Amazon announced last Tuesday that they are closing the majority of their physical grocery and retail stores and will be laying off 16,000 people. In past years, they opened and then quickly shuttered their bookstore concept stores too. In the broader context of their business, this was easily predictable. Each of these stores are essentially experiments to help them perfect technology that can then be licensed to others. Case in point — while Amazon shuts their own stores, more retail stores such as Hudson airport stores are being powered by Amazon’s “Just Walk Out” automated stores.
The most profitable business for Amazon over the past several years has not been their Prime membership or all the things they sell themselves. It’s seller fees on their third party selling platforms plus profits on Amazon Web Services and the Cloud. The point is, Amazon makes a lot more money licensing technology or controlling the platform for sales than the profits on selling stuff that it ships to you.
As we head into the coming year and beyond, look for Amazon to double down on more services and businesses like this and scale back on the things they themselves need to sell and carry.