Amazon’s next $4.3 trillion market to conquer

From books to e-commerce to cloud hosting, Amazon (AMZN -3.15%) achieved unprecedented success in multiple fields. In doing so, the company has grown into a giant with a market cap of $1.5 trillion and likely revenue this year of over $500 million.

Amazon has always sought to continually expand its boundaries. It’s no surprise that the company has gone beyond e-commerce to physical stores with Whole Foods, Amazon Go and Amazon Fresh.

But those efforts pale in comparison to another opportunity in Amazon’s sights. Here’s the next $4.3 trillion market that Amazon hopes to capture.

Three major movements in a huge market

Health care. It represents almost a fifth of the US economy. Total health care spending in the United States reached nearly $4.3 trillion last year. And Amazon has taken three big steps in this huge market.

First, the company developed its online pharmacy business. Amazon’s acquisition of PillPack in 2018 was a key step in this effort. This deal gave Amazon a home delivery pharmacy service in all 50 states with strong relationships with major pharmacy benefit managers. Today, Amazon Pharmacy allows customers to save on a wide range of prescription drugs.

Second, Amazon has expanded into telehealth. The company launched Amazon Care in 2019. It initially offered telehealth services only to Amazon employees in the Seattle area. However, Amazon Care began making its services available to other organizations across the United States in 2021.

Third, the e-commerce and cloud giant intends to become a national provider of primary care beyond telehealth. Amazon Care offers in-person visits at select locations. But Amazon announced in July 2022 its intention to acquire One Medical for $3.9 billion. One Medical supports virtual healthcare visits, but also operates physician offices in 19 major metropolitan areas with more on the way.

building blocks

To be sure, Amazon Pharmacy has so far not posed a huge threat to major drugstore retailers. Amazon Care remains a nascent telehealth service. One Medical generated $623 million in net revenue last year, a pocket change for Amazon.

However, these are all important building blocks for Amazon’s overall healthcare strategy. And there are others too.

Amazon also markets Halo, a fitness tracker. It integrates healthcare-related features into the Alexa virtual assistant. The company’s subsidiary STS Lab Holdco performs diagnostic tests at home. Amazon Web Services (AWS) partners with several healthcare organizations, including drugmakers and medical technology companies. WorkingWell is a program that helps improve health and wellness as well as reduce workplace injuries for Amazon employees (for now).

It may seem like Amazon is extending its tentacles into nearly every facet of healthcare. It’s an exaggeration for now, but it’s still early days. The company has not clearly defined its ultimate goal in the field of health. However, he did provide some clues.

Amazon’s four guiding principles are customer obsession, passion for invention, operational excellence, and long-term thinking. The company’s story of starting small in other markets, scaling up, and then dominating is likely the model it will follow in healthcare. It seems likely that Amazon will seek to integrate all of its current healthcare products and services in ways that reduce costs for patients and payers.

No Conquest Necessary

Amazon is clearly more than just a top e-commerce company. However, it may never be known as a healthcare company despite its multiple initiatives.

But Amazon doesn’t need to become a leader in healthcare like it does in e-commerce or cloud hosting to succeed. The sheer size of the health care opportunity allows small players to win.

Also, that $4.3 trillion figure doesn’t tell the whole story. The federal government projects that US healthcare spending will reach $6.8 trillion by 2030. And there are big healthcare opportunities for Amazon outside of the US as well.

Amazon could well conquer the health market. The good news for the company, however, is that it can achieve victory without any conquests being necessary.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Keith Speights holds positions at Amazon. The Motley Fool holds positions and recommends Amazon. The Motley Fool has a disclosure policy.

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