。Macquarie Research 2019 Industrial Distribution Sector Outlook15 January 2019 2AMZN Thought Process on Deal Activity Based on conversations with our Internet team, past AMZN deal activity (Fig 2) has primarily beenfocused on increasing Prime members. There are ~100 million members globally as of mid-April andwhen AMZN first threw out that figure. The historical data below are Macquarie estimates. Fig 1 AMZN Prime MetricsSource: Macquarie Capital (USA), January 2019Fig 2 AMZN Select M&A HistoryDivestitures not included; transactions in US$mSource: FactSet, Macquarie Capital (USA), January 2019It appears that in terms of Prime members, smaller businesses can use their existing consumer Primeaccounts, but that’s for only single users. For the multi-user business memberships, the agreementsare more bespoke with options for 3, 10, 100 and 100+ users. Fig 3 Amazon Business PrimeSource: Company data, Macquarie Capital (USA), January 2019(millions)201320142015201620172018E2019E2020E Worldwide Prime Members2031466691114136155 Growth53%51%43%38%25%19%14% US Prime Members (75% of Worldwide)1523334660728087 Growth50%47%40%30%20%10%10% US Households123123125126126128130132 US Prime, % of US Households12%18%27%37%48%56%61%66% Close DateDeal TitleTransaction ValueEV/SalesEV/EBITDAIndustryPendingAmazon offers to acquire PillPack$1,000Drugstore Chains 12 Apr '18Ring$900Electronic Production Equipment23 Jan '18SQRRL DATA INC $40Packaged Software 21 Dec '17Immedia Semiconductor$90Semiconductors03 Oct '17Body Labs$100Packaged Software 20 Jul '17Graphiq$50Miscellaneous Commercial Services08 Jul '17Game Sparks Technologies$10Media Conglomerates 28 Aug '17Whole Foods Market$13,4880.7x7.8xFood Retail12 May '17Souq FZ LLC $580Catalog/Specialty Distribution 09 Jan '17Four Zero Five Labs$19Packaged Software19 Oct '15Elemental Technologies$50010.2x-Electronics/Appliances 29 Apr '15ClusterK$50Packaged Software22 Jan '15Annapurna Labs$370Semiconductors 25 Sep '14Twitch Interactive$842Movies/Entertainment17 Apr '13Amazontakes a majority stake in Evi Technologies$26Internet Software/Services 01 May '12Kiva Systems$7757.8x-Information Technology Services21 Jan '11LOVEFiLM International$3233.6x21.8xInternet Software/Services 01 Apr '11Quidsi$5453.0x-Internet Software/Services13 Dec '10BuyVIP SL $1101.1x-Catalog/Specialty Distribution 02 Nov '09Zappos$8740.9x20.0xCatalog/Specialty Distribution19 Mar '08Audible$2001.8x86.4xInternet Software/Services 28 Mar '00Amazon takes a minority stake in Eziba$18--Specialty Stores04 Oct '99Convergence Corp $20--Packaged Software 18 May '99Amazon takes a minority stake in HomeGrocer$43--Catalog/Specialty Distribution14 May '99E-Niche$196-NMCatalog/Specialty Distribution 09 Jun '99Accept $37356.4xNMPackaged Software11 Jun '99Alexa Internet$270728.7xNMInternet Software/Services 14 May '99Exchange $219--Internet Software/Services14 May '99Livebid $75--Catalog/Specialty Distribution 04 Aug '98PlanetALL $87--Information Technology Services04 Aug '98Junglee Corp. $170138.9xNMInternet Software/Services 27 Apr '98Bookpages Telebook & Internet Movie Database $55--Catalog/Specialty Distribution Business Prime plansCost per yearUsers