Following through on its mission to be the “earth’s most customer centric company,” Amazon is positioned to enter the $3.5 trillion healthcare market. The sector takes up 18 percent of the United States’ GDP, making it an attractive target for Amazon. In the past year, Amazon partnered with Berkshire Hathaway and J.P. Morgan for an employer health initiative, acquired the pharmaceutical start-up PillPack, filed a patent for Alexa to pick up on a cold or cough and announced a product to collect patient medical records.

However, while Amazon has a history of transforming business sectors, healthcare is notoriously complex and resistant to competitive forces. Proponents argue that the company is dedicated to innovation and disrupting markets, giving it an edge over other healthcare businesses. Critics, on the other hand, believe that this is not enough to overcome Amazon’s lack of expertise. Both sides of the argument have merit. However, with all the uncertainty at this point, it is difficult to predict whether Amazon will succeed or fail. In this case, it is more interesting and worthwhile to think about how the company might go about revolutionizing healthcare in the first place.

Amazon has always focused on services that need to be delivered to a customer. Assuming it continues to do this, certain business models are more promising than others.

For one, Amazon can integrate healthcare into people’s everyday lives. Currently, most people do not monitor their health enough. According to the Center for Disease Control, seven out of ten Americans die each year from chronic diseases, many of which are preventable. Instead of preventing diseases, the current health care system incentivizes patients to get treatment only after they become noticeably sick.

Amazon has the potential to counter this. Using Alexa, the virtual voice assistant, Amazon will detect coughs and sneezes. This catches illnesses early on. Then, as Christina Farr of CNBC posits, Alexa can respond by booking an appointment at the doctor’s office or getting the patient a virtual consultation through video call or messaging. If patients choose the virtual option, they have the choice to get portable tests mailed to their home and sent to the lab afterwards. This is already technically feasible for diagnostic tests such as blood draws and strep throat cultures. With the company’s acquisition of Pillpack, a full-service pharmacy that helps people manage multiple medications, medication can also be delivered straight to a customer’s home once they are prescribed. Additionally, Amazon already has the advantage of having a two-day delivery system infrastructure. It would be able to test patients and deliver medication faster and easier than any of its competitors.

Ideally, an Amazon customer would never even need to leave home to get treatment. This makes health care more convenient and accessible. Patients in rural areas may live far away from hospitals, and others have debilitating conditions that make it extremely difficult for them to move around or even get transported. For them, Amazon’s model would elevate their quality of care exponentially. And for everyone else, the initiative promotes prevention-based health care. By catching illnesses earlier on, not only do patients get health benefits, but unnecessary health care spending is reduced. Crucially, it will reduce the strain on emergency treatment facilities and make health care more efficient.

Beyond this, Amazon may also provide other stand-alone services. According to Dr. Josh Luke of Forbes, a priority in the medical field is addressing the needs of patients with memory loss. There are people with chronic diseases that require prompts and reminders for complicated medical regimens. An Alexa can be programmed to set alarms for such patients, decreasing their need for an expensive caretaker.

In the coming years, other applications of Alexa in the healthcare setting can be expected. Amazon has partnered with pharmaceutical company Merck for a challenge to inspire Alexa developers to create skills to help people with diabetes manage their conditions, as reported by Huron Consulting Group. Hospitals are also experimenting with Alexa—using it to help surgeons create check lists or share information with patients once they are discharged.

In essence, Amazon has the potential to create what Harvard Business Review writer Robert Huckman calls a “closed loop system.” Amazon will be involved in every step of the illness experience. Through consolidating healthcare, Amazon makes it more accessible, and therefore more effective.

Secondly, Amazon could capitalize on data. Personal data is increasingly being sought after by healthcare delivery systems. For example, big pharma aims to produce the most effective drugs, and a major part of that goal is finding what is optimal for each patient, which depends on their genomic information and medical preferences. Amazon offers a distinctly different set of data points than other companies—it has a wealth of information about their customers and their purchasing habits. It is possible for Amazon to develop algorithms to identify the purchase patterns and health information of high-risk patients. Existing healthcare delivery systems could use Amazon as a supplier of information as they try to prevent sicknesses and make sure patients stay healthy.

