Skip to main content

Amazon 2018: Bulldozing More Market Leaders

By February 22, 2018Article

2018 is off to a roaring start in the software and technology sectors.  But what’s in store for the next few years?  If you’re an Amazon watcher like me, you know not to take your eye off the giant or risk getting squashed by its next category-crushing move.

Before taking an in-depth look at what markets might get “Amazoned” in the near term, let’s set the 2018 stage with a quick look at technology market trends overall:

  • The Internet of Things (IoT) will add billions more devices in industrial and consumer settings. The really significant advances will not be in the technology, but rather in the creative new services, business models and revenues that are generated as multiple industries including insurance and financial services are disrupted. Monetizing IoT is more about business model innovation than just the technology.
  • Edge computing gains traction spurred on by IoT device proliferation. In addition “ginormous” amounts of Big Data, created by billions more sensors, the need to manage the aggregation, anonymization, security, communication, and processing of some data at the edge will become critical. Local processing vs. sending it all to the cloud will become the route for greater efficiencies. 
  • Artificial Intelligence and Machine Learning (AI/ML) become infused in everything- or at least those terms will be sprinkled into every new technology offering like pixie dust. Some of this may be superficial in 2018. But that may obscure the huge impact it will have in the next decade. It is real and will have significant implications for economic productivity, jobs displacement and the economy in the long term.
  • Bitcoin and the hundred plus other cryptocurrencies enjoy a roller coaster ride in 2018. People taking out loans to buy Bitcoin and waiters bragging about their purchases – this does not end well.  It has already partially played out and is far from over as bitcoin dropped more than 50% in one month alone. All the ups and downs, scams and hacks of Bitcoin and its crypto siblings, wallets, exchanges and ICOs obscure some of the fundamental value of blockchain technology. It is slowly getting embedded into new infrastructure through trials and industry consortiums. This may unfold like the story of the “tortoise and the hare” with one getting all the attention while the other wins the race.
  • Security continues to be a major issue. More data, from more people, going through more devices, with more important/valuable/personal information continues to drive more spending on security software and systems. The cat and mouse game in security progresses with more state and non-state actors participating.
  • More unicorns are created; Uber’s missteps continue; additional autonomous/connected car announcements;  Elon Musk shoots off more SpaceX rockets, creates a few more “boring” companies and sells more flamethrowers…

Amazon 2018: Coming to an Industry Near You

Now that we’ve dispensed with the easy predictions, let’s look at a few other trends that will have major impacts in the years ahead. Leading high tech companies – Apple, Microsoft, Netflix, Facebook, Google, Alibaba, Tencent, and more – are all disrupting many industries. Let’s drill down on just one company, Amazon, which has an outsize influence on many technologies, industries and markets.  I’ve read the “business and technology tea leaves” to lay out seven specific predictions on how Amazon’s disruptions will disrupt a number of industries:

1. Amazon continues to dominate e-commerce, approaching 50% of all US online commerce.  It just achieved $60 billion in sales in Q4 of 2017 growing at 38%. While it is now selling more apparel than Macy’s and has over 30 private label brands, analysts like Needham project it will account for 50% of all online sales in the next couple of years.  At the same time, it is reshaping physical retail with its $14B acquisition of Whole Foods and rumors abound about other acquisitions like Target. It is also introducing new retail concepts with its own Amazon Go that is a high tech convenience store which automates payments and does not require checkout stands.

2. Amazon becomes the 4th largest software company in the World while dominating Cloud Computing. It is already a top 5 software company. With revenues in Amazon Web Services (AWS) running at over $20 billion per year now, Amazon is twice as big as SalesForce ($9.9B in 2017) and one of the top five software/IT companies in the world. Growing about 40%, it may pass SAP in 2018 to become the fourth largest software company in the world behind just Microsoft, IBM, and Oracle.  For more details on all their software/service offerings and implications for software companies, see Amazon Web Services: the largest Cloud Offering on the Planet.

3. Amazon begins competing directly with Fed Ex, UPS and other logistics companies in a trillion dollar market. Fulfillment by Amazon (FBA) has enabled third-party merchants to pay Amazon to warehouse and ship their goods to customers.  Now it has announced FBA Onsite and Shipping with Amazon. This new offering enables companies to keep their product inventory on their own premises. But it leverages Amazon’s logistics, delivery/pickup capabilities, and scale to manage shipping to customers. This is only one of the many steps Amazon has taken to leverage its size and expertise to compete directly with parcel, freight, and shipping carriers.  

Recently, Amazon announced Shipping with Amazon to compete with Fed Ex and UPS starting in Los Angeles. This strategy will likely evolve to open up a lucrative business that leverages Amazon’s logistics expertise into what one analyst group, Robert W. Baird & Co believes could become a $400 billion business for Amazon. Some innovative shipping and logistics software companies like PaceJet are even integrating with Amazon to leverage these trends.

4. Amazon and Netflix remix the Media and Entertainment landscape. Amazon Prime and Netflix are continuing their push as major players in the media and entertainment space. They will each spend about $8 billion this year developing original TV and Entertainment content which is as much as many major networks.  Amazon has over 25 TV shows and 8 movies in production. Their Twitch gaming network is one of the most watched cable networks in the US. As a comparison, it reached 960K users in January 2017 – more than either CNN (783K) or MSNBC (885K).

