Amazon will thrive after COVID-19

Amazon has already received a retail
windfall, but their infrastructure
will be more important in the long run.

My final exam this term will include a take-home question: How will COVID-19 affect the fortunes one of the major Internet companies -- Apple, Google, Facebook, or Microsoft?

I didn't include Amazon because they are an obvious winner. On December 30, 2019 Amazon stock was selling for $1,847.84 per share and on May 1, 2020 it was $2,286.04, a 23.7 percent increase. The government gave trillions of dollars to consumers and at the same time, told most brick and mortar retailers they had to close, creating a double windfall for Amazon and other online retailers.

Since its inception, the Internet has enabled us to substitute communication for transportation. (See, for example, my 1998 pilot study at Hyundai USA). The rate of that substitution is a function of technological improvement and experience with the technology by users and organizations. COVID-19 has led to the invention of new use cases for communication in lieu of transportation and forced organizations and individuals to learn to use the technology. That will cause an increase in the rate of substitution of communication for transportation which will increase demand for Amazon’s infrastructure and services. While Amazon is known for retail, they are a major infrastructure company, which will be more important in the long run.

Amazon & Jeff Bezos' infrastructure
and services

More companies will establish affiliate retailer stores at Amazon.com and those that are already there will see increased sales. (In 2018, third-parties accounted for 58% of Amazon retail sales). There will be increased demand for Amazon fulfillment and delivery services as well as Amazon credit cards.

Organizations that need to tighten their belts to survive after COVID-19 will want to cut costs and staff, making Amazon Web Services (AWS) and Cloud Storage more attractive than on-premises information technology. Organizations that fail as a result of the pandemic will free up IT people and potential entrepreneurs to create startups to exploit novel Internet use cases that were made apparent by COVID-19. Many of those startups will be run out of Amazon datacenters.

Space is a long-term growth sector and Amazon will benefit from that as a space infrastructure company. They are investing heavily in the launch business and recently (along with two others) received funding as part of NASA’s ambitious lunar program. Amazon's ground station service will be attractive for space startups with little cash to spend on building out their own ground infrastructure.

Amazon’s forthcoming broadband Internet service satellite constellation got a boost with the recent bankruptcy of OneWeb, which was shaping up to be a major competitor. OneWeb says COVID-19 precipitated their bankruptcy and Amazon may purchase the company or a portion of its assets.

Amazon’s Echo voice platform is also the leader in the growing voice-application sector.

In addition to being strong in retail and infrastructure, Amazon is rich. They had $55 billion cash in the quarter ending March 31, a 33.8% year-over-year increase. A lot of people will be looking for jobs after COVID-19, and Amazon will be able to afford to hire them. They will also have the funds to buy companies. How about Zoom? (If they can't afford something, they can probably get a loan from founder and CEO Jeff Bezos who has a net worth of $138.5% billion).

Finally, in addition to generating revenue, Amazon’s infrastructure will yield increased amounts of information in the post-COVID era. That information will enable them to better allocate resources and investments and make dynamic pricing decisions.

One caveat -- all of this is good news for Amazon post-COVID, but if it is too good, they may face anti-trust action.