Reflecting on two decades with Amazon

Amazon’s enduring investment advantage is its ability to keep reinventing itself through customer focus, long-term spending and a culture that supports experimentation.

• Baillie Gifford first invested in Amazon in 2005, when the company was still mainly known as an online bookseller and online shopping represented only a tiny share of consumer spending.
• Amazon Prime appeared around the initial investment despite models showing very poor short-term economics, since frequent customers were the most likely to claim the annual free-shipping offer; lower friction later encouraged them to buy more often.
• AWS began as internal infrastructure and became a customer cloud service in 2006. It remained in Amazon’s “other activities” division for a decade before its accounts began growing rapidly in 2015–16, and it now generates nearly 60 percent of Amazon’s operating profits.
• Jeff Bezos stepped back from operations in 2021, prompting Slater to reduce Baillie Gifford’s exposure. Andy Jassy has executed well, although Amazon’s $717bn-revenue scale makes it difficult for new experiments to become material without a major new business.
• Slater sees AWS and AI as the next potential growth engine because more valuable activity may move into the cloud, while acknowledging that Amazon’s spending is enormous and demand must materialise.

Takeaway: Investors should focus on whether Amazon’s culture and ambition can keep producing new opportunities rather than trying to predict its next business in advance, with AI investment remaining a significant execution and demand risk.