Amazon's stunning loss of a $10 billion contract is the latest in an increasingly worrisome series of political defeats.
Jeff Bezos is used to beating his rivals. Remember Toys R Us, Borders, Sears, or your local childhood mall? Amazon bulldozed all of them in its path to retail supremacy. And in doing so, Jeff Bezos became the world’s richest person. But Bill Gates reclaimed that title earlier this year. And that’s just one of many big losses Bezos has taken in 2019.
On Friday, Amazon announced that it suing to block the government’s recent decision to award a $10 billion cloud computing contract to chief rival Microsoft. Amazon whined that the decision had been influenced by political bias.
Let’s be realistic here. The retail industry employs millions of Americans. For Amazon to be the country’s leading retailer, it needs to be a good member of the community. Otherwise, it will run into more and more political opposition.
Already, Bezos has managed to make opposition to Amazon a bipartisan issue. It’s no secret that President Trump has long had a strong distaste for Bezos, his personally-owned Washington Post newspaper, and Amazon:
And Democrats are increasingly hostile to Amazon as well. Presidential candidates such as Bernie Sanders and Andrew Yang have laid out harsh critiques of the company’s employee practices and impact on local communities.
Meanwhile, star congresswoman Alexandria Ocasio-Cortez helped lead the opposition to Amazon’s proposed HQ2 in New York City:
Now, 2019 hasn’t been an outright disaster for Amazon. The stock is up year-to-date after all. But it has badly trailed the overall stock market. And it hit its all-time high closing price of $2,039 way back in September 2018 and trades nearly $300/share down from there now.
It’s not hard to see why. In addition to losing the crucial defense contract, Amazon is having numerous other setbacks. Its earnings fell for the first time in years. Its streaming service looks outclassed against Disney and other rivals. The grocery store strategy looks defective; one Bloomberg columnist it compared it to “throwing spaghetti at the wall” and wrote:
So far, Amazon’s serious foray into groceries is marked by head-scratching tactics and middling financial and strategic performance.
Now this doesn’t mean Amazon will collapse tomorrow. Far from it. But dominant retailers can lose their way surprisingly quickly. Sears dominated American retail in the 1960s and built the landmark Sears Tower in 1973. Sears would give way within years to discounters like K-Mart and Walmart. Walmart itself became the king of retail and drew public hatred and regulatory fire in the late 1990s. That’s the stage where Amazon and Bezos are at today.
If you bought Walmart stock in 2000, you made a terrible mistake. Walmart’s retail performance quickly fell off. Walmart stock sold for $70 in 2000; you’d have to wait until 2014 before the price rose above $70 again.
We’ll look back on Amazon in 2019 in the same way. Jeff Bezos is having his mid-life crisis, and his company’s fortunes are suffering for it. Amazon is still a fine business. But the days of Amazon being a top growth stock, and Bezos being the world’s wealthiest person, are now over.
This article was edited by Samburaj Das.
Last modified: January 10, 2020 2:18 PM UTC