#4 – Will Amazon take over the world?

Over the past 15 years – investors, small business owners and consumers heavily debated the positive and negative impacts of Walmart. How much was Walmart impacting local small towns?  How important was Walmart for the US economy?  And the debate made sense (given the negative press on how Walmart paid and treated it’s employees), and the sheer size of Walmart (~450bn of revenue in 2012) more than many  International Countries total GDP (larger than Poland’s total GDP!)

But as we all know, and use… Amazon has emerged, and the dominance, growth and potential Amazon has been incredible. Via smart infrastructure investments distribution, warehousing and shipping logistics – Amazon has been able to amass online delivery capabilities second to none. Complimented by a ingeniously designed Amazon Prime loyalty program and a significant set of product offerings (e.g., Kindle, Cloud, Echo etc.)

Demonstrated in simple summary of total Revenue and YoY growth (from 2012 to 2016)  as compared to retail distributors in various sectors of the economy Amazon competes in, the story is striking.

  • On average no competitor has had an average growth rate of above 10% revenue growth in a period where Amazon has averaged well above 20%
  • Amazon’s total revenue has doubled from 48bn in 2012 to more than 107bn in 2016
  • Many of Amazon’s competitors are flat and are down in revenue from 2012-2016 (Staples, Sears, Best Buy, Barnes and Nobles)
  • What’s even more amazing it is likely that much of Walmart and Target’s stagnation in revenue growth is solely due to Amazon!!
  • Amazon is now almost the size of Costco and likely be the #2 retailer by the end of 2017 (in terms of total revenue)
  • Not pictured below are the companies already feeling the pain of the consolidation and dominance of the Walmarts and Amazons (Sports Authority, Borders, Radio Shack)

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You might say – shouldn’t we be looking at net income, or the bottom line? and in some respects, it is important to look at how much Amazon is making (which was nearly 1.3bn a record high in 2016) but then we would lose sight of the massive investments Amazon is making in it’s infrastructure capabilities (to deliver and penetrate new markets e.g., supermakets/fresh direct) which impact the overall picture of net income.

My view is you will continue to see massive pressure on the likes of Staples, Best Buy, Bed Bath and Beyond, Barnes and Nobles – etc. really forcing them to become the only destination for that segment (for when a customer wants to try something out in person) otherwise why do you need them?