Dec 3, 2020 - Economy

Amazon's second great land-grab

Illustration of dozens of Amazon packages parachuting from the sky.

Illustration: Aïda Amer/Axios

Amazon is in the midst of a hiring spree unprecedented in American corporate history. It's a show of force that, if history is any guide, will be extraordinarily difficult to compete with.

By the numbers: Amazon has been doing extremely well during the coronavirus pandemic. In the six months from April through September this year it made a profit of $11.6 billion. That's up from $4.8 billion in the same period of 2019, and a mere $450 million in those six months of 2017.

  • What's astonishing about those results is that they come during a period of greatly increased costs. Amazon isn't just hiring aggressively; it also has to keep all those new hires safe in the face of a pandemic, while also staying true to its 2019 promise that it would deliver almost everything to Prime members in just one day.

Driving the news: Amazon has increased its workforce by well over 400,000 people this year alone, bringing total headcount to more than 1.2 million. On top of that number, NYT reports that some 600,000 temporary workers and delivery drivers are now working for Amazon.

  • No company has ever expanded this fast — and the fact that Amazon is adding so aggressively to its full-time workforce shows that the retailer sees this growth as permanent, rather than being a temporary artifact of the pandemic.
  • The message is clear: Amazon is intent on taking advantage of the pandemic to increase its competitive advantage over all other retailers, to build an all but insurmountable gap.

Flashback: Amazon did something similar following the dot-com crash of 2000. While its competitors were struggling to stay alive, Amazon spent three years building developer tools and APIs that would give quick and easy access to Amazon's computation, database, and storage capabilities.

  • At first, the project was designed just for internal use, but eventually it was expanded to be available to anyone.
  • By the time Amazon launched its first cloud-computing product, EC2, in 2006, it was effectively six years ahead of any competition — and it took another few years for other companies to even try to compete in what is now known as "the cloud".
  • Amazon's cloud business, AWS, made $3.5 billion of net profit on its own in the third quarter of 2020. That's 56% of the company's consolidated net income.

The bottom line: Amazon is the one mega-cap company that has real capacity to absorb and reinvest the massive profits that it's throwing off. It has never paid a dividend, and it hasn't bought back any of its own stock since 2012. Instead, it's building a seemingly invincible real-world army.

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