Amazon Project

Part
01
of five
Part
01

Amazon Emerging Businesses

Two of the top emerging businesses by Amazon include pharmacy (via PillPack) and its AmazonCommercial line. More information about each line of business is provided below.

PHARMACY (PILLPACK)

Business Line

  • The first rumor that Amazon will get into the pharmacy business came in late 2017, but it was only confirmed in June 2018 when Amazon acquired PillPack.
  • The PillPack deal was closed at $800 million.
  • "PillPack is a pharmacy that delivers medications to customers" where they coordinate refills and renewals, then ship them to customers. The acquisition provided Amazon "entry into the pharmacy business" including in the pharmacy benefits management (PBM) and distribution spaces.
  • This is just an emerging business and line of products are still limited. Amazon has not added pharmacy products but it offers over-the-counter pills, medical supplies (i.e. gauze and bandages) and at-home pregnancy kits.

Current State

  • Amazon appointed Nader Kabbani to handle the pharmacy initiative of the company where the PillPack team will directly report to Kabbani. It shows that the pharmacy business is one of the most ambitious projects of Amazon and the company is intending to disrupt this sector.
  • Additionally, PillPack is now seeking licenses to different states that will allow them to expand services. Currently, it already received pharmacy licenses from 19 states, while another three have pending applications.
  • The company has also already established mail-order facilities in Austin, TX, Miami, FL, Manchester, NH, and New York, NY.

Future Plan

  • The acquisition of PillPack is also to save time applying for licenses because PillPack already had a long list of licenses in hand. The Indiana license they have has changed ownership already and named to Amazon.
  • Amazon’s immediate plan is focused on the Indiana region. The company plans to apply for a license for its fulfillment center in Indiana. Also, Amazon is "gearing up for a large expansion in this region, with plans to open an $80 million distribution facility."

AMAZON COMMERCIAL

Business Line

  • In June 2019, Amazon launched its own private label “AmazonCommercial”. This is the company’s first venture in offering commercial and industrial supplies for targeting wholesale and distribution verticals.
  • AmazonCommercial is the company’s private-label brand in commercial paper products such as tissues, paper towels and toilet paper for industrial category targeting business-to-business sector.
  • Amazon described this label as creating "value for businesses by providing professional-grade, cost-effective products." This move will directly set them up to compete with brands like Office Depot, Staples, and Grainger.

Current State

  • This business is just in its nascent stage since it launched only two months ago and offers a limited range with only nine SKUs of commercial paper products.
  • Revenue estimates show that the 80-roll pack of toilet paper is sold at 1,230 units monthly making this the most popular product under AmazonCommercial label.
  • Amazon is using different tactics to promote the brand such as putting up display ads, sponsored product ads and utilizing Amazon Vine Review Program.

Future Plan

  • With B2B sales market projected to value at $6.6 trillion by 2020, Amazon has intent in entering the B2B market.
  • It is reported that Amazon is continuing its efforts in tapping the B2B sector and has been integrating Amazon Business to displace "traditional wholesale distributors across verticals". Amazon is intending to "invest more in this direction".

RESEARCH STRATEGY

Your research team leveraged reports from the Amazon website, press releases, and media/news reports from sources such as Forbes, CNBC, IBJ, Entrepreneur, Tech Crunch and other similar sites to find emerging business or new business that Amazon has launched recently. We found two of the top emerging businesses of Amazon: pharmacy and AmazonCommercial. We selected these two ventures because of the impact they are projected to bring when launched and numerous expert analyses have been published about them. Additionally, these businesses were shown to garner a lot of attention within their respective industries. The news about Amazon’s acquisition of PillPack and getting into the pharmacy industry created such a buzz that PBM stocks plummeted down upon the news release. AmazonCommercial has also been prevalent in the press since this business line is targeting another sector and space which has impacted its would-be competitors and other Amazon merchants.


Part
02
of five
Part
02

Amazon Growing Businesses

Two additional business lines at Amazon that are considered top in terms of growth are advertising and logistics. More information about each line is presented below.

