These are the 3 areas most likely to become Amazon's next growth driver — and Echo is not one of them (2024)
Amazon CEO Jeff Bezos went to great lengths in his annual shareholder letter this year to highlightthe three big "pillars" of his company: Amazon Web Services, Marketplace, and Prime.
All three businesses have played a significantrole in growing Amazon's revenue, which topped $100 billion for the first time last year. But as bigas those three businesses are, it's equally important for Amazon to find the fourth pillar of the businessthat could eventually generate billions ofdollars a year.
Alex Wong/Getty Images
"While I'll focus on those three, I assure you that we also remain hard at work on finding a fourth," Bezos wrote in the letter.
It's hard to predict where that fourth pillar will come from. Some think that it'll be Amazon's voice-controlled audio speaker, Echo, while some expect its video-streaming service to take off.
But according to RBC Capital's Mark Mahaney, these are the three areas most likely to become Amazon's next growth drivers: shipping, business supplies, and groceries.
Mahaney notes that hepicked them based on market size, market efficiency, Amazon's competencies, and signs of traction by Amazon. Here's a summary of his thinking:
Related stories
1. Shipping: Mahaney sees the parcel-shipment market to be about $200 billion in size, the smallest among the three. But he still believes that's a big-enough opportunity for Amazon to invest in, and an area that needs improvements given the shipment delays it experienced in recent holiday seasons. Plus, having a stronger logistics network will only bolster the customer experience.
Mahaney believes that Amazon already has the capacity and scale to build up its own logistics network, and it's only a matter of time before it bulks up its shipping business.
"Shipping as a Fourth Pillar for Amazon will be either an obvious option or an obvious reality," he writes.
Advertisem*nt
2. Business Supplies: Amazon Business sells everythinga company needs, from basic office supplies to industry-specific products like lab equipment or hospital wear. Mahaney believes that the business-supplies market to be $5 trillion worldwide.
Within a year of officially launching, Amazon Business has sold over $1 billion worth of products, and is growing 20%month-over-month. Given its size and hyper-growth rate, Mahaney believes that Amazon Business could generate $3 billion in revenue in this year alone. And although that's a relatively small number compared to Amazon's total revenue, Mahaney sees huge potential for itto gain bigger traction soon.
3. Groceries: Amazon has been working on grocery-delivery services for a while, but it was over only the past couple of years that it really started to ramp up. Mahaney estimates the annual grocery spend to be roughly $3 trillion, giving Amazon a huge future opportunity.
Mahaney notes that Amazon is already one of the largest players in the online-grocery space, and will further grow only as the total online-groceries market is expected to keep expanding. And with its already-robustlogistics network, Amazon's groceries business has all the potential to be the next growth driver, he says.
Analysts expect hyper-growth from Amazon Music, which is quickly gaining market share in the streaming business, challenging Spotify and other market leaders… Other potential areas of growth, according to Amazon, are fresh food and luxury goods.
Third-party-seller services, digital advertising, and subscription services (like Amazon Prime) also grew steadily in 2022, as depicted in the opening section. Amazon's third-party services, like commission and fulfillment fees, provide the company's second-largest income stream, and the 20% growth there is impressive.
Amazon is the largest and most successful retailer in the western world because they built the best customer experience. Customers expect 3 core things when they buy products online: Large Selection: Consumers always want to find the product they are looking for and, of course, this product should be in stock.
Amazon is currently worth $1.65 trillion and employs 1.3 million people (p. 1). I During its early days, Amazon was able to accelerate its growth by creating fulfillment centers, computing infrastructure known as the Amazon Web Services, and introducing Kindle in the e-book market (p.
Amazon's revenue could be as high as $821.5 billion in 2025, compared to $574.8 billion in 2023. Amazon stock increased more than 40% year over year as of June 5, 2024.
Customer loyalty is achieved by its world-class delivery service. Amazon's main strategy is to differentiate itself by developing products and services that meet the needs of its customer segments. The four pillars of Amazon's growth strategy include customer-centricity, innovation, corporate agility, and optimisation.
The two key segments, AWS and advertising, increased 17% and 24%, as reported, respectively, over the year-ago period. Amazon's advertising growth has bested its large internet peers over the last year or so, while AWS' growth accelerated both year over year and sequentially.
Growth Opportunities is a tool that provides custom seller-specific recommendations for immediate actions you can take to help grow your business with your current selection. How to take action and explore the tool's benefits.
Despite the current pause, Amazon's ambition to grow its international presence remains undimmed. The company has announced plans to enter the South African market in 2024 and is also eyeing Ireland for a future launch.
Amazon's mission is to be Earth's most customer-centric company, and the very first of our 16 Leadership Principles—Customer Obsession—states that, “Leaders start with the customer and work backwards.
By prioritising the customer above all else, Amazon has garnered unwavering loyalty, and this customer loyalty translates to repeat purchases and consistent growth.
Amazon is an online retailer that sells a variety of products, including books, music, movies, electronics, and apparel and is very popular worldwide. There are many reasons for Amazon's success, but some of the most important reasons are its customer focus, its innovation, and its willingness to take risks.
Further, Amazon's operating income is expected to climb 68% to $62 billion in 2024. That's a slowdown from the 200% in operating income Amazon posted in 2023 but the growth rate last year benefited from comparisons to 2022, when operating income sank 51% to $12.25 billion.
Who are Amazon's biggest competitors? Amazon's biggest direct competitors include Walmart, eBay, the Alibaba Group, Target, as well as more localized eCommerce marketplaces (such as Otto or Rakuten). In the video streaming segment, Amazon's biggest competitors are Netflix, Rakuten, HBO, Disney, and Apple TV+.
After delivering at our fastest speeds ever in 2023, Amazon set new records for Prime delivery speeds in the first three months of 2024, with more than two billion items arriving the same or next day to Prime members around the world.
However, this scarcity offers unique opportunities for those willing to explore less crowded territories. Looking forward, Fashion and Apparel steal the spotlight as Amazon's fastest-growing categories with an estimated 12.4% growth rate.
Amazon's North America and international segments continued to produce nice sales growth. In Q1, the North America segment had a 12% top-line increase while international's growth was 11% (both figures excluding the impact of foreign currency exchange fluctuations).
Introduction: My name is Errol Quitzon, I am a fair, cute, fancy, clean, attractive, sparkling, kind person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
)
