Amazon (NASDAQ:AMZN) shares have surged past $3,000 in recent days as investors bet that the e-commerce giant will emerge from the pandemic even stronger than it was before.
Its valuation has now topped $1.5 trillion, up from less than $1 trillion. High expectations are baked into that valuation, but throughout its history the company has only done right in the eyes of investors, delivering monster returns as it's come to dominate e-commerce and cloud computing, and establish itself as a force in areas like video streaming and voice-activated technology.
Looking ahead, Amazon remains just as ambitious as always. CEO Jeff Bezos likes to say it's always Day One, and said in last year's shareholder letter, "Amazon today remains a small player in global retail," indicating he still believes there's plenty of opportunity for growth. In order to satisfy shareholder expectations, Amazon will have to execute on those opportunities. Below are three key growth areas the company is eyeing over the next decade.
Amazon's 2017 acquisition of Whole Foods signaled that the company was serious about building a grocery business. After a decade of struggling to grow Amazon Fresh, Whole Foods gave Amazon a well-known brand and more than 400 stores to work with. Since then, the company has made delivery from Whole Foods free for Amazon Prime members, and the company plans to open up its own branded supermarket in Los Angeles, perhaps a preview of a new, value-oriented chain. The "Just Walk Out" technology powering Amazon Go could also give its physical stores an advantage.
Though grocery sales have traditionally been resistant to e-commerce, the pandemic has led to a major shift in online grocery shopping as chains like Walmart and Kroger have seen demand soar during the crisis. That's likely to drive permanent adoption of online grocery shopping as the practice becomes a habit.
Though Amazon still has a small share of grocery sales, it's made a priority out of the category because the market so big. Last year, grocery stores in the U.S. generated $682 billion in revenue, meaning the market is large enough to move the needle even for Amazon, which is on track to reach around $350 billion in revenue this year, according to analyst estimates. It's also a high-frequency-purchase category that can drive further customer loyalty.
With more than 150 million global Amazon Prime members, the Whole Foods brand, a market shifting online, Amazon Go technology, and a budding logistics network, the company could have a much larger share of the grocery market in a decade.
Amazon's ambitions in healthcare have slowly come into focus in recent years. It acquired online pharmacy Pillpack in 2018 for $1 billion, and that same year launched a healthcare joint venture with Berkshire Hathaway and JPMorgan Chase, now known as Haven.
Last year, the company launched Amazon Care, a healthcare service currently limited to employees that offers doctor visits using telehealth technology and prescription drug delivery, and the platform seems to have the potential to disrupt traditional healthcare by leveraging technology like telehealth and the convenience of delivery.
In April, Amazon shared that the company is working on its own COVID-19 test to use on its employees to help ensure the safety of its warehouses, a move that could establish it as a player in diagnostic testing down the road and build up trust in healthcare with consumers. If Amazon is able to scale up its test production before there's a vaccine, the company could even make the tests available to the general public.
Like groceries, healthcare represents a huge opportunity for Amazon and one that appears ripe for disruption. With its recent launch of Amazon Care and another components like Pillpack coming into place, the pandemic could be the kind of accelerant that helps establish it as a force in healthcare. The industry is shaping up to be a major focus for Amazon over the next decade.
Amazon's acquisition of Zoox last month for a reported $1.2 billion was the company's latest step to build out its logistics operation. Though Amazon said the move was focused on the driverless taxi technology Zoox is known for, rather than logistics, the deal could serve as a launch pad for Amazon to autonomously ferry around passengers and packages.
Amazon is also wary of Uber, which recently announced it would launch grocery delivery and has said before that it aims to be the Amazon of transportation, and Zoox makes Amazon a competitor in the autonomous vehicle race.
Aside from Zoox, Amazon has made a number of moves to ramp up its logistics operations, acquiring airplanes, agreeing to buy 100,000 electric vans from Rivian, and building out a fleet of Amazon Flex drivers to support its giant e-commerce business.
Logistics is a natural extension of the company's e-commerce business and Amazon has already begun taking business away from shippers like FedEx and XPO Logistics and bringing it in-house with its own resources. Over the holiday season last year, Amazon even blocked its third-party sellers from using FedEx, claiming that its on-time rates weren't high enough.
With a self-driving platform now under its umbrella, Amazon's intentions in logistics and transportation are stronger than ever. Fast and convenient delivery is central to its value proposition, and as Amazon expands its logistics capacity the option to open the service up to non-Amazon shipments becomes more appealing. Much like it did with Amazon Web Services, it could turn this in-house project into a thriving stand-alone business.
It's always Day One
As the next decade begins, there's no reason to expect Amazon to slow down its pace of innovation. Given its valuation, investors very much see the tech giant pushing the envelope in these areas and others, which include industries that don't even exist yet. With a mission to be Earth's most customer-centric company, the scope of Amazon's business knows no bounds. The 2020s could be its most innovative decade yet.