ADVERTISING

  • In the fourth quarter of 2018, Amazon's advertising business line grew by 97% to reach $3.39 billion in net sales, making it one of the company's fast-growing sources of revenue.
  • In the 2018 fiscal year, Amazon's advertising business line generated $10.1 billion in revenue, a 117% YoY growth from $4.7 billion in the previous year. This growth helped Amazon move ahead of Microsoft and only behind Google and Facebook in the U.S. digital ad market.
  • Pivotal Research projects that revenue from Amazon's ad business would grow faster than any other segment of the company and hit $38 billion by 2023.
  • Dave Fildes, Amazon's Director of Investor Relations, said in an earnings conference that Amazon is "continually evolving its tools and services for advertisers, to make sure they've got a variety of ways to meet their goals. That includes expanded sponsor brand placement and improved campaign manager features."
  • While Amazon's AWS business line is regarded as the company's most lucrative business line, analysts are predicting that it could be overtaken by Amazon's advertising in just two years.
  • This growth is fueled by a steady increase in traffic caused by product search on the Amazon platform which gives "third-party sellers a reason to increase bids for keywords".

Plans for the future of the line

  • Amazon plans to expand its advertising offerings beyond their e-commerce platform and mobile shopping app.
  • They plan to expand ad services into their "ad-supported video service Freedive under IMDb, planned ad-supported channels for Fire TV, live NFL games on Amazon Prime Video and live-streaming video platform Twitch, and a new ad-supported tier of Amazon Music for Echo and Alexa-enabled devices."

LOGISTICS

  • The 2018 annual report of Amazon was the first time the company listed transport and logistic services among their competitors.
  • In 2018, they spent $27 billion on shipping.
  • Experts hint that Amazon would spend about $6 to ship a box by themselves instead of paying UPS or FedEx about $8 or $9 per box, respectively, which could save them a couple of billion dollars and give them more control over their supply chain.
  • Wolfe Research reports that Amazon now handles 26% of their shipping orders.
  • In a press release by the company, in December 2018, they hinted that they can now "transport hundreds of thousands of packages per day with their new dedicated air network and that their fleet of planes make two-day shipping possible almost anywhere in the U.S."
  • They currently have planes in 21 U.S. airports.
  • On August 7, 2019, FedEx, one of Amazon's major logistics partners, announced that they would no longer make "ground delivery service for Amazon as the online shopping giant builds its own fleet and becomes more of a threat to delivery companies."
  • The announcement comes two months after FedEx ended their air delivery service with Amazon.

Plans for the future of the line

  • Amazon recently expanded its logistics services, Amazon Air, to include 50 planes and new regional hubs in "Fort Worth, Texas, Wilmington, Ohio, and expanding one in Rockford, Illinois" this year.
  • They plan to open a "$1.5 billion air hub at Cincinnati/Northern Kentucky International Airport in 2021" with a capacity twice the current air fleet of 50 plans to 100 planes. The new hub will schedule 200 flight landings and departures every day.
  • Furthermore, Amazon added 20,000 vans to cater for ground deliveries.

RESEARCH STRATEGY

To identify two more of Amazon's top growing business lines, your research team leveraged articles and expert analyses from credible media pages on the fastest growing business lines of Amazon based on the annual revenue growth of these sectors. The "top" was based on the growing business lines with the most publicity and industry-expert analyses.


Part
03
of five
Part
03

Amazon Grocery Leadership Teams

Steven Kessel, the SVP Physical Stores, serves as the head of Amazon's grocery business line. The General Manager of Amazon Restaurants is Russell Baker. Other key leaders/team members for Amazon's grocery business line include Eugene Wang (Business Tech Leader - Alexa Shopping Grocery and Consumables) Todd Fellerman (CPG Vertical Lead & Head of Grocery, Amazon Advertising), and others.