The data can also be applied by Amazon itself. Once the company is in the healthcare space, health information (such as Alexa reminders and Pillpack information) can add to consumer insights. Amazon could suggest food and vitamins to customers to help them manage their health. These recommendations could be for products that customers did not even know they needed. As a recent addition to the Amazon conglomerate, Whole Foods may play a role in this business model. The grocery store can stock and sell the recommended products based on users’ health data. Strategy and innovation consultant Ashley Brady explains that this would be a cost-effective and value-based method of care. Existing Whole Foods customers can easily become more health conscious. Others have an in-person product distributor readily available to them, if they choose to have one.

If Amazon is indeed successful in entering the healthcare sector, then it is likely through data analytics and by making healthcare more accessible in day-to-day life. Of course, there are still many uncertainties about the company’s future path, and some of the models above may eventually prove improbable. Obstacles relating to market competition and consumer privacy all have the potential to derail Amazon’s expansion. Yet, analyzing Amazon’s potential business models has revealed and confirmed some intuition about the company’s strengths and weaknesses. Amazon is much more likely to succeed in health care if the sector is looking to improve operational execution and customer service, and it is much less likely to if the sector wants to gain a deeper understanding of the core of medicine and health.

On November 13, 2018, Amazon announced its decision to split its second headquarters (HQ2) into two locations: Arlington, Virginia and New York City, New York. The company plans to invest $5 billion and create more than 50,000 jobs across the two new headquarters locations, with more than 25,000 employees in each city. The new construction has already catalyzed the housing industry in the Queens area of New York, with property values on a significant upswing. As this Amazon effect continues to enhance the housing market, investors should look to the area for prime investment opportunity.

 

It is first important to examine the advantages for Amazon to choose New York before delving into its effect on investment. Given the incentives Governor Cuomo and Mayor Bill de Blasio offered Amazon, it is clear why the company decided to select the city. For instance, according to Amazon’s blog “dayone,” the company will receive performance-based direct incentives of $1.525 billion based on its creation of jobs in Long Island City. These include a refundable tax credit through New York State’s Excelsior Program of up to $1.2 billion and a cash grant from Empire State Development of $325 million based on the square footage of buildings occupied in the next 10 years. Amazon will receive these incentives over the next decade based on the incremental jobs it creates each year and as it reaches building occupancy targets.

 

In return for these tax breaks, the company has agreed to donate space on its campus for both a tech startup incubator and for use by artists and industrial businesses. Moreover, Amazon will donate a site for a new primary or intermediary public school, as well as invest in infrastructure improvements and new green spaces. Ultimately, Amazon’s arrival to New York City will both bolster the area’s investment and spur economic opportunity, facilitating a business climate that is more attractive to other companies and the industries of tomorrow.

 

One of the most significant effects of the new Amazon construction is the forecasted investment opportunity in the regional real estate market. Heading into the traditionally slow winter season, condominium sales in the Queens area had slumped. After the news broke of Amazon’s decision, however, housing prices began to soar. Through an investigation of asking prices, The New York Times reports that the Amazon deal has boosted buyer confidence, citing how one overseas buyer was willing to bid $2 million for a one-bedroom studio apartment without even seeing it.

 

Further, Jonathan Miller of Miller Samuel, a New York City based real estate appraiser, believes that rent and home prices will grow by 5 to 10 percent overall, while condominium pricing specifically may face upwards of 15 percent in growth. With the continuation of this trend, Long Island City may be poised to become the next Silicon Valley in the coming decade. Interestingly enough, not long ago, the area seemed in danger of becoming overdeveloped. That same building boom may now become its saving grace. Since Amazon announced its decision, 6,000 new rentals are in the pipeline to come on the market over the next three years, which will certainly be needed with the 25,000 employees estimated to be commuting through the area.

