Amazon could supercharge its biggest weapon by getting into healthcare

  • People are thinking a lot about what Amazon could do to the healthcare industry if it decided to get involved. 
  • Should Amazon get into the business of prescription drugs, analysts at Morgan Stanley say that building pharmacies at Whole Foods could be a good way to get more Amazon Prime members who are over 55. 
  • Building pharmacies in Whole Foods could also generate $2.3 billion in sales and help grow Amazon's Prime Now business. 


People are starting to seriously think about what it might mean if Amazon were to get into the healthcare industry. 

In a 70-page report released Monday, analysts at Morgan Stanley broke down all of the potential ways Amazon could get into the industry, at varying degrees of involvement. 

7 shock-worthy facts that show how big Amazon has become:

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7 shock-worthy facts about Amazon
7.5 percent of Seattle's working-age population are Amazon employees

Amazon has more than 300,000 employees worldwide, and 40,000 in Seattle alone.

As a portion of the city's working-age population — roughly 528,000 — that comes out to 7.5% of the city working at Amazon.

For perspective, if the same portion of New York City's adults worked for one company, that company would have about 488,000 locals on staff.

Amazon accounts for 43% of all online sales

Amazon used to be a way to buy books online; today, it's the default buying site for just about everything, especially for people who have Amazon Prime.

An analysis by Slice Intelligence released in February found that 43% of all US online retail sales were done through Amazon in 2016.

That's up from 33% in 2015 and 25% in 2012.

1 out of every 4 US adults has Amazon Prime.

Speaking of Amazon Prime, the company now counts approximately 63 million people among its subscriber base, or about 25% of the total US adult population.

That number may underestimate the true coverage, however, since it doesn't account for multiple adults in one household all sharing the same Prime account.

Amazon ships 1.6 million packages a day

Amazon fulfillment is a beast of its own.

A report from 2013 (the latest year for which data are available) found Amazon shipped 608 million packages that year, or 1.6 million packages a day.

As of 2015, Amazon estimated its fulfillment centers were within 20 miles of 31% of the US population, and within 20 miles of 50-65% of its core, same-day-accessible market.

That's enough cardboard to span all of West Virginia

A back-of-the-envelope calculation reveals all those packages (not including padded envelopes) yield roughly 26,400 square miles of cardboard.

The total land area of West Virginia, meanwhile, is just north of 24,000 square miles.

Given the speed of Amazon's shipments, the company could blanket the whole US in cardboard in about five months.

45,000 robots roam the floors of Amazon's warehouses

To help those shipments leave the warehouses on time, Amazon relies on a growing fleet of autonomous robots that fetch packages from their shelves and bring them to human employees.

The 45,000 robots live across 20 fulfillment centers in the US. In 2016, the company increased the fleet 50% from its prior head count of 30,000.

Amazon is more valuable than all major brick-and-mortar retailers combined

The sum total of those investments in infrastructure and supply chain management have made Amazon by far the most valuable retailer in the United States.

Amazon's $356 billion valuation is so big, it's larger than Wal-Mart, Target, Best Buy, Macy's, Kohl's, JCPenney, and Sears combined.

With the recent acquisition of Whole Foods, there are no signs the retailer has any plans of slowing down.

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"Amazon’s disruption of healthcare is a foregone conclusion," the analysts wrote. "Recent hires and public statements make it clear that Amazon is already moving into medical supply distribution."

If Amazon wanted to go all-in and get into the pharmacy business, especially by opening pharmacies at Whole Foods locations, it could be a major boost to Amazon Prime membership in one key demographic: People over 55.

"We note too that the older demographic still under-indexes toward Prime membership...which speaks to the opportunity for Pharma to help Amazon further penetrate the ~80 million 55+ population in the United States," Morgan Stanley analysts wrote in the note.

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In particular, getting into the pharmacy business might be the right avenue to approach potential Prime members who are over 55 because they're already internet-savvy when it comes to finding cheaper prices or coupons to help them afford their medications.

Prime is a big advantage that Amazon has over other online retailers. According to survey data from RBC Capital Markets, more than half of the 2,200 people the group surveyed signed up for Amazon Prime, with more than half of that group spending more than $800 a year on Amazon.

Whole Foods doesn't have a pharmacy, though it does sell vitamins and supplements. Setting up pharmacies within Whole Foods could generate an estimated $2.3 billion of pharmacy sales within stores as well, Morgan Stanley analysts said, as well as drive Amazon's Prime Now business, which has free two-hour delivery. 

"Offering this benefit of convenience will help it compete against traditional retail pharmacies and will provide yet another benefit to being a Prime member," the report said. 

It still remains to be seen whether Amazon does enter the pharmacy business. If it does, what that business will look like could widely vary. There are a lot of people involved in the process of delivering and paying for your prescription, from the drugmakers, to insurers, to the pharmacy. 

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SEE ALSO: A futuristic doctor's office that doesn't take insurance and is backed by Eric Schmidt and Marc Benioff is opening in LA

DON'T MISS: Healthcare companies are taking Amazon very seriously

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