In November , Amazon announced that it was further expanding its pharmacy delivery business — the company launched Amazon Pharmacy, which allows customers to order prescription medications and offers free delivery and prescription discounts for Prime members. Down the road, Amazon may further leverage its tech to expand its healthcare presence.
The Alexa app platform also carries lightweight healthcare apps from institutions like Mayo Clinic and Libertana to answer simple health questions, send alerts in emergencies, and help communicate with caregivers. In the future, these capabilities could lead to Amazon getting into the diagnosis, drug recommendation, and even the prescription side of pharmaceuticals — though that future is likely some way off. The current process of picking up a prescription is time-consuming and inefficient, and the price that patients pay for their medicine varies based on factors like geography, insurance, and more.
In the past, retail pharmacies defended against disruption by having the most convenient and the fastest way to fill a prescription for most Americans. Amid the Covid pandemic, however, prescription delivery became table stakes, with most retail pharmacies waiving their delivery fees, or offering day free delivery or same-day delivery for a fee since many patients could not fill prescriptions in-person. But the delivery offerings come at a price for pharmacies.
With its vast network of fulfillment centers and its PillPack acquisition, Amazon could offer cheaper and faster delivery, pricing out the retail pharmacies in the long run. Amazon also has footholds in the brick-and-mortar world it could eventually leverage, through Whole Foods and its forthcoming grocery chain.
In the longer-term future, Amazon could use these capabilities to take aim at one of the most lucrative — and disliked — parts of the healthcare supply chain: PBMs. However, they receive significant criticism due to the lack of price transparency as well as perverse incentives around how PBMs select which drugs to supply to consumers. Source: JPMorgan. Amazon does not rely on pharmaceuticals to drive its profits, so it has the freedom to become a virtually non-profit approach to pharmacy benefit management — and with PillPack, it may have the growth engine required to reach PBM scale negotiating power.
With a large user base of consumers ordering drugs through Amazon, the company may be well-positioned to negotiate bulk discounts from drug distributors. This is already the operating model of companies like GoodRx and BlinkHealth. Amazon, however, would be able to leverage the largest member population in the United States to do it. With lower costs in place and a more transparent supply chain, Amazon could become an attractive alternative drug supply partner for employers who are unhappy with the rebate-driven PBM model that contributes to high drug costs for their employees.
Amazon took its first steps into commercial loans back in , when the company began offering small-business loans to merchants participating in its Amazon Marketplace via its Amazon Lending arm.
Since then, the company has doubled down on its lending efforts. Amazon has a vast number of independent merchants — 8M third-party merchants as of — that use its platform, information on the financial health of those businesses, and the customer-first culture to build a compelling lending platform.
Among those selling tools today is small business financing. Amazon Lending provides loans to merchants through a partnership with Bank of America, while the retail giant recently announced a partnership with Marcus by Goldman Sachs to provide credit lines to select sellers.
This Marcus partnership is the first time that Amazon will open up its treasure trove of sales data on its sellers to a third-party financial institution to make underwriting decisions. Amazon gets the increased business, plus a cut of the interest from the loans; the merchant gets the capital they need to grow. Often, the aims of large financial institutions stand at odds with those of small businesses. Given that credit needs for small businesses tends to be for smaller amounts, banks can see them as being less profitable opportunities.
Another challenge facing small businesses seeking capital from commercial banks is a lack of suitable collateral. Banks prefer to lend to businesses with assets, such as property or specialized equipment, that can be used to secure the loan.
This puts small, online businesses at a distinct disadvantage, as these companies are much less likely to possess the kind of tangible collateral that banks often seek. These challenges make small business loans an attractive market for Amazon to disrupt.
Whereas banks often rely upon credit scores and personal financial documentation to determine the risk associated with lending to a given business, Amazon already has information such as revenue history and future earnings projections, inventory data, and sales data. With all of this information, Amazon may be able to make better-informed lending decisions than the average commercial bank — and, as the approval system would be data driven, likely process them faster. Merchants who wish to participate in the Amazon Lending program must be invited to do so, meaning that not every Amazon Marketplace merchant can apply for a loan.
The advantage of this exclusivity is that Amazon can offer loans quickly: unlike traditional lenders that rely upon extensive documentation typically furnished by the borrower, Amazon Lending typically approves loan applications within just 24 hours. Amazon also does not charge borrowers origination fees or penalize them for prepayments. The company also paused its automatic repayments for the first few months of the Covid pandemic, providing small businesses with valuable lifelines.
