Many economists expect a recession by the end of 2020. Is your organization ready not just to survive the downturn, but to be poised for growth? Learn how Amazon continued to innovate and emerged from the last recession well-positioned to achieve greater success than ever before.

Many are predicting that the U.S. will enter a recession in the next year. To prepare, we believe the most important thing a business leader can do is study and learn from the past. Here, we take a look at Amazon’s performance during the Great Recession.


How prepared are you for the next recession? Assess your readiness by taking the Revenue Growth Maturity Model Diagnostic. While Level 2 and 3 companies are poised to survive a recession, those at Levels 4 and 5 have the opportunity to thrive.



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Amazon’s stock declined just 8% from December 2007 to June 2009, the official period of the Great Recession. It outperformed the market, which dropped 36% in the S&P 500. Amazon also eclipsed the performance of both Google and Microsoft, whose fared even worse than the S&P.


How Did Amazon Remain Largely Unscathed?


It’s no secret that Amazon has a diverse business portfolio. The one-time online bookseller has morphed into a giant that dominates retail, digital media, cloud computing, and, most recently groceries. Those investments become even more meaningful during the downturn.


The most obvious example is Amazon’s Prime subscription business. It launched a few years before the recession, but Prime was likely a major contributor to Amazon’s performance in the retail segment. While many stores struggled through the downturn, Amazon barely flinched. True, it didn’t have the overhead costs most others did, but it also had the benefit of a subscription model. The consistent spending habit it created amongst Prime members (raise your hand if you’re guilty) may have helped ease the blow of the recession.


Another example it the company’s logistics business. At the onset of the Great Depression, Fulfillment by Amazon, was still relatively new. The concept intended to bring more third-party sellers into the fold by streamlining their costs to fulfill sales. The business was still in its infancy, so it is difficult to gauge how much it helped. However, as a new stream of revenue, it must have help Amazon mitigate the impact of the recession.


The company also launched another new, even more significant offering in early 2006. Amazon Web Services (AWS) was announced just one year before the beginning of the Great Recession. The combination of the timing and a new technology might have been a recipe for disaster, but instead, it helped Amazon’s star rise even higher. Revenue growth did slow, but it did grow (29.2% in 2008 and 28.4% in 2009) at a time when most others were losing money.


The diversity of Amazon’s business portfolio helped the company over-achieve during the recession. However, its innovative concepts and willingness to experiment took it over the line and set the pace for today’s success.


Let’s dig a little deeper into one of the most forward-thinking concepts, AWS.


 Amazon Web Services Forever Changed the Market


The top 5 cloud infrastructure providers accounted for nearly 80% of the global market in 2018. Amazon owns nearly half the market.


When AWS launched on 2006, it was a risky move beyond the early predictions for a recession. Amazon was taking a gamble on a business in a brand-new industry – both to the company and to the marketplace. Cloud computing and hosting services were relatively new concepts.


It was only seven years earlier that Salesforce began using cloud computing successfully. iCloud didn’t even exist yet. This was a truly revolutionary idea. The launch was a gamble that has paid off in spades.


Admittedly, it’s hard to account for the exact growth trajectory of AWS. Historically, Amazon did not report AWS revenue in public filings. It was accounted for in an “Other” category. However, the growth of the Other category is a good way to rough size AWS revenue. Using that measure, Amazon Web Services grew from generating less than $100 million in revenue in 2006 to $3.1 billion just 7 years later in 2013.



Fast forward to today. The second quarter of 2019, AWS generated cloud computing and hosting revenues of $8.4 billion. It’s growing at over 45% per year.



Moreover, AWS has been able to deliver increasingly more operating income to Amazon. The capital it provides for additional investments positions the company well for upcoming recessions. Amazon is playing the long game really, really well.


In the first quarter of 2019, AWS operating income equated to half of the operating income for the entirety of Amazon.



How Does One Become an Amazon-Like Bull?


In 1994, Amazon launched as an online bookstore. At the start of 2019, it had a market capitalization of $755.7 billion.


Spoiler alert: Amazon’s greatest hit wasn’t an online bookstore. It wasn’t Amazon Prime, Fulfillment, or even Whole Foods. To date, it’s AWS – a B2B cloud service.


In order to survive and thrive in an increasingly volatile market, companies have to continuously evolve. Product strategies and roadmaps must be well thought out, but also have a bold approach. Fight the urge to be overly conservative and instead invest in technology. Historically, downturns actually seem to reward the adoption of new technologies.


With innovation comes new and/or increased revenue streams. One of the most important things Amazon did in the dot-com bust and the Great Recession was to not run out of money. It seems obvious, but skillful financial management is necessary for surviving a downturn. Amazon’s ability to absorb slowing sales thanks to its strategic investments in other segments was paramount to the company’s success.


Start taking a look at your model now. Have you emphasized innovation in your product strategy?  Have you invested in technology? Is your business able to be nimble? Neglecting any one of these things may make the next recession more painful. Assess your readiness using our Revenue Growth Maturity Model Diagnostic.


Start the RGMM Diagnostic Here


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