Amazon overtook Exxon Mobil Corp. to become the fourth-largest U.S. company by market capitalization in trading Monday.
The e-commerce giant's stock was up 0.7% in morning trading, taking its market cap up to $362.1 billion, while Exxon Mobil fell 2%, pushing its market cap down to $361.6 billion.
The phenomenon means that the top four largest companies are all technology companies: Apple Inc. at $565.9 billion; Alphabet (Google) at $549.6 billion, and Microsoft Corp. at $440.0 billion, according to MarketWatch.
Just last month Newsweek published “How Jeff Bezos is Hurtling Toward World Domination,” noting that 15 years ago many speculated that Amazon would be a casualty of the dot-com bust. Instead, the online retail giant has vastly expanded its assortment, introduced a sticky customer base in its Prime membership program, and managed to steadily turn a profit.
Although the company has drawn criticism from some investors for its penchant to plow revenues back into its operations, which includes a vast fulfillment and delivery network and massive third-party seller marketplace, analysts have mostly remained sanguine about Amazon’s long-term prospects.
In fact, much of Amazon’s success comes from putting its customers first. Amazon this week said it would double its investment rate in Prime Video streaming in the second half of the year and triple the number of Amazon Originals productions, explaining that the service boosts renewal rates after free trials of Prime membership and customers like it. Analysts like where the company is going, and are mostly on board with the investments Amazon says it’ll take to get there, though there remains some concern about margins.
In addition to its prime place thanks to its market cap, Amazon is expected to leap over Macy’s as the country’s biggest fashion retailer, with a major incursion into that space.
"In light of Amazon and Macy’s recent results, we feel more confident that Amazon will displace Macy’s as the No. 1 U.S. apparel retailer by 2017,” John Blackledge, analyst at investment bank Cowen & Co, said in a May research report. “Amazon’s Apparel & Accessories business is one of the key drivers of Amazon’s EGM (electronics and general merchandise) segment.”
And Deutsche Bank analysts in June said Amazon accounted for 90% of the $5.6 billion growth in consumer electronics sales posted nationwide in 2015, testing the likes of Best Buy in that category.
Ultimately, experts say, Amazon is much more interested in building an appealing, consumer-oriented marketplace where prices are low (or at least low enough), where the products are of good quality, and the service is trustworthy. Amazon Prime members (or other Amazon shoppers) may be willing to pay a bit more knowing they can have it delivered swiftly for free and that they’ll get strong customer support if they’re not satisfied. In short, Amazon is intent on developing Prime to the point it would be "irresponsible not to be a member,” as Bezos wrote this spring in his annual letter to shareholders.
Certainly in the bigger picture, Amazon’s move up the market-cap ladder, along with the top spaces occupied by Apple, Google parent Alphabet, and Microsoft, shows how much the economy has shifted to tech, in an era when oil companies are falling. Like Apple, Amazon is a tech-based company as much as a retailer.
But it’s that customer focus, along with the robust profits that its AWS cloud computing unit provides, that may be the biggest driver of Amazon’s growth.
"If you spend time with executives and employees, you see it’s part of the customer culture there,” Scot Wingo, founder and executive chairman of e-commerce firm ChannelAdvisor, which works with a range of Amazon Marketplace third-party vendors, told Retail Dive. “Everyone talks about the customer, but I’ve never seen anyone walk the walk like Amazon does.”