(2016-03-15) Thompson Amazon Tax

Ben Thompson: The Amazon Tax

AWS is a tax on the compute economy. So whether you care about mobile apps, consumer apps, IoT, SaaS etc, more companies than not will be using AWS vs building their own infrastructure.

E-Commerce is inexorably taking over more and more of the U.S. retail sector in particular, and Amazon is taking over 50% of that e-commerce growth. Combine this reality with the growth in Prime and Amazon is effectively on its way towards collecting a tax on all of retail

massive fixed costs but benefits tremendously from economies of scale

referred to itself as a “transportation service provider.”

Amazon itself would be this logistics network’s first-and-best customer, just as was the case with AWS. This justifies the massive expenditure necessary to build out a logistics network that competes with UPS, Fedex, et al, and most outlets are framing these moves as a way for Amazon to rein in shipping costs and improve reliability, especially around the holidays. However, I think it is a mistake to think that Amazon will stop there: just as they have with AWS and e-commerce distribution I expect the company to offer its logistics network to third parties, which will increase the returns to scale, and, by extension, deepen Amazon’s eventual moat.

The company is organized with multiple relatively independent teams, each with their own P&L, accountabilities, and distributed decision-making.