Amazon’s first-quarter earnings results, announced after the market closed in New York yesterday, confirmed that the coronavirus pandemic has accelerated trends that were already benefiting the giant company. Net sales for the first quarter increased by 27 per cent on last year to $75.5 billion. The company as a whole is taking in $9,602 per second.
Following the results, Bloomberg’s Billionaires index updated the personal wealth of Amazon’s founder and CEO, Jeff Bezos, to $149 billion. In three months — a period in which US economy has contracted by 4.8 per cent and more than 30 million Americans have filed for unemployment — his personal wealth has grown by of $34.2 billion, an overall growth rate of more than $15 million per hour. Were his wealth to grow at this rate for a year, Bezos would make more money in 2020 than Morocco, a country of almost 36 million people.
This is within the realms of possibility. Yesterday’s earnings report forecasts similar figures for Q2. It’s unclear where Bezos is spending the lockdown period — his $80 million New York apartment, his $165 million Beverly Hills estate or his 330,00-acre ranch (with attached spaceport) in Texas — but he is very much in the right place at the right time.
Amazon and its founder are positioned to profit not only from the effect of lockdown on retail, but from the pandemic’s wider effects on everything from internet use to the wider media to politics itself.
The most visible of these trends is the pivot to online shopping and delivery, in which Amazon is a behemoth. In the US, Amazon’s market share is more than six times greater than its nearest competitor, Wal-Mart. The company accounts for around half of the money spent online in the world’s largest economy.
As restaurants, pubs and bars have been replaced by a huge increase in supermarket shopping, Amazon is positioned to profit from its ownership not only of Amazon Fresh and Whole Foods Market, which grew by 8 per cent in the last quarter, but from its development of a technology, which it calls Just Walk Out, that removes the checkout process from physical shopping.
In e-commerce more widely, Amazon has become so huge that it has begun to devour the delivery chains that it previously fed. Using fleets of planes and ships owned or leased by the company through subsidiaries such as Amazon Logistics and Amazon Maritime, and tens of thousands of its own vans, the company is thought to deliver almost half of its own packages — billions of items — and is forecast to outgrow delivery giants such as UPS and Fedex within a few years. Last year the company placed an order for 100,000 electric vans, a contract 15 times larger than the UK’s entire electric vehicle market.
Other trends in consumer behaviour are proving even more profitable to Amazon in the long run. As the UK went into lockdown, ISPs reported huge rises in internet use; Virgin Media reported said that downstream traffic had doubled, while Openreach reported a 28 per cent rise in daytime use across the UK. A very considerable portion of the world’s most popular websites, apps and services run on Amazon Web Services (AWS).
AWS doesn’t have the prodigious turnover of Amazon’s online shopping business, but because the margins are much higher, the company actually makes more profit from cloud computing services, in which it is also, by a considerable margin, the market leader.
What most customers choosing between Netflix and Prime Video — and indeed BBC iPlayer — don’t realise is that they are, directly or indirectly, paying to use an Amazon service in every case. Netflix runs almost entirely on AWS. The cloud giant’s other big customers include Zoom, Twitter, Reddit, Deliveroo, Ocado, Apple and the NHS.
The upsurge in internet use and media consumption will be of greatest benefit to the media companies Amazon and Bezos own directly, which include not only Prime Video but the audiobook service Audible and Twitch, the world’s most popular live streaming website, which is watched by 15 million people a day and is becoming, especially among younger viewers, a credible alternative to YouTube. Bezos himself also owns America’s sixth-largest newspaper, the Washington Post.
His ownership of one of America’s most respected media organisations also means that Bezos is one of the very few people who has almost nothing to lose in the upcoming presidential election. He is despised by Donald Trump, who recognises in Bezos an acumen, a work ethic and indeed a level of wealth that are a humiliating affront to a man who has only, to paraphrase Hillary Clinton, played a successful businessman on TV.
If Trump loses in November, Bezos — who has maintained an icy silence while Trump has used his Twitter account to lie about his businesses and mock his divorce — will enjoy, as the owner of the Post, some credit for the removal of a reviled and incompetent populist. This would be excellent PR for brands such as Whole Foods, and would help to assuage any guilt the American middle class might feel when shopping with a company that has had more than its share of controversies.
But if Trump wins a second term, Bezos will also win. The 2017 Tax Cuts and Jobs Act reduced the corporate tax rate in the US from 35 to 21 per cent, but more importantly for Bezos it introduced new credits for things that Amazon does a lot of, such as R&D and investment in rapidly-depreciating assets (such as computer equipment). The Trump administration’s economic stimulus plan actually extends the tax breaks offered to rich individuals and companies even further. It may be that, as the person at the very furthest extreme of America’s inequality specturm, Bezos actually has more to gain from a Republican presidency.
The power relationship in Trump-Bezos feud was made clear by the addition, just before the earnings report was released, of some of Amazon’s overseas websites to a list of “notorious markets for counterfeiting and piracy”. If this unusual move — which has no legal effect on Amazon’s ability to trade — was a swipe at Amazon’s share price, it serves only as a demonstration of Trump’s inability to damage Bezos.
There are only two factors likely to harm Bezos and Amazon in the long run. The first is the accusation that Amazon is a monopoly, but while it is vast, it is also relatively diverse in comparison to other tech titans. Facebook and its subsidiary Instagram, for example, own around 70 per cent of the social media market, not even counting WhatsApp.
The second and more important factor is that consumers, especially younger consumers, increasingly make a company’s ethics part of their buying decisions. Amazon has faced controversy over its workers’ conditions, their safety and their representation, as well as its environmental impact. Bezos himself seems not to appreciate the importance of this. He recently donated $100m to food banks in the US, seemingly unaware of the derisory scale of this gift; it is equivalent to a person with the median level of wealth in the UK donating £192.
Around the world, people in politics, economics and business are discussing a renewal of the social contract, a change in direction that will be both brought about by the global pandemic and our means of recovering from it. Jeff Bezos may be the last and most egregious example of an economy built for billionaires. But he may also be a sign that the pandemic is creating a society even more unequal than the one we had before.