The man who sells us everything

Amazon is expanding in a hundred different directions at once: it’s an online mega-mall, a TV studio, a computer services provider, a digital devices manufacturer, a chemist and a supermarket, to name only a few. John Arlidge reports

Most people who get off the train in Cambridge head straight to the River Cam for a punt and a stroll past the colleges and laboratories where DNA and much else besides were discovered. Few notice the building opposite the station. This, with its dull beige walls and green windows, is where the hi-tech innovations that are changing our lives in once-unimaginable ways are being dreamt up. In the secret labs on the top floor, with windows frosted to protect from prying eyes, Alexa, Amazon’s voice-controlled electronic “assistant”, learns how to respond to our questions and commands. Alexa is the device that has kick-started the latest arms race in tech: voice-controlled smart devices.

Look higher still and you will soon see drones flying over the roof of the Amazon Cambridge Development Centre, to give the building its proper name. These aircraft, which will deliver a six-pack of beer direct to your garden in half an hour or less when the barbecue is running dry, are being designed and tested here by British scientists. “We’re right out at the edge of what you can do with technology,” says the centre’s director, David Hardcastle, although the test drone he has just plonked on his desk makes his point rather better. So what’s next, I ask. He just smiles and fiddles with his cufflinks, which will probably soon be Alexa-enabled.

Second-guessing Amazon is a mug’s game. No one will spill the magic beans. But there is one thing that we can predict. Amazon, already nicknamed “the everything store”, is fast becoming the “everything, everywhere, every time” store. It’s growing so fast that it’s now the world’s third-largest tech company by revenue, on course to generate sales of $200bn this year. That’s $548m a day. Analysts expect sales to reach $350bn by the end of 2020 and to surpass the $500bn mark by 2023. In July it became only the second company, after Apple, to pass the $900bn marketvalue milestone. That made the firm’s founder, Jeff Bezos, 54, the wealthiest man in modern history, worth $150bn.

As it grows online – and makes the odd foray into the physical world, notably its recent $13.7bn acquisition of the supermarket chain Whole Foods – it will have an even bigger effect on the way we behave, our towns and cities, and our jobs than it has already wrought, for good or bad. Make that BAD!, as far as Donald Trump is concerned. The world’s most powerful critic is waging a Twitter war on Amazon, accusing it of avoiding

tax, bankrupting highstreet retailers, and destroying the fabric of towns and cities.

It’s not hard to see why Trump, and many on our side of the Atlantic, are furious, especially those who work at struggling bricks-and-mortar retailers. Amazon’s global digital shop is fast replacing the high street. The firm’s recent $1bn acquisition of Pillpack, an online pharmacy start-up, takes it into healthcare, threatening Boots in the same way that the first product it sold, books, threatened Waterstones. Banks are in the firing line. Amazon wants to offer current accounts. Ocado is under attack, too, after Amazon’s decision to offer Amazon Fresh home food delivery, including a partnership with Morrisons.

And shopping is only the start. Amazon is fast becoming a media giant. Amazon Music is already the world’s third-largest digital music service by subscribers, behind Spotify and Apple Music. Amazon’s Prime Video was the fastest-growing new video-ondemand service in Britain last year, overtaking Netflix. Subscribers increased 41% to 4.3 million households last year. The figures will rise sharply once it starts screening sports: it has bought the rights to US Open tennis and will live-stream 20 Premier League football matches per season for three years from 2019.

So, what makes a simple shop so irresistible that even those of us who agree with Trump’s criticism still use it to buy most of the stuff we need? We read novels on Kindle, watch TV and now wake up with Alexa. Can it continue to escape the scrutiny and public disgust hammering the other tech giants, notably Facebook? Amazon has grown so big, so fast, and been largely ignored by regulators because it is different. Not necessarily better than its west coast US rivals, but different. To find out how, you have to go to 2117-2127, 7th Avenue, Seattle.

The first distinction is as clear as the summer sky around the company’s head office the day I arrive. Amazon is not, like its biggest tech competitors, in Silicon Valley. Nor does it look like anything in “the Valley”. Its 45,000 Seattle-based staff do not work in a perfectly formed bubble, unencumbered by the awkward intrusion of reality. Amazon’s $4bn mother ship is spread over ten million sq ft in more than 40 buildings downtown. That helps Amazon never to lose sight of its customers. “It inspires us to invent for them every day,” says Sam Kennedy, from Nashville, the first Amazonian I meet.

“Amazon’s drones will deliver a six-pack of beer direct to your garden in half an hour or less when the barbecue is running dry”

Customers never lose sight of Amazon, either. The entrance to Amageddon is marked by glass domes. The Spheres – to Amazon, or “Jeff Bezos’s balls” to everyone else – are 27 metres high and 40 metres wide, and filled with 40,000 plants. Modelled on the greenhouses at Kew Gardens, they are a place for employees “to feel differently, to think differently”. (Not for too long, though. Bezos monitors the time his employees spend there.) Their main role is to demonstrate transparency. They practically scream: “Look inside. We’ve nothing to hide. We’re not Facebook!” All the tech behemoths like to think they are take-no-prisoners innovators, but Bezos raises the bar. He reminds his human drones to push harder every day by calling the main 37-storey tower of his HQ Day 1, because “every day is day one at Amazon”. If they forget the firm’s scrappy start-up culture, what will follow is “painful decline. Followed by death.” The company’s values, pasted on walls everywhere, increase the pressure. “Have backbone! Bias for action!”, the signs scream. Amazonians don’t mind doing without the perks enjoyed by staff at Google and Facebook. Another of Amazon’s core values posted on every noticeboard is “Frugality!” There’s no free food and staff travel economy class – all except Bezos, who has a private jet and a spaceship, New Shepard, in case he can’t find anywhere on Earth he wants to fly to. Bezos may be tough, but he likes to be challenged. Amazon HQ staff are encouraged to write their own messages on the walls alongside company values. On my visit, Amazonians ridiculed Bezos’s decision to sell limited-edition 355ml bottles of Amazonbranded Coca-cola at $10, five times the regular price. Over a large poster advertising the drink, one wrote “$10 fan Coke is wrong”. Another drew a face crying with laughter.