The invite-only nature of Amazon Lending might seem exclusionary, but it allows Amazon to prequalify merchants and provide a superior experience for borrowers by streamlining the loan application process and reducing the time needed to reach a lending decision. Among these companies, Amazon has a deep competitive moat made up of data and speed — one that is difficult for commercial banks to match. With its data advantage, Amazon has the power to offer loans to businesses that traditional banks might consider lower-quality borrowers and refuse or lend to on more onerous terms.
Amazon stepped in and is a great partner for us. This data also means Amazon has a significant advantage in terms of the customer experience of applying for a loan, as getting a loan through Amazon is much faster than getting a loan through a bank. While there may be no incentive for Amazon to lend outside its own ecosystem today, the company is using its small business financing program as a means to encourage merchants around the world to leave local competing e-commerce companies and join Amazon.
The significance of these moves is less that they promote Amazon loans to current Amazon merchants, but that they have the potential to bring new merchants into the Amazon ecosystem.
If small businesses grow over reliant on the availability of Amazon lending, they risk a hard fall should Amazon significantly scale back its focus on SMB financing and product promotions. Recent reports suggest that Amazon is ramping up its work with manufacturing partners to develop new private label products for the company to sell under its own brand. These kinds of private label products provide Amazon with an obvious host of benefits, such as not having to share space and revenue with other SMB brands or spend time developing its own products.
Private labels could also increase competition for the SMBs that want to use the Amazon marketplace to sell their wares. Amazon is also partnering with larger brands to sell their products on the e-commerce site, including Apple and Under Armour. Prioritizing big name brands and private labels over small businesses would make small business lending inherently less attractive inside Amazon, and along with the numerous major risks involved, may imply that the company is walking back some of its ambitions in the space.
Fulfillment logistics is the process of storing inventory, packing customer orders, and shipping orders.
To do so effectively requires significant investment in inventory tracking, fulfillment, and delivery technology. Shipping is one of the most important and largest cost centers for Amazon — it prides itself on rapid delivery as a way to enhance the customer experience and entice more customers to join Amazon Prime. However, the company used to rely almost entirely on shipping companies UPS and FedEx, as well as the US Postal Service, to get shipments to customers, taking that part of the business out of its hands entirely.
Over the past decade, Amazon has been investing heavily in its logistics and delivery capabilities, trying to improve the speed and efficiency of the shipping process and reduce its reliance on third-party logistics providers. From to , the company increased its logistics infrastructure in the US by nearly 3X. In fact, its shipping costs are increasing at a faster pace than online sales, showing how the Covid pandemic has impacted the price of delivery in recent months.
Though the retail giant used to rely almost exclusively on carriers like UPS and FedEx to ship their packages, Amazon now ships and delivers nearly two-thirds of its own packages using Amazon Logistics.
The company is primarily focused on automating the delivery process, making it faster, more efficient, and more predictable. Though Amazon has already invested significant funds into building out its fulfillment and logistics operations, it still plans to expand in the coming years. However, outside of expanding its capacity, the company is also investing in and creating new technologies that may automate or improve the logistics and delivery processes, from drone fulfillment to autonomous delivery vehicles.
Amazon is expanding its logistics infrastructure through a variety of different in-house initiatives. Fulfillment is one important area to improve efficiency. Amazon has already employed , robots across its warehousing network, using robotic fulfillment to increase the speed and accuracy of getting online orders filled and ready to ship. The company has also looked to shopping malls across the US, which are filled with stores that are going out of business or closing brick-and-mortar locations , to increase fulfillment square footage.
Amazon is in talks with the largest mall owner in the US, Simon Property Group, to convert old department stores into fulfillment locations. The company has already converted out-of-business malls in Cleveland, Ohio, to act as fulfillment warehouses, according to the Wall Street Journal.
When it comes to mid-mile and last-mile delivery — getting the customer orders from warehouses to their final location — Amazon has a few initiatives in the works. Freight matching: Freight matching platforms have risen to prominence for efficiently matching shippers with available carriers, facilitating partnerships between verified players, and providing pricing transparency.
In May , Amazon launched its new digital freight matching platform across the continental US. The announcement is significant because it may allow Amazon to use its scale to gain greater control over the mid mile freight market, strengthening its position as a major shipper. As Amazon establishes its freight matching capabilities for third-party shippers, it may leverage its scale to offer below-market rates to shippers and competitive rates to truckers — drawing business away from competing platforms.
In fact, it recently launched a new initiative to lease Amazon-branded trucks to small trucking companies, according to The Information. Autonomous last-mile delivery: Last-mile delivery, or the final leg of the supply chain, is complex and highly inefficient. Read more: Amazon is turning 25 — here's a look back at how it changed the world.
