Amazon is one of the largest electronic commerce website currently on the Internet. This online giant prides itself on its excellent business-to-business, business-to-consumer, and consumer-to-consumer relationships. The company sells new and used, as well as rents, multiple products ranging from books, electronics and computers to clothing, toys, and gardening tools. Amazon’s presence in the online shopping industry is well known.
In 1995, Amazon opened its doors as one of the largest e-commerce retailers in the world. The company is headquartered in Seattle, Washington but has operations and an active website in the United States, Canada, Europe, and Asia (“Timeline History Amazon.com”, 2012).
The history of Amazon is one of growth. From its conception to present day the company has acquired new companies and expanded. Jeff Bezos wrote the business plan for Amazon as part of his entrepreneurial dreams. The company was originated as an online bookstore that sold exclusively on Netscape and America Online websites (DataMonitor360). In fact, the company’s 1990s slogan was “Earth’s largest bookstore” (Stone, 2011).
In 1999, Amazon was no longer solely a seller of books. The company acquired drugstore.com, pets.com, exchange.com and homegrocer.com. Along with that, Amazon formed an alliance with Toysrus.com to create a co-branded store (DataMonitor360). By this time, Amazon had received market capitalization (Hoovers). The company was proving to be a threat for traditional brick-and-mortar stores. In 2002, Amazon began working with other retailers like The Gap and Nordstrom to integrate clothes into their product line-up (Hoovers).
Amazon continues to diversify their products. Now, Amazon is a Fortune 500 company and is known for its wide range of products and online sales on its trademark website, www.amazon.com. These products include books, DVDS, CDs, software and electronics, apparel, furniture, toys, food, and more. All of these products that are bought and sold include merchandise that has been purchased for resale from vendors as well as products offered by third party sellers. It engages in business-to-business, business-to-consumer, and consumer-to-consumer sales.
The company continues to grow and expand. Currently, Amazon employs about 88,400 people throughout the world (DataMonitor360). Along with that, the company’s financials has been improving. As of the fiscal year end in December 2012, Amazon documented total revenue of $61,093 million, which is a 27.1 percent increase from the fiscal year end in December 2011 (DataMonitor360). The year 2013 was no different in regards to increased and better financials for the company. In a press release at the end of January 2014, Amazon announced they were booming with $74.45 billion in total revenue. Furthermore, their operating cash flow increased to $5.47 billion, approximately 31 percent, and the company’s free cash flow increased $2.03 billion (“Amazon Booms in 2013 With $74.45 Billion in Revenue”, 2014).
The company continues to stay in the top of the market be continuously innovating old services and devising new ones. Some of these newer products and services that Amazon now offers include Amazon Prime, Prime Instant Video, Amazon Kindle, Amazon AutoRip, Amazon Studios, AmazonSmiles, and more.
Condensed Amazon SWOT Analysis
- Largest online retailer
- Diverse product line
- Multiple services offered to consumers
- Efficient distribution chain and logistics
- Patent infringement issues
- Frequent technical outages of Amazon’s web hosting
- Low margin business
- Growing e-commerce and e-reader market
- Growing emphasis on digital advertising businesses
- Growing interest in cloud computing
- Intense competition for e-commerce and e-reader markets
- Risk of Foreign exchange fluctuations
Worldwide sales at Amazon soared by 43% in the first quarter of 2018 to $51 billion, with profits rising to $1.6 billion. It is a far cry from the business launched by Jeff Bezos in 1995 as a book-selling website.
Detailed Amazon SWOT Analysis
1. Low cost structure, the largest merchandise selection and a huge number of third party sellers
Amazon is the largest online retailer in the world. In 2019, the company earned US$141.247 billion from online sales of its own merchandise and an additional US$53.762 billion from the commissions of the third party sellers’ sales in its online stores. In total, the company’s online retail operations brought in a massive US$195.009 billion in revenues – more than the next few largest online retailers earned combined.
Amazon’s extraordinary online growth has allowed the company to become the 2nd largest retailer in the world, only behind Wal-Mart, when compared to other brick and mortar companies.
Source: Amazon financial reports and Digital Commerce 360
Note that Amazon has grown much faster than the entire U.S. e-commerce market, meaning that the company has actually increased its market share by taking it from the competitors.
What is the key to such success? According to the Amazon’s report, the online store’s success lies in its low cost structure, the largest merchandise selection and a huge number of third party sellers.
Figure 2. Jeff Bezos “napkin sketch” outlining Amazon’s strategy
Source: Seeking Alpha
A low-cost structure leads to lower prices, which combined with a huge range of products, results in a better customer experience. Satisfied customers invariably return to the Amazon websites, creating ever-growing traffic, which subsequently attracts 3rd party sellers to Amazon’s marketplace. All of these factors lead to faster business growth for Amazon.
Amazon follows a cost leadership strategy, but so do many other online and offline retailers. Why then does Amazon outperform them?