HEAD OF AMAZON'S GROCERY BUSINESS LINE

PRODUCT DEVELOPMENT/DESIGN

  • Eugene Wang is the Business Tech Leader - Alexa Shopping Grocery and Consumables (link to LinkedIn profile).
  • One of his responsibilities includes leading a team of “product managers, designers, and software engineers to develop the future of grocery and consumable shopping with Alexa.”
  • Rajneesh Mahajan is the Head of Engineering, Alexa Shopping List and Grocery Shopping (link to LinkedIn profile).
  • He is the head of the engineering team that develops the software that allows users to conduct grocery shopping with Alexa.
  • Julian Merschen is a Senior Manager, Product Management Tech, Alexa Shopping Grocery (link to LinkedIn profile).
  • Merschen and his team are responsible for building the end-to-end system that allows users to “shop for groceries at Whole Foods, AmazonFresh, and Prime Now” with Alexa.
  • Shravan H. is a Senior Product Manager, Online Grocery (link to LinkedIn profile).
  • His team was responsible for launching the “online grocery delivery and pickup” services at Whole Foods.

MARKETING

  • Todd Fellerman is the CPG Vertical Lead & Head of Grocery, Amazon Advertising (link to LinkedIn profile).
  • His responsibilities include managing the “grocery (food & beverage) national team of managers and business sales leads” and overseeing the “marketing, digital, media and eCommerce partnerships with the premier global food & beverage companies.”
  • Chad Mallory is a Marketing Manager, Grocery - AmazonFresh & Prime Now (link to LinkedIn profile).
  • Mallory’s responsibilities include creating “actionable strategy and insights from Fresh and Prime Now search data,” executing “on-site and offline marketing plans to support key vendor brands” within the grocery, frozen, & alcohol categories, and others.
  • Meghan Coughlin is a Manager of Account Management - Entertainment/Grocery (link to LinkedIn profile).
  • One of her responsibilities includes overseeing “teams across three offices and partners across a number of teams, including but not limited to sales, retail, product, creative, and shopper marketing to ensure strategy alignment with advertisers.”
  • Davey Holmes is a Marketing Manager, AmazonFresh (link to LinkedIn profile).
  • His responsibilities include managing the “ongoing execution of the deals program” and developing promotional strategies for AmazonFresh and Prime Now.

OTHER KEY LEADERS/TEAM MEMBERS

  • Ganesh Rao is the Director/GM, AmazonFresh + Prime Now (link to LinkedIn profile).
  • He oversees a team that creates “actionable customer insights, build innovative traffic and membership products, and operate marketing channels to drive the growth of ultrafast grocery delivery from Amazon globally.”
  • Serena Cheng is a Senior Instock Manager, AmazonFresh & Prime Now (link to LinkedIn profile).
  • She is responsible for managing the inventory in the baby, household, and personal care categories at AmazonFresh & Prime Now.
  • Zach Brough is a Senior Vendor Manager - Grocery (link to LinkedIn profile).
  • Brough oversees vendor management in the baby food category.

RESEARCH STRATEGY

The organizational structure of Amazon's grocery business line was identified by examining the company’s investor relations website, employees listed on its LinkedIn page, and other articles published online that talked about its leadership team. Articles that featured the SVP Physical Stores, Steven Kessel, have only provided information about who he reports to and his responsibilities. Only the main leadership team at Amazon is available in the public domain, and the explicit organizational/reporting structure of the company’s specific divisions such as the grocery business and other units are not publicly available. Besides Kessel, the rest of the employees provided above are identified by examining the list of employees on the company’s LinkedIn page. The information for selected United States-based senior leadership and manager level employees in Amazon's grocery business line have been provided based on publicly available information.
Part
04
of five
Part
04

Amazon AI and a Service Leadership Teams

There are two departments within Amazon's AI as a Service business line: Product Development/Design and Marketing. In the former, there are 10 members of the leadership team; while in the latter, there are three members of the leadership team. These team members have been identified below, along with their job titles, a brief description of their role at Amazon, and a link to their LinkedIn profile.

OVERVIEW OF THE ORGANIZATIONAL STRUCTURE OF AMAZON'S AI AS A SERVICE BUSINESS LINE

  • The vice presidents and general managers of deep learning and artificial intelligence report directly to the vice president of Amazon AI Services, while the VP of Amazon AI Services reports directly to Amazon's AWS CEO.

