Author Mark Richards
“That is so irritating. I mean it, like, you know, totally ruins your day. There you are, the richest man in the world. Then you release some disappointing results. Those ungrateful investors sell some shares, the price goes down… And suddenly you are only worth $89bn and you are back behind that upstart Bill Gates!”
That was Jeff Bezos’ week last week. He briefly became the richest person in the world (according to Bloomberg’s Billionaires Index) as Amazon shares rose ahead of its results, inching ahead of Bill Gates by just a billion dollars. Yes, the race really is that exciting – it is a wonder any of us can sleep at night…
Then the results came out: despite revenue for the three months to June rising to $38bn (25% up on the same period last year) earnings-per-share were down as the company invested in new sectors and countries and chased growth. The shares slipped back by 2% and that was enough for Bill Gates to reclaim his no. 1 ranking.
But wherever Jeff Bezos is in the rich list, Amazon has come to play a central part in all our lives. We have written many times about the decline of the traditional high street: Amazon has played a key role in that – so let us look back at the history of the company, and where it might go from here.
Jeff Bezos and Amazon
Jeff Bezos was born in Albuquerque, New Mexico in January 1964. After graduating from Princeton (unlike Bill Gates and Mark Zuckerberg, who both dropped out of college) he founded Amazon in July 1994 – so just 23 years ago. The company began life as an online bookstore and then gradually diversified, initially into DVDs, Blu-rays and CDs and then – as we all now know – everything you could ever want. Amazon now has 14 separate retail websites for different countries and has recently added Dutch, Polish and Turkish language versions of the German site. In 2015 Amazon surpassed Walmart as the most valuable retailer in the United States by market capitalisation, and is now the fourth most valuable company in the world – along with Apple, Alphabet/Google and Microsoft it is worth more than $500bn. Amazon is the largest internet company by revenue and the eighth largest employer in the US. Earlier this year Amazon announced plans to acquire Whole Foods Markets for $13.4bn which will vastly increase its presence as a physical retailer.
So much for supermarkets…
When the Whole Foods acquisition is complete Amazon plans to vastly expand the company’s distribution network. Current estimates are that it will create 130,000 full and part-time jobs by the middle of 2018, which is likely to make Amazon close to becoming the largest employer in the US.
Does Amazon want to deliver your weekly shop? Last year the company launched Amazon Fresh in 69 London postcodes – but anyone who bought anything on Amazon Prime Day cannot have failed to notice emails offering a ‘£2.99 Pantry Reward.’ The question is clear: why buy your toilet rolls and dog food from the supermarket when Amazon will deliver them for you?
Attack of the Drones
Amazon is very firmly committed to the UK – more of that later – and part of that commitment is its research facility in Cambridge where it will employ over a thousand highly skilled ‘techies’ by the end of the year. What will they be working on? Largely, on drone delivery. Yes, there are huge logistical, legislative, safety and security concerns with delivery by drone but ultimately it will happen. Some estimates say drones will be a $90bn industry within ten years – and not just for deliveries from Amazon…
Amazon’s investment in London
It is not just Cambridge where Amazon is making a major investment in the UK. It will now take up all 15 floors of the 600,000 sq. ft. Principal Place development in the heart of London, creating up to 900 new research and development jobs – double the number originally planned. They will largely be focused on developing Amazon’s Prime Video streaming service and will include engineers, data analysts and graphic designers.
On the face of it, that is great news – and a big vote of confidence in the UK, especially with Google also planning a major development near King’s Cross. But it does emphasise the question we raised last week: will HS2 really spread the wealth to the regions or – with it becoming so easy to get to London – will business be forced to concentrate on where companies like Google and Amazon are located?
But is this the real future?
But if we want to see the real future, maybe we should look to China. Second quarter growth figures for the US economy may have been good – but they were still a long way behind China’s 6.9%. And with an emerging middle class hungry for consumer goods, surely China’s Amazon must be the place to see what lies around the corner? The site we need to look at is Taobao, described as ‘like Amazon but bigger and faster.’ Taobao is owned by China’s Alibaba Group, whose chairman Jack Ma is often described China’s answer to Jeff Bezos – although the poor lad is a relative pauper at $44bn.
In some areas, Taobao will deliver in 15 minutes – which for a good many office workers will beat ‘nipping out to the shops’ – and will deliver virtually anything, including a Vietnamese bride and/or a live scorpion.
But before you decide whether a live scorpion might be the answer to your irritating new boss, perhaps we should consider the impact all this has had on Jeff Bezos himself. In the early days of Amazon, he looked exactly what he was – a man who wanted to sell you a book. Last week new pictures of him emerged, in which he looked – to me at least – remarkably like J K Simmons in Whiplash. So how do you become the second-richest man on the planet? It is simple. Repeat after me: “Are you rushing, or are you dragging…”