Commercial plumbing
Amazon, on the way to becoming infrastructure
Today, the Financial Times kicked off a series of articles about Amazon with a look at its growing presence in the market for business services. Written by Barney Jopson, the coverage focuses on "charting Amazon's ability to reinvent industries, drawing upon over 50 interviews with former employees, clients, software providers, rival retailers, academics , bankers and consultants."
Underscoring Amazon's wide reach, the FT reports that the company's 2011 sales in North America ($48.1 billion) were higher than the online sales of the next 10 retailers combined ($47.4 billion). A commentor (below) points out that the Amazon's 2011 U.S. sales are actually lower than the FT reports ($26.7 billion, according to Internet Retailer). While the FT's revenue analysis is incorrect, it accurately notes that the flip side to Amazon's growth is its limited profitability: $631 million, a margin of 1.5%, barely a quarter of the margin recorded by Walmart.
This first article focuses on the tensions inherent in using a service provider who is also a retailer and potential competitor. This ground has been covered before, but the FT does a good job pulling together a variety of perspectives.
Although it's not fully developed in this initial piece, Harvard Business School professor Marco Iansiti opens an interesting door in talking about Amazon as "a source of systemic risk that we didn't have before." Jopson observes:
"[Investments in services have] lifted Amazon’s economic influence beyond its tech peers Apple, Google and Facebook and taken it into the realm of network businesses such as stock exchanges, power grid operators, credit card processors and shipping lines."
Amazon's pervasive presence, coupled with the tension between the company's competing roles as partner and collaborator, lead the FT to suggest that "its role seems set to face sterner political scrutiny."
Much of the newspaper's coverage is reminiscent of Eric Hellman's April post, "Publishing's Amazon-powered future". There, Hellman claims that "Amazon will ruthlessly bring effiiciency to every process in publishing." If so, the workflow lessons I posted about last week might come in handy.
Note: Edited July 10 to correct sales figures for Amazon. The FT described the worldwide sales figure as its North American revenue, and I picked up the report without double-checking it against other sources.
‘Underscoring Amazon’s wide reach, the FT reports that the company’s 2011 sales in North America ($48.1 billion)...’
Thanks, I will no longer bother to read this since a simple google search shows this number to be the total net sales by Amazon for 2011, not just USA.
I’m sorry to see you leave; there’s more to the post than this one number.
You’re right, the number reported by the Financial Times is wrong. I didn’t double-check their reporting. Generally, that’s not something I do. More often, I provide a link to the source, in this case the FT.
According to Internet Retailer, 2011 sales were $48.08 billion, of which $18.7 billion came from the U.S. and $21.37 billion came outside the U.S. I will make those changes in the text and leave the comments in place to note the correction.
Sorry, when I said I will no longer bother to read this, I meant the Financial Times piece, not this post.
This is such an elementary mistake by FT that they are either rank incompetents or were blinded by their own need to reach certain preconceived conclusions.
One should rather read seeking alpha articles to get a more balanced view of Amazon as a company. At least the bias there is clearly visible.
Thanks for the clarification. I think the error is notable, and I am glad you flagged it. I’m not sure it wounds the FT’s coverage as deeply as you might, but readers here can take a look and decide for themselves.