Over the past few years, Big Tech firms have begun venturing into new avenues of business outside their core sectors. Part-business survival tactic and part-business expansion, these companies have embarked on diversification journeys nonetheless. With a fast-changing future, and with Industry 4.0 in full swing, they realized that they cannot limit themselves by the industry that earned them their name and stature in the market.
Today, we will be exploring 5 ways e-commerce giant Amazon is diversifying its business.
1. Cloud services
There is perhaps no greater diversification success story for the e-tailer than its cloud services offshoot, Amazon Web Services (AWS), which went into business in 2006.
According to Investopedia, “AWS brought in a record $10 billion of revenue [in Q1 2020], accounting for 13.5% of Amazon’s total revenue. Having grown steadily in the 30-percent range the past few quarters, AWS is a frontrunner to other cloud computing platforms such as competitor Microsoft Azure.”
Over the years, AWS’s scalability, adaptability and cost-flexibility has made it the go-to cloud option for companies of all sizes. It also set a strong precedent for Big Tech firms expanding outside their original sectors.
2. Autonomous vehicles
At this point, nearly every tech firm with deep pockets and a future-oriented mindset has invested in – or discussed investing in – autonomous vehicles. While the technology is still relatively novel, expensive and far from perfect, both automotive firms and non-automotive firms are anticipating the age of the self-driving car.
Amazon is no different. Like Google and other big names in Silicon Valley, it has invested in the technology – namely in US startup Aurora, in 2019. Like Apple and others, Amazon’s diversification attempts are not solely positioned to expand the company’s investment portfolio, but to also benefit and develop its core services. Amazon has spoken endlessly about its interest in self-flying drones, trucks and other means of transportation in an effort to raise the efficiency of its e-commerce business.
Amazon did not disclose the amount it invested in the $530 million funding round. The e-commerce firm also showed interest in June in buying Zoox, another autonomous tech firm, valued at over $3 billion in 2018.
Aurora competes with other self-driving companies such as Google’s Waymo.
3. Food delivery
Back in May last year, Amazon had shown interest in a significant investment in the UK food delivery firm Deliveroo, leading a $575 million funding round which would take the total the food delivery app has raised to date up to $1.53 billion, CNBC reported at the time.
Since then, the Competition and Markets Authority (CMA), a UK competition regulator, had been investigating the deal, but recent reports indicate that the CMA has “provisionally cleared” an Amazon investment that would give it a 16% stake in the company.
Amazon had previously dabbled in online food delivery in the UK and failed, shuttering UK operations of its Amazon Restaurants brand in 2018 and closing down in 2019. Its investment in Deliveroo shows that Amazon is now taking the F&B sector more seriously.
4. Grocery retail
Amazon’s upcoming investment in Deliveroo is the latest instance of Amazon showing interest in the F&B industry, but not the first.
In 2017, Amazon announced it would buy grocery retailer Whole Foods for $13.7 billion, signifying a solid push into the realm of brick-and-mortar for the highly digitized seller. Whole Foods operated 456 stores at the time of the announcement.
Since them, Amazon’s investment had paid off big time, with the demand for grocery delivery skyrocketing during the COVID-19 pandemic.
5. Internet connectivity
Similar to Google’s project Loon which employs a network of balloons to extend internet connectivity, Amazon’s Project Kuiper plans to provide internet to the world using a network of 3,236 satellites.
Amazon finally secured the Federal Communications Commission’s (FCC) approval to set up its network of satellites in late July, The authorization allows Project Kuiper to deliver satellite-based broadband services in the United States, helping expand internet access to households and communities across the country.
Project Kuiper’s promise is simple but ambitious: It will deliver high-speed, low-latency broadband services to places beyond the reach of traditional fiber or wireless networks.
To bring the project to life, Amazon will be investing more than $10 billion into it.
But Project Kuiper isn’t exactly Amazon’s only outreach to space. A secretive passion project for Amazon owner Jeff Bezos, Blue Origin wants to make space travel more affordable and commonplace. After years of secrecy and speculation, we finally learned about in 2019.