But perhaps the biggest difference between Amazon and its Silicon Valley peers is its attitude to making money. Most big tech outfits like to charge a lot for the gadgets they create and rack up vast profits. Amazon, by contrast, does not seek to make much money at all from its devices. “We break even,” says David Limp, head of devices, whose haircut is so neat and whose clothes are so crisp he looks rather like a device himself. He’s not kidding. A Kindle e-reader starts at £60, compared to £399 for an Apple ipad Mini; and an Echo Dot, which features Alexa, can be yours for £35, nine times less than Apple’s rival Homepod. Amazon can do this because it subsidises devices and its retail arm with the vast profit its makes from Amazon Web Services (AWS), its cloud-computing arm. AWS sells computing power, data storage and content delivery to everyone from the smallest start-up to the CIA, raking in $20bn a year. It’s the little-known power behind Bezos’s empire and even if you want to escape it, you can’t. Like Netflix? You’re swelling Amazon’s coffers. The streaming giant depends on AWS.

Amazon does, of course, work very hard to hook us on using its devices once we’ve bought them – and then charge us even more for premium subscriptions, such as Prime, which offers almost unlimited fast delivery and TV. It does this because the more we shop, watch and download, the more data it gathers that it can use to offer us new products. Even then, it uses low prices to lure us, which means lower margins. It made only $3bn profit on $178bn revenues last year. Huge investment in research and development also eats into profits. Amazon sunk $23bn into R&D last year, more than any other company.

Amazon has enjoyed a stellar run by any measure, but nothing lasts for ever. The company is coming under scrutiny as concerns about privacy and the monopoly power the big tech firms enjoy increase. Rival retailers are lobbying Trump to break up Amazon. Bill Simon, former boss of Walmart, the largest big box retailer in the world, argues Amazon abuses its dominant position in e-commerce to undercut and drive competitors out of business. He has a point. A cursory web search reveals story after story of vendors who complain that Amazon has forced them to sell their goods on its platform on lousy terms. Some smaller companies even claim Amazon has tried to bankrupt them by copying their hit products and then selling them at a lower price.

Margrethe Vestager, the fearsome EU competition chief, is also on Amazon’s case. She’s fed up with being given the runaround by companies, including Amazon, that – legally – try to avoid tax by shifting profits from high-tax countries, such as Britain, to low-tax ones such as Luxembourg and Ireland, or structure their businesses so that they make little profit to avoid tax. But if Amazon has an Achilles heel, it is in its comically named “fulfilment centres” – its giant warehouses. They are anything but fulfilling for the people who work there. Scarcely a month goes by without a newspaper sending an undercover reporter to record how staff work crippling shifts. To meet targets, insiders say pickers must collect as many as 1,000 items and walk up to 15 miles in a single shift.

But Amazon thinks it has a trump card. By delivering ever lower prices, it argues it is the opposite of a greedy monopolist. “I wake up every day thinking customers are better off than they were ten years ago,” says Greg Greeley, the former head of Amazon Prime, when I pose the question everyone always wants to ask: do you wake up worrying about putting yet another bricks-and-mortar store out of business? Amazon executives add that while it may dominate certain markets, notably online books, when you take into account the total retail market, it is only a small fraction – 2% in the UK and 4% in the US. As for pressuring smaller rivals, they point out that two million small- and medium-sized businesses worldwide rely on Amazon to fulfil their orders. In 2017, independent companies’ orders fulfilled by Amazon exceeded sales by Amazon itself.

Can anything stop the world’s biggest data-driven instantgratification company? On my final afternoon in Seattle, I ask Gur Kimchi, the Israel-born scientist who oversees Amazon’s tech centre in Cambridge and has already test-flown the first local delivery – a bag of popcorn. We debate the rights and wrongs of big tech, but he’s heard it all before. He wants to move on. “Let me leave you with a parting thought,” he says. “If you think drones are exciting, think about the other 50 projects – bonkers, crazy projects – we can’t tell you about.” Alexa-enabled spectacles? Not weird enough. An Alexa implant so she can tell us what to do, not the other way around?

Like Hardcastle, Kimchi is not giving anything away, but his message is clear: Trump or no Trump, the online mega-mall that sells soap powder and makes soap operas; the online marketplace, music box, online advertiser, cloud-computer services provider, bank, audible books player, supermarket chain, food-delivery service, e-reader manufacturer, always-on home help, CIA’S little helper, online car dashboard, drone squadron, pharmacy chain, creator of warehouses where Dickens meets robots and much, much else — is only just getting started.

A longer version of this article appeared in The Sunday Times. © The Sunday Times/news Syndication