Past its Prime? Amazon comes of age

Hey, Ryan Reynolds here for Mint Mobile. You know, one of the perks about having four kids that you know about is actually getting a direct line to the big man up north. And this year he wants you to know the best gift that you can give someone is the gift of Mint Mobile's unlimited wireless for $15 a month. Now you don't even need to wrap it. Give it a try@mintmobile.com Switch upfront payment.

Of $45 for a three month plan.

Equivalent to $15 per month. Required new customer offer for first three months only. Speed slow after 35 gigabytes. If network's busy, taxes and fees extra. See mintmobile.com.

Hello and welcome to the Intelligence on Economist Radio. I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. From cramped trenches to packed ships, the theater of war is an ideal breeding ground for pathogens. But our defense editor argues it's not just that disease is a greater risk during conflict, it's that disease can change the conflict itself. And as the Amazon was defiled and colonized, Antonio Bolivar tried to convey that it was the precious lungs of the world. Our obituary's editor looks back on his life as a keeper of tribal stories and natural medicines and as an unlikely film star. But first, a different Amazon. This week, Amazon is holding its first sale event of the pandemic. Typically, prime day in July would be the big summer sale, but this year it's been pushed back to September. Just a few months ago, encouraging people to buy wasn't the company's problem.

It's boom time for Amazon as many.

People turn to online ordering to get.

Supplies during this outbreak.

Visits to the Amazon website are up 32% compared to a year earlier.

Experts are predicting revenues of up to $73 billion in the first quarter alone.

Even with a dozen new planes and 175,000 new workers, pandemic panic buying wreaked havoc with Amazon's delivery timelines.

What Amazon is trying to accomplish now is sort of like a Black Friday.

Or Cyber Monday happening every day. And they didn't have months to prepare. The company says it's now giving priority.

To medical and household supplies. Select products on Amazon are either unavailable or won't be delivered for weeks.

But it wasn't just Amazon responding to a tectonic shift in shipping and surging competition is just one of the challenges the 26 year old firm now faces.

Amazon just couldn't quite cope with the scale of the e commerce boom. That sort of felt like a Run on the bank.

Tamsen Booth is the Economist technology and business editor.

So a lot of the company's warehouse workers ended up staying away naturally from work. In some cases their warehouses were about 50% down in terms of staff numbers. So its shipping speeds tumbled. You can see the strain on the numbers. Sales were up during the first quarter by 26% but profits were down 29%. And that speaks to just the massive cost of coping with this kind of massive boom.

And why wasn't it able just to raise prices to account for those new costs?

So the company has about 40% of the online retail market in America, but only about 6% of retail overall. Most of its big bricks and mortar competitors haven't really taken e commerce that seriously. They've under invested. And what you've got with this e commerce boom because of the pandemic is that these companies are finally seeing that there is just, there's no option but to do everything they can to get into this space. So the likes of Walmart, Target, Costco, they've flung resources at this area. So during April, year on year, digital sales have doubled at some of these firms. And if you look out longer term, a lot of people in Silicon Valley are extremely excited about Canadian company called Shopify. Shopify gives companies a way to sell online that's a really viable alternative to Amazon. It lets brands keep their own relationship with the end consumer. It's kind of invisible. It sits behind them. And now Shopify is becoming the backend of Facebook shops, the social networking giant, new e commerce service. And now you've got Walmart partnering with Shopify as well. So you're really seeing a sort of anti Amazon alliance emerging in the longer term.

And so with all that competition nipping at its heels, then where can Amazon turn for growth?

I think the first, most obviously on the e commerce side is international. So at the moment it's quite an American business. Over two thirds of revenues come from the U.S. so there's a lot of opportunity if it can manage it for growth in Latin America, India, elsewhere and Asia. And then of course Amazon has Whole Foods and Amazon Fresh which kind of go together. It bought Whole Foods bricks and mortar chain 2017 and that allows it to create this kind of hybrid of the physical and digital. There's an awful lot of excitement about Amazon Go, which is a cashierless store that it's rolled out in big cities in America so far. Hundreds of cameras track you as you browse the aisles. They watch what you're taking and the algorithms take the information and then bill you in an app later on. Amazon's planning to roll it out to about 3,000 shops by next year. And of course, as with many of the services that Amazon has developed in house, it may well plan to sell it to other retailers.

