The share price has broken through the US$800 barrier and it keeps on rising.
Enough has been written about the incredible success story AWS that is turning the company into the infrastructure provider of the internet, we want to focus on the retail business.
Amazon’s recent profit expansion points to the first major profit harvesting, which implies a strategic change at Amazon, as this is a departure from the cycle of growth.
According to Jeff Bezos profits hinder the flywheel effects and should always be reinvested for future growth and to keep the wheel spinning faster.
Seen in this light the profit harvesting is hugely significant, Amazon basically feel that such a major strategic change won’t hurt the business, as they have become so dominant, that they have become untouchable.
This means we have entered the second phase of the ecommerce era. It’s not the day one of the internet anymore.
We are entering the Amazon age. In other words Amazon have now become so dominant, that in their very own view they have become untouchable. Amazon can now run the business in the hunt for profits. And it can do so without having to worry too much about the competition or that its shoppers could defect. Prime locks them into the ecosystem.
This has three implications:
1) The market share grab is over, the competitive barrier has been erected and as online continues to grow so will Amazon’s dominance. Amazon could well be on its way to become the most valuable company on earth.
2) Amazon needs a new definition, as it’s clearly not “day one of the internet” any longer. Amazon’s profit harvesting is a massive change. The company will turn from hunter into prey. This actually raises a host of new challenges.
3) Amazon becomes more of an utility and the infrastructure of the internet through AWS, the marketplace and its logistics footprint roll out. This invites scrutiny from the state and we expect the current investigations into its tax matters to be a foretaste of things to come. There will be much more interference from regulators going forward.