THE CLARUS News

What Could Amazon Look Like In Five Years?

Clarus Commerce CEO Tom Caporaso talks about what Amazon could look like in the near future and it’s bigger than just e-commerce.

(As originally published on NASDAQ on July 30th, 2018.)

Amazon has come a long way in a relatively short period of time. The Seattle-based online behemoth has made its presence known in a variety of consumer categories since the company launched in July 1995.

Given Amazon’s growing presence in so many industries, and the rapid advancements in technology, what could Amazon look like in five years?

 

Logistics

A big piece of Amazon’s future could significantly impact the logistics business.

It already has Amazon Logistics, which is a shipping and delivery service that could go head-to-head with current providers UPS, USPS, and FedEx. If Amazon wants to seriously compete against UPS, USPS, and FedEx, things could get very interesting in the delivery world.

Amazon recently launched a program for entrepreneurs to sign on to use Amazon Prime-branded vans and get support from the company as they form businesses to deliver Amazon packages.

Amazon officials are inviting entrepreneurs to form small delivery companies. Each would employ up to 100 drivers and lease between 20 and 40 Amazon-emblazoned vans.

This initiative should help it rapidly build out its own delivery network across the country. The new initiative will give Amazon a visible presence in larger metro areas.

To reduce its reliance on UPS and FedEx, Amazon launched various initiatives to improve its fulfillment infrastructure:

  • Utilized third-party delivery to a greater degree
  • Used its dozens of distribution centers to get packages closer to the customer for final-mile delivery
  • Began developing a drone delivery service
  • Started an ocean freight service
  • Tested an Uber-like app that would pay people to drive packages to locations they’re already going toward
  • Amazon is rumored to be interested in buying shipping and logistics firm XPO Logistics
  • Launched Prime Air, a cargo delivery service
  • Building an air cargo hub in Kentucky for the service

 

eSports

Given the launch of the inaugural NBA 2K League in May, coupled with the worldwide growing popularity of eSports, could this be a destination for Amazon?

Amazon first entered the eSports/Video Game world in 2012 with the launch of Amazon Game Studios.

Amazon paid $970 million in cash for the gaming/streaming service Twitch.tv in 2014. Two years later, Amazon announced the development of three eSports-focused titles.

Amazon announced GameOn, a platform to be licensed to developers to allow them to integrate their games with various eSports functionality/services and dedicated Twitch streaming.

Twitch.tv and its exclusive streaming partnerships/dedicated viewer base will serve as an additional leverage point for Amazon’s Prime premium loyalty program.

According to Seeking Alpha, Amazon has been actively exploring eSports and should be poised to make a significant impression given its infrastructure.

“Amazon will be able to leverage their ownership of Twitch.tv and its exclusive eSports streaming contracts to secure the majority of the eSports viewership as it explodes in popularity across North America,” according to Seeking Alpha.

 

Business Shippers

Besides Amazon’s incredibly successful Prime program, the company last year launched a new paid membership program targeting businesses in the U.S. and Germany. The new program is called Business Prime Shipping.

The program allows for Prime’s free, two-day shipping to be available to all office supply users with an Amazon Business account. This service certainly places Amazon in direct competition with Office Depot and Staples.

Pricing for the Business Prime Shipping membership program is based on the number of users on the account. The membership price begins at $499 for companies with up to 10 users. After that, it goes up to $1,299 for businesses with up to 100 users, and $10,099 for those with more than 100 users.

Business Prime Shipping speaks to what Amazon does best: Listens to its customers and addresses those pain points.

This service is available to all business sizes and gives customers access to hundreds of millions of products on Amazon’s vast marketplace.

 

Voice Activated Shopping

This is a category where Amazon has made some inroads. Amazon is intent on its technologies around Alexa-powered shopping by voice.

Amazon founder/CEO Jeff Bezos offered these thoughts about his vision of Alexa for the future: “A ubiquitous computer that has unlimited resources constantly available to serve your every need,” he said.

As of September 2017, Amazon had more than 5,000 employees working on Alexa and related products. Amazon seems determined to be at the top of the list regarding voice-activated shopping.

 

Health Care

In a move that could have a major impact on the pharmacy industry, Amazon recently bought online pharmacy PillPack for $1 billion.

The next step for Amazon could very well be delivering prescriptions to your door, and maybe even including these types of deliveries in its long list of Prime benefits.

Health care could be a road Amazon could travel down further in the next five years.

In January Amazon, Berkshire Hathaway, and JPMorgan Chase announced a partnership to cut health-care costs and improve services for their U.S. employees.

The new company’s initial goal is to target technology solutions to simplify the health care system.

“The health care system is complex and we enter into this challenge open-eyed about the degree of difficulty,” Amazon CEO Jeff Bezos said at the time. “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort.”

If Amazon officials focus even more in the health and fitness segment, maybe gym memberships tied to their highly successful Prime premium loyalty program could come into play?

This is where Amazon’s highly successful Prime premium loyalty program could play a key role.

Perhaps Prime member benefits could include a personal trainer, personalized Whole Foods grocery lists, and delivery of supplements to your gym? What about a gym membership like ClassPass in a fitness segment to engage consumers more?

The possibilities are certainly there.

 

Is The Answer Up There?

Bezos isn’t afraid to explore new horizons for the next great idea.

He founded Blue Origin in 2000. Blue Origin is a privately funded aerospace manufacturer aimed at developing technologies that enable private human access to space.

The company was awarded a three-year contract with NASA to test different types of technologies in microgravity during suborbital flights with the company’s New Shepard spacecraft.

Here is another potential category where a Prime membership could serve its members well.

Maybe members could receive a benefit related to discounted space flight tickets or a members-only access in general?

Although it’s already involved in the cloud services category, apparently the sky isn’t the limit for Bezos and Amazon.

 

It All Comes Back to Prime

This massively popular premium loyalty program passed 100 million global members earlier this year, which is an amazing achievement.

Consider that Prime had about 28 million members in 2014, and you can see the astonishing growth in the past four years. So many people enjoy the value in Prime and are willing to pay for those benefits.

Who knows what that membership figure might look like five years from now, but it’s safe to say it will be significantly higher.

Besides recording its biggest sales event ever on Prime Day 2018, Amazon also registered the largest number of new Prime members in a single day.

Prime’s growth is a sign that members appreciate the benefits they receive. There is no reason that this program shouldn’t continue to expand and grow in the next five years because the value proposition is great and keeps getting better.

 

Amazon Sticks To Its Fundamentals

Amazon’s winning formula from Day 1 has always been putting the customer at the center of everything it does and taking the friction out of shopping.

Company officials will continue to look through the customer lens, identify pain points, and either buy or build into a category they see as potentially profitable.

Chances are, we’ll start to see Amazon (and ultimately Prime) creeping into more and more areas of our daily lives.

Are You Ready to Go Premium?

If you want to become a 24/7 presence in your best customers' lives, it's time to get started.