- Low cost structure. By mainly selling online, Amazon doesn’t incur huge costs related to running physical retail outlets. Online marketplaces also potentially allow for selling more units without any increase in marginal costs.Amazon constantly invests in both additional fulfillment centers and to existing centers to enable a reduction in order fulfillment times and shipping costs. These time and cost savings result in lower prices that are passed on to consumers.
- Selection. According to ScrapeHero, Amazon sells around 120 million of various products in its Amazon.com Marketplace. In comparison, Walmart offers only 43 million SKU’s in its online shop, or just 36% of the number of products that Amazon offers. This vast difference in range is the reason why online customers are more likely to visit Amazon.com rather than Walmart’s e-shop.
- Third party sellers. Amazon’s business model includes accommodating third party sellers who are able to offer their own merchandise on Amazon’s sites and whose products therefore compete against Amazon’s. At the beginning, third party sellers were mainly attracted to the Amazon Marketplace because of the high traffic to its stores. Now the main drivers are such programs as ‘Fulfilled by Amazon’ and Prime. Third party sellers often offer products that are not available through Amazon’s retail division.In 2018, third party sellers accounted for 58% of all the products sold through the company’s online stores. Amazon’s third party sales grossed US$160 billion in 2018, while eBay’s merchants sales only grossed US$95 billion in the same period.
Low prices, huge product range and the vast number of third party sellers are all key factors in improving the Amazon customer experience and in driving more traffic to their sites. Few companies can compete with Amazon in any of these areas.
2. Synergies between Marketplace, Amazon Web Services, Prime and subscription services
Amazon is involved in 4 key businesses:
- Amazon Marketplace
- Amazon Web Services (AWS)
- Amazon Prime
- Subscription Services
All four Amazon offerings support each other and create benefits that would not be achieved if the businesses operated independently.
Source: Strategic Management Insight
AWS was introduced in 2006 when Amazon realized it could sell its servers’ excess capacity to other enterprises. For Amazon as an online retailer, the key place to sell its goods is its website.
To run an e-commerce website with millions of visitors each day the company had to invest heavily in its server infrastructure. These investments and the resulting server capacity have helped AWS to grow. In return, AWS provides two important elements for its sites:
- Speed. Page load speed is crucial for Amazon. Every 100ms of delay costs the company tens or hundreds of millions due to the lost customers. AWS helps to speed up the website’s load time, so that Amazon is able to serve each customer as quickly as possible. Subscription services also benefit from this. The content and especially, the video content is served very fast to the subscribers, increasing their satisfaction with the service.
- Capacity. During the peak times of Cyber Monday (the Monday after the Thanksgiving holiday in the U.S), Black Friday (the Friday after the Thanksgiving holiday), and in the several weeks leading up to Christmas, Amazon receives an overwhelming number of visitors to its sites. AWS’s huge capacity, which is not needed during the rest of the year, is employed during these peak times to help Amazon cope with the increased number of visitors.
In 2005, Amazon introduced the Amazon Prime subscription service, which offers access to Prime Videos, Prime Music, free two-day delivery, same day delivery and many other benefits for a flat annual fee.
As of December 2019, there are 112 million Amazon Prime members worldwide. Prime users buy more merchandise and spend more on each item than regular users. Marketplace helps to attract new visitors to Prime through its Fulfillment by Amazon program (FBA).
The FBA program allows third party sellers to place their products in Amazon’s warehouses, where Amazon takes responsibility for all logistics, customer service, order fulfillment and returns. This enables more products to become eligible for Amazon Prime, which is the key for the program to flourish.
In addition, packaging and shipping costs are reduced when two or more items are shipped. As a result, Prime becomes more profitable and Amazon customer satisfaction increases.
Prime members also get an access to the Amazon’s prime content and subscription services. Amazon marketplace customers who are signing up for the Prime membership for faster deliveries and bigger discounts are more likely to consume the Amazon’s prime content and will get locked to the Amazon’s Prime membership even more.
On the other hand, people who become Prime members due to the Amazon’s Prime content, will spend more on Amazon Marketplace due to the Prime membership benefits. Prime membership creates multiple benefits for every Amazon service and the company itself.
Synergies between Amazon’s Marketplace, AWS, Prime and subscription services are hardly quantifiable, but they provide some of the strongest competitive advantages any company could have.
Another Detailed SWOT Analysis of Amazon
The SWOT analysis of Amazon is given below:
1. Strong brand name – As a global e-commerce giant, Amazon has a strong position and successful brand image in the market.
2. Brand valuation – According to Interbrand’s Global Brand Ranking 2019, Amazon is ranked at #3 position (after Apple at #1 and Google at #2), with a brand value of $125 Billion.
3. Customer oriented – Amazon caters to a large number of customers for everyday needs at inexpensive prices. This has made it a customer-oriented brand.