But I mean Amazon is a sprawling company. What about the other parts of the business?

So on the cloud side of things, Amazon web services, cloud computing service, the company's been powering services that we're all using like Zoom, Netflix, Disney Fortnite. So over half of the company's operating profits come from aws. In the most recent quarter that trend was really on steroids. It was 77% of operating profit came from the cloud operation and it's growing at 33% a year. It's an extraordinary operation and so far in the past couple of months it's been doing incredibly well.

And what about the man at the head of all of this, Jeff Bezos? How is he tying it all together?

Amazon remains really his vision. I mean I see Amazon, like many super successful companies as having some kind of cult like elements and Jeff Bezos is the cult leader and the company follows his interests and obsessions. However, 26 years on you've got a company that is really huge and complex and so he's had to delegate and none more so than the two co CEOs of the retail side, Jeff Wilkie, and of AWS, Andy Jassy. There's been quite a bit of chatter about the future and succession around Jeff Bezos. And in the past couple of years especially Jeff Bezos has definitely been less involved in the day to day management of Amazon. He's back in now, involved in the day to day because of the pandemic and is involved with the minutiae of stock levels and exactly how the company is coping with things on the safety front for workers. But these questions aren't going to go away and insiders will question Amazon's long term future. Is it a future with Jeff Bezos as chief executive anymore or will that change?

And so with all that in mind and with Mr. Bezos taking seemingly a shifting role, what do you think the future of the company looks like?

I think what's fascinating is that you may see a departure from the recent past. I think we're approaching a sort of watershed moment where some hard decisions have to be made and just some background. I mean the company has been designed and carry on acting like a startup, a sort of always be hustling kind of feisty, aggressive, expansionary young company. But the fact is, it's 26 years old, it's massive, it's complex, it's quite mature, its growth rates are slowing, and it has some hard choices to make. For instance, there are internal pressures for AWS to go its own way, mainly because customers of AWS don't necessarily want to be handing Amazon money with which it can fund new ventures. There's a lot of pressure to really split up different elements of the E commerce platform, and then you have the uncertainty over how involved Jeff Bezos is going to remain. So I think it's a moment that is extremely unpredictable as to what happens next at Amazon, even by its own standards.

Tamsin, thank you very much for your time.

Thanks so much for having me.

For a closer look at the future of E commerce and Amazon's place in it, listen to Money Talks, our weekly podcast on the markets, the economy and the world of business. In today's episode, Tamsen talks to some of the competition snapping at Amazon's heels and investigates what's holding back the company's efforts to conquer emerging markets.

More than 600 million people are supposedly.

Involved in the digital ecosystem of India.

But in reality, it's not as vast.

As you think because of how difficult the conditions are.

The small stores are heavily organized and.

They manage to put up all sorts of rules that affect Amazon.

It can have warehouses, but it can't have inventory.

There was a new tax of 1 to 2% put on foreign e commerce sellers. That still is quite unclear, and that.

Came up earlier this year. You know, there's just impediment after impediment after impediment.

Listen to Money Talks, available wherever you get your podcasts.

Hi, I'm Cindy Crawford and I'm the founder of meaningful beauty.

When Dr. Sabah and I decided to.

Do a skincare line together, he said to me, we are going to give women meaningful beauty.

And I said, that's exactly right.

We want to give women meaningful beauty, which means each and every product is meaningful.

It has a.

A reason to exist.

It's efficacious.

You're going to get results, and then you just go out and live your life. Meaningful beauty. Confidence is beautiful.

Learn more@meaningful beauty.com.

Throughout history, war and disease have often been intertwined. During the First World War, Spanish flu festered in the trenches and barracks. More than 36,000American soldiers died before they ever reached France. The virus killed more people than the conflict itself. So far, COVID 19 has hit rich, peaceful countries the hardest. But it's beginning to ripple through Less stable parts of the world, conflict could help the virus to spread, and the spread may make conflict worse.

War and disease really feed on each other.

Shashank Joshi is our defense editor.

