Amazon just pulled off its biggest quarterly profit in company history — for the second quarter in a row — and more people should be talking about it.
Amazon looks unstoppable. Here are five things that could slow it down.
Two potential obstacles: Prime hitting a wall, and failure in India.
Win McNamee / Getty Images
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.
Amazon is on its longest profitability streak in four years. And it’s doing so while its core retail business in North America is still growing more than twice as fast as the U.S. e-commerce industry on the whole. Translation: It is eating up a ton of market share and increasingly looking pretty much unstoppable along the way.
Which leaves us with a question: Who or what can slow the company down? Here are five ideas.
A slowdown in Prime membership growth
The $99 membership program is the single most important piece of Amazon today. Prime members shop more frequently and spend more than non-Prime members do, and also price-compare less.
There are currently at least 46 million Prime members worldwide and possibly a lot more. Paid membership totals grew 51 percent last year, which is still fast. But, for the first time, Amazon has added a monthly payment option for Prime, hinting that it sees a need to reach new members in the U.S. not willing or able to pay $99 a year upfront.
On last week’s earnings call, an Amazon executive called the upfront $99 fee “a hurdle for many people,” and said the monthly option is meant in part to appeal to new “demographic groups.”
Still, growth is currently strong and Amazon has not yet launched the service in new markets like India and Mexico. Plus, it keeps adding value to what started out as just a shipping program: Music streaming, video streaming and same-day delivery options are some of the additional perks included in Prime memberships.
Failure in India
Amazon only launched in India in 2013, but it is already challenging homegrown competitor Flipkart, which is nine years old, as the top destination for online shopping. Jeff Bezos has promised to invest billions into the company’s operations in India to make sure it succeeds in what will someday be one of the world’s biggest e-commerce markets.
And it better. Amazon has underperformed in the only nation more populous than India: China. So if it wants to be a global power for decades to come, it has to get India right. It won’t be easy; federal regulations prohibit Amazon from storing and selling its own inventory in the country, meaning it has to operate much differently in India from how it does in the U.S. and several other countries.
Increased competition for AWS
Amazon’s cloud computing unit will soon be a $10 billion business and has recorded operating profit margins that most analysts didn’t think were possible. But the unit has had to engage in pricing battles with competitors before and may face them again.
Microsoft continues to invest big in cloud services; Google’s hire of VMware co-founder Diane Greene should re-energize the search giants’ efforts. While Prime is the most critical part of Amazon today, AWS may hold that spot in a distant tomorrow. Amazon has to continue to protect this future.
The “voice search” wars
The Amazon Echo has been the surprise consumer electronics hit of the last few years, but the real star is the Alexa AI-powered personal assistant behind it. That technology has made it clear that the idea of “voice search” is a big one, and Amazon is currently set up to be a key gatekeeper to that new world.
Others will vie for that role, however. Apple, Google and Microsoft are all making big plays in the area, so Amazon will have its work cut out not to squander its early lead.
The brutal workplace stigma
One thread of negative news that Amazon can’t shake is that it is a grueling place to work. From stories about warehouse workers collapsing on the job and dying to office workers crying at their desks, the Amazon workplace does not give off warm and cuddly vibes.
Eventually, you would think these narratives would have an effect on recruiting, but there are no obvious signs of that yet. You might also think shoppers would rebel at some point, too.
And yet, Amazon grows in popularity among shoppers every year. Amazon customers may cringe when they read one of these articles, but few stop shopping there as a result. What would need to happen to change that? Apparently something much, much worse.
This article originally appeared on Recode.net.
