Is Amazon getting too big for its britches?

Amazon shocked a few people last week when it announced it intended to purchase the Whole Foods supermarket chain for a whopping $13.7 billion. It raised all kinds of questions about Amazon’s intentions and whether perhaps the company was growing too big and too powerful.

This blog is about the cloud, not retail, but it’s impossible to parse the two sometimes because certainly the Whole Foods purchase will have some impact on AWS in the future.

At some point all of the work begins to run together and I’m sure that the powers that be at Amazon see it as part of a whole, not merely a logical extension of its growing retail and logistics arms.

The question is how big should Amazon be allowed to get. It’s worth noting that the New York Times reports that in spite of its continually growing clout, the company with a $500 billion market cap has actually made very little money in its two decades in existence, reporting a cumulative profit of just $5.2 billion. Compare that with Walmart, with a market cap of $231.25 billion, and which made $14 billion in profit last year alone.

In an interesting aside, The Wall Street Journal reported this week that Walmart was encouraging its vendors to stop doing business with AWS, a market reaction that I’m betting Amazon hadn’t counted on. Whether that has any impact, remains to be seen, but it is an compelling consequence of the acquisition.

What’s more, Whole Foods was an Azure customer. For the price of $13.7 billion, AWS gets to take that customer away from Microsoft. That very likely wasn’t a primary reason Bezos and company decided to pull the trigger on the deal, but it was a happy side benefit, for sure.

Will regulators start paying closer attention?

For now, Amazon is a growing behemoth, which controls vast amounts of data and computing both on and offline, and regardless of the amount of money it’s making, it’s a powerful combination. When you consider that AWS, just one piece of Amazon’s spreading empire, controls approximately 40 percent of the cloud infrastructure market, that’s alone is a troubling from a competitive standpoint.

Amazon appears to be testing its limits here and pushing just how far regulators will be willing to go in allowing a deal of this scope. In a cover story about Amazon’s growing power in The Economist last March, the publication had this say, and this was long before the Whole Foods deal came to light.

“And here lies the real problem with the expectations surrounding Amazon. If it gets anywhere close to fulfilling them, it will attract the attention of regulators. For now, Amazon is unlikely to trigger antitrust action,” The Economist observed. Perhaps the Whole Foods acquisition could change that.

It’s worth noting that last week there were rumors flying around that Amazon was intending to buy Slack. That appears to have quieted for now, but all of these moves suggest a company that is willing to try just about anything to control more aspects of our computing lives, and if you care about competition in the marketplace, that has to be troubling. As such, this deal has the potential at least to catch the attention of regulators in the US and Europe and that is surely a consequence Amazon wants to avoid.

Photo: Fumiaki Yoshimatsu on Flickr. Used under CC by SA 2.0 license.

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