4. Differentiation and Innovation – Amazon frequently brings creative ideas and innovative additions to its product line and service offerings like ambitious drone delivery service and Withings Aura Smart Sleep System. This creates a differentiation from other companies.
5. Cost Leadership – Amazon doesn’t incur costs in maintaining physical retail stores by selling everything online. With economies of scale, Amazon efficiently controls its costs and lowers its inventory replenishment time. The company has formed numerous strategic alliances with many companies like Evi Technologies, Thalmic Labs, Shoefitr, The Orange Chef etc. It has a strong value chain system which also helps in maintaining a low-cost structure.
6. Largest Merchandise Selection – Amazon owns extensive product mix which attracts online customers to make their majority of purchases from it rather than other online retailers. As of 2018. Amazon has sold 562.3 million products in its Amazon.com Marketplace.
7. Large number of third-party sellers – Due to the high traffic volume on Amazon’s sites, a large number of third-party sellers have joined the platform of Amazon to sell their own merchandises. The data from Fulfillment by Amazon (FBA) reveals that there are more than 2 billion items available from third-party sellers.
8. Go Global and Act Local strategy – This strategy has benefited Amazon the most. Amazon develops partnerships with local supply chain companies that help it in competing against domestic e-commerce rivals. It understands the local needs and launches its services as per the country’s culture.
In India, for example, it has launched a market campaign “Aur Dikhao” to encourage users to search more of its products.
9. Large number of acquisitions – The successful acquisitions of Whole Foods, Zappos.com, woot.com, Junglee.com, IMBD.com, and many others have produced significant revenues and profits for Amazon.
10. Involved into 3 key business – Amazon Marketplace, Amazon Web Services (AWS), and Amazon Prime are 3 key businesses of Amazon which work and support each other. As a whole, they generate massive profits and advantages for the company.
11. Highest revenues in the industry – With over $778.39 billion market capitalization and above $200 billion annual revenues, Amazon is the market leader with the highest revenues in the industry.
12. Superior logistics and distribution systems – Amazon uses highly efficient logistics and distribution systems. It even has fixed rates for different delivery time periods. Thus, it executes reliable, secure, and fast delivery of goods and products to the customers.
1. Easily imitable business model – Online retail businesses have become quite common in this digital world. So imitating Amazon’s business model for rival firms is not so difficult. A few businesses are even giving Amazon a tough time. These include Barnes & Noble, eBay, Netflix, Hulu, and Oyster etc.
2. Losing Margins in Few Areas – In few areas such as India, Amazon has faced losses. It’s free shipping to customers can be one of the reasons that expose the risks of losing margins in some markets.
3. Product Flops and Failures – Its Fire Phone’s launch in the US was a big failure while its Kindle fire device didn’t even grow well.
4. Tax Avoidance Controversy – Tax avoidance in Japan, UK and US has sparked negative publicity for Amazon. President Trump has recently criticized Amazon over taxes on social media network.
5. Limited brick-and-mortar presence – Amazon owns very limited physical stores. This sometimes hinders to attract customers buy things which are not sellable on online stores.
6. Vox published negative reports related to employees’ treatment and workplace conditions against Amazon in July 2018. Poor air conditioning, timed bathroom breaks, and constant video surveillance are few of the negative remarks made by the employees. Such things affect the market reputation of Amazon.
1. Amazon can gain the opportunity to penetrate or expand its operations in developing markets.
2. By expanding physical stores, Amazon can improve competitiveness against big box retailers and engage customers with the brand.
3. Amazon has the opportunity to improve technological measures and organizational policies to reduce counterfeit sales. One case of counterfeit sales came into light when Amazon sold a fake My Critter Catcher. The product was sold for $1 less than the original product.
4. Can do backward Integration by expanding its production of in-house brands such as Amazon basics to differentiate its offerings and improve profit margins.
5. More acquisitions of e-commerce companies can increase the company’s market share and reduce the competition level.
1. Few controversies have caused a dent in Amazon’s brand image. People critically reacted and boycotted Amazon sites in 2010 when they found that it’s selling the book “The Pedophile’s Guide to Love & Pleasure: a Child-lover’s Code of Conduct.”
2. Government regulations can also threaten the business proceedings of Amazon in some critical countries. Amazon does not ship to Cuba, Iran, North Korea, Sudan, and Styria.
3. Increasing cybercrime can affect the network security system of the company.
4. Aggressive competition with big retail firms like Walmart and eBay can give Amazon a tough time in the future.
5. Imitation is easy as many new entrants are coming up in the market usually with the same business model of Amazon.
SWOT analysis clarifies the current standing of Amazon. Few necessary improvements are needed to be done to administer the lacking and reinforce its market position.
In short, Amazon needs to strengthen its key areas, minimize its weaknesses, avail opportunities, and counteract threats for future progress.
Few recommendations are given below:
1. Consolidate the market dominance by boosting its marketing efforts, promotional activities, and competitive advantages.
2. Strategically deal with global controversies. Amazon needs to resolve tax issues and manage its app’s features efficiently to diminish negative publicity in the market.