War zones are fantastic places for a virus. Health care systems are destroyed. Doctors are driven away. Refugee camps are cramped and unsanitary. They don't have the ability to socially distance in a meaningful way. People's immune systems are worn down by hunger, by trauma, ill health. So it's a fantastic place for the virus to spread. But in the other direction, viruses also change military dynamics. Armies and navies are fertile ground for contagion. They live in cramped barracks or confined ships. They cross borders very often and at the sort of macro level, at a higher diplomatic level, the uncertainty and the shock of a pandemic can encourage armed groups, or it can encourage countries to take advantage of the situation in destabilising ways. So, in a way, war zones are susceptible to viruses, but viruses also change the dynamic of wars themselves.

And do you see that happening now with COVID 19?

I think we see it in a very large number of places. One example of this is Colombia, where we have a civil conflict between various rebel groups and the Colombian government. And the lockdown has given opportunities to both sides. So, for example, many of the rebel groups have jumped at the opportunity to expand their control and build something resembling legitimacy by imposing health lockdowns and portraying themselves as protectors of the people. In one region on Colombia's border with Venezuela, one of the rebel groups has offered to educate the children of farmers while schools are closed. And so that kind of indoctrination is a great opportunity if you're a rebel group. But on the other hand, the government's realised that because road traffic has plummeted, the illicit vehicles heading to rebel hideouts from where they are farming the illegal coca crop, those vehicles stick out like sore thumbs. And so the government's been able to mount a string of attacks on these convoys. So, in other words, the pandemic, by shocking social, economic and political life, creates opportunities for countries, for armed forces, for armed groups, in unexpected and interesting ways.

But is there no counter current in which various conflicts reduce simply because people want to put down their arms and instead fight a common enemy?

There was a bit of hope that would happen back in March. Antonio Guterres, the UN Secretary General, urged a global ceasefire because of the pandemic. It is time to put armed conflict on lockdown and focus together on the true fight of our lives. To warring parties, I say pull back from hostilities, put Aside mistrust and animosity. Silence the guns, stop the artillery, end the airstrikes. And he's repeated that call several times since. And at the beginning, we saw fighters in more than a dozen countries appearing to heed his call. But in many of those, the tranquility has been pretty short lived. Lots of the ceasefires have either ended or been violated. According to data collected by the Armed Conflict Location and Event Data Project, we have seen political violence go up in 43 countries and remain steady in 45 of them.

So aside from Colombia, which war zones worry you the most right now? Places that seem most vulnerable.

I think Congo is looking particularly vulnerable. The country is still recovering from an outbreak of Ebola, which is started in 2018. And now it has COVID 19. It has very limited capacity to conduct tests, a healthcare system that has been profoundly damaged by conflict. But I think one of the most serious aspects of this is the refugee problem. In Congo, we have seen almost half a million people flee their homes since violence escalated in late March. And as I suggested earlier, refugees are people who may be living in cramped conditions, their immune systems may be worn down and they are ripe for the virus spreading in camps. And in places like that, not just in Congo, but also in Rohingya camps in Bangladesh, for example, these refugee communities are perhaps some of the most vulnerable people from COVID 19 anywhere in the world.

And what about the fighting forces themselves? As you say, they are often traveling far and wide and in cramped conditions.

Exactly. And that's where rich countries are being affected, in some cases quite badly as well. Although this isn't like the Spanish flu a century ago, which ripped through Western armed forces and killed lots of young, fit people. In this case, young fit people seem to be spared the worst effects of the virus. It is still having pretty substantial effects. For example, we're seeing foreign governments cut ground forces and military trainers in countries like Iraq. We're seeing exercises in Europe cancelled. And I think some of the most dramatic cases have been on navies. You know, we saw the coronavirus spread through one of America's biggest aircraft carriers, the USS Theodore Roosevelt, in March, and it caused such a crisis that America's Navy Secretary sacked the captain of the Roosevelt, who had sounded the alarm about conditions on the ship. And I think that gives you a sense of how governments are really concerned about the impact of the virus on their own military readiness, on their own appearance of strength. And I think they're ultimately afraid about how others might take advantage of that.

Well, and it opens another way in which the pandemic can affect conflict, not just the troops on the ground or in ships, but the wider geopolitical conflicts.

It does. It affects perceptions of strength. Countries are desperate to dispel any sense that they might be seen as weak or easy pickings in order to avoid anyone taking advantage of their moment of vulnerability. So the response, I think, has been a kind of nervous muscle flexing. For example, we saw America surge its aircraft carriers out to sea last month to show we may have lost an aircraft carrier to coronavirus. We may have been badly affected, but it's not going to stop us from policing the world and standing up to our enemies if that's what it takes.

