up the tech giants that have dominated the last ten years. Given that the new chief executive comes from AWS, which contributes more than half of Amazon’s operating income, will there be sufficient temptation to perform a separation? Freed from the costs of supporting the retail business, you could argue that AWS would reach even greater heights than it already has. And if that happens, the outlook for retail could be very different indeed.