Everyone knows Amazon.com, Inc. (NASDAQ:AMZN) as the digital retailer to beat. That’s been a very good position to be in for the Seattle-based company. Its Amazon Prime service, which allows members to get two day shipping on their items for a yearly $79 fee, has been a success in getting tons of products out of Amazon’s warehouses and to customers’ doorsteps.
The Kindle Fire HD, a $199 tablet that runs Google Inc (NASDAQ:GOOG)’s Android operating system, has been doing quite well, undercutting other tablet models in price. That includes even Google’s own line of tablets. Surprisingly, Google and Amazon.com, Inc. (NASDAQ:AMZN) compete in more ways than most people think – in tablets, retail, and cloud computing.
Retail prospects
Online retail business prospects are looking pretty good for Amazon. Forrester is predicting a 13% rise in online shopping revenue for 2013 to a total of $262 billion in the U.S. Online shopping only makes up an 8% share of retailing right now.
This means that there is room for Amazon.com, Inc. (NASDAQ:AMZN) to grow, and Forrester expects 10% of all retail revenue to be from online sources by 2017. From Forrester’s research, in the years from 2013 to 2017 online retailing is expected to grow 10% year over year.
It’s clear by these numbers that people are going to increasingly do their shopping online. Amazon.com, Inc. (NASDAQ:AMZN)’s rivals have taken notice. Google Inc (NASDAQ:GOOG) is reportedly working on a competing strategy and Wal-Mart Stores, Inc. (NYSE:WMT) intends to spend money developing its own position in the online shopping market as well.
However, Wal-Mart has a long way to go to make inroads into online retailing. The company also does not have the cachet to capture the attention of tech-savvy online shoppers. You have to wonder whether or not Wal-Mart Stores, Inc. (NYSE:WMT)can get any bigger than they already are. It’s one of the reasons why they are trying to get into the online retailing space. As an e-commerce play, they aren’t really a very good investment.
Cloud services
Amazon’s Cloud Services division, also known as Amazon.com, Inc. (NASDAQ:AMZN) Web Services, is going to be a big driver of growth for Amazon over the next few years. In fact, research firm Trefis is predicting that the company’s Cloud Services division will grow from $3.55 billion in 2013 to $17.6 billion in 2017.
Businesses, large and small, are always looking for ways to save money on their information technology costs. Amazon Web Services fills that need since they offer an array of cloud services that can be much cheaper than buying hardware.
Cloud services, like the Amazon Glacier data archiving service, cost just pennies a month for companies to store backups copies of data on the company’s servers. And the Amazon Elastic Compute Cloud allows businesses to easily scale from a small website to a huge digital operation without having to purchase computer hardware upfront in order to grow.
Working with Amazon’s cloud, companies can scale computer services based on need rather than having to spend a bunch of money up front on technology expenditures.
Other companies are in this market too. For example, the Google Inc (NASDAQ:GOOG) Compute Engine is offering similar services to businesses looking to save money on technology costs. However, Amazon offers a bargain with their pricing model along with a lot of flexibility for developers to work on top of their proven size and infrastructure.
Google Compute Engine is also very new and Amazon.com, Inc. (NASDAQ:AMZN) has a major head start over Google right now. But that’s fine with Google. They are making major inroads with businesses by offering cheap enterprise solutions such as Google Apps and geolocation services. Google Inc (NASDAQ:GOOG)’s cloud business should do fine and makes the company a better investment overall.
This is what makes Amazon’s Web Services division the hidden, yet successful business in the shadows behind their well-known blockbuster retailing side. They are a company which is surprisingly well diversified, poised for growth in the retail space, and especially in the enterprise segment over the next few years.
Daniel Cawrey has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Google. The Motley Fool owns shares of Amazon.com and Google.
The article Amazon’s Hidden Growth Business in the Cloud originally appeared on Fool.com.
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