PRODUCT DEVELOPMENT/DESIGN TEAM

HASSAN SAWAF
  • Job Title: Director of Applied Science
  • Job Description: Hassan Sawaf has been with Amazon since September 2016, where he is Director of Applied Science and Artificial Intelligence in Amazon Web Services. His position at Amazon involves building services and technologies to fuel Amazon and Amazon AWS customer initiatives with human language technology and machine learning.
  • Linkedin Profile
MARCELLO FEDERICO
  • Title: Principal Applied Scientist, AWS Deep Learning
  • Job Description: Marcello joined Amazon in September 2018 to contribute to the science behind Amazon’s AI services running on AWS, such as machine translation and language understanding.
  • Linkedin Profile
SRAVAN BABU
  • Title: Senior Machine Learning Scientist
  • Job Description: Sravan Babu works at Amazon with the Amazon Comprehend team, where he helps with "innovating and launching new natural language processing algorithms".
  • Linkedin Profile
RISHITA ANUBHAI
SAAB MANSOUR
  • Title: Senior Applied Scientist, LEX
  • Job Description: Saab Mansour is leading the science efforts behind the NLU and dialogue management components in Amazon Lex — a service for building conversational interfaces.
  • Linkedin Profile: N/A
SWAMI SIVASUBRAMANIAN
BRATIN SAHA
  • Title: Vice President and General Manager, Machine Learning Services, Amazon AI
  • Job Description: Bratin Saha is "responsible for all Machine Learning Services including Amazon SageMaker, Deep Learning AMIs/Containers, Deep Engines (TensorFlow, MXNet, PyTorch, and others), Ground Truth and Amazon Mechanical Turk, and Neo".
  • Linkedin Profile
ZOE HILLENMEYER
  • Title: AI Services Sr. BDM — Amazon Personalize, Amazon Forecast
  • Job Description: Zoe Hillenmeyer works "as the connective tissue" for various teams within AWS, including customer teams, marketing teams, sales, teams, engineers, and service teams.
  • Linkedin profile
MATT WOOD
  • Title: General Manager, Deep Learning and AI
  • Job Description: "As part of the team at Amazon Web Services, I help customers build sophisticated applications with innovative analytics, AI, and deep learning products. I work with teams of all sizes to help bring their ideas to life through technology. "
  • Linkedin Profile
MIKE MILLER
  • Title: General Manager, AWS AI Devices at Amazon Web Services (AWS)
  • Job Description: Mike Miller works with AWS to introduce AI devices into various businesses and organizations.
  • Linkedin Profile

MARKETING TEAM

JOEL MINNICK
  • Title: Head of Marketing — Artificial Intelligence, Machine Learning, Deep Learning
  • Job Description: Joel Minnick is responsible for the marketing teams that support AWS's machine learning services, platforms, and frameworks businesses.
  • Linkedin Profile
RYAN GAVIN
  • Title: General Manager of Artificial Intelligence and Machine Learning Marketing
  • Job Description: "I oversee the marketing and strategy for the broadest and deepest set of machine learning and AI services in the industry including pre-trained AI services for computer vision, language, recommendations, and forecasting; Amazon SageMaker to quickly build, train, and deploy machine learning models at scale; and deep learning open-source frameworks."
  • Linkedin Profile
TARA SHANKAR JANA
  • Title: Sr. Product Marketing Lead AWS Machine Learning, DeepLens, ML Education, and Learn ML on AWS
  • Job Description: "My job is to drive adoption of AI/ML education with 1M developers globally through compelling marketing campaigns and content. "
  • Linkedin Profile
Part
05
of five
Part
05

Amazon Grocery Advertising

Amazon does all of its own adverting through their Amazon Advertising business that uses machine learning to create digital creatives for their grocery businesses as well as third-party sellers. Additional details regarding the company's advertising strategy are provided below.

