The common thread running though all of their lines of business is to create businesses with complex problems, solve those problems incredibly well, then sell those solutions to other companies. Amazon uses themselves as their first-and-best customer [1]. AWS, Prime and all of their best solutions work in this way. The whole company is organized to support this strategy.
The fact that Amazon is expanding their warehouse capabilities beyond their needs and building deeper into the stack by getting into real estate development is a natural continuation of this strategy.
His analysis is interesting, but very slanted with the tech business viewpoint. The cringy canonization of Uber back in the day is a great example. IMO, these machinations by Amazon are probably more about financial engineering than anything else.
Amazon has a good distribution network, but Shopify, Walmart and Target seem to have found and are competing successfully at Amazon’s weak points. Many people I know pivoted to Target for consumer staples vs Amazon. You can have anything they carry in about 30m. Shopify seems to be the place for sellers who want to protect their brand and avoid being ripped off within days.
Not sure why Ben cares about an Amazon truck vs UPS delivering stuff he’s probably alone in that.
Most likely a low-cost option to expand at their leisure.
1. In general land will be cheaper now than in 50 years. Even if current prices are high, the fluctuations will look like a blip in a few decades.
2. They can lease the land to minimize holding costs (taxes, etc.).
3. They block out competitors from deals.
4. They can expand their capacity as needed when needed.
I know several wealthy universities I have been affiliated with have done this. Whenever real estate near the university was for sale, they were the buyer. Price really didn’t matter (a “high” price was fine). They left the buildings as they were and used them for the same uses. Then when they wanted to expand for a new facility or whatever, they just wrapped up all the leases, knocked the old stuff down, and built the new thing.
People wonder why they paid so much for the land, but it always looked like a genius move over time.
Similar concept in my opinion.
Same reason as the Catholic Church. They aren't making more land any time in the foreseeable future.
If I had to guess, I’d say land purchases are some sort of vehicle to filter profits for tax purposes. There’s a million rules that benefit property owners for that purpose.
For startups/new breweries it can be a double edged sword leading to high initial debt or overhead costs but with the right leadership/strategy/product it definitely pays out over time.
Because for their purposes, it's better to have self-managed real-estate than depending on what might be on the market at a given time
Does it make sense to rent a warehouse then get hit with a rent hike after 10yrs or something? No
If both of these stories are true, it makes me wonder why they're acquiring so much real estate.
0: https://www.techradar.com/news/amazon-now-has-too-much-wareh...