Bezos leaves Amazon in its prime – keeping it that way is the task

A pain-free departure of a visionary founder is a difficult trick to pull off for any business. The stakes are even higher for a company the size of Amazon, as Jeff Bezos steps back from his day-to-day management role.

The decision by Bezos, 57, to quit as chief executive later this year took analysts by surprise, but the first step has already gone smoothly, with Andy Jassy appointed as his successor without any public power struggle.

It is, on the face of it, an auspicious time for a new chief executive. Amazon also reported another round of record results, with profits of $24bn (£17.6bn) during 2020 pumped up by housebound customers during the pandemic. Yet the company’s scale and reach means Jassy will face several significant challenges when he takes the reins.

In its core retail business Amazon has a dominant position, but Jassy will now oversee its push into businesses with stricter regulation, such as prescription medicines. Amazon is also targeting fresh food, where deep-pocketed incumbents will not willingly give up their customers.

And the upheaval in retail is by no means over. Amazon’s investments in technologies such as autonomous drone delivery and shops without tills show it is alert to threats, but new business models could pop up, particularly from rivals in China, that could dent growth.

Growth in its main markets could also become moredifficult, forcing Amazon to spend moreto retain customer loyalty, such as going up against Netflix and Apple on expensive film and television production to feed its Prime Video service.

There are other, more controversial issues that Jassymust grasp. Amazon still relies on an army of low-paid workers and has faced repeated criticism from workers who have felt inadequately protected during the Covid-19 pandemic, and over the firm’s continued opposition to unionisation.

Amazon has already faced scrutiny from regulators in Europe and the US, particularly focused on the potential conflict between its role as a platform for smaller retailers and as a retailer itself. The European commission has already found evidence that Amazon used non-public data from its sellers to its advantage. Further evidence of abuses could cause serious headaches for Jassy.

In the longer term the new boss faces a problem of his own making. Jassy, who joined Amazon in 1997, was a technical adviser to Bezos when two engineers suggested the company sell the web hosting technology it had built to other businesses. Under Jassy’s leadership Amazon Web Services (AWS) expanded to provide operating income of $13.5bn last year – well over half the group’s total.

That success has led some analysts to question whether AWS should be a standalone company, able to spend the cash it generates on more profitable ventures than subsidising the retail business. Those voices could be emboldened by a new chief executive.