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AMAZON

July 17, 2023
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1901
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The giant is just sleeping, not dead

 

E-COMMERCE 

E-commerce is the buying and selling of goods or services via the internet, and the transfer of money and data to complete the sales. You will often hear people use terms like B2B, B2C, D2C and they will assume that you know what they are talking about. It is honestly very simple. B is for Business C is for Consumer and D is for Direct

 

Business to Consumer (B2C): This is the most popular. Where  business sells to a consumer. Think Woolies, PnP

Business to Business (B2B): Here businesses sell to each other. These are not consumer-facing platforms. Its often raw materials or software.

Direct to Consumer (D2C): Direct to consumer e-commerce is the newest model of ecommerce. D2C means that a brand is selling directly to their end customer without going through a retailer, distributor, or wholesaler. Subscriptions are a popular D2C item, and social selling via platforms like Instagram, Pinterest, Facebook, SnapChat.

Consumer to Consumer (C2C): C2C e-commerce refers to the sale of a good or service to another consumer. Consumer to consumer sales take place on platforms like eBay, Etsy, Fiverr.

Consumer to Business (C2B): Consumer to business is when an individual sells their services or products to a business organization. C2B encompasses influencers offering exposure, photographers, consultants, freelance writers, etc.

 

Some examples of types of e-commerce:

 

  1. Retail: The sale of products directly to a consumer without an intermediary.
  2. Dropshipping: The sale of products that are manufactured and shipped to consumers via a third party. (This is a very lucrative side hustle. Remind me on another day)
  3. Digital products: Downloadable items like templates, courses, e-books, software, or media that must be purchased for use. Whether it is the purchase of software, tools, cloud-based products or digital assets, these represent a large percentage of ecommerce transactions.
  4. Wholesale: Products sold in bulk. Wholesale products are usually sold to a retailer, who then sells the products to consumers.
  5. Services: These are skills like coaching, writing, influencer marketing, etc., that are purchased and paid for online.
  6. Subscription: A popular D2C model, subscription services are the recurring purchases of products or services on a regular basis.
  7. Crowdfunding: Crowdfunding allows sellers to raise start-up capital in order to bring their product to the market. Once enough consumers have purchased the item, its then created and shipped.

 

In 2014 the e-commerce market size was $1,3 trillion. It is estimated to grow to $6,4 trillion in 2024. This is clearly a sizeable part of the global economy and we cannot ignore its growth potential.

 

WHO IS AMAZON?

Amazon is one of the largest and most successful companies in the world. Initially a humble online bookstore, Amazon has expanded into a massive online retailer that offers everything from groceries to electronics to cloud computing services. With a market capitalization close to $1 billion, Amazon has become a juggernaut in the tech industry, but what is the investment case for Amazon?

 

Amazons growth has been fuelled by a number of factors, including the ongoing shift towards online shopping, the increasing popularity of Amazon's Prime subscription service, and the company's expansion into new markets such as healthcare and advertising.

 

Amazon has a strong competitive advantage in the e-commerce industry. Its vast network of distribution centers and warehouses, as well as its proprietary logistics and delivery infrastructure, give Amazon a significant edge over its competitors. Additionally, Amazon's Prime membership program has created a loyal customer base that is willing to pay an annual fee for access to exclusive deals, free shipping, and other benefits.

 

Amazon's dominance in the e-commerce industry has also paved the way for the company's expansion into other areas, such as cloud computing. Amazon Web Services (AWS) is now the leading cloud services provider, with a market share of around 32%. The cloud computing industry is expected to continue to grow rapidly in the coming years, providing a significant opportunity for Amazon to continue to expand its business.

 

Amazon has a strong track record of developing new products and services that disrupt traditional industries. For example, the company's Echo smart speakers and Alexa voice assistant have revolutionized the way people interact with technology in their homes. Amazon's continued investment in research and development suggests that the company is committed to staying at the forefront of innovation in the tech industry.

 

BRANDS

Amazon owns a wide range of brands across multiple industries.