 

Even with the increased construction in Long Island City, the neighborhoods adjacent to it will need to absorb some of the new residents to accommodate the incoming workforce. The surrounding Queens neighborhoods of Astoria and Sunnyside, middle-class enclaves of single- and multi-family brick and row homes, have already been rapidly gentrifying in recent years. Trendy Brooklyn neighborhoods such as Williamsburg are also nearby, along with the chic Upper East Side of Manhattan, which sits just across the river. Each of these communities will be affected, their real estate markedly increasing in value.

 

As property values continually rise, there has been an influx of investors arriving to the area hoping to take advantage of the Amazon situation. In fact, The Wall Street Journal reports that search volume for residential units in the area spiked more than 400 percent in the first few days of Amazon’s announcement. While this number did taper off following the decision, it remains at a steady 295 percent, still incredibly high compared to the previous activity in the local housing market. This further indicates the strength of buyers and their increasing willingness to pay premium New York housing costs for a piece of the investment action.

 

If undertaken, this significant property investment by buyers will not go unrewarded. With housing prices projected to continue their ascent, buyers can easily earn back their investment through the upswing in rental prices. StreetEasy cites how hopes for future growth in the Long Island City area have already buoyed condo sales in the Harrison, a newly developing luxury condominium building, where roughly 35 percent of units sold were listed for rent shortly after their sale. As a similar situation occurs in buildings across the area, in the long run, property values could potentially rise enough to make buyers millionaires.

 

Moreover, if buyers cannot afford direct investment in the expensive Queens area, they can even gain solid returns from properties as far as New Jersey. Although it is difficult to commute from North Jersey to Long Island City, the expansive public transit network allows commuters to get to the city in around an hour. The more affordable housing costs of North Jersey are quite enticing to Amazon employees looking for single-family homes in the suburbs. With median home prices likely to rise in conjunction with buyer demand, townhouses and condominiums in North Jersey will become lucrative investments that allow buyers to partake in the Amazon Effect.

 

Regardless of proximity to Long Island City, Amazon’s pending arrival should make renters consider homeownership. Prices are substantially increasing in the housing market, but mortgage rates still remain low and lenders do offer a range of low down payment products. As property values continue to rise, homeowners will be able to tap into their growing home equity and could have attractive refinancing options at their disposal. Moreover, they could rent out their property through a site such as Airbnb when away from home or to local tenants for a return on their investment, and the booming state of the area due to Amazon ensures a constant supply of these renters. As the Queens area recovers from its mild housing dip, it is evident that now is the time to make a long-term property investment.

 

Ultimately, Amazon’s decision to build a massive campus in New York City is one of the largest economic development initiatives for the city in the past decade. The company brings large private sector growth to the area and has promised to create up to 40,000 high-skilled jobs within the next decade. In addition, Amazon’s HQ2 is likely to lure other companies, from established competitors such as Google to burgeoning startups, generating additional growth for the area in the near future. This unprecedented growth has already trickled down into the housing market and construction for the headquarters hasn’t even started yet. If the sudden spike in property prices is any indicator for the future of the city, it is clear that New York City may well be on its way to becoming the next Silicon Valley.

Type in “relentless.com” on your search engine – you will be redirected to Amazon’s home page. A URL registered by Jeff Bezos, Amazon’s CEO, when he was considering naming the company Relentless.com. The name is fitting, as Amazon.com hasn’t stopped at anything to defeat competitors in its pursuit of internet dominance. However, in 2005, Marc Lore and Vinit Bharara had the gall to create Quidsi, the parent company of Diapers.com, a direct competitor to Amazon. Quidsi, not surprisingly, was eventually defeated by Amazon, because of its ability to take huge losses due to its long-term vision and other sources of funding. The company sold to Amazon in 2010, for, according to TechCrunch, $545 million. This was not the end of the story.

In late 2014, Lore announced that he would be launching a new venture, Jet.com. The premise behind the new e-commerce site was that by charging an annual membership fee of $50, it could set lower prices, by not taking any commission on products. It would also save customers money by lowering their total costs on their shopping cart, if all of their products came from one fulfillment center, or they bought more than $35 worth of products. The company quickly gained traction in the investment world, and according to Bloomberg Business, raised $220 million, before registering a single customer.

This initial plan has suffered some major setbacks. According to Bloomberg Business, many customers were unsatisfied with the trial efforts, complaining of glitches within the site. Furthermore, after launching to the public in July, Jet.com has missed expectations, and Jet.com dropped the annual $50 fee, the company’s only real source of revenue.

These setbacks, are real and show why Jet.com will not be able to create a real challenge to Amazon’s thriving business model. Amazon is huge and not focused on making short-term profits. With a market capitalization of $271.8 billion, and the patience and resources that most companies can only imagine, Amazon has no reason to be fearful of Jet.com. For example, Amazon Web Service (AWS) provides cloud computing to almost all U.S. startups. According to Quartz, it generates $6 billion, a year in revenue. This means that Amazon has a large source of constant revenue (regardless of the fluctuation from online retail sales). Amazon can afford to cut its prices if it ever felt threatened by Jet.com. This is a proven tactic, essentially what it did with Quidsi. Both companies cut pricing on retail items, to extraordinarily low levels. Business Insider, in a 2010 article, showed that Amazon was able to reduce its prices significantly more. Eventually, Quidsi was forced to sell to Amazon because it could not compete.

Another reason Amazon can defeat Jet.com is that consumers are happy with all Amazon has to offer. Amazon, has a large streaming service, music services and fast shipping (free two-day shipping for prime subscribers). Furthermore, Amazon has an extremely large selection of products stored in its warehouses, whereas beta testers for Jet.com complained about its lack of selection.

Additionally, Amazon already has a loyal customer base and a developed product. If someone is already paying for an Amazon Prime subscription, they may be unlikely to give it up for slightly cheaper Jet.com products. Part of the reason Diapers.com was so successful was because it focused on offering just one thing, baby products. Competing with a behemoth like Amazon, in one discreet product area wasn’t so daunting, because there is a finite amount of baby products. However, it will take years before Jet.com can ever build a selection close to Amazon. Furthermore, Amazon’s third party market place, where independent vendors can sell items , provides for goods that Amazon doesn’t provide, which gives it another advantage over Jet.com.

Jet.com is focusing on a niche of consumers, who would rather pay less and wait longer, in order to receive a product. But this niche may not exist. However, over the past couple of years, Amazon has dominated the discount store, Walmart. Amazon has come to overtake Walmart as people are willing to pay a premium for what Amazon has to offer. According to Time Magazine, Amazon’s revenue per employee is triple Walmart’s. While, Walmart, still has higher revenue, it lags behind in market capitalization, where it is valued at $197.1 billion, as opposed to Amazon’s valuation of $271.8 billion. If a large, established store like Walmart is struggling to compete with Amazon, imagine the issues a small startup will have. Based on the Walmart example, Jet.com will be unable to present real competition to Amazon.

However, despite its inability to compete with Amazon, Jet.com can still be a success. According to USA Today, Jet.com has raised $770 million with a valuation of $1.50 billion. This is obviously a lot of money for a young startup, and will provide the company time to figure out where, their client base is and how to target them. In fact, on Cyber Monday, Jet.com announced $2.7 million in sales, a company record according to internet Retailer. While this may seem like a small number compared to Amazon, it demonstrates that Jet.com’s funding will allow its research team to target the right consumers and eventually grow.

Jet.com is a really interesting concept, yet it will not be able to compete with Amazon, because it doesn’t provide enough value for consumers, and has entered a marketplace too large for a startup. However, even if Jet.com may be unable to become the dominant e-commerce player, it still can be a profitable venture. The large amounts of money it has raised will allow it to develop and target the right group of consumers. Likely, there will be a period of slow growth, while the company works out its kinks, but eventually it may become a profitable business that can provide a small alternative to the dominant e-commerce site.