Commercial plumbing

Today, the Financial Times kicked off a series of articles about Amazon with a look at its growing presence in the market for business services. Written by Barney Jopson, the coverage focuses on "charting Amazon's ability to reinvent industries, drawing upon over 50 interviews with former employees, clients, software providers, rival retailers, academics , bankers and consultants."

Underscoring Amazon's wide reach, the FT reports that the company's 2011 sales in North America ($48.1 billion) were higher than the online sales of the next 10 retailers combined ($47.4 billion). A commentor (below) points out that the Amazon's 2011 U.S. sales are actually lower than the FT reports ($26.7 billion, according to Internet Retailer). While the FT's revenue analysis is incorrect, it accurately notes that the flip side to Amazon's growth is its limited profitability: $631 million, a margin of 1.5%, barely a quarter of the margin recorded by Walmart.

This first article focuses on the tensions inherent in using a service provider who is also a retailer and potential competitor. This ground has been covered before, but the FT does a good job pulling together a variety of perspectives.

Although it's not fully developed in this initial piece, Harvard Business School professor Marco Iansiti  opens an interesting door in talking about Amazon as "a source of systemic risk that we didn't have before." Jopson observes:

"[Investments in services have] lifted Amazon’s economic influence beyond its tech peers Apple, Google and Facebook and taken it into the realm of network businesses such as stock exchanges, power grid operators, credit card processors and shipping lines."

Amazon's pervasive presence, coupled with the tension between the company's competing roles as partner and collaborator, lead the FT to suggest that "its role seems set to face sterner political scrutiny."

Much of the newspaper's coverage is reminiscent of Eric Hellman's April post, "Publishing's Amazon-powered future". There, Hellman claims that "Amazon will ruthlessly bring effiiciency to every process in publishing." If so, the workflow lessons I posted about last week might come in handy.

Note: Edited July 10 to correct sales figures for Amazon. The FT described the worldwide sales figure as its North American revenue, and I picked up the report without double-checking it against other sources.

Brian O'Leary

About Brian O'Leary

Founder and principal of Magellan Media Consulting, Brian O’Leary helps enterprises with media and publishing components capitalize on the power of content. A veteran of more than 30 years in the publishing industry and a prolific content producer himself, Brian leverages the breadth and depth of his experience to deliver innovative content solutions.