top of page

Amazon's growth strategy could target 5 key markets

Amazon dominates the U.S. e-commerce market, and globally, it has a market-share lead in cloud computing through its AWS division. But as any close watcher of Amazon's growth strategy knows, it continually moves into new markets to satiate its thirst for advancement.

Moreover, the stream of new technologies developed by AWS support Amazon's core business as well as its newer forays. That's a reason why every enterprise should view Amazon not only as a technology supplier, but a potential competitor.

A critical growth source for Amazon is its Prime membership program, which counts 100 million people in the U.S. As Prime's slate of features evolves, Amazon seeks to build a deeper, broader connection with consumers' lifestyles, further disrupting the retail market and bringing in more revenue. 

The company is famously secretive about its plans, but a sense of new directions for Amazon's growth strategy can be gleaned through past clues, expert opinions and some educated guesswork. Here's a look at what may come next.

Travel and lodging

One may wonder why Amazon hasn't made a major push into online travel booking to take market share from the likes of Expedia and Orbitz. In fact, Amazon did launch a hotel-booking service called Destinations in 2015, only to quietly shutter it just months later without a clear public explanation why.

Rumblings that Amazon will try again crop up regularly, such as in a Morgan Stanley report released earlier this year.

Amazon has a choice in terms of how to enter the travel-booking business anew. The model used by Expedia and similar companies is to negotiate bulk inventory deals with hoteliers and airlines, then resell them to customers at a competitive price.

But Amazon's growth strategy could take a cue from Google Travel, a metasearch engine that competes with sites such Kayak. These portals make money on referrals to travel providers, rather than hold and sell inventory.

Given Amazon's traditional role as a marketplace owner and facilitator, the latter option could be more likely. Meanwhile, Amazon has also hatched an Amazon Pay partnership with Cleartrip on domestic flights in India, as well as discount programs for hotels and transportation in that country.

The barrier for Amazon to re-enter the travel market by building an Expedia-like business from scratch would be enormous, said Dennis Schaal, executive editor/founding editor of travel news and research provider Skift.

"Expedia and [Priceline parent] Booking Holdings have a two-decade or so head start," Schaal said. "The best thing to do would be for Amazon to buy Expedia, which is having performance and stock price woes, so it could be bought for cheap."

Then again, travel is a business with proprietary items such as custom vacations, said Forrester Research analyst Sucharita Kodali.

"It just seems too niche and a business that requires a lot of individual sales support, which isn't really Amazon's approach," he said. "Perhaps they will try to be an Airbnb competitor since they already have so many sellers on their retail platform?"

Health care

Amazon shook up the retail pharmacy market in June 2018 with its $1 billion acquisition of PillPack, which offers a home-delivery service for prescription drugs. It kept its plans quiet until April, when Prime members received the first word of PillPack's availability under Amazon's ownership.

PillPack builds on Haven, a partnership Amazon formed with Berkshire Hathaway and JP Morgan Chase. Haven is initially aimed at the companies' collective 1.2 million employees. But its efforts to improve insurance, cut drug costs and boost the quality of primary carethrough machine learning and other technologies -- which don't have a profit motive, according to Haven -- will be shared with others over time.

But Amazon could seek profits from health care through different avenues, such as urgent care centers, which have a business model that maps to Amazon's philosophy of lower cost and convenience delivered at scale.

Amazon conceivably could co-locate these centers with real estate it already owns, such as Whole Foods supermarkets, and as part of its buildout of Amazon Go retail stores.

But a retail health care presence is unlikely for Amazon, save for an acquisition of a chain such as CVS, said David Chou, an analyst with Constellation Research and CIO of Luye Medical Group, an Asia-Pacific health care system with more than 50 facilities.

In turn, if Amazon wants to shake up the hospital provider industry, it must either acquire a health system or an EMR (electronic medical records) vendor that already has a presence in hospitals, Chou said. This includes Cerner, which is already an Amazon partner and customer.

"The operating model of hospitals is very complicated and unless you are running an organization, it is very difficult to drive automation and disruption from the outside looking in," Chou said.

Healthcare can benefit tremendously from Amazon’s ability to attract and retain customers with the ease of the digital experience, he added.

"Unfortunately, people do not look at their healthcare services unless they need treatment or help, so it will be important to find a way to engage with patients on proactively managing their health when they are healthy and keeping them healthy," Chou said.

Here is my take from a healthcare point of view. You can see the full article at the link above by Chris Kanaracus





  • Grey Facebook Icon
  • Grey Twitter Icon
  • Grey Instagram Icon
bottom of page