How Amazon Rattles Other Companies

Amazon’s ambitions have few limits, and the mere specter of its entry into a particular industry can shape markets. When the company has appeared interested in expanding into a new business, it has spooked investors in potential competitors, leading to large sell-offs. The most recent example: Amazon, along with JPMorgan Chase and Berkshire Hathaway, announced the formation of a new health care company on Tuesday. The three companies provided few details about the new entity, other than saying it would initially focus on technology to provide simplified, high-quality health care for their employees and their families, and at a reasonable cost. But health care investors shuddered at the prospect, selling off shares of established players like UnitedHealth and Anthem plunging. Both stocks quickly fell by more than 5 percent.


One of the more notable examples of Amazon’s influence is in the pharmacy business. After reports that Amazon might soon enter the prescription drug market, shares in CVS Health and Walgreens, the two largest pharmacy chains, fell sharply in early October.

Then, in early December, CVS said it would pay $69 billion to buy Aetna, a deal that could reshape the health industry. Many analysts said that Amazon’s interest in selling prescription drugs was one reason why the two began talking. The idea is that the deal could help insulate the companies in case Amazon does make an ambitious move into selling drugs, as well as give the combined improved leverage in negotiations with drug companies.

With huge amounts of consumer spending and frustrating inefficiencies, prescription drug sales are the type of business that invariably attracts Amazon’s attention. And the likelihood of Amazon eventually getting into the pharmacy business is high, several analysts and a former employee have said. But it is not clear when it will make that move or how aggressive it intends to be.

In June, Amazon announced that it would buy Whole Foods for more than $13 billion, by far its biggest acquisition yet. The unexpected deal sent shares in several of the nation’s biggest grocers, including Walmart, and Safeway, down sharply. Kroger, another top grocer, lost about one-tenth of its value on the day of the announcement.

But the drop in stock prices wasn’t a one-time occurrence.

Shares in these companies fell again a couple of months later, when Amazon said it would sharply lower prices on numerous products at Whole Foods. Kroger, for example, fell 8.1 percent that day.

Amazon has put a lot of time and effort into improving its ability to deliver goods to customers, encroaching bit by bit on the country’s two giant delivery companies, FedEx and U.P.S. It has leased dozens of cargo jets to distribute inventory to warehouses around the country and is a building its own hub in Kentucky for a fleet of its own planes.

The key phrases here are “own hub” and its “own planes.”

When the news was reported in January that Amazon was building a cargo hub in Kentucky, where U.P.S. has its largest air cargo facility, stocks in both U.P.S. and FedEx plunged. In U.P.S.’s case, it would take the better part of the year for its shares to recover.

That wasn’t helped by the media event that Amazon held in July to show off its Prime Air fleet of planes, which it tested during its annual Prime Day promotional event. In October, the delivery companies took another hit after a report that Amazon was testing its own delivery service.

“We do the prep. You be the chef.” So read Amazon’s trademark application in early July for prepared food kits. Then, later in the month came reports that Amazon Meal Kits were available on the company’s website. The reports sent the stock price of Blue Apron, the newly public meal kit service, down as much as 11 percent.

One area of shopping that Amazon has not yet entered is the car business.

If you want a Ford F-150 or a Tesla Model 3, you still need to go elsewhere, and there is no sign that will change anytime soon.

But car parts are another matter, and Amazon’s aggressively pursued that business in 2017, reaching deals with some large parts distributors. The result has been falling share prices for some of the nation’s biggest parts retailers, including AutoZone and Advance Auto Parts.

  • NYTimes