Amazon’s R&D spend rose 41% to $22.6B in 2017


Dive Brief:

  • Last year, U.S. tech companies led in spending on research and development, according to FactSet data reported by ReCode, with Amazon’s $22.6 billion spent in 2017 topping the list.
  • Amazon’s 2017 investment rose 41% over the previous year, when it also dominated, ReCode said.
  • The e-commerce giant, followed by Alphabet, Intel, Microsoft and Apple, together spent some $76 billion on R&D, according to the report.

Dive Insight:

Research and development spending by tech companies isn’t much of a head-turner, but Amazon’s supremacy underscores how the e-commerce giant is at least as much of a tech company as it is a retailer.

The company has rivals scrambling to keep apace with its checkout-free Amazon Go store. It has also been exploring niche efforts like developing tech solutions for seniors, and it runs the largest cloud services business in the world, a highly profitable unit for Amazon compared to its retail arm, which operates on thin margins.

Amazon’s Alexa voice assistant, which is dominating in the emerging space, is likely a major beneficiary of its recent R&D investments. Amazon always sends out a litany of accomplishments with its earnings reports, but in January, reporting on the company’s fourth quarter, CEO Jeff Bezos was all about Alexa. The company set optimistic projections for the virtual assistant last year, and they were exceeded, he said. “We don’t see positive surprises of this magnitude very often — expect us to double down.”

It’s not just the sales of Alexa-enabled devices that are important to Amazon but also the opportunity the company has to bring Alexa into more homes, said Keith Anderson​, Profitero vice president of strategy and insights. “There’s mounting evidence that Alexa households that are Prime members tend to spend more.”

Alexa has potential beyond retail sales too, considering that advertising could bring another revenue stream, something the retailer is considering. Anderson also expects Amazon to continue advancing Alexa’s technology with capabilities like voice-to-screen that could boost search and make it that much easier to enlist Alexa when shopping for apparel, for eample.

All the various markets opened by new technology are adding a good bit to Amazon’s massive value as a company. Morgan Stanley analyst Brian Newark last year broke down Amazon into its various businesses, giving each a value on its own, with retail at $600 billion, Amazon Web Services at $270 billion, Prime subscriptions at $70 billion and advertising at $55 billion — for a total of $995 billion.

But the growth in various sectors brings some risks, GlobalData Retail Managing Director Neil Saunders warned earlier this year. “Amazon is now rapidly moving to a company that supports consumers across multiple aspects of their lives,” he said. And while that’s an opportunity, it also comes with two dangers — the increased risk of regulatory intervention and a backlash from consumers concerned about its power. “Neither of these is at the tipping point, but with each innovation and each spurt of growth, Amazon moves closer to these potential problems,” he said.

Along with its voice assistant and smart home technology, Amazon is also developing drone delivery technology, fulfillment and packing robots, and other tech aimed at making the e-tailer as efficient as possible.

Categories: Apparel, Business, E-commerce, Retail, Technology, USA

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