Essentials$179Up to 3 users Small$499Up to 10 users Medium$1,299Up to 100 users Enterprise$10,099Over 100 users Macquarie Research 2019 Industrial Distribution Sector Outlook15 January 2019 3Recently, AMZN also launched new Business Prime member benefits including spend visibility, guidedbuying, extended payment terms and upgraded shipping options among other items (see AMZNComing Out with New Business Prime Benefits). Moreover, in the exhibits below we show that AMZN hiring in Amazon Business sales and accountmanagement roles is slower versus history, and not ramping, which suggests that for AMZN to getbigger in industrial supply M&A would make sense. Building a sales force organically does not look likea focus based on AMZN job scrap data. Our sense is AMZN is doing well with small and medium sized businesses (SMB) while on the largerenterprise side is in the early innings of building a service component angle. Aside from building outinfrastructure for same day delivery, account managers are likely spread thin (not being able to providethe same level of service as the publicly traded distributors). Having said that, AMZN has a clearadvantage in value selection and convenience in order to bundle other products on top of industrial(office supplies, etc.). Bottom line, we think AMZN could do a large industrial distribution deal in order to increase primebusiness memberships. Fig 4 AMZN Job Category, % of totalDashed lines indicates gap in data in August 2017, February-March 2018 and August-October 2018Source: Company data, Macquarie Capital (USA), January 2019Fig 5 AMZN Business Job Category, % of totalDashed lines indicates gap in data in August 2017, February-March 2018 and August-October 2018Source: Company data, Macquarie Capital (USA), January 2019 0% 2% 4% 6% 8% 10% 12% Jul -17 Se p-1 7 Oc t-1 7 Oc t-1 7 Oc t-1 7 Oc t-1 7 No v-1 7 No v-1 7 No v-1 7 No v-1 7 De c-1 7 De c-1 7 De c-1 7 De c-1 7 De c-1 7 De c-1 7 Jan -18 Jan -18 Jan -18 Jan -18 Fe b-1 8 Ma r-1 8 Ap r-1 8 Ma y-1 8 Jun -18 Jun -18 Jul -18 Jul -18 No v-1 8 Jan -19 Sales, Advertising, & Account ManagementFulfillment & Operations Management 0% 5% 10% 15% 20% 25% 30% 35% 40% Jul -17 Se p-1 7 Oc t-1 7 Oc t-1 7 Oc t-1 7 Oc t-1 7 No v-1 7 No v-1 7 No v-1 7 No v-1 7 De c-1 7 De c-1 7 De c-1 7 De c-1 7 De c-1 7 De c-1 7 Jan -18 Jan -18 Jan -18 Jan -18 Fe b-1 8 Ma r-1 8 Ap r-1 8 Ma y-1 8 Jun -18 Jun -18 Jul -18 Jul -18 No v-1 8 Jan -19 Sales, Advertising, & Account Management Macquarie Research 2019 Industrial Distribution Sector Outlook15 January 2019 4Fig 6 AMZN - Job AnalysisSource: Company data, Macquarie Capital (USA), January 2019Fig 7 Amazon Business – Job AnalysisSource: FactSet, Macquarie Capital (USA), January 2019July 17, 2017June 29, 2018July 29, 2018November 29, 2018January 3, 2019 Amazon Jobs% of TotalCount% of TotalCount% of TotalCount% of TotalCount% of TotalCountDelta% change since July 2017% change m/mSoftware Development32%6,43727%4,82828%5,09230%6,33030%6,7262894%8% Operations, IT, & Support Engineering7%1,3998%1,3768%1,3957%1,5427%1,53313410%(1%)Solutions Architect5%9327%1,3167%1,3247%1,4507%1,48355159%3% Project/Program/Product