Books proved popular with growing numbers of online buyers, and Bezos began to add other products and services to the Amazon inventory — most notably e-readers, tablets and other devices. Today Amazon predominantly makes its revenue through retail, web services and subscriptions.
After moving into e-readers and tablets, it extended more broadly into technology products and services. More recently Amazon has expanded into bricks-and-mortar, heralded by its purchase of the Whole Foods chain in , the creation of its own high tech stores such as Amazon Go , and its sophisticated distribution and delivery services such as Amazon Prime. Read more: Fear not, shoppers: Amazon's Australian geoblock won't cramp your style.
This gives the company a position of extreme market dominance. Amazon is hugely popular with customers, but has attracted criticism from supplier advocates, workers unions and governments. Industrial relations matters, such as fair wages, unsafe work practices and unrealistic demands, appear the most common area of concern.
A UK report found:. In March , as COVID began to take hold, workers claimed they were fired for voicing concerns about safe working conditions. Luna will work on any Bluetooth controller, but Amazon has also released its own Luna version pictured , which will connect directly to the cloud service. There is no fixed release date for Luna, but keen gamers can already sign up for access in the US. Amazon has been supplying hospitals for years now, but it intends to take the medical side of its business to the next level.
Amazon Care launched in September as a pilot for Seattle-based Amazon employees and their families. So far it has proven successful enough that Amazon is starting to scale up the service to cater for more workers.
The service provides virtual and real-life healthcare assistance through Oasis Medical, including in-app visits to a doctor, in-person check-ups and prescriptions delivered within two hours. In June , the company snapped up online pharmacy PillPack, enabling it to dispense prescriptions in 50 states, something that would have taken years to achieve otherwise.
Another unique feature is that it tracks the tone of your voice to get a sense of your mood and energy levels. Halo's design really makes it stand out from its rivals as it is a waterproof fabric band without a screen, so can only be operated through an app. This new tracker was made available for early access customers in August and fully released in the US in December, but a wider release date to other countries is not yet known. And Amazon isn't stopping at its own branded vans Amazon is now looking to make its delivery service more environmentally friendly.
In , Amazon released its Climate Pledge, which is a commitment to be net zero carbon across the board by — 10 years ahead of the Paris Agreement. The first of the eco-friendly vans was revealed in late , with 10, scheduled to be in operation by , and all , on the road by While Amazon hasn't revealed any plans to incorporate driverless technology into its future delivery vehicles, the company's investments suggest that might be the plan.
Zoox is known for building its vehicles from scratch, rather than from traditional cars, and it plans a vehicle that can drive backwards and forwards without turning. This isn't Amazon's first venture into driverless tech, as the company has previously invested in companies such as self-driving car start-up Aurora in , and driverless trucks by Embark were spotted carrying Amazon wares on the I Interstate highway in the US in January Things may move fast for its latest acquisition, as Zoox was granted a permit to test driverless cars without a back-up driver in California in September last year.
The smallest addition to the Amazon delivery fleet is Scout, a drinks cooler-sized robot on wheels that navigates pavements at walking pace and drops off small parcels around the neighbourhood. There's been a lot of hype about the Amazon Prime Air drone delivery service since December , when founder Jeff Bezos mentioned the firm's plans to develop the concept during a US TV interview.
Amazon is now well on the way to rolling out the service, which will deliver packages weighing up to five pounds within just 30 minutes using miniature drones. In December , the first Prime Air package was delivered at breakneck speed in a testing ground in Cambridge, England, which has a Prime Air fulfilment hub nearby.
The drone delivery service was due to get going at the end of in the UK, but this was then postponed to summer But today, an official launch date is still not set, and some have accused Amazon of using the promise of drones as a means of drawing in new Prime customers.
Amazon also has competition, as Walmart has recently signed a number of deals with drone companies to facilitate a similar delivery service from its stores. Also taking to the skies is Amazon Air. Since , the company has been building up a fleet of planes for its delivery efforts.
The company leased 15 Boeing s in the summer of , which brought its fleet to a total of 65 Prime airplanes ready to drop off goods. However, expansion is always on the horizon with Amazon, and last summer 12 new cargo planes were added to the Amazon Air fleet, bringing the total number up to more than 80 at that time, as the company tried to keep up with demand.
This was a stark contrast to what is happening to most of the aviation industry as it struggles to survive the coronavirus pandemic. In January this year Amazon revealed that it has bought 11 aircraft from Delta and WestJet as it continues to expand; the planes will join its network in and There are currently more than fulfilment centres, most of which are in North America and across Europe.
The centres use some of the most sophisticated tech around, including robots that organise shelves of goods and artificial intelligence-based stock taking.
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