Why Amazon is Worth $1 Trillion

Why Amazon is Worth $1 Trillion

This video is sponsored by Brilliant. The first 200 to use the link in the description
get 20% off their annual premium subscription. On September 4th, 2018, Amazon became a 1
trillion dollar company. That’s twice what it was a year ago, and
only a month after Apple first broke the record. Now, if your name rhymes with Real deGrasse
Bison, you might point out that 1 trillion is a pretty arbitrary milestone, that new
years is fake, leap day is a lie, and the phrase “time flies” is scientifically
inaccurate. But it’s still a good excuse to stop and
ask, Why? Why is Amazon valued higher than Walmart,
Samsung, Netflix, and Disney put together? First, Jeff Bezos thinks only in the long-term. And because investors understand this, the
company can act in ways that only make sense three, five, ten years in the future. Second, they focus more on customers than
the competition. The goal is building loyalty, even if it means
sacrificing profit today. And finally, with remarkable scale comes remarkable
efficiency. When you ship billions of packages a year,
you can buy your own airplanes, start your own shipping company, and lower your prices. But there’s another reason Amazon has such
an advantage: data. No other website even comes close to the number
of sales made with Amazon. Not Ebay, not Apple, not even Walmart. The battle seems already won. Unlike a Costco or a Staples, companies can’t
really choose whether to sell on Amazon, only whether they make the profit. Say you’re shopping for a pair of tennis
shoes, Most people would click buy, receive it in
the mail, and never question who it came from. It says Nike, the pictures are real, it even
has the logo. But often it’s actually a reseller, who
buys in bulk, adds a margin, and sells on the same official-looking product page. Sometimes it’s not even the real product. Knockoffs are everywhere. In part, because Amazon isn’t really incentivized
to police them. To you and me, it doesn’t matter who the
seller is if the price is right. But for Nike, it’s everything. Brands can either refuse to sell on Amazon
and watch other people do it for them, Or they can embrace it, and yes, give them
a cut of the profit, but at least see some of it. So, you can guess which one they choose. Either way, Amazon wins. In theory, a company the size of Nike doesn’t
need them, they have a recognizable brand, and they can easily sell on their own website. But even they submit to Amazon, who, at this
point, isn’t so much a player as the game itself, There’s a whole industry around making sure
your product shows up when someone searches for it, and you get picked as the seller when
someone clicks “buy”. It’s called “Winning the buy box”, in
fact, here’s a whole book about it, which you can purchase, you guessed it, on Amazon. Now, controlling 49% of online sales is impressive,
But here’s the catch: Online is only one-tenth of retail, It’s a big slice of a relatively small pie. To really prove its trillion-dollar valuation,
Amazon needs to beat Walmart, at its game. And that’s harder than it looks. This is Amazon’s revenue from retail, this
is Costco’s, and this is Walmart’s. 90% of Americans live within 15 miles of its
doors. You could drive twenty-six hundred miles through
Canada, and take a ferry to the remote Kodiak Island, but you still haven’t escaped the
land of low prices and… poor fashion choices. Not even if you’re Pitbull. Whole Foods gives Amazon a 500 store head
start, but nothing compared to Walmart’s eleven thousand. And yet, I’d still bet on Amazon. Here’s why. The average grocery store has a profit margin
of about 1%. The slightest change in efficiency can be
the difference between failing and thriving. They need to know what customers are buying,
how much they’re willing to spend, and when they’re vulnerable to advertising. This is why stores are so eager to sign you
up for their rewards program, are you sure you want to pass up on this 5% cash back opportunity
of a lifetime? Because all of a sudden you’re the perfect
customer, voluntarily identifying yourself at the cash register, allowing them to link
your purchases together and slowly build a profile. No individual receipt is all that valuable,
but together, they can start to see trends and even make predictions. A few years ago, Target made the news for
doing exactly this: A man from Minnesota drove to the store, demanding
to see a manager, His teenage daughter was receiving coupon
after coupon for baby clothes and diapers and strollers – what were they trying to encourage? So Target called him a few days later to apologize,
but by then, he had his own apologizing to do, his daughter was pregnant, and Target
knew before he did. You might say they hit the bullseye. The other benefit of all this data is predictive
stocking, not the creepy kind, well, depending on who you ask, It’s being able to order
and ship products in anticipation of their demand. Walmart began doing this back in 2004, Guessing
which items it should order in preparation for Hurricane Frances. The answer was strawberry pop-tarts, of course Today, this isn’t just handy information,
it’s an essential part of the business model. Consumers expect faster delivery and wider
availability. As free shipping becomes 2-day shipping…
becomes 2-hour shipping, the dynamics of retail change dramatically. There isn’t enough time to ship your bananas
from Colombia, they have to be waiting in a local warehouse before you decide to buy,
but without wasting valuable space. And that means predicting which items will
be ordered and when. Here Amazon has the advantage, It doesn’t
just know what products you buy but what device you use, what you search for, how long you
spend looking, all that and a whole lot more, at much bigger scale than someone like Walmart. It doesn’t have to guess how shoppers behave,
it knows. Of course, there’s also a downside. Amazon has always been the magic way to make
stuff show up at your door. Walmart, well, controversial. “Criticism of Walmart” isn’t exactly
the shortest Wikipedia page. Part of which is just distance. Walmart is visible. With Amazon, you see only the results. But public perception may start to change
– more stores, more warehouses, more people concerned about their privacy. The seeds are already planted, there’s even
talk of regulating Amazon as a monopoly. But it has a built-in defense against those
arguments: Low prices. It may control huge portions of many huge
industries, but it uses that scale to save money for consumers. It even competes with its own sellers. Amazon can find which products are selling
well but whose brands people don’t care about, things like batteries and knives, analyze
their return and review data, and manufacture a cheaper version without the normal marketing
expenses. It’s their version of generic brands, with
the power of data. Their most successful is AmazonBasics, which,
if you search for something like “iPhone charger”, is practically all you see, here,
here, here, here, here and here. Many of its brands you wouldn’t even know
were Amazon’s, like Rivet and Presto. It knows how to rank first on its own website,
which allows it to sell more products, therefore manufacture them cheaper, lower their prices,
which, again, sells more products. And the beauty of being in so many different
industries, online storage, movie production, music distribution, print publishing, organic
groceries, personal electronics, and so on, is more data and more uses for it. That’s why investors are so confident, Scale,
long-term investment, customer-focus, and data are all universal – they give Amazon
an advantage in any business they enter. In other words, if your business sells, well
anything to consumers… there’s a good chance you should be worried. Amazon isn’t alone, the future of many industries
is using algorithms to predict and analyze big sets of data. With Brilliant, you can learn those valuable
computer science skills in a very approachable, intuitive way. Say you have a list customers and their purchases,
and you want to guess what one of them will buy next. One way to do that is called Collaborative
Filtering, noticing that many people who buy a backpack also look for school supplies. Some patterns are invisible to you and me,
so we use a neural network. For example, retailers might want to automatically
classify their shoppers in different categories. So you train the network with data you already
have, which it can use to understand completely new information you give it. Those are the kinds of topics you can learn
with Brilliant. To get started or dive deeper into the world
of computer science and learn more about Brilliant, go to brilliant.org/Polymatter and sign up
for free. The first 200 people to use that link will
get 20% off the annual Premium subscription.