  1. Amazon Basics: Amazon's private label brand that offers a variety of products, including electronics, home goods, and office supplies.
  2. Echo: Amazon's line of smart speakers and digital assistants that use Amazon's voice-controlled AI assistant, Alexa.
  3. Fire: Amazon's line of streaming media players, tablets, and smart TVs.
  4. Ring: A home security brand that produces video doorbells, security cameras, and other smart home security products.
  5. Whole Foods Market: A grocery store chain that focuses on natural and organic foods. Amazon acquired Whole Foods in 2017.
  6. Zappos: An online shoe and clothing retailer that was acquired by Amazon in 2009.
  7. Twitch: A live streaming platform that is focused on video game streaming and esports. Amazon acquired Twitch in 2014.
  8. IMDb: A database of information about movies, TV shows, and celebrities. Amazon acquired IMDb in 1998.
  9. Goodreads: A social cataloging website that allows users to track and review books. Amazon acquired Goodreads in 2013.
  10. Audible: A provider of audiobooks and other spoken-word content. Amazon acquired Audible in 2008.

 

COMPETITORS

Amazon has several large competitors across its different business segments. Here are some of the main ones:

  1. E-commerce: Walmart, eBay, and Target are some of the largest competitors to Amazon in the e-commerce space. These companies have been investing heavily in their online businesses to compete with Amazon's dominance.
  2. Cloud Computing: Microsoft Azure and Google Cloud Platform are two of the largest competitors to Amazon Web Services (AWS). Both companies have been growing rapidly in the cloud computing space and have been gaining market share over the past few years.
  3. Digital Advertising: Google and Facebook are the two largest competitors to Amazon in the digital advertising space. While Amazon's advertising business has been growing rapidly, it still lags behind Google and Facebook in terms of market share.
  4. Grocery: Walmart and Kroger are two of the largest competitors to Amazon in the grocery space. Amazon's acquisition of Whole Foods in 2017 was seen as a move to compete more directly with traditional grocery retailers.

 

CHINESE RISKS?

Chinese e-commerce companies such as Alibaba and JD.com are also competitors to Amazon in the global e-commerce market. These companies have been growing rapidly in recent years, and Alibaba in particular is often referred to as the "Amazon of China".

 

There are significant regulatory barriers to Chinese e-commerce companies expanding into the U.S. market. The U.S. government has expressed concerns over Chinese companies operating in sensitive industries such as technology and telecommunications, and there have been efforts to restrict Chinese companies' access to the U.S. market. This has made it difficult for Chinese e-commerce companies to directly compete with Amazon in the U.S.

 

Amazon has a strong competitive advantage in terms of its logistics and delivery infrastructure. The company's vast network of warehouses, distribution centers, and proprietary delivery operations give it a significant edge over competitors. While Chinese e-commerce companies have been investing in their logistics capabilities, they are still behind Amazon in terms of scale and efficiency.

 

Amazon has a strong brand recognition and customer loyalty that gives it a significant edge over competitors. While Chinese e-commerce companies may be dominant in their home market, they still lack the same level of brand recognition and trust in other markets.

 

MOST RECENT DECEMBER 2022 RESULTS

Amazon closed out its slowest year of growth in its quarter century as a public company. Revenue for the year increased 9% as inflationary pressures and rising rates put a damper on consumer spending. The stock price lost almost half its value in 2022. Sales in Amazons online stores segment contracted 2% year over year. The company has been contending with slowing sales as rising gas and food prices forced consumers to pull back discretionary spending. The pandemic-fueled e-commerce boom has also fizzled with consumers increasingly returning to physical retailers.

 

Amazons cloud business Amazon Web Services missed estimates for the fourth quarter, reflecting a slowdown in business spending. AWS grew just 20% in the period, down from 27.5% in the third quarter.

 

Operating income in the quarter came in at $2.7 billion, down from $3.5 billion a year ago. The fourth-quarter figure includes about $2.7 billion of charges, of which $640 million came from severance costs related to the layoffs, the company said.

 

CONCLUSION

Amazon is a very strong and powerful company who has seen a significant pullback in their stock price, while posting strong numbers. It might be worth adding this to your watchlist, especially during turbulent market times.

 

This is not an article about Artificial Intelligence, that is coming. Big Tech are strong contenders in the AI Space.

 

Disclosure: I own shares in AMAZON at time of writing.

 

Disclaimer: Nothing in this article should be seen as financial advice. Everything stated is for educational purposes only. Always do your own due diligence.

 


 


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