3. Increase its limited presence through opening physical stores outside the U.S. This will augment brand popularity and market reach.
4. Enhance its strategic entry in developing countries where many growth opportunities are available.
5. Increase competitive edges and enlarge the gap between Amazon and its biggest competitors.
6. Address the issues of counterfeit sales and cybercrimes by upgrading technology measures.
7. Enhance network security systems for the protection of consumers’ rights.
There are many competitors in the e-commerce industry, both direct and indirect. The competition in the e-commerce industry is high with a steady trend. Furthermore, the barriers to entry are low, making it easy for entrepreneurs to join and compete in the industry. Most of the competition in the industry is from domestic companies, despite this being a global industry (IBISWorld). This does pose a threat for Amazon.
There are some key factors that IBISWorld has identified as what are strong contributions for companies in the e-commerce industry. This includes the ability to control stock on hand, ability to quickly adopt new technology, provision of superior after-sales service, and having a loyal customer base.
While Amazon is one of the major companies in the industry, eBay is trailing behind with a large presence. Smaller companies like Overstock and Bidz manage to steal some of Amazon’s business as well.
Like Amazon, eBay opened its digital doors in 1995. The company’s vision was to sell products at a fair price that anyone in the world could purchase. eBay’s business model differs from Amazon’s as it follows an auctioning model. Here, sellers pay a small fee to the company and make arrangements for goods to be shipped to the buyer (Sinclair 15).
eBay only makes up 3 percent of market share, but they still manage to heavily compete (IBISWorld). This strong competition is because eBay sells merchandise worldwide and offers a variety of products just like Amazon. The company also has over 120 million users who actively use the website (Hoovers). The company also utilizes PayPal and Bill Me Later as payment assets, which many consumers favor for its easy-to-use functionality. Furthermore, eBay includes platforms like StubHub.com, Half.com, and has a stake in craigslist. The company’s net income growth in one year is 9.47 percent and they had $16.05 billion in sales for the 2013 fiscal year (Hoovers).
Overstock came around a few years, in 1999, after the market dominators Amazon and eBay. Patrick Byrne, founder of Overstock.com, wanted to create a website for “bargain-seeking” people. The company was based on three main principles: value, investing and fair dealing (“Who we are”). Overstock business model is to liquidate the surplus of inventory on his website. This means that a large majority of the goods sold on Overstock comes from manufacturers overproduction, following Byrne’s plan.
While Amazon does not actively place television commercials, Overstock has been known to do so. These commercials have featured well-known celebrities including Jason Mraz and Ne Yo.
Amazon employs over 80,000 people, Overstock has a much smaller overhead with only 1,500 employees. In 2013, the company has a steady growth of 18.64 percent for one-year sales growth, a market value of $341.97 million, a net income of $88.51 million, and had $1.30 billion in sales (Hoovers).
Bidz.com is significantly smaller than Amazon, eBay, and Overstock. The company was founded in 1998, but acquired by Glendon Group in 2012. The business model of Bidz.com is similar to dollar store discounts, an auction house, and online convenience mixed into one e-commerce store. For example, a product is put up for sale where it is then auctioned off with the starting price of $1.
Even smaller than Overstock, Bidz.com only employs 175 people and hasn’t seen employee growth in quite some time. Bidz.com has experienced some financial rollercoasters, contributing to why it was acquired by Glendon Group. Nevertheless, it is estimated that Bidz.com had an estimated $43.7 million in annual sales in 2013 (Hoovers).
Amazon is headquartered in Seattle, Washington, but the company has offices, distribution centers, and customer service centers across the globe (“Global Locations”). Amazon strives to have all products in their fulfillment centers at all times to ensure people can purchase any item they want.
In North America alone the company controls 54 fulfillment centers. This number does not even include the subsidiary companies that Amazon owns like diapers.com. Their office located in Phoenix, Arizona is one of the largest, with the equivalent size of 28 football fields (Dickey, 2012).
Outside of North America the company manages an estimated number of 51 fulfillment centers throughout the UK, Germany, France, Italy, Czech Republic, Poland, China, Japan, and India (“Amazon Fulfillment Center Network”).
Amazon’s strategy for locations of distribution facilities is unlike many companies. While most companies choose to have locations based on population and popular geographical locations, Amazon has been known to have locations based on state tax considerations. This allows Amazon to not charge sales tax to consumers in most states (“Amazon Fulfillment Center Network”).
Electronic commerce, more commonly referred to as e-commerce, involves the sale of products and services via electronic means. The concept was first brought into fruition in the early 1990s when the Internet opened up its usage to commercial users. It was not for another decade though until this industry started to really boom (“E-Commerce Industry”). While this is a relatively new concept, the e-commerce and online auctions industry has become an extremely popular form of purchasing behavior in a short amount of time. The Internet has become a major platform for e-tailers, retailers that primarily sell online, which for some businesses accompany their brick-and-mortar stores and threatens others.
