AMAZON
Amazon.com, commonly known as Amazon is an American electronic commerce and cloud computing
company based in Seattle, Washington that was founded by Jeff Bezos on July 5, 1994. The tech giant is
the largest Internet-based retailer in the world by total sales and market capitalization. Amazon.com
started as an online bookstore and later diversified to sell DVDs, Blu-rays, CDs, video
downloads/streaming, MP3 downloads/streaming, audiobook downloads/streaming, software, video
games, electronics, apparel, furniture, food, toys, and jewelry. The company also produces consumer
electronics—notably, Kindle e-readers, Fire tablets, Fire TV, and Echo—and is the world's largest
provider of cloud infrastructure services . Amazon also sells certain low-end products like USB cables
under its in-house brand AmazonBasics.
Amazon has separate retail websites for the United States, the United Kingdom and Ireland, France,
Canada, Germany, Italy, Spain, Netherlands, Australia, Brazil, Japan, China, India, and Mexico. Amazon
also offers international shipping to certain other countries for some of its products. In 2016, Dutch,
Polish, and Turkish language versions of the German Amazon website were also launched.
In 2015, Amazon surpassed Walmart as the most valuable retailer in the United States by market
capitalization.Amazon is the fourth most valuable public company in the world, the largest Internet
company by revenue in the world, and the eighth largest employer in the United States. In 2017,
Amazon announced their plans to acquire Whole Foods Market for $13.4 billion by the end of the year,
which would vastly increase Amazon's presence as a physical retailer.
The company was founded as a result of what Amazon founder Jeff Bezos called his "regret minimization
framework," which described his efforts to fend off any regrets for not participating sooner in the
Internet business boom during that time.In 1994, Bezos left his employment as vice-president of D. E.
Shaw & Co., a Wall Street firm, and moved to Seattle, Washington. He began to work on a business plan
for what would eventually become Amazon.com.
On July 5, 1994, Bezos incorporated the company as Cadabra, Inc. Bezos changed the name to
Amazon.com, Inc. a few months later, after a lawyer misheard its original name as "cadaver". In
September 1994, Bezos purchased the URL Relentless.com and briefly considered naming his online
store Relentless, but friends told him the name sounded a bit sinister. The domain is still owned by
Bezos and still redirects to the retailer.The company went online as Amazon.com in 1995.
Bezos selected the name Amazon by looking through the dictionary; he settled on "Amazon" because it
was a place that was "exotic and different", just as he had envisioned for his Internet enterprise. The
Amazon River, he noted, was the biggest river in the world, and he planned to make his store the biggest
in the world. Bezos placed a premium on his head start in building a brand and told a reporter, "There's
nothing about our model that can't be copied over time. But you know, McDonald's got copied. And it
still built a huge, multibillion-dollar company. A lot of it comes down to the brand name. Brand names
are more important online than they are in the physical world." Additionally, a name beginning with "A"
was preferential due to the probability it would occur at the top of any list that was alphabetized.
Amazon's initial business plan was unusual; it did not expect to make a profit for four to five years. This
"slow" growth caused stockholders to complain that the company was not reaching profitability fast
enough to justify their investment or even survive in the long-term. When the dot-com bubble burst at
the start of the 21st century and destroyed many e-companies in the process, Amazon survived and
grew on past the tech crash to become a huge player in online sales. The company finally turned its first
profit in the fourth quarter of 2001: In 2011, Amazon had 30,000 full-time employees in the USA, and by
the end of 2016, it had 180,000 employees. The company employs 306,800 people worldwide in full and
part-time jobs.
Amazon products and services
Amazon.com's product lines available at its website include several media (books, DVDs, music CDs,
videotapes and software), apparel, baby products, consumer electronics, beauty products, gourmet
food, groceries, health and personal-care items, industrial & scientific supplies, kitchen items, jewelry,
watches, lawn and garden items, musical instruments, sporting goods, tools, automotive items and toys
& games.
The domain amazon.com attracted at least 615 million visitors annually by 2008. Amazon attracts over
130 million customers to its US website per month by the start of 2016. The company has also invested
heavily on a massive amount of server capacity for its website, especially to handle the excessive traffic
during the December Christmas holiday season.
Results generated by Amazon's search engine are partly determined by promotional fees.
search engine-$1.35 Billion.
Network TV-$72 Million.
Outdoor-$59 Million.
Newspaper-$42 Million.
Cable TV-$15 Million.
Amazon allows users to submit reviews to the web page of each product. Reviewers must rate the
product on a rating scale from one to five stars. Amazon provides a badging option for reviewers which
indicate the real name of the reviewer or which indