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Tue October 23, 2012
Is Amazon.com taking over the world?
Amazon.com recently gobbled up more than $1 billion dollars’ worth of real estate in Seattle’s South Lake Union neighborhood. The company is growing like crazy – we’ll hear on Thursday how fast quarterly sales and profit are growing.
It’s spread way beyond retailing – the latest is that Amazon is functioning like a bank – lending money to its third-party merchants. It's just one of the many ways in which Amazon is flexing its muscles.
Imagine saying this sentence: "My movie just got optioned by Amazon." Writer Jamie Nash can say that about two of his screenplays that he had previously shopped around Hollywood unsuccessfully.
"They got some interest but they didn't get that sale, so they'd been sitting in the back of my hard drive for a long time," Nash said.
Then he heard about a screenplay contest sponsored by Amazon Studios. It's the company's new movie production arm. Nash entered and Amazon snapped up his scripts.
The book people?
Amazon Studios hasn't produced any movies or TV shows yet, but Nash is hopeful his films will get made. He says when he tells friends and family the movie house he's working with, they scratch their heads.
"They kind of look at me and they're like, you mean the book people?" Nash said.
You know Amazon, the book people, who have laid waste to brick-and-mortar booksellers. But now you've got Amazon in movie production, Amazon in banking, Amazon making tablet computers and running a massive cloud computing system that NASA and Pfizer use. What isn't this company doing?
Brian Walker is a Seattle-based analyst with Forrester Research.
"Amazon's always been very interested in becoming a utility, a backbone, so pervasive in an industry that you can't imagine it not being there, and it may not necessarily operate on a fat margin, but it's everywhere," Walker said.
It may seem like Amazon is dabbling in lots of different things, but Walker says the endeavors are logical. If Amazon can make a hit TV show, it can lure lots of people to its online streaming and away from Netflix. If it can make loans to third-party merchants so they sell more stuff through Amazon, the company gets more commissions plus interest on the loans.
Can it do it all?
But come on, no company can do everything perfectly. Walker says Amazon risks spreading itself too thin.
"Just as we see with Google, you could potentially get into a situation where there's lots of different businesses, but there's really only one that's making money," Walker said.
Still, Amazon has a pile of cash and no shortage of ambition. So what do you do if you're a business owner and Amazon is coming after your market? Like the world of plumbing supplies.
Larry Solomon points to 10-foot lengths of plastic pipe that he heard one of his customers recently bought from Amazon. Solomon is chief executive of Pacific Plumbing Supply in Seattle.
He's long competed with Amazon on small things like garbage disposals or faucets that can be shipped easily. But Amazon recently launched an industrial supply web site aimed at contractors and plumbers – Solomon’s customers. Solomon says he offers more intensive service. Still, he can't ignore such a giant operating in his own backyard.
"We're not in any way dismissive of the monster headquartered here in Seattle," Solomon said.
But here's the thing – on the one hand, he calls the company a monster. On the other, he shops from them all the time.
"Most recent purchase – I bought my grandson's Halloween costume," Solomon said. "He wants to be a policeman."
Can’t live with 'em, can’t live without 'em.
Lots of companies have complicated relationships with Amazon these days. UPS ships a lot of boxes for Amazon. But Forrester analyst Brian Walker says he wouldn’t be surprised to see Amazon start its own shipping business – it already has a fleet of trucks and logistics expertise. Message to Big Brown – watch out.