According to Imran Khan, managing director of Goldman Sachs, e-commerce is benefiting from several positive trends, including technological advances and changes in the market. First, the continued rollout of broadband provides people around the globe with instantaneous access to the Internet and these e-commerce websites. The stores are now at an arms reach. Second, more and more people are becoming accustomed to shopping online. There is an increase of user comfort, especially from older generations, of shopping online that is aiding e-commerce growth (Davis).
There are other factors driving the supply chain for e-commerce as well. The increasing percentage of households with at least one computer paired with the continued rollout of broadband is a huge benefit. The US Census Bureau’s Current Population Survey, CPS, questions people on their computer ownership. With the cost of computers decreasing, household computer ownership steadily increased. Within a decade, the ownership of computers increased tremendously, with 56.3 percent of Americans owning a computer in 2001 and 75.6 percent in 2011 (“Current Population Survey, July 2011”). Furthermore, in 2008, 71.1 percent of Americans owned a computer compared to the estimated 78.5 percent who owned one in 2013 (IBISWorld).
The increased number of households with a computer and wider access to broadband access has increased Internet traffic overall as well. In the late 1990s, Internet traffic nearly doubled every 100 days for three successive years. This growth has been steady and continuous in the years to follow as well (Carayannis, Alexander, and Kirkwood). In the upcoming years to 2018, it is predicted that the total Internet traffic volume will increase another 21.3 percent, totaling 108.4 exabytes per month (IBISWorld).
The opportunity that is brought to both businesses and consumers is what drives the e-commerce industry. Small businesses are now able to sell specialized products that consumers are generally unable to find in stores. This allows these small businesses and entrepreneurs to stay in business for little to no overhead costs (“E-Commerce Industry”). Consumers are also able to easily compare products features, benefits, and prices with e-commerce. The ease of moving about from one store to another is not a hassle as it is just a few mouse clicks away instead of potentially miles away.
With all of these changing trends towards digital media, it is no surprise that the number of online retailers and auction sites has increased at an average annual rate of 2.5 percent to an estimated 51,073 businesses in the past five years (IBIS World). Morgan Stanley’s research team conducted research to report on global e-commerce. The study shows that e-commerce currently generates approximately 6.5 percent of all retail sales with it predicted to increase to 10 percent by 2016 (Kawa, 2013).
The story also identified companies that were best positioned to remain in the e-commerce industry. The two key players of this industry are Amazon and eBay. While not listed on Morgan Stanley’s list, Overstock and Bidz are both close competitors for Amazon as well. Furthermore, the e-commerce industry has low barriers to entry, making it easy for small businesses and entrepreneurs to compete (Gendler).
Amazon follows the “low price guarantee” model and lists their payment, pricing, and promotion information directly on their website. One way Amazon proves to be competitive is matching prices on eligible items with select retailers. This even includes retailers who sell goods on the Amazon website (“About Price Matching”).
A second pricing strategy for Amazon is it includes the list price on all products, which is the full retail price of the product (“About List Prices”). Amazon does include a surcharge for oversized or heavy items though. The company regrettably notes this on their website, but does include the fee on the detail page for the product (“About Surcharges”).
Finally, Amazon offers a refund should you purchase a product and the cost lowers within a seven day delivery date (Elliot, 2013).
As one of the largest global e-tailers, Amazon sells a large variety of both products and services. The company has expanded tremendously from its initial origin of an online bookstore. Below, you will see a detailed list containing many, but not all, of the products and services that the company offers (DataMonitor360).
- Kindle Books
- Children’s Books
Movies, music and games:
- Amazon instant video
- MP3 downloads
- Musical instruments
- Video games
- Digital games
- Game downloads
Electronics and computers:
- Home audio and theater
- Camera, photo and video
- Cell phones and accessories
- MP3 players and accessories
- Car electronics and global positioning system
- Electronic accessories
- Laptops, tablets and netbooks
- Desktops and servers
- Computer accessories and peripherals
- External drives, mouse, and networking
- Computer parts and components
- Software Personal computer games
- Printers and ink
- Office and school supplies
Home, garden and tools:
- Kitchen and dining
- Furniture and decor
- Bedding and bath
- Patio, lawn and garden equipment
- Home improvement supplies
- Power and hand tools
- Lamps and light fixtures
- Kitchen and bath fixtures
- Arts, crafts and sewing
- Pet supplies
Grocery, health and beauty:
- Grocery and gourmet food
- Natural and organic food
- Health and personal care products
- Beauty products
Toys, kids and baby:
- Toys and games
- Baby products
- Clothing (kids and baby)
- Video games for kids
Clothing, shoes and jewelry:
- Handbags and accessories
Sports and outdoors:
- Exercise and fitness equipment
- Outdoor recreation
- Hunting and fishing
- Athletic and outdoor clothing
- Team sports
- Boating and water sports
- Fan shop
- All sports and outdoors
Automotive and industrial:
- Automotive parts and accessories
- Automotive tools and equipment
- Tires and wheels
- Motorcycle and ATV Industrial and scientific
- Web services
- Order fulfillment
- Co-branded credit cards
This list shows just a glimpse of industries that Amazon takes part in selling. It is difficult to list everything, which is one of Amazon’s strengths. People love that it is essentially a one-stop-shop. In fact, some people call Amazon “Earth’s biggest everything store”, a transition the company made from the “largest bookstore.” Not all of these products and services are available worldwide though. Amazon has regional products and services. You are able to see a full list of what is offered where online at Amazon Web Services.
