By
Chimamanda U. Martha
April 18th, 2024
As Amazon stock price is showing a major revival, here’s a look into the challenges and opportunities for the e-commerce tech giant.
By the end of 2018, America-based e-commerce behemoth Amazon has seen a major fall in its valuations. From its one-year high of over $2000, Amazon’s stock price corrected over 35% falling to a low of $1350. However, the Amazon stock is now showing formidable recovery surging 20% from its bottom. At the press time, Amazon (AMZN) is 3% up trading at a price of $1696.60.
Amazon has been one of the most preferred stocks of U.S. investors giving magnificent returns over the last few years. Moreover, Amazon is currently the largest public-listed company with a market cap of $830 billion. However, we know that the dynamics of the technology market are changing rapidly with giants like Apple, Alphabet, etc. engaged in intense battle.
To stay at the forefront of the revolutionary change, Amazon is re-strategizing its business and making aggressive moves in different market sectors. This includes shifting to offline retail stores with Amazon Go, to working on AI and voice-controlled tech with Alexa. However, to keep things rolling, Amazon has to meet some immediate challenges ahead of them.
India’s New Rules In the E-Commerce Industry Creating Hurdles
According to PwC analysis, India’s digital revolution is likely to catapult its e-commerce industry to $100 billion by 2022. India is currently the second-biggest internet market in the world and is on the way to be “(arguably) the world’s most promising internet economy”.
The Indian government has recently brought new rules in place which can act as a hurdle for this e-commerce giant. The new rules prohibit giants like Amazon and Walmart (having 77% stake in Flipkart) from selling products from businesses wherein they have their equity stake. The rules also ask e-commerce companies to limit cashback and discount offers.
As Motley Foll reports: “Amazon, though, derives around 40% of its Amazon India sales from Cloudtail India, its joint deal with Catamaran Ventures. It has another major retailer, Appario Retail, that also exceeds the 25% threshold. Under the new rules, they won’t be able to sell on Amazon.”
The implementation of the new rules is seen as a measure to protect small retailers listed on Amazon and Flipkart. The small retailers complained against Amazon’s “predatory” pricing policies and thus asked for creating a level playing field.
Thus with the new rules in place, Amazon has to re-strategize their estimates about future growth.
Challenges In Rumored Cloud-Based Gaming Service
Amazon is reportedly working on a cloud-based video game streaming service that would allow its users to play high-end games without high-end hardware requirements. The new service shall be available to any user on a subscription basis. This would likely mark a transformational change in the gaming industry which is still dominated by gaming consoles. Moreover, it would also give Amazon a competitive edge while putting the company in the growth trajectory.
Through its AWS services which is Amazon’s most profitable business, Amazon holds the largest share in the public cloud computing market. Amazon can leverage its position in the cloud-based video game streaming services.
However, Amazon has to face giants like Alphabet and Microsoft in this battle. Alphabet’s Google is reportedly working on its own video game streaming platform. At the same time, Amazon is aggressively promoting its upcoming service named xCloud. Microsoft holds a big advantage with its popular consoles dominating the gaming industry. Its xCloud is likely to allow users to play high-end games across several devices.
Adopting a New Strategy With Gas Station Presence
One of the major growth drivers for Amazon over the last years is it constantly improving customer and product-delivery services. Amazon has constantly experimented new strategies to bring much more integrated and intuitive shopping experience for its customers.
Investment banking firm D.A. Davidson says that Amazon should consider engaging with gas stations to sell its products, reports Bloomberg. While that you are running out of gas and moving to the nearest station, you can order groceries through the Amazon app and collect them from the gas station.
Tom Forte, an analyst at D.A. Davison says that having its own gas stations with retail stores could give Amazon “thousands of commercial locations to advance its delivery efforts”. It would also help the company to generate a new revenue stream through gasoline sales.
The major USP of Amazon’s growth has been its fast delivery services with constantly reducing delivery times. Amazon Prime customers can even leverage the benefit of same day delivery. However, Amazon’s delivery network is strong in countries like the U.S. Also, some of the urban cities in India enjoy this facility. But if Amazon has to tap larget market share in countries like India, it has to provide better delivery services to the rural Indian population.
Setting up Amazon gas stations with its products in such areas can really trigger the company’s growth story in these unchartered market. Furthermore, earlier reports also suggest that Amazon could likely use Ripple’s XRP-powered payment systems for effective cross-border payments.
Cory Johnson, Ripple’s chief market strategist, believes that e-commerce companies can leverage the crypto technology to instantly move across their global wallets.