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    Giorgio Tsoukalos

    Amazon has a deal with the CIA worth billions and billions. Amazon sells them our information helping the CIA spy on us. Amazon is a monster.

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    Samuel McKissick

    I heard about the target baby thing before, in a book called the power of habit. most interesting book i ever read.

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    rio d

    Amazon does not buy their own airplanes you jackfruit. They use an AMCI like Atlas Air to lease their airplanes and services. Then when the contract is up they move on to a better lease to save money or renew with different terms.

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    dish fst

    I love this channel. The videos are great, but there's more to it than that. This guy's segues to sponsor promo's are so buttery smooth that I never see them coming….. Lol I may come for the videos, but I stay to guess when those GQ style promo's will stride on scene so nonchalantly that it's almost classy. 😆

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    I am inclined to listen to the wise words of Bill Burr and to not get your savey save fucky fuck card — https://www.youtube.com/watch?v=9l-kJdeuz98

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    Silas Wong

    I love your videos but could you cite the sources you cite a little better? Some of the facts you listed I had trouble tying them to the source links

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    Arshi A




    Looks like they got rid of the Help section. There is no help for amazon dot ca. I called them all day and they kept transferring my call from one department to another. I got scammed by a pfshing ad of amazon prime video where in the background they depicted the show i wanted to watch and after i paid for the membership they kept charging my card. Good thing my bank contacted me about a 'suspicious recurring charge by Amazon'.
    I called today again and some guy was acting saucy with me that I had no choice but to hang up.The reviews are disgusting on @t
    Amazon is a scam and nothing else. They just scamming people and when u call its a hit or miss…u might get a nice person to help u or you might get an asshole who hates his job and could cares less about your situation.
    Most of the stuff is from China and with no logo of the company. Maybe its just here in Canada but i am just about done dealing with these crooks. Better off giving aliexpress business, at least you get the stuff, i know it takes a while but if i want cheap China stuff why not give China websites business directly.
    I made a video of the Makart Nail drill where the company logo is not on the machine(its an aftermarket item) and i paid $80 for it.
    SHAME ON THEM FOR NOT HELPING PEOPLE AND PRETENDING THAT THEY DONT UNDERSTAND THE SITUATION!!! There is no head office or anything where you can meet someone face to face with all your documents and invoices. I have proof of payment on my card but there is no way of exchanging emails with higher authorities and proving to them that the payment was made as it shows on yur credit card transaction.
    I have prime membership but now i have to pay again because I had to delete my account and recreate it.