One of Amazon’s most well known products is its e-reader, the Kindle Fire. The Kindle, which launched in 2007, competes with the Barnes & Noble Nook and Apple iPad. The Kindle acts as both a tablet an e-reader, unlike the Nook. Furthermore, the product is sold at a much lower cost as the iPad. This positions the product perfectly in the market. Amazon currently sells more e-books than they do print books. To expand their presence online and in the e-book market even further, Amazon purchased Goodreads in 2013, a social media online book community used by over 30,000 book clubs (Hoovers). Moreover, Amazon entered the self-publishing industry allowing the company to print books on a demand basis (di Stefano, 2012).
Amazon’s products consist of 85 percent of the company’s sales (Hoovers). But, along with all of these products, Amazon offers services that make up the remaining 15 percent. These services include self-publishing, online advertising, e-commerce platform, hosting, and a co-branded credit card.
Amazon Prime is another strategic service meant to boost membership. The program was launched in 2005 as a customer loyalty program. The membership starts at yearly fee of $79 that then provides customers with free two-day shipping or $3.99 one day shipping for every order. Along with that, the service allows people at access movies and TV shows through Amazon Instant Video, something that competes with Netflix. The company has later defined the Amazon Student and Amazon Mom programs that are a continuation of the original Amazon Prime (Gray, 2012).
Amazon Web Services is a great tool for web developers. The company is continuously updating this service to stay current with technological advances and trends. Amazon Web Services includes Cognito, Zocalo, SNS, and Mobile Analytics. Cognito allows developers to store and manage data. Zocalo is newer than the other services. It is a storage and sharing service that many developers can really utilize. Amazon SNS allows developers to send notifications to several devices. Finally, the Amazon Mobile Analytics allows developers to track users and collect analytical information (Snyder, 2014).
The company is constantly developing newer and better strategies to stay at the top of the e-commerce industry. This year, in 2014, Amazon is planning to break into a new industry to compete with services like Yelp, Angie’s List, Craigslist, and TaskRabbit (Di Stefano, 2014). The marketplace is one for local services including babysitters, handymen, and more. The company has been speaking with startup companies in Seattle and San Francisco that already connect service providers with customers (Seetharaman, 2014). Amazon’s strategy is to have a service paired with just about every product they sell on their website, making it difficult for competitors to even compete.
Amazon does not engage in large campaigns or million dollar SuperBowl advertisements. The company has devised a marketing strategy that is focused on six pillars: it offers products and services, has a customer-friendly interface, scales easily from small to large, exploits its affiliate’s products and services, uses existing communication systems, and utilizes universal behaviors and mentalities. The logic is simple, because the products and services are offered online the advertising should be seen there as well. This has been something seen throughout time as the company spent $80 million in offline advertising in the fourth quarter of 1999, but only $9.4 billion in the fourth quarter of 2009 (“Marketing Strategies of Amazon.com”).
Amazon’s marketing techniques are primarily done online and with a strong pronouncement of quality to the marketplace. Pay Per Click Advertising has not been one of the company’s most beneficial methods of advertising, but the company continues to purchase such advertisements. The company regularly places advertisements on the left side of Google’s search page to diferct potential consumers to their website. Clickriver, later replaced by ProductAds, was a Pay Per Click program that allowed vendors to place ads on the company’s website. It was modeled after Google’s Pay Per Click program (“Marketing Strategies of Amazon.com”).
As Amazon was one of the first e-commerce websites, the company continuously makes subtle changes to their website. The company does not make any drastic redesigns as to not upset consumers, but continual improvement is key. Amazon is constantly seeking perfection and spending millions of dollars to recognize issues on the website and develop solutions (“Marketing Strategies of Amazon.com”).
One of Amazon’s largest marketing strategies is actually free. Permission marketing in the form of email marketing is an opportunity that Amazon fully engages in. Amazon tailors marketing emails sent to consumers based on their purchase behavior. This direct marketing really grabs the attention of potential consumers in the most cost-effective way.
The majority of Amazon’s sales and profits come from the sales of electronics and other products. In 2013, the company reported $74.45 billion in net sales, with the majority of sales being in North America (Statista).