In the meantime, other networks are being acquired as Disney tries to absorb Fox and Hulu’s streaming service to compete in this new world. It is also shoring up its position by signing a streaming deal with Alibaba to penetrate the Chinese market. To underscore how much impact all this disruption is reeking on the industry, ATT’s CEO Randall Stephenson has said his company’s merger with Time Warner is critical to fight off Amazon and Netflix. And Comcast is now considering counter bidding on Fox assets to stay competitive, especially if the ATT-Time Warner deal is approved.  All these deals, partner realignments in the ecosystem and shifting business models are textbook examples of an industry in disruption.

5. Amazon shakes up the Consumer Electronics industry. Amazon’s Alexa/Echo was first introduced back in 2014 and spawned what has become known as the smart speaker market. Leading speaker manufacturers Bose and Sonos were seriously impacted and Sonos now offers Alexa with some of its systems.  Google, and Apple which just introduced its Home Pod, have been late to the party.  And Facebook has just announced two smart speakers named Aloha and Fiona expected to be launched by July 2018. With 68% market share, Amazon’s Alexa enabled Echo systems will be used in 2018 by about 30 million people and dominate the US market according to eMarketer.

And this market is just the tip of the iceberg. Alexa is really an artificial intelligence (AI) enabled, natural language, speech recognition platform that will evolve into a new interface to many appliances, computers, smart homes, connected cars, offices and other “things”. Companies like GE, LG, Phillips, Ford, Toyota, Sears and 1400 other brands have already developed 30,000 skills that enable Alexa to control and integrate all kinds of devices and services. 

Alexa and other virtual assistants will have a Tectonic Impact on the developer community. The new UI/UX paradigm forces software developers and hardware device engineering teams to build new products and re-architect existing applications to integrate voice interface platforms. This will have profound impacts over the next decade on product design, budgets, and business models.

6. Amazon steals market share from Google and Facebook advertising revenues.Many people are not aware that Amazon purchased an advertising network back in 2014. Amazon is in an ideal position to help advertisers better target buyers given they have existing relationships with 70-80 million Prime members. They have credit and payment data, browsing history, purchase history, viewing and listening history, etc.  All of this very rich demographic and psychographic data can provide much better targeting for advertisers and higher ad rates.

In summing up its results for 2017, Amazon reported its ad business grew 68% to $1.7 billion. Although this is a drop in the bucket now compared to Google’s $95B in ad revenue, expect Amazon to grow this aggressively in the next few years.

7. Amazon starts offering custom manufactured clothing. In addition to all of its private label brands and special manufacturing relationships, Amazon is also working on custom fit and custom manufactured clothing. They have already filed patents for on-demand apparel cutting and assembly machines. This should come as no surprise. There are already other companies creating custom manufacturing systems like the German company DESMA that makes systems that can robotically produce custom fit and specially branded footwear. These shoes can be custom fit for each individual in popular styles of major brands.  So whatever the future mix of online, in-store, or custom manufactured clothing, expect Amazon to be there. 

If you can’t beat them join them. That seems to be the approach taken by a number of major retailers and brands like Brooks Brothers, Perry Ellis, Calvin Klein, Poshmark, Sears, Best Buy, 1-800 Flowers and others. They are all starting to incorporate Amazon’s AI-enabled, Alexa/Echo voice recognition systems into various products and merchandising activities. They are just a handful of the 30,000 skills that have been developed for Alexa.

Bonus Predictions  In addition to all of the moves outlined in Predictions 1-7, you can expect to see innovative products and services used inside Amazon to reduce costs and improve operating efficiencies. Some may also be offered outside Amazon to it customers and partners to build new revenue streams. 

Amazon is making large investments in Artificial Intelligence (AI), Alexa-optimized AI chips, advanced robotic systems for warehouse productivity, drone delivery systems (Amazon Prime Air), drone air traffic control systems, airborne fulfillment centers, and many other science fiction-like advanced technologies.

In addition to developing these new technologies, Amazon is also exploring additional industries and product categories to enter. A few are rumored to be: Healthcare (new partnership with JP Morgan and Berkshire Hathaway for their employees); retail expansion via Target acquisition; selling prescription drugs;  getting into mortgages, real estate, auto sales and a number of other multi-billion dollar sectors.

How the heck does Amazon do it?

If your mouth is agape wondering how Amazon can be so successful in so many different industries when most companies have trouble figuring out just one, read more about their success strategies in Disruption Amazon Style: Lessons from the Masters.  Our analyses show Amazon has proved expert in deploying all parts of Grey Heron’s Four Values Framework™* – Value Creation, Value Migration, Vertical/Horizontal Integration and Value Delivery Systems – to outsmart their competitors, grow revenues and get into entirely new markets.

Unless current players get wise to their tactics and focus on staying one step ahead, 2018 will be yet another year of Amazon bulldozing incumbent market leaders around the world.

Chris Kocher is a co-founder of Grey Heron, a management and strategic marketing consulting firm. He has 30 years in both strategic and hands-on operating experience helping executives and investors build revenues and shareholder value. He has consulted with over 130 companies on innovating with new business models, product strategies and monetization. Chris has held management positions at HP and Symantec in addition to advisory roles at startups. He has worked extensively on monetization, SAAS, IoT, ecosystems, partnerships and accelerating growth in new business initiatives. For help on your growth strategies, new business model or monetization initiatives, email him at or follow him on LinkedIn 

The Four Values Framework (4Vs) ™ is a structured approach to developing new growth and monetization strategies developed by Grey Heron Venture Consulting. It has been used with multiple companies to identify Vertical and Horizontal integration approaches, new Value Creation areas, Value Migration into new markets and product categories as well as building complete Value Delivery Systems to ensure strategic alignment.

Copy link
Powered by Social Snap