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    Patrick Santos

    They were only worth a trillion for a minute. Theyve since lost a bunch of market value… Still better than aapl tho.

    Still a great video

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    Micael García

    Can I say this? I never knew amazon was a thing until know, but know that I do, I don't care about whatever they're doing, instead, I can only think that…

    I DON'T LIKE THE NAME AMAZON FOR SUCH A BIG MONOPOLY, like, it is just SO UNDERWELMING for what they are!!!!!!

    Also, something I just though about: It would be pretty interesting if they somehow get a monopoly over non virtual selling too – that, on that scale would mean all objects would begin to sell cheaper basically everywere. As it would make ANYONE trying to sell stuff be unable to do so (without tying up to amazon), no more mid-sised business could exist by themselves, and amazon alone would be controling the price for ANYTHING – with a catch: if they make things too expensive, everything will fall apart, as people would venture out to search for better priced stuff, leaving amazon alone… Which now that I think about it, is just obvious and basic marketing stuff WTH am I talking about and what was I trying to get at?
    WTV no one will read this anywa- wait a sec you are doing so! :3
    Oh yeah I remember my own recent thoughts, It was this!:
    Lower prices means more sells for amazon and less for others – yet those prices can't rise much quicker after that just for profits due to the nature of marketing. Which I think would lead to a pretty weird inflation decreaser getting all prices into the minimum yet with people getting less and less ways to make money, centering ALL business into (I think):
    1) Entertainment.
    2) Scientific Developments.
    3) Food.

    The second option can somehow be monopolized by Amazon too, but it will take a long time until that happens, and at the very least I won't be alive to see it happen.
    For the first one: you need people to make stuff people wants: High-level/advanced AIs can only do the type of things it saw, but on different ways, and might follow repetitive patterns not truly wanted – Many times when I am searching for something I've never experienced before, a catchy title is not what I want. A bot has it hard finding that I liked something that didn't follow my behaviour, so that's that (not really).
    And the second one… Because SCIENCE!

    Pd: WHAT THE LIVING CHEDDAR IT TOOK ME 30 MINS TO WRITE THIS CRAP?!?!?!? I am ceirtainly not made for writing. 😢

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    Diogo F

    Sorry about your privacy situation America. Europe is already on top of this. It's literally illegal to do this in the EU without consent cause of GDPR

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    Hey Polymatter, great channel!
    Talking about Amazon, here is a short business tip:
    Speaking as an international viewer (EU), you might want to consider signing up to the Amazon affiliate program, registering for every single country and posting the international affiliate-link below your videos. When users click on the link, they are redirected to the Amazon version of their own country, earning you commissions under their countries respective Amazon affiliate program. 
    You would just need to include some book regarding the topic of your video (or any other product available on Amazon). Could be a high impact activity with low time and money commitment to you, just saying..

    Keep up the great work!

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    EB Productions

    apple didn't break shit. The VOC was worth 7 trillion a just a few hunderd years back. So apple is a few hunderd years late

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    V Wong

    I see people are complaining about Bezos for his greed. Any more explanation? Because I think if he is really that greedy, he would not make a win-win solution by allowing normal people like you and me to be selling things on his platform and make money on their own by benefiting from sharing economy of online platforms?

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    i love your videos, but they're so centered around America. What about amazon in Europe or Asia? Is it the same case? Your facts seem very general, but then we realise that it's only from the american perspective (you should probably state under the facts that it's an American context, because some non-Americans may get confused, thinking that it applies to their country too)

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    …because the present value of the future cash flows that the Amazon is projected to generate, is estimated to be $1 trillion. Next question!

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    Liam Howard

    One thing amazon doesn’t have is my loyalty. Nor does Walmart. They are just the go to for cheapest prices the most conveniently. Specialty markets in targeted areas is where retail is going in my opinion.

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    Amazeon is uh maze'n! All I gotta do is keep bitching about a problem. And wish for a solution. Next thing ya know, the answers on my door step. Swear god. Stereo broke on me. Then poof! Four and uh half horsepower worth of watts RMS ta dry my nuts with after muh showers. Thanks Amazeon 🤠!


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    Stephen Cheng

    Why is Amazon valued higher than Walmart, Samsung, Netflix, and Disney put together?

    Because it is the retailer for just about everything, sent everywhere.

    And because it cheats on its taxes and abuses its workers.

