Silicon Valley Venture Capitalists Are Afraid of Amazon

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Farhad Manjoo, The New York Times’ technology columnist, wrote recently an interesting column on Amazon at The New York Times, titled “How Amazon’s Long Game Yielded a Retail Juggernaut”, in which he looks at the increasing dominance of Amazon in the U.S:

I recently asked a couple of Silicon Valley venture capitalists who have previously made huge investments in e-commerce whether they were keen to spend any more in the sector. They weren’t, citing Amazon.

This is a rather surprising point of view given the global online retail landscape and Zalando’s success story over the last years in particular. It is not surprising if one looks at what e-commerce companies got backed by Silicon Valley based VCs lately. Not many. These quotes just confirm what many were already thinking about the VC landscape.

Also, this shows that there is a place for Alibaba and others to fund the next wave(s) of online retail companies.

More from The New York Times:

This week I also asked several stock analysts if they could see any potential competitive threat to Amazon’s online sales dominance. Some literally laughed at the question.

“The truth is they’re building a really insurmountable infrastructure that I don’t see how others can really deal with,” said Ben Schachter, who studies Amazon for Macquarie Securities.

​I don’t agree with the notion that “Mr. Bezos has already won the game” as it is being stated in the article. But it is interesting how strong the company is being perceived nowadays. And, for many categories Amazon has won indeed, in western countries at least.

​On Amazon Prime:

Last year Mr. Bezos told me that people were increasingly signing up for Prime for the company’s media offerings — the free TV shows, music and movies that come with the subscription, and which Amazon has been spending vast sums to produce.

Mr. Schachter, of Macquarie Securities, estimates that there will be at least 40 million Prime subscribers by the end of this year, and perhaps as many as 60 million, up from an estimated 30 million at the beginning of 2015. He argued that Amazon’s investments in giveaways will help make Prime more attractive to people in lower-income groups. As a result, he predicted that by 2020, 50 percent of American households will have joined Prime, “and that’s very conservative,” he said. (..)

Analysts at Morgan Stanley reported recently that “retail gross profit dollars per customer” — a fancy way of measuring how much Amazon makes from each shopper — has accelerated in each of the last four quarters, in part because of Prime. Amazon keeps winning “a larger share of customers’ wallets,” the firm said, eventually “leading to a period of sustained, rising profitability.”

(Highlights by me)

​Read the column at The New York Times for more.

More on the big picture of Amazon here at Early Moves:

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