So all that seems to add up to the suggestion that when all of this is over or at least reduced, that it will be a more conflicted world.

This is not like the Spanish flu of 1918 that was world shaping and had profound catastrophic impact. This is milder at one level, but what I think it is going to do is bequeath a legacy of conflict zones that have essentially festered for months, in which humanitarian workers and diplomats have simply not been able to get on the ground, in which refugee communities have suffered serious depredations, and in which the legacy of great power mistrust, particularly between America and China, a sort of relationship that was going downhill anyway, but has excell accelerated under this pandemic, means that conflict resolution and diplomacy is even harder to push forward. So I think we will see a world that is in ragged shape and of course it would have been pretty unstable anyway, but I think it's going to be even more messy and complicated than it would otherwise have been in the absence of this pandemic.

Shishong, thank you very much for joining us.

Thanks, Jason.

For a lot more analysis like this, subscribe to the Economist. To find the best introductory offer wherever you are, just go to economist.com intelligenceoffer.

If you engaged Antonio Bolivar in conversation and you brought up the subject of the animals of the forest, he had an interesting reaction.

Ann Roe is the Economist's obituaries editor.

As soon as he mentioned jaguar, he would start to growl. And if you mentioned anaconda, he would begin to writhe like the great snake. By doing this, he was channeling the gods who were within the animals. And in this way, when he was interviewed for television stations in his native Colombia and elsewhere, he would seem to be bringing the culture of the jungle right into people's everyday lives in the West. He came from the Okayina tribe, which was an extremely depleted tribe. And so he'd been brought up among a different people, the Witoto people, and had learned their language and not his own. He was almost, as he well knew, the last survivor of his tribe. He reckoned there were a few dozen left. They were a distinctive tribe because they had blue eyes, so they were very easily marked out. He had always done some acting work, although this was not his main role in life. He was noticed by a director called Ciro Guerra. As soon as Guerra saw him, he said, this is a marvelous face. I want to get that man for my film. The film was called the Embrace of the Serpent, a collation of the diaries of two white explorers who had investigated the Indian tribes and had been the first to do so. Sirigueira had the idea of putting them together and linking their lives through a shaman of the Amazonian tribes called Karamakate. And this figure was to be played by two actors. The younger Karammakati, who guided the first explorer, the second Karamakate, the older one by Antonio Molivar. Certainly many members of his audiences imagined that he and Karammakate were the same man. The part of the Ode Karamikate was absolutely ideal for him because he was, in fact, the not a shaman, a very important member of the tribe who was in charge of collecting and preserving his tribe's culture, their recipes, their medicinal botany. He was the figure, like a grandfather, who would sit with them round the fire or in the longhouse, telling the stories of the ancestors, how some superior beings had stayed on the earth after humans had been created and had actually passed into animals, so that the animals he imitated were, in fact, gods. The film was very well received in the West. In fact, it was nominated for Best Foreign Film at the Academy Awards. He certainly hoped that all the publicity that had been gathered by the film would translate into a greater awareness around the world of how important the Amazon was. He gave a great many interviews afterwards in which he stressed again and again that the Amazon was the lungs of the world. They were the great filter of all the pollution and filth that it produced, and that it was vital for humanity to understand that every part of it was connected, the soil and the air and the animals. Everything was bound together and it all had to be protected. The latest invader of the Amazon was in fact COVID 19. He lived in the town of Leticia, and coronavirus had a particularly bad effect there. It was that that he died of in the end. Antonio Bolivar felt very keenly that he was the last of his tribe. And in the film as O da Caramakate, there's a scene where Evan, the American explorer, gets up at night and finds, to his surprise, that Karamikate is weeping in his bunk. The problem is that Karamakati himself knows that he's become empty. He's almost forgotten everything about his tribe that he ought to know. And I think this is very redolent of what was happening in Antonio Bolivar's own life, that he was the repository of all the myths and culture and knowledge of his tribe, and also felt extremely keenly that he needed to pass them on.

And row on Antonio Boulevard, who's died aged 75. That's all for this episode of the Intelligence. If you like us, give us a rating on Apple Podcasts and see you back here tomorrow.