Who knew that an ordinary online bookstore Jeff Bezos started 26 years ago would one day become a $1.7 trillion e-commerce giant, selling everything from books to furnishing, clothing, grocery, and other goods, as well as providing cloud computing services to businesses worldwide.
In a recent course of action, Amazon’s founder and CEO, Jeff Bezos, has announced that he will step down as the CEO of the company in the third quarter of 2021. He will hand over this rein to his cloud Chief Andy Jassy. However, Bezos will remain onboard as Amazon’s executive chairman.
The announcement came as a surprise to many investors and sparked debate whether Jassy would be able to handle new challenges as the new CEO.
Here are the five biggest challenges Jassy will face over the next few years.
The continued growth of AWS
In 1997, Jassy joined Amazon and led Amazon Web Services (AWS) since its establishment in 2003. Under his leadership, AWS grew as the world’s largest cloud infrastructure platform and the company’s most profitable business.
In the fourth quarter of 2020, AWS controlled 32% of the global cloud infrastructure market as per Canalys. It even generated around 59% of the company’s operating profits in fiscal 2020.
In 2021, Jassy needs to ensure that AWS keeps increasing and adding its moat. However, this will be challenging after Bezos steps down as the leader and hands his reins over to Jassy.
Resolving quality control issues
Amazon has slowly increased its dependence on third-party sellers for increasing its marketplace revenue over the last decade. The third-party service revenue increased 50% to $80.5 billion in fiscal 2020 from 19% in 2019 and 18% in 2018.
Growth is considered to be a double-edged sword. This is because this revenue growth has also opened the floodgates for counterfeit and low-quality products. Due to this, Amazon would be exposed to customer lawsuits and tighter regulations that could hold it legally accountable for bad quality products from unscrupulous third-party sellers.
Company’s video game business growth
Jassy recently reconfirmed his commitment to extending the company’s fragmented video game business that includes its streaming platform Twitch – the first-party publisher of Amazon Game Studios, and the Luna cloud gaming platform.
Amazon Game Studios has already canceled various high-budget games, and its online RPG New World still has not been released over four years after the initial announcement. Luna faces tough competition from Google Stadia, Microsoft’s Xbox Cloud Gaming, and other cloud gaming platforms.
To keep the company’s video gaming business number going up, Jassy may need to make big acquisitions or investments on the tech front.
Improving company’s labor conditions
Amazon is facing a lot of criticism and complaints regarding poor working conditions and low wages. Jassy needs to lay out a plan for how Amazon can improve working conditions, and consider a raise in wages rather than automating those jobs away with more driverless cars, warehouse robots, and delivery drones.
Either approach would strangle Amazon’s near-term margins. However, increasing wages and resolving employee complaints may improve the company’s image, automating jobs could befoul the brand image and drive shoppers to retailers.
Addressing the antitrust challenges
Jassy will take over the company when it’s already facing major antitrust challenges in the US, Europe, and other markets. Many regulators have accused Amazon of using data from third-party sellers for creating its own first-party products. This has pushed many third-party merchants to use their own advertising and fulfillment services, and other anticompetitive actions.
Lawsuits and probes against the company may have dragged on for years. But they are likely to damage Amazon’s e-commerce business. Jassy, as the new CEO has to deal with these issues to ensure the company’s core marketplaces continue to improve and grow at a healthy rate.