The 2014 press release by Amazon states that company had a 20 percent increase of net sales to $25.59 billion within the fourth quarter of 2013 compared to the fourth quarter of the prior fiscal year, which was $21.27 billion. Throughout the whole year, the net sales were on par with that of the fourth quarter, with a 22 percent increase to $74.45 billion (“Amazon Booms in 2013 With $74.45 Billion in Revenue”, 2014). These huge financial gains were in part due to some relatively newer products and services that have hit the market.
The press release continues to state projections for the year 2014. Amazon predicted that the net sales would be between $18.2 billion and $19.9 billion in the first quarter. This means that the growth would be between 13 percent and 24 percent (“Amazon Booms in 2013 With $74.45 Billion in Revenue”, 2014).
With Amazon being one of the largest e-commerce websites and an international company, it is no surprise the sales forces is equally as large. Amazon has approximately 88,400 employees (DataMonitor360). In 2012, Amazon hired an addition 50,000 people to assist with the demand of e-commerce products in the holiday season (Dickey, 2012).
Employees assist in all areas of the company from retail, seller services, e-commerce platforms, general operation, customer service, Amazon Web Services, digital, finance and administration, human resources, and legal.
According to Statista, almost 40 percent of Internet users worldwide have purchased products or goods online through an electronic medium such as a desktop computer, tablet, or mobile device. This percentage equates to over one billion online buyers. The digital buyer penetration is expected in increase to 45.1 percent by 2017 (Statistics & Market Data).
Every sector of e-commerce has continued to grow and the trend is projected to continue. In 2013, business-to-consumer e-commerce sales were over 1.2 trillion dollars (Statistics & Market Data).
Amazon’s computing services platform, Amazon Web Services, maintains a large share of the web services market. The service is a part of the infrastructure as a service, or IaaS, market. In 2013, Amazon Web Services equated to 37 percent of the IaaS $9 billion market. Amazon Web Services is growing at a rate of 60 percent, which is much higher than the market rate at 45 percent (D’Onfro, 2014).
In Amazon’s book market, they were also in the lead of market share. When Borders went under, the customers were divided to other companies in the market. In 2012, Amazon’s share of book spending was up to 29 percent in the first quarter, compared to Barnes & Noble’s, which was at 20 percent (Milliot, 2012).
Forrester research has shown growth in the future of the e-commerce market. While the online market only accounts for eight percent of total retail sales in the United States, Amazon’s growth shows the future growth of the market as a whole. Forrester projects that over the next five years there will be a compounded annual growth rate of nine percent (“How Amazon Plans On Driving Future Growth”, 2013). This is not just limited to the United States either. E-commerce growth is a trend across the globe. In international markets like the Asia-Pacific region, sales increased to $332 billion that is over 33 percent in 2012 (“How Amazon Plans On Driving Future Growth”, 2013).
The e-commerce market encompasses all business-to-business, business-to-consumer, and consumer-to-consumer sales. The market is relatively difficult to calculate the overall size due to the fact that very few research companies measure all of these sectors.
Amazon markets to consumers of all ages and with a variety of interests. This, in part, is due the large variety of products and services the company has to offer, as mentioned previously. According to Forrester Research, approximately 60 percent of consumers shop online at a quarterly basis. This shows just how large of the population utilizes e-commerce websites. The company’s search engine is able to segment consumers based on purchase behavior (MacLeod, 2006).
Age is one of the largest ways to segment Amazon consumers. The largest age group of online shoppers is those between the ages of 31 to 44 with the least likely being those who are 66 or older.
While consumers between the ages of 18 to 30 are the most likely to respond to online advertising and engage the most in online behaviors, this age group has a smaller discretionary income. Along with that, this age group primarily purchases items like clothing, footwear, and electronic devices online.
Those between the ages of 31 to 44, the ones accountable for the most revenue, purchase higher-priced goods and services than the younger group. These products are typically larger electronics and discretionary items. Furthermore, Forrester Research shows that 68 percent of this age group shops online on a regular basis.
Those between the ages of 45 to 54 still account for a decent amount of revenue, but they tend to care more about convenience than price.
The next age group is consumers aged between 55 and 65. This group was at one point concerned with Internet fraud or unsure of how to work the technology. Those who have moved past this mostly purchase collectibles and antiques because of the high amount of disposable income. This accounts of 20.4 percent of revenue.
Finally, those over the age of 66 generate the least revenue for e-commerce websites like Amazon. The is largely due to the unfamiliarity of technology (IBISWorld).
Income, while it does correlate with age, is another factor. Studies have showed that consumers who are more likely to engage in online shopping have a higher income than those who won’t engage in online shopping (Black).
Amazon started operations back in 1995. In those days, its founder, Jeff Bezos, was simply beginning with a site that sold books. Yet, he already had a vision for the organization’s amazing development and rise to the top of internet retail. Indeed, from the very first moment, Bezos realized that he needed to make Amazon ‘an everything store’.
