Opinions

Why is Amazon so successful?

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’

Milestones

Companies owned by Amazon

Major Breakthroughs

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.

What’s new?

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

Amazon.

•   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!!).

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