It’s no fairytale, Jeff Bezos indeed has a plan of how to achieve this ambitious target
Analysts at MKM Partners forecast that Amazon will be the top retailer in technology by the year 2025. The conclusion followed Amazon’s takeover of Whole Foods for 13.7 billion dollars, which brought brick-and-mortar grocery retail into Amazon’s domain.
Amazon is the third largest enterprise worldwide and, with a market cap of 427 billion dollars, it is a leader on the Internet and Catalog Retail market. The company was founded in 1994 by Jeffrey “Jeff” P. Bezos and has its headquarters in Seattle, Washington, United States. It's 341,400 employees are responsible for sales totaling 135.99 billion dollars.
Forbes named Amazon the third most innovative company, the sixth most valuable brand and the fourth in market value, worldwide.
After the acquisition of Whole Foods, Amazon’s stock increased by 30% compared to last year and analysts don’t see the surge as being only a temporary one. On the contrary, they expect Amazon’s share to rise up to USD 3400 from its current level of USD 999.60. How do they envision this to happen?
There must be well-founded arguments to support this kind of statement according to which the company would triple its size in less than 8 years.
Indeed, there are. The American tech giant has announced the construction of a second headquarter in a secret location, a project worth 5 billion dollars, and this has deep implications.
The first one is related to customer relationships since, by building new headquarters, Amazon is creating direct jobs for 50,000 people. This new market could further multiply the number of people who are going to be able to spend their money on Amazon's products.
Furthermore, Amazon is known for investing in the cities where it is based, and has for instance made donations of several millions of dollars to the University of Washington as well as to homeless shelters in Seattle.
Local residents who directly experience the positive impact in their community are likely to shop there more often. By building new headquarters, Amazon is also implementing a PR stunt that will breed new generations of loyal customers, a key aspect of Jeff Bezos’ strategic thinking.
The second implication is productivity. By creating new headquarters, Amazon is going to be able to double its market output. This by itself represents a significant argument for how Amazon is to substantially increase its market value.
In a nutshell, Amazon’s share could triple in 8 years since it has a coherent plan to at least double its output by creating more physical capital and substantially increasing their number of staff. Moreover, Amazon, being the third most innovative company worldwide, has a string track record of improving its logistics and efficiency.
According to mainstream economic theory, output is increased through technological innovation. Moreover, computer processing speed doubles every 18 months, following Moore's law. Given these circumstances, it’s not that hard to believe that Amazon could indeed manage to increase its overall production efficiency by 175% in 8 years, making it the world's top technology retailer.
Latin American Post | David Eduardo Rodríguez Acevedo
Copy edited by Susana Cicchetto