7 Big Amazon Predictions for 2018
24 Dec 2017
Amazon.com (AMZN – Get Report) followed up a strong 2016 with an even better 2017. Its e-commerce growth surged in the U.S. and (eventually) overseas, Amazon Web Services (AWS) continued growing at a 40%-plus clip and — thanks partly to its $13.7 billion purchase of Whole Foods — the company generally terrified retail rivals to an unprecedented degree.
Here are some thoughts on what 2018 might have in store for Jeff Bezos’ company. As always, it’s worth remembering that predictions like these rarely have a 100% hit rate.
1. Amazon revamps and expands its grocery delivery services.
The AmazonFresh service, which provides (depending on the time of the order) same-day or next-day delivery for thousands of grocery items, has been around for a while. But it’s still only available in a handful of big U.S. and foreign metro areas, and isn’t exactly cheap: Amazon charges U.S. Prime members an extra $15 per month for AmazonFresh, and a $10 delivery fee is attached to orders under $50.
The addition of Whole Foods’ retail stores and distribution centers to Amazon’s empire should pave the way for AmazonFresh’s expansion. And by increasing Amazon’s grocery scale and bringing order-fulfillment points closer to customers, they should improve the service’s economics, which in turn should enable cuts to AmazonFresh’s monthly fees and/or order minimums.
Amazon only closed the Whole Foods deal in August, so moves like this can’t be expected right away. In addition, Whole Foods’ partnership with grocery delivery startup Instacart, which on paper isn’t due to expire until 2021, could complicate matters. But Amazon has indicated it wants to use Whole Foods to strengthen its online grocery efforts, and could be ready to make a move in a few months.
2. Amazon Prime sees a price hike
Amazon last hiked Prime’s annual U.S. fee in early 2014, when it was raised by $20 to $99. Since then, Amazon has significantly grown Prime’s product selection and same-day/next-day delivery services, as well as invested billions in Prime Video and (to a lesser extent) other digital content services that are bundled with Prime. Along the way, it has gotten tens of millions of consumers hooked, relying on Prime for both their weekly shopping needs and much else besides.
While the psychological effect of raising prices above $99 probably needs to be accounted for here, it feels like the stage has been well-set for a 2018 U.S. Prime price hike. Prices could also rise in places such as Germany (€49, or $58) and Japan (¥3900, or $34), though it’s worth noting Prime doesn’t provide quite as much value in those locales.
3 Amazon gets serious about conquering Latin America
In the past, Amazon’s management has noted the company’s international expansion has been limited by the amount of attention management is able to give at any one time towards the opportunities in front of it. That appears to explain why Amazon, which has devoted a lot of attention to expanding in Europe and India, remains only a small player in some major Latin American markets, and non-existent in others.
But things are gradually changing. Prime launched in Mexico in March, and Amazon is reportedly planning to open a major warehouse near Mexico City. In addition, an electronics marketplace for third-party sellers was opened in Brazil in October.
4. India and advertising become major growth engines
With the help of billions in local warehouse and logistics investments, Amazon has quickly joined local marketplace Flipkart as a top player in a burgeoning Indian e-commerce market. With its gross sales rising 67% last quarter, Amazon India appears to have been an important contributor to the 29% third-quarter growth recorded by Amazon’s International reporting segment, and it should be a bigger contributor still to future growth.
Source: The Street