Management--Technical6%1,1816%1,1016%1,0906%1,3366%1,35617515%2%Sales, Advertising, & Account Management5%9776%1,0085%9866%1,2266%1,25928229%3% Project/Program/Product Management--Non-Tech6%1,2185%9275%9256%1,2036%1,35713911%17%Fulfillment & Operations Management5%9354%7424%7723%5693%647(288)(31%)11% Finance & Accounting3%5933%6173%6063%7363%74615326%2%Business & Merchant Development2%4183%5723%5483%5473%57215437%4% Human Resources4%8193%5623%5534%9254%9068711%(3%)Systems, Quality, & Security Engineering3%6793%5083%4993%6333%689101%11% Marketing & PR3%6093%4913%4852%4752%502(107)(18%)5%Business Intelligence3%5782%4172%4162%5262%549(29)(5%)6% Buying, Planning, & Instock Management2%4682%3612%3632%4602%485174%7%Customer Service1%2532%3192%3261%2571%252(1)(0%)(2%) Machine Learning Science1%2762%2822%2822%3572%3568029%(0%)Design2%3591%2631%2681%3041%313(46)(13%)3% Facilities, Maintenance, & Real Estate1%2681%2611%2571%2481%282145%13%Editorial, Writing, & Content Management1%2501%2461%2541%2181%236(14)(6%)7% Supply Chain/Transportation Management1%2841%2161%2101%2741%28621%6%Research Science1%2281%2161%2271%2491%2825424%15% Hardware Development1%1861%1901%1951%2711%2799350%4%Leadership Development & Training1%1501%1571%1561%1491%161117%8% Medical, Health, & Safety1%2361%1381%1400%1031%128(108)(46%)18%Administrative Support1%1701%1311%1291%1301%131(39)(23%)1% Fulfillment / Warehouse AssociateNANA1%1271%1311%1780%51NAnm(100%)Legal1%1631%1081%991%1231%116(47)(29%)(6%) Investigation & Loss Prevention1%1431%1051%1061%1091%123(20)(14%)13%Data ScienceNANA0%540%591%1291%139NAnm19% Audio / Video / Photography Production0%640%430%440%530%49(15)(23%)(9%)Public Policy0%300%300%310%180%19(11)(37%)3% Database Administration0%480%270%270%360%37(11)(23%)4%Economics0%430%210%210%360%42(1)(2%)29% Total100%20,394100%17,760100%18,016100%21,200100%22,092(2,378)4%0% July 17, 2017June 29, 2018July 29, 2018November 29, 2018January 3, 2019 Amazon Business Jobs% of TotalCount% of TotalCount% of TotalCount% of TotalCount% of TotalCountDelta% change since July 2017% change m/mSoftware Development29%7919%1423%2035%6435%66(13)(16%)14% Sales, Advertising, & Account Management25%6718%1320%1825%4623%43(24)(36%)(23%)Project/Program/Product Management--Non-Tech14%3914%1013%119%1610%18(21)(54%)20% Project/Program/Product Management--Technical7%198%69%87%128%14(5)(26%)33%Marketing & PR3%912%99%82%32%4(5)(56%)11% Systems, Quality, & Security Engineering2%63%22%22%43%5(1)(17%)50%Buying, Planning, & Instock Management4%117%55%43%54%7(4)(36%)40% Design3%93%25%44%84%8(1)(11%)-%Business Intelligence6%155%45%42%34%7(8)(53%)100% Editorial, Writing, & Content Management-%03%25%43%51%22nm(150%)Data Science-%03%21%12%3-%--nm(150%) Solutions Architect-%01%11%12%32%33nm-%Operations, IT, & Support Engineering-%01%11%11%11%11nm-% Machine Learning Science1%41%11%11%21%2(2)(50%)-%Business & Merchant Development1%33%21%11%21%2(1)(33%)-% Economics-%0nmNA-%01%21%22nmnmAdministrative Support1%2-%--%02%41%1(1)(50%)nm Human Resources0%1-%--%0-%--%-(1)(100%)nmLeadership Development & Training1%3-%--%01%11%1(2)(67%)nm Research Science1%2-%--%0-%--%-(2)(100%)nmTotal100%269100%74100%88100%184100%186(181)(32%)1% 。。。。。。