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    Quigon Paj

    These videos need to be integrated into the curricula of every public school social studies department in the United States. And universities should find a way to create a mandatory one-credit course for students within every one of their colleges. I'd even support a requirement for voter registration forms including links to them. We are at the cusp of one of the most significant transformations in the evolutions of the economic foundation of society, with ramifications being at the "civilization" level. Hypermacroeconomics. People need to know how and why it is happening.

    Perhaps the most important consequence, albeit it a bit frightening, is how seeing these videos has opened my eyes to the PROFOUND significance of how everything will play out in the pre-Orwellian dance of death between Big Data and the federal government. We witness every day a cascade of news coverage of Congressional hearings, ubiquitous accounts of public outcries over concerns about privacy, ownership of personal data, censorship, deplatforming, organizational accountability, etc. The debates center around identifying the sources of POWER within our evolving technocratic society, and defining the nature of the responsibility of those who wield it. (e.g is Twitter a platform or a publisher, and can it be given authority to wield power in certain ways, without being held accountable for potential injustices that occur as a consequence in others?

    In the culture of sensationalist media, it is difficult to ascertain the exact significance of the outcomes of all of the specific conflicts, controversies, or even ostensibly innocuous decisions being made. But what's at stake is the very structure of the hierarchy of power among the institutions comprising our very civilization.

    Orwell was correct in his depiction of the archetypal dystopian society…but I'm beginning to think that he was limited by the fact that he wrote about it while living in a time in which he couldn't possibly have imagined the idea that tyrannical authorities do not EMPLOY apex technology to oppress the subjugated masses, but rather, those who develop and control that technology can/will/might BE the tyrannical authorities. Anyone who saw the Joe Rogan podcast with Jack Dawson and his VP, Vijaya, knows how terrifying it was to see so much power, over such foundational principles of society (e.g freedom of expression) in the hands of people who embody the catastrophic combination of possesing an exceedingly mediocre intellect, staggering levels of self-assuredness about the righteousness of their own moral conviction, and an invidious commitment to wield their power without regard for whether it is consistent with the core values that serve as the foundation of our form of government, if not our society itself.

    Basically, Orwell couldn't have known that Big Brother's throne will be located in Silicon Valley.

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    Aaron TV

    It's simple. Amazon loses money on their sales but they stay afloat due to their investors. Any company that sells their product at a loss will be the most competitive.
    Everything else is just semantics that any corporation of scale is capable of. Amazon's edge comes from its ability to raise capital

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    Mark Arnott

    👨‍💻😳because they learnt from microsoft apple & google Wait dont all these c/o's Own part of Amazon haa ! i bet they do indirectly 😁😋

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    RR Lewis

    Uhhh You Will NOT see Sold by NIKE Fulfilled by AMAZON on products. Shoez4US , ChampsSports, Foot Locker may act as intermediary options to NIKE products. YOU ARE FLAT OUT WRONG on this very general idea. One would think that since NIKE is not the concept you are trying to outline. You'd have at least gotten it right. APPLE products on Amazon? Are they available on their release date at all and for long to come? NOPE. Can you buy a Google Assistant on Amazon? NO. You over simplify this far far far too much. If you purchase your Nike products on Amazon you are simply not wise. You are likely to overpay and perks that are more than just 'perks' such as wear your shoes for up to 30 days and you can still return them for full price regardless of condition. That's pretty rad. Order through Nike.com then return to a Nike Store. Or backwards. This is beneficial to many people.

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    RR Lewis

    It is also worth noting that searching 'iphone charger' and 'almost all you see' is Amazon brands is simply not accurate. Top spot? Sure. They should have the right to label their inferior and often more expensive option as Amazon's Choice. How often do you see their shitty Bluetoooth speaker, cable, stand or spatula ranked as highly as many budget competitors? Anker comes to mind as a possible search result. Aukey? A lot of these companies have been offering great quality products for dirt cheap prices for so long it is false that Amazon can jump in and produce equal results despite the inherent advantages. Surpassing the combined value of Wal-Mart, Samsung (random South Korean selection?), Netflix (specialized and dominant in their sphere) and Disney's media empire is supposed to impress people as you open your video? Geez chief. I immediately thought…..that's the best he could do?

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    Voranart Sirisubsoontorn

    Being expensive could be the only ways USA innovations may not be bought out by out-of-thin-air money from outsides haha.

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    Danny Landrum

    Here's why I can and do vote on Amazon: Amazon allows me to donate to the oldest civil rights organization in the country – the NRA Foundation – every time I make a purchase; whereas Walmart actively opposes my civil rights by calling for a homeland defense rifle ban and thus I'll never set foot in there again.

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    Brenda Carter

    It took years for Nike to embrace Amazon. I don't think they officially started on the platform until 2016 or 2017. Before then, all of their listings on the site were created by third party sellers.

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