Amazon isn't just big

Large, diversified holding companies are nothing new. Warren Buffett's

Berkshire Hathaway, India's Tata Group and South Korea's Samsung touch on
many parts of the global economy.
But Amazon is different. It strategically connects and leverages enough
information about your behaviors in one part of your life to make predictions
about what you might need in another. By doing so, it captures more of your
disposable income across industries.
"They were, from the start, not really in the books business," says Daniel Raff, a
professor of management at the Wharton School of the University of
Pennsylvania. "They understood that the web site was a source of information
for them about who their customers were, and their customers' search behavior
and price sensitivity."//
Since 2005, that information has been concentrated around Amazon's most
powerful innovation: The Prime membership, which offers a slate of benefits
that incentivize consumers to consolidate as many of their purchases as possible
within Amazon's ecosystem. Kantar Consulting estimates that in late 2017,
about 57 million households in the United States paid $99 a year - and $199, as
of this April - foe access to exclusive television content, discounts at Whole
Foods, and of course, fast free shipping.
That last perk is what has set Amazon apart from the e-commerce competition.
Raff compares Amazon to a mid-20th century Sears Roebuck, the catalog
company that shipped a universe of consumer goods from the center of
America's rail network in Chicago to anyone within reach of a mail truck. But
rather than aggregating through a central hub, Amazon has built its own
distributed empire of warehouses. Staffed by armies of workers and, more
recently, robots, this network allows the company to deliver packages nearly as
quickly as a shopper clicks "Buy."
It's an expensive project. According to a 2017 study by a team of economists,
Amazon spent billions building and operating more than 100 fulfillment centers
between 2006 and 2018. But that investment has paid off big time: The
researchers estimated that this new infrastructure allowed Amazon to increase its
profit margin by between 5% and 14% over that same period by shortening
travel distances and reducing the number of transfer points required to get the
buyer their brown box.
Amazon's aggressive investment in its fulfillment network is just one way in
which the company has enjoyed the full confidence of Wall Street while never
paying a dividend to shareholders.
The company only started booking robust quarterly profits consistently in 2015,
boosted by cloud computing – that is, Amazon Web Services, a data hosting
business that generated $6 billion in revenue last quarter
As legal scholar Lina Khan argued in a 2017 Yale Law Journal note, investors
tolerated the company's near-zero profit margins for decades because they knew
that revenues were being reinvested in establishing what Bezos calls "market
leadership," which will support an "enduring franchise."
Much of that reinvestment goes into real innovation. In July alone, Amazon
published approximately 49 new patents, including one that would facilitate the
display of targeted advertisements to a customer picking up items at an Amazon
locker and another that would let drones communicate with each other in the air
Amazon's extraordinary evolution: A timeline
Yet a growing number of voices, from commentators like former New Republic
editor Franklin Foer and New York Times columnist Paul Krugman to think
tanks like the Open Markets Institute and Roosevelt Institute, see those terms as
code for "monopoly power."