Some Of The Many Changes To Amazon’s Business Model In 2021

March 30, 2021

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By Ankur Shah. Originally published at ValueWalk.

Amazon has been investing in its long-term growth prospects for the better part of two decades and 2021 will prove to be no different. Regardless of what and where Amazon invests in, there is a consistent theme: Amazon is building on its massive scale to exert its dominance or encroach in rival’s territory.

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Here is a list of some of the more notable and visible changes Amazon confirmed or expected to implement in 2021.

CEO Transition Means A New Amazon Business Model

Amazon announced in conjunction with its fourth quarter results on Feb. 2 that its founder and CEO Jeff Bezos is stepping down from his role in the coming months.

Bezos quit his career on Wall Street to create Amazon, an online store that sold books in the late 1990s. Over the years the company expanded to sell nearly anything and everything and saw tremendous success with completely new business lines, especially in AWS, a cloud computing business.

Bezos will officially step down in the third quarter of 2021 and transition to the role of Executive Chair. Andy Jasy, head of AWS, will assume the CEO title at that time.

Some investors and Amazon followers are worried that Bezos’ departure could mark an end to the company’s innovation engine. But Wall Street analyst Tom Forte explained on CNBC how the CEO transition could change Amazon’s vision and focus in 2021 — for the better.

According to the D.A. Davidson analyst, Amazon declared it is transitioning to a “services company” under the leadership of a tech and cloud expert.

“So you think about AWS, you think about retail as a service empowering third-party sellers to sell products on Amazon, delivering those products on behalf of third-party sellers,” the analyst said. “So, I think this is a declaration that Amazon is a services company.”

Changes To Payment Options For Third Party Sellers

Third-party sellers that operate on Amazon were notified in early 2021 of a new change in how Amazon handles their payments. On Feb. 1 Amazon announced what it called the Payment Service Provider program (PSP) to “enhance our ability to detect, prevent, and take actions against potential bad actors.”

Amazon further explained that it will only transact with third-party vendors that use a regular bank account or work with one of a handful of pre-approved payment processors. The logic behind this move is that Amazon wants to minimize the occurrence of fraud and theft so it will only transact with entities it personally vetted and approved. As of July 15, 2021, Amazon will not disburse cash to sellers that do not transact with an approved payment processor.

Some of the more notable PSPs include OFX Global, Payoneer, WorldFirst, among others. Amazon said it will continue adding new payment processors over time.

The payment processors must agree to Amazon’s terms and conditions if it wants to take part in the program. Most notably, participating processors must agree to a two-way data-sharing agreement with Amazon.

Amazon will share with participating processors the PSP account number a third-party vendor provided to Amazon and information about their selling account. In return, participating processors must share with Amazon information about the seller’s identity.

Amazon notes that it will only use the information provided by a payment processor to “identify and take actions against individuals who engage in abuse, fraud, or other illegal activity.”

Expanding Physical Retail Footprint

As odd as may seem to the casual observer, Amazon will continue to invest in its physical retail presence in 2021 and beyond. At a time when nearly every physical retailer is looking for ways to gain market share online, Amazon is sparing no expense to gain market share offline.

Amazon opened its 11th Fresh grocery store in March 2021. According to Bloomberg, it has plans to open 28 more stores. Amazon Fresh shouldn’t be confused with its other grocery brand Whole Foods it acquired in 2017. Fresh is also different from its Go Grocery stores that use the “Just Walk Out” technology.

Amazon is looking at the growing competitive landscape with a particular eye on Walmart and Target. Both Walmart and Target have a unique advantage over Amazon given their thousands of stores.

Not every customer wants to shop online for one of many reasons. Amazon is missing out on sales by default of its online presence.

So Amazon is looking to slowly and carefully build up its physical retail empire in 2021. Given Amazon’s stellar reputation of leveraging its data, it will know where it can build a physical presence in close proximity to a large base of loyal customers.

Amazon can also leverage its stores to include pick-up features and other value-added benefits exclusive to paying Prime members.

Aside from Amazon’s stores, the company is also licensing out its “Just Walk Out” technology that consumers might also see in 2021. For example, airport specialist retailer Hudson announced in early 2021 it will use Amazon’s technology in its convenience stores.

Live Sports And Entertainment

Amazon’s foray into streaming video isn’t meant to compete with Netflix, rather it is a strategy to reinforce the value an Amazon Prime member gets out of the yearly subscription cost. But in 2021, Amazon appears to be set on expanding its video offering to include more live sporting events.

Amazon confirmed in March a new 10-year agreement with the National Football League to exclusively broadcast Thursday Night Football matches as of 2023. Also in March Amazon won the rights to stream 21 New York Yankees games regionally on Amazon Prime Video.

While not yet confirmed, Amazon is expected to include live video features for its online shopping business in 2021 and beyond. Brands and companies will likely be able to host live video events where they can showcase or demonstrate one or more products.

Conclusion: Plenty Of New Features

Amazon is among an elite group of companies that deserve credit for their forward-thinking vision. In Amazon’s case, the company is particularly known for investing billions of dollars in new products and services under the assumption it may not prove to be a success.

One, some, or all of Amazon’s ideas in the pipeline could prove to be a new multi-billion dollar idea or it could just as quickly disappear into oblivion.

One thing is for sure: Amazon fans will be treated to new ideas each and every year.