From books to e-commerce to cloud hosting, Amazon (AMZN 0.81%) has achieved unparalleled success in multiple arenas. In doing so, the company became a giant with a market cap of $1.5 trillion and likely revenue this year of well over $500 million.
Amazon has always sought to continually expand its boundaries. It's not surprising that the company moved beyond online commerce into brick-and-mortar stores with Whole Foods, Amazon Go, and Amazon Fresh.
But those efforts pale in comparison to another opportunity in Amazon's crosshairs. Here's the next $4.3 trillion market that Amazon hopes to conquer.
Three big moves in a huge market
Healthcare. It makes up nearly one-fifth of the U.S. economy. Total U.S. healthcare spending reached close to $4.3 trillion last year. And Amazon has made three big moves in this huge market.
First, the company built its online pharmacy business. Amazon's acquisition of PillPack in 2018 was a key step in this effort. This deal gave Amazon a home-delivery pharmacy service in all 50 states with solid connections with major pharmacy benefits managers. Today, Amazon Pharmacy allows customers to save on a wide range of prescription medications.
Second, Amazon expanded into telehealth. The company launched Amazon Care in 2019. It initially offered telehealth services only to Amazon employees in the Seattle area. However, Amazon Care began making its services available to other organizations across the U.S. in 2021.
Third, the e-commerce and cloud giant intends to become a national primary care provider beyond telehealth. Amazon Care offers in-person visits in some locations. But Amazon announced in July 2022 that it plans to acquire One Medical for $3.9 billion. One Medical supports virtual healthcare visits but also operates physicians' offices in 19 major metropolitan areas with more on the way.
Building blocks
To be sure, Amazon Pharmacy hasn't mounted a huge threat to big pharmacy retailers so far. Amazon Care remains a fledgling telehealth service. One Medical generated $623 million in net revenue last year -- pocket change for Amazon.
However, they're all important building blocks for Amazon's overall healthcare strategy. And there are others as well.
Amazon also markets Halo, a fitness tracker. It's incorporated healthcare-related functionality into the Alexa virtual assistant. The company's STS Lab Holdco subsidiary makes home diagnostics tests. Amazon Web Services (AWS) is partnering with multiple healthcare organizations, including drugmakers and medtech companies. WorkingWell is a program that helps improve health and wellness plus reduce workplace injuries for Amazon employees (for now).
It might seem as if Amazon is extending its tentacles into nearly every facet of healthcare. That's an exaggeration for now, but it's still early. The company hasn't clearly articulated its ultimate goal in healthcare. However, it has provided a few clues.
Amazon's four guiding principles are customer obsession, passion for invention, operational excellence, and long-term thinking. The company's history of starting small in other markets, ramping up, then dominating is likely the pattern it will follow in healthcare. It seems likely that Amazon will seek to integrate all of its current healthcare products and services in ways that lower the costs for patients and payers.
No conquering necessary
Amazon is clearly more than just a top e-commerce company. However, it might never be known as a healthcare company despite its multiple initiatives.
But Amazon doesn't have to become a leader in healthcare as it is in e-commerce or cloud hosting to be successful. The sheer size of the healthcare opportunity allows smaller players to win.
Also, that $4.3 trillion figure doesn't tell the full story. The federal government projects that U.S. healthcare spending will reach $6.8 trillion by 2030. And there are big healthcare opportunities for Amazon outside the U.S. as well.
Amazon just might conquer the healthcare market. The great news for the company, though, is that it can achieve victory with no conquering necessary.
