By: Subhashree Das
Every time we decide to buy something online, we have very few e-commerce sites to choose from and Amazon.com is one of them. The company which initially started under the business name ‘Cadabra’ and sold books, now has a net worth of $1000B as of July 07, 2020. Last year, it became the world’s second-ever public company to be valued at $1 trillion, after Apple, and it has the second-highest market valuation in the world, after Microsoft. In the past 25 years, Jeff Bezos has created an empire that online sellers simply cannot afford to ignore. Ever wondered how this ‘Everything Store’ managed to have everything? Fret not; this post would cover the analysis of how Amazon is able to continuously rise up the ladder. But before jumping right off to the analysis, let’s have a quick look at ‘How it all started and where it has reached now’
Companies owned by Amazon
Amazon Web services (AWS): Bezos claimed Amazon not as a retailer but as a technology company. In order to prove his point, he launched AWS in 2002 which initially provided data Internet traffic patterns, Web Site popularity, and other statistics for developers and marketers. In 2006 it expanded its AWS portfolio with its Elastic Compute Cloud (EC2), a web service that provides secure, resizable compute capacity in the cloud. It is basically designed to make web-scale cloud computing easier for developers. In the same year, the Simple Storage Service (S3), which rents data storage over the Internet, became available.
AWS is now the world’s most comprehensive and broadly adopted cloud platform used by billions of customers—
That includes the fastest-growing startups, largest enterprises, and the leading government agencies.
In May 2020, AWS made a record for a cloud service provider, passing $10 billion in revenue. The division’s revenue grew 33 percent over last year to $10.22bn and was responsible for 13.5 percent of Amazon’s total revenue.
Kindle: In 2007 Amazon.com began to sell its own Kindle e-readers, with the aim: to bring people books. In 2009 the company introduced its first publishing line, Amazon Encore, dedicated to popular self-published and out-of-print books. This also lets individuals publish their own e-books. In the year 2011 the company introduced a related low-cost tablet computer, the Kindle Fire.
The Kindle’s screen uses E ink rather than a traditional LED screen. It’s black-and-white, doesn’t require a backlight, and looks much more like a piece of paper than a computer screen. Lacking these battery-diluting properties gives you weeks — yes, weeks — of battery life instead of hours. And it’s better for reading at night when you want to cut down on backlit screen time.
Reasons behind the success
Now that we know how it all started and what the major acquisitions were, let’s analyze the prime reasons behind this massive success.
Amazon is able to dominate the market because of its services that gained customer loyalty and Profitability. A customer always wants their 3 core needs to be fulfilled:
1. Wide variety of options
2. Low price
3. Fast Delivery
But how did Amazon achieve this?
1. Diversification: Starting as online bookstore, Amazon now has enormous options for its buyers. A search of “The Gourmet Store” would take you to a world of food and beverages from around the world. One can also find blogs of some of the finest dishes.
Amazon now sells products ranging from music, books, electronics, health and beauty, automotive, grocery, and clothing.
2. Low cost: Because cost is always an important factor for consumers, Amazon aims to have the lowest price on internet.
The Buy Box helps them achieve this.
2.1 What is Buy Box?
The Buy Box is the white box besides the product details page, where customers can add their product to cart for purchase.
Not all the sellers are eligible to win the Buy Box. Only those with excellent seller metrics are able to win the share (winning 85% of sales).
Right under the buy box (in red) shows the list of other sellers on Amazon who is yet competing to win the buy box (remaining 15%) In mobile, the Buy Box holds heightened Importance. That’s because the mobile site only features the buy box. So to reach mobile shoppers, winning the Buy Box is of utmost importance.
2.2. How does the algorithm work?
Once a merchant has passed the Amazon’s minimum eligibility requirements, the Buy Box algorithm is further breaks down the sellers according to different variables. Amongst many others, the key variables that decide the winner are:
• Using Fulfillment by Amazon:
• Seller-Fulfilled Prime.
• Landed Price.
• Shipping Time.
Ultimately, Amazon tries to balance between price and delivery speed to give consumer the best value for their money.
3. Speed of Delivery: Online shopping is full of suspense and excitement. The quicker the products arrive, the
Happier the customers are. To make this possible Amazon introduced Prime in 2005 at $79 per year.
3.1What is Amazon Prime?
A subscription model which initially started off as 2-day shipping for certain products later added features like Prime Pantry, music, movies, and many other perks. The introduction of Prime helped Amazon to increase customer loyalty and retain ability.
3.3 Secret behind the speed
Faster delivery is a nightmare for many businesses. Amazon has been able to reach this goal owing to its
1. Innovative technology, powered by robotics.
2. Improved logistics.
Amazon is making huge investments in AI to further improvise its already impressive supply chain system.
Apart from these three, other factors such as hassle free replacement and refund policy, the feature to give reviews for products and extremely helpful customer care service has helped Amazon gain a wide customer base.
While the pandemic is giving a tough time for most businesses while shutting down many, Amazon is all set to
Enter new territories.
• Amazon comes to the rescue of the fashion industry which might face bankruptcy post COVID. In May 2020, it entered into a partnership with Vogue and the Council of Fashion Designers of America and unveiled “Common Threads: Vogue x Amazon Fashion”.
• Amazon has recently entered the food delivery market in selected parts of Bangalore just as food delivery
Apps like Zomato and Swiggy have reduced their workforce due to the pandemic.
Some interesting facts
• Although it is the ‘Everything Store’ but you can’t buy Full-sized homes, cars, cigars and live animals on
• The first book Amazon ever sold was called Fluid Concepts and Creative Analogies by Doug Hofstadter.
• Amazon sells a disembodied husband pillow, dressed in business-casual attire, with a lifeless hand detail
(Who needs a virtual husband?)
• There are about 6000 dogs that work in Amazon HQ in Seattle (isn’t that adorable!!).