Amazon Struggles to Find Fourth Revenue Stream in the US... "Wobbles in Every Industry It Touches"

Amazon Struggles for Years in New Business Development
Slow Progress in Healthcare and Offline Store Sales
Currently, Online Shopping, Membership, and Clouding Account for 90% of Revenue

Amazon has been struggling for years to develop new core businesses, according to an analysis. While Amazon has established three core businesses?online shopping, the paid membership service Amazon Prime, and the cloud computing business AWS?and is making efforts to develop new ventures referred to as the "fourth pillar," it is evaluated that it has not achieved the same level of blockbuster success as before.

The Wall Street Journal (WSJ) recently reported in an article titled "Amazon is searching for its next big hit" that Amazon has been pushing into healthcare, offline retail stores, entertainment, and hardware sectors for years but has failed to turn these into profitable new businesses.

Amazon operates primarily around three businesses: ▲online shopping ▲paid membership services ▲cloud computing. These three businesses account for 90% of its total revenue. Amazon's online shopping is the largest in the world, and Amazon Prime, which started in 2005 as the world's first paid membership service, now has over 200 million members. AWS holds the throne in the global cloud computing market with a 40% market share, surpassing Microsoft (MS) and Google.

WSJ reported that Amazon internally refers to its new business efforts as the "fourth pillar" and has been focusing on finding new businesses for several years. Last year, CEO Andy Jassy raised expectations by stating at a conference that through these new businesses, Amazon would become "a completely different company."

However, WSJ explained that doubts about the "Amazon effect" have arisen recently as Amazon has failed to deliver results for years. The market coined the term "Amazon effect" to describe how industries Amazon announces plans to enter tend to falter significantly. When Amazon acquires startups in a particular industry, the stock prices of competitors in that industry tend to drop.

For example, when Amazon announced its acquisition of Whole Foods in June 2017, the stock prices of Walmart, Kroger, and Target plummeted. A year later, in June 2018, when Amazon acquired the online pharmacy startup PillPack, the stock prices of retailers like CVS and Walgreens Boots Alliance, as well as pharmaceutical distributors such as McKesson and Cardinal Health, declined.

Hal Reynolds, Chief Investment Officer (CIO) at Los Angeles Capital Management, commented, "Their (Amazon’s) recent performance has not been very good."

As part of its new business ventures, Amazon operated offline stores such as Amazon Go and Amazon Fresh, but store expansion was slow. Earlier this year, Amazon announced a temporary halt to new store expansions. In 2014, Amazon launched the AI speaker Alexa, seemingly establishing itself as a hardware manufacturer, but last year the related business unit faced layoffs and setbacks. The healthcare sector, which CEO Jassy aimed to grow, also failed to produce significant results and led to some employee layoffs.

Besides these, the streaming service Prime Video and logistics centers, part of the Amazon Prime membership, continue to operate as part of preparations for new businesses. WSJ also reported that the satellite internet project "Project Kuiper" and the autonomous vehicle business being developed through its subsidiary Zoox are being prepared as Amazon's fourth pillar.

Mark Shmulik, an analyst at AB Bernstein, emphasized, "Amazon is losing focus on oxygen, capital, and most importantly, truly disruptive innovation that only Amazon can do because it is generating too many ideas," and stressed the need for Amazon to strengthen its strategy by focusing on its strengths.

In response, Amazon released a statement emphasizing that it has built three successful businesses and expressed optimism, stating, "We see multiple very large opportunities to serve customers and generate revenue over the coming years."