But the beginnings were humble, as he started the company from his very own garage. The servers he was utilizing required so much power that he and his wife couldn’t run a hair dryer or a vacuum without blowing a wire in the house.
In the beginning of its operations, a chime would ring in its office each time somebody made a buy. At that point, everybody would rapidly accumulate around to check whether they knew the client. Luckily, the number of sales made the chime last just 14 days before the ringing became frequent enough to turn it off.
Bezos initially intended to name his organization ‘Cadabra’, a play on the word ‘Abracadabra’. Notwithstanding, Todd Tarbert, Amazon’s first legal advisor, persuaded Bezos that the name sounded too much like ‘cadaver’, which was not a decent name for a bookstore.
The founder eventually settled on the name ‘Amazon’ in light of the fact that the site postings in search engines in those days were ordered alphabetically, and having a site with the primary letter of the alphabet would mean standing higher on those postings.
Since Amazon has gone from strength to strength, expanding across all continents and developing numerous quality, innovative products. Amazon has invested millions in new businesses that will make voice controlled applications for its intelligent assistant Alexa, giving it a huge number of new aptitudes. Amazon likewise opened many new fulfilment centres, and made its first drone delivery in the UK.
At the point when the Fire Phone flared out, the Amazon Echo smart speaker came in. The most recent variant of Amazon’s streaming service, Amazon Music Unlimited, was developed over its underlying music store, Amazon MP3, which opened ten years ago.
Indeed, even Amazon Studio’s Emmy Award-winning unique shows are altogether based upon a crowdsourcing stage that the organization initially presented in 2010 for yearning scriptwriters.
The organisation’s own fashion business is currently the second biggest retailer in the United States. It has developed from brand experiments with outdoor furniture, home merchandise, electronic accessories and diapers, and even perishables like natural espresso.
What’s more, Amazon isn’t centered around a firmly composed ecosystem of interlocking applications and services like other giants such as Apple, Google and Microsoft. Instead, it underscores platforms that each serve its clients in the most ideal and speediest way.
Just several years ago, ‘Prime Video’ actually became accessible in over 200 nations – after the November introduction of The Grand Tour, Amazon’s most watched premier ever.
Indeed, even Twitch, the streaming video game network that Amazon procured in 2014, disclosed its initial three unique titles from its recently framed studios.
Amazon is fixated on fulfilling its clients’ needs not just by offering them great sales, but by always putting resources into new, special innovations. Unlike all other web based business organizations, Amazon will immediately exchange any short term benefits for the opportunity to enhance the client’s long term devotion and loyalty.
The organization does this in spite of how much cash this philosophy costs temporarily. It does this in spite of being a public company, with impatient investors who, for the most part, demand that the company should increase the profits with each passing quarter.
But it was all the way back in the good ‘ol days, that Amazon’s sense of duty to its clients was what set them apart from its competitors. Furthermore, this dedication persists right up until today.
Amazon also has the Alexa Fund. It gives up to $100 million in investment, fueling the advancement of voice technology. Amazon states that all interactions fulfilled around the human voice will, on a very basic level, enhance the way individuals utilize this type of innovation.
The Alexa Fund is essentially centered around how voice innovation can enhance clients’ lives. The areas that are specifically compelling are equipment items for inside and outside the home or on-the-go that would benefit from the Alexa Voice Service.
Since the introduction of Alexa enabled gadgets such as the Amazon Echo, the organization has always been hearing pitches from engineers, device makers, and organizations of all sizes that want to innovate with Alexa.
There are plenty of new skills that can be delivered to any of the Alexa-enabled devices through the Alexa Skills Kit. These new contributions belong to the science behind voice technology, including text to speech, natural language understanding, automatic speech recognition, artificial intelligence and hardware component design.
Amazon’s both top and bottom line made significantly more profit than it was expected. The organization announced $2 billion in benefit, which was record breaking. The stock’s fans and supporters cheered this bit of news, and a liberal tax rate overhaul sets the stage for more unfathomable development going ahead.
The main engine of this growth has been Amazon Prime. Clients who pay $99 a year for a Prime account can look for anything from Ben and Jerry’s frozen yogurt to a last minute birthday presents with practically instant delivery. It has huge warehouses and many employees in order to get everything pressed, sent, and delivered on time, without fail, every single time.
The vision and the mission that the organization has are expressed uproarious and clear: “Our vision is to be Earth’s most customer-centric company; to build a place where people can come to search and discover anything they might want to buy online.”
It went from a straightforward online book shop, whose first offer was Fluid Concepts and Creative Analogies by Douglas Hofstadter, to a monstrous web based shopping platform that is spreading to every single market and assuming control over the online retail world.
Amazon had a humble and an extremely niche starting point, however it has extended to be one of the greatest and most popular companies around the globe. It has a growing presence in many nations and has situated itself to be a noteworthy worldwide organization. With its advances in item offerings, unique items, and delivery services, Amazon demonstrates the possibility to keep on growing on a phenomenal scale.
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