OVERVIEW

  • Amazon has its own $3.5 billion advertising business that runs "sponsored ads" on their website for AmazonFresh as well as for third-party businesses.
  • Amazon Advertising creates display ads and creatives for their own products as well as company's that sell their products through their AmazonFresh or Prime Pantry programs.
  • The e-commerce creatives that Amazon designs are created using a machine learning algorithm. The algorithm can create ads based on the images provided on the amazon product page or with a customized design.
  • In addition to advertising available straight from the company, Blue Whale Media is an Amazon Advertising Agency. After searching press releases, annual reports, and company profiles, it is unclear if the company is owned by amazon or not, however, they do not advertise for Amazon but rather provide resources for third party sellers to advertise on Amazon.

TYPES OF ADS

  • Sponsored Ads: These ads are pay-per-click ads that show up as the top results of a search instead of the search providing the best rated product first. These ads take into account broad keyword, exact keywords, and phrase keywords depending on the company's preference.
  • Sponsored Brand Campaigns: These ads are key-word driven ads that display above, below, or alongside the search results. These ads take into account branded product keywords, complimentary product keywords, and sponsored products automatic targeting keywords depending on the brand's preference.
  • Amazon Product Display Ads: These are pay-per-click ads that appear on the side of a product page using product targeting and interest targeting.
  • Amazon Native Ads: These are ads for amazon products placed on other web pages in three forms: recommendation ads, search ads, and custom ads.

FUTURE OF GROCERY ADVERTISING

  • In 2018, the company's advertising revenue grew by 250% over 2017 in the fourth quarter.
  • Amazon CEO, Trevor George stated "This could be a very profitable endeavor for brands that realize this now. Because AmazonFresh is a new area for ads, the cost per click will initially be low."
  • The Director of Amazon, Ryan Burgess stated "The grocery category, in particular, has a lot of competition from big name-brands who will drive up CPC’s and make advertising less profitable for smaller sellers. The advantage smaller brands have over their larger counterparts is the ability to get started now before it becomes too costly."
  • Will Margaritis — SVP of e-commerce at Dentsu Aegis Network — stated that amazon is offering a branding opportunity through sponsored ads.
  • Margaritis speculates that Amazon will evolve their advertising in the future to reap in-store benefits from their online presence with Whole Foods similarly to Walmart, however, he says that this is probably "way down the road."
Sources
Sources

