January 2, 2016

You know Amazon. By perpetually straddling the edge of profitability, they’ve turned their simple online book store into a global commerce platform, capturing now tens of billions of dollars in revenue annually.

Countless people rely on Amazon for their livelihood. For many retail businesses, and not just scalpers, Amazon Marketplace is their sole consumer-facing presence. For many websites, Amazon referral links are a primary source of revenue. Half of the Internet runs on Amazon Web Services, and not just small-time players: Netflix, Facebook, Apple, Dropbox, Twitter, Adobe, Slack, Square, Yelp, Reddit, Gawker, Pinterest, Condé Nast, Comcast, the United States government…

Amazon owns their store, their warehouse, and are slowly owning their delivery. In my city, Amazon used to deliver through FedEx, UPS, and USPS, whichever was cheaper that day. Then Amazon transitioned to delivering through a smaller regional carriers, like OnTrac, no doubt to cut costs and further play FedEx and UPS off one another.

Last year Amazon started delivering through unmarked ‘AMZN_US’ personal cars. Due to the cars and their low-key appearance, I suspect those deliveries were done by contracted Postmates employees or similar doing on-demand delivery services on behalf of Amazon.

Later Amazon then transitioned to white, unmarked ‘AMZL_US’ vans, which I can only assume stands for Amazon Logistics. Today, my city’s filled with marked Amazon vans, emblazoned with ‘A to Z’ smile logos.

As an aside, I’m happy the OnTrac days are behind us. Every delivery was at night, no knock, no ring. Packages were damaged, and a few times, soaking wet. I can only imagine OnTrac were overwhelmed by Amazon’s business but didn’t want to lose it.

Now with Amazon’s delivery business at full tilt, about all ‘Prime’ items on Amazon offer same-day delivery, presumably through the local fulfillment centers sending items to physical Amazon Locker stores that are then passed off to local Amazon Logistics vehicles for delivery.

Amazon’s doing groceries too, with a two-hour delivery window. Every time I go for groceries, I see two or three people with shopping carts filled with paper Amazon bags fulfilling orders for online shoppers.

And now the craziest part for my head to wrap around: Amazon’s buying airplanes to do their own air freighting.

From a consumer perspective, I’ve been an Amazon Prime subscriber since its introduction ten years ago. Due to Amazon Prime’s free shipping and Amazon’s previously tax-free purchases outside of Washington state, each year more of my purchases found their way to being made on Amazon. Other online stores often had slightly lower prices, but once you factored in sales tax and shipping, Amazon always had the better price.

The nice thing about online shopping is you don’t have to put up with the information overload of a million in-store advertisements jumping out at you and needing to navigate through crowds of distracted shoppers stopping and cutting everywhere when all you need is a hammer. Typing in ‘hammer’ and having one shipped to your door is a much better experience.

Aside from Amazon’s vertical integration, they’ve got a little diversification too. As mentioned previously, they’ve leveraged their experience hosting a global online store into being one of the largest web hosting and remote computing services. They have a modestly successful consumer electronics arm. They own countless other websites and their respective revenue streams, mostly specialty stores.

The worst near-term case I can imagine for Amazon is them killing off some verticals and going back to how things were, namely still wildly successful.

Honestly at this point Amazon is one of those monolithic companies that if it vanished tomorrow, there would be a massive hole in the world. I can only see their octopus-like reach expanding further across the landscapes of consumer discretionary, business operations, and media.

Is that a good thing? I don’t know. But their growth has been mind boggling, especially these last few years.