What Jeff Bezos has achieved with Amazon is remarkable – but others have paid the price for its growth
In fact Amazon is not even a Silicon Valley story, with Bezos choosing to establish it in Seattle instead.
However none of that should undermine the spectacular growth of the business in the past 27 years.
During that time it has gone from fringe bookseller to a $1.7 trillion behemoth, with its influence stretching far beyond retail.
But in getting to that point, the company has been accused of sharp practice with competition, taxes, its treatment of workers and its hoarding of user data.
A revolution beyond retail
During the week Amazon announced $386 billion in sales during 2020 – up 37.6% year-on-year, in no small part, due to the surge in online shopping worldwide as bricks and mortar retailers closed during to the pandemic.
Profits, meanwhile, grew by more than 84% to $21.3 billion.
It is estimated to hold about 10% of the European e-commerce market, but close to 40% in North America – something it has achieved by making a staggering array of products available to everyone, often at a far lower price than other retailers can manage.
But as incredible as its sales figures are, they do not fully capture the disruptive effect Amazon has had – one that goes far beyond simply selling products online.
That includes its innovation in logistics; with massive, hyper-connected factories and sophisticated delivery networks allowing some customers to receive their products hours after making a purchase.
It has become a major producer of its own devices and services – including its ‘Alexa’ digital assistant, which is used in millions of homes worldwide, and its ever-growing Prime Video service.
And perhaps its most significant division is its least seen, with its AWS cloud computing platform powering large portions of the internet – including Facebook, Netflix and Apple’s services.
To make all of that happen, Amazon has become one of the largest private employers in the world. By the end of last year, it employed almost 1.3 million people worldwide. That’s more than Apple, Google-owner Alphabet, Microsoft, Intel, IBM, Samsung and Facebook combined.
But over its near three decades of constant growth and reinvention, Amazon has also displayed some of the worst tendencies of Big Tech.
Amazon is, of course, a retailer – but behind its shop-front is a complex data gathering operation with an often cavalier attitude towards privacy.
Its algorithms not only monitor people’s shopping habits, but what they do when they’re browsing other corners of the web too. That helps it to recommend more purchases and sell ads (which was a more-than $20 billion business for Amazon last year).
Alexa is also a trojan horse for its data mining, getting a better picture of a user with every query and command.
However the digital assistant goes beyond that, listening to people’s conversations – even when not prompted to do so – and sending snippets back to Amazon’s servers. This is done in a way that can make the user identifiable, with Alexa recordings even being subject to court orders in US murder investigations.
And Amazon has turned law enforcement’s interest in its data into an opportunity, partnering with numerous US police departments to tap into footage from its Ring smart doorbells. Until recently its Rekognition subsidiary was also selling facial recognition technology to US authorities.
Amazon will argue that all of this data gathering has a valid purpose.
Monitoring browsing and shopping habits allows it to offer the right products to users, or connect the right seller to a buyer. Alexa’s recordings help to improve its ability to understand requests. Partnering with police helps to make neighbourhoods safe.
But none of that takes away from the fact that people are handing over vast amounts of information about themselves – often without realising it – and Amazon is the one profiting.
And Amazon has worked hard to keep as much of that profit to itself, and out of the hands of tax authorities.
That includes the use of complex profit-shifting involving a Luxembourg-based subsidiary (it is currently fighting a European Commission decision that said it had received illegal state aid there, and owed €250m in back tax).
Meanwhile, US tax bills are a relatively new phenomenon for the company, as it has used various tax breaks to eliminate – and more recently reduce – what it owed the IRS.
Perhaps the clearest window into its tax management strategy came in 2017, when it unveiled plans for a second headquarters – dubbed HQ2.
Amazon invited cities and governments to pitch for the project – effectively launching a beauty pageant of incentives, with 50,000 jobs the reward.
It eventually chose two locations – Arlington, Virginia and Long Island, New York – securing close to $2 billion in tax breaks and $350m in cash grants. (Local opposition saw it quickly pull plans for the New York office, however).
Work to rule
Of course Amazon is a business and is entitled – even obliged – to maximise profits. But in doing so, Bezos has created a poster child for inequality.
The success of its retail operations have come at the expense of countless bricks and mortar operators, both big and small. As impressive as its revenue and employee figures are, they need to be considered in the context of the jobs and income that have disappeared across an ever-shrinking high street.
The nature of many of the jobs Amazon has created are also controversial.
Warehouse workers in the US and Europe have repeatedly complained about the gruelling conditions they face – on their feet for long shifts, with trackers keeping them under constant pressure to fulfil orders quickly.
Drivers have raised similar complaints – and are now facing additional scrutiny as the company plans to add surveillance to its branded delivery vans.
For its part, Amazon says it offers competitive wages and benefits to its warehouse staff. However it has also fought hard to resist attempts to unionise, while just last week it settled a US case that alleged it pocketed some drivers’ tips.
All of this is against the backdrop of Jeff Bezos’ ever-growing net worth, largely due to the sky-rocketing value of his Amazon shareholding.
That has been particularly true in the past year, as the pandemic pushed more customers than ever to shop online.
According to Oxfam’s estimate, Jeff Bezos’ net worth rose by almost $80 billion between March and December 2020 alone.
That means that, roughly every ten seconds during the period, his value rose by the same amount an Amazon warehouse worker gets paid in a year.
In total, Bezos is estimated to be worth roughy $193 billion – or almost $148,500 for every employee at Amazon.
And that is despite repeatedly tapping into his war chest – often to fund his other ventures, like space exploration business Blue Origin and The Washington Post newspaper.
And while his change in focus may see him continue to sell shares, his 10% stake – and elevation to ‘executive chair’ at the firm – means he will still hold considerable sway at Amazon for some time to come.