From Part 01
Quotes
  • "Last October, Amazon.com Inc. (NASDAQ: AMZN) was rumored to be getting into the pharmacy business. The stocks of pharmacy retailers dropped 6%. Thursday morning, Amazon announced that it is acquiring PillPack and pharmacy stocks dropped around 9%."
  • "PillPack is a pharmacy that delivers medications to customers in presorted dose packaging, coordinates refills and renewals, and ensures that shipments are made on time. The deal is expected to close in the second half of this year, but no other details were provided."
  • "Not only does PillPack give Amazon an entry to the pharmacy business, it also serves some of the same functions as pharmacy benefits management (PBM) or distribution companies. Those stocks also took a hit this morning."
Quotes
  • "Pillpack's Phoenix, Arizona facility has been granted nine additional state pharmacy licenses in the past two months, allowing that site to sell into other states."
  • "Amazon’s purchase of San Francisco-based online pharmacy startup PillPack last year represented a huge splash by the company into the retail pharmacy space, leveraging"
  • "While Pillpack has been significantly ramping up its efforts to expand its capabiltities, the research analysts predicted the initial strategy for the company’s pharmacy rollout will be to launch prescription drug sales to its employee base before offering the products to the general Amazon consumer."
  • "“We believe Amazon will still have to acquire or build a few more mail pharmacies/grow capacity before being able to go live with a consumer pharmacy offering,” the analysts wrote."
Quotes
  • "Amazon has tapped 14-year company veteran Nader Kabbani to run its new pharmacy business, including the team that came in through last year’s acquisition of PillPack, CNBC has learned."
  • "The entire leadership team from PillPack, which Amazon bought for more than $800 million last year, reports to him, according to an internal document."
  • "Kabbani’s appointment shows Amazon is putting one of its most ambitious new projects in the hands of a trusted company executive with plenty of experience in supply chain and logistics, but no background in pharmaceuticals or health care."
Quotes
  • "While Amazon has been selling some professional products under its other private label brands for some time — such as its expanding AmazonBasics line of professional cleaning and janitorial supplies — this marks the first time Amazon has created a new product brand just for commercial and industrial supplies that we have seen."
  • "Amazon continues to ramp up its B2B selling efforts. Amazon said last fall that its Amazon Business marketplace was on pace to do $10 billion in revenues in 2018. Amazon currently says it has 1 million worldwide Amazon Business customers and 150,000 Amazon Business sellers. Competing top commercial suppliers include Grainger, ULINE, and many more."
  • "Nevertheless, the launch of AmazonCommercial brand items shows Amazon intends to invest more in this direction. We’ll continue tracking its growth as Amazon’s efforts evolve."
Quotes
  • "AdAge reported today that Amazon recently launched the brand AmazonCommercial, a product line of bulk toilet paper, tissues and paper towels intended for a rapidly expanding B2B customer base - and its first foray into the Industrial category. "
  • "According to Frost & Sullivan, B2B sales are expected to reach more than $6.6 trillion by 2020, surpassing business-to-consumer (B2C) valued at $3.2 trillion by 2020. "
Quotes
  • "AmazonCommercial gives the retailer a powerful addition to its private brand portfolio that is designed to speak directly to the business-to-business sector."
  • "The move puts them in direct competition with Staples, Office Depot/Max, Grainger and Uline who each have significant customer bases in this space."
From Part 02
Quotes
  • "Advertising is another fast-growing source of revenue for Amazon. Advertising accounts for most of Amazon's "Other" category, which is not an official business segment. Amazon said the category grew 97 percent in the fourth quarter to bring in $3.39 billion in net sales."
Quotes
  • "Amazon's advertising business has quickly become one of its fastest-growing business units, and it will continue to expand as Amazon invests more in video, ad sales staff and ad technology."
  • "Amazon has reportedly been pitching ad buyers to buy ads on its platforms by saying that they are more "brand safe" or less risky than buying ads on big social media platforms, like Google's YouTube and Facebook."
Quotes
  • "Amazon will continue to invest in expanding its ad business beyond display ads on its e-commerce platform and mobile shopping app, yielding both powerful opportunities for brands and rising threats to incumbents."
  • "Although Amazon ad revenue growth has decelerated in recent quarters, it could meaningfully resurge as Amazon develops new offerings around its owned-and-operated platforms and devices. Those include its ad-supported video service Freedive under IMDb, planned ad-supported channels for Fire TV, live NFL games on Amazon Prime Video and live-streaming video platform Twitch, and a new ad-supported tier of Amazon Music for Echo and Alexa-enabled devices"
  • "Further, Amazon's ability to attract ad spend is likely to continue to overtake e-tail and retail rivals like Walmart and Target that are likewise expanding their ad businesses."
Quotes
  • "Pivotal Research forecast Amazon’s advertising revenues will reach $38 billion by 2023, growing faster than any other Amazon business in that time."
  • "Amazon’s “Other revenues” category, about 90% of which is media and ad tech, was on pace for $10 billion in 2018. While Pivotal doesn’t believe Amazon’s revenue will catch Google’s and Facebook’s in five years, estimated to be $215 billion and $59 billion respectively, adding almost $30 billion in ad revenue will make Amazon a clear “third force” in data-driven advertising."
Quotes
  • "Amazon is becoming a player in the logistics and shipping industry."
  • "That’s what analysts think about the recent expansion of Amazon Air to include 50 planes and several new regional hubs, including a $1.5 billion hub opening in northern Kentucky in 2021."
Quotes
  • "FedEx will no longer make ground deliveries for Amazon as the online shopping giant builds its own fleet and becomes more of a threat to delivery companies. The announcement Wednesday comes two months after FedEx already terminated its air delivery contract with Amazon. FedEx said dumping Amazon is part of its plan to go after more e-commerce deliveries from other companies."