Is Amazon’s growth realistic? Its stock has increased 173% since the start of 2015, and some investors project that it will reach half a trillion dollars in sales within the next decade – driven by eCommerce, AWS, and various other services, including digital assistant Alexa. We decided to do a series of thought experiments on what Amazon will look like in five years.
Amazon’s mission is to “be the earth’s most customer centric company,” and Jeff Bezos wants Prime membership to be “such a good value that you’d be irresponsible not to be a member.” Such projected growth makes Amazon highly unusual, especially for a big company, and if they do realize this growth, they’ll be lucky to avoid increased attention from government regulators (which was the theme of The Economist magazine’s cover story recently (“Amazon’s empire and what could threaten it”).
In this series of thought experiments, we defined possible scenarios of what the company could look like in 5 years. Here are the topline summaries of three such experiments.
1. The prophecy comes true: Amazon is biggest, most customer-centric company ever
Amazon is already incredibly easy for shoppers to use, and it gets even more magic-like the more consumers interact with its Alexa, recommendations, and one-click buying. The outcome of this thought experiment is that Amazon’s customer-centric focus, combined with the value of Prime membership and its host of other services, will drive growth in line with current investor projections.
2. New more effective competition emerges: Result is Amazon experiences strong but moderatly lower growth
Until now, few online competitors have offered value propositions that match, let alone beat Amazon. Over the next several years, growth will slow moderately as Amazon saturates core markets and a number of smaller, more specialized online retailers will offer value propositions that are seen as superior to Amazon, at least for selected groups of consumers.
The emergence of these competitors will reveal that Amazon can be vulnerable. This will inspire others to attack where they find a symmetrical advantage. The result will be continued strong, but moderately lower growth.
3. Society hits the brakes: Growth triggers external social and government reactions
Government regulators, responding to concerns about the scale of change and related job loss driven by Amazon’s growth and increasing market power, will impose restrictions that limit the company’s flexibility and further slow its growth. This lines up with the question: What is Amazon – a retailer, a mega com or a new utility? Bezos said early on that there was room for everyone (Amazon and thousands of other retailers) to be successful on the internet because it is so big. For that to be true, others might have to create some new boundaries for a company that continues to push boundaries and deliver abnormal growth rates.
These three outcomes begin to frame the range of possibility for Amazon’s future. While none of us can tell the future, this is an important discussion – because if Amazon is as successful as forecast, it will have big implications for everyone who produces and sells products and/or services.
We invite you to:
- Check out the video below from The Economist.
- Vote in our short poll (found in side bar or below comments)
- Post a comment outlining the outcome of your own thought experiments.