Amazon: more than a retailer
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4
minutes
Written by
Guido
For most of us, when we hear the word “Amazon,” what’s the first thing that comes to mind? If you said “shopping,” your answer coincides with how most people view the company. Amazon is a shopping juggernaut, make no doubt about it. In 2022, the company did a whopping $513 billion in sales. $315 billion of that was in North America, while International represented $118. Despite these massive numbers, Amazon wasn’t able to turn a profit on them, settling for a $2.7 billion loss. While retail will always be in its DNA, we’re seeing Amazon making massive investments in other parts of the business. What Amazon is building isn’t simply the next great retailer. Rather, it’s an ecosystem of services. Let’s explore:
AWS or Amazon Web Services generated $80 billion in revenue in 2022; not bad for a “secondary” business. Despite massive growth rates over the past several years, AWS still managed to grow at close to 20% in the most recent fourth quarter.
In March of 2022, Amazon closed its acquisition of MGM for $8.5 billion. The acquisition brought with it thousands of films for Prime Video and puts Amazon in a position to continue to pursue more linear/streaming TV ad deals.
Also important is that more Prime Video content increases the value of a Prime subscription. Amazon has more than 200 million Prime members worldwide, but 172 million of those reside in the United States. On one side of the coin, this points to the incredible dominance of Amazon in the US. On the other, Amazon’s reach globally has a long way to go.
Speaking of advertising, Amazon did $37.8 billion in ad revenue in 2022. To put this in perspective, Walmart recently announced earnings and highlighted their 41% growth year over year with Walmart Connect. While impressive, the 41% represents total advertising revenue of $2.7 billion for the year. Doing some simple math, that means that Amazon Advertising is 14 times larger than Walmart Connect. Amazon’s goal with advertising is to venture beyond its sellers. For example, Amazon has recently highlighted advertising execution with car manufacturers, insurance companies, and luxury goods companies, all of which don’t physically sell anything on Amazon. While we’ve all lauded the ability of Amazon’s DSP to precisely target customers for goods on the platform, this proves that Amazon’s first party data is incredibly powerful.
Amazon is making major investments in data clean rooms, which operate completely separate from their retail business. The concept is aimed at manufacturers that want to view their data in a single “one stop shop.” Put simply, imagine being able to see the data for 100 retailers in your market on a single screen. While this is still “self serve,” the consolidation alone should save your team valuable hours and help you make better overall decisions with your business.
Amazon launched Buy With Prime in the spring of 2022, which allows DTC websites to integrate Amazon payment and shipping services. While this service is connected to the sell through of physical goods, Amazon is using its scale and network to extend its influence off of its own site. Customer data still belongs to the brand owner, but shoppers now get the trust and speed that comes with Amazon’s checkout and delivery services.
In addition, Amazon’s Delivery Service Partner (DSP) logistics program encourages small businesses to build within Amazon. Amazon has long been a winner when it comes to receiving, processing, storing, and shipping out goods. Where it is focused now is on last mile delivery solutions that allow it to be more agile, and not only deliver Amazon packages, but operate as a service provider for other businesses.
As someone that’s worked with brands on Amazon for the past ten or so years, it’s been a fascinating journey to observe the trajectory of the company. On one hand, navigating the constant changes has led to many sleepless nights. On the other, Amazon’s actions continue to reflect their Day One mentality, which is a spirit of constant innovation and small bets. As Amazon continues to evolve, we expect to see continued diversification around the core theme of “serving people.” Where will Amazon go next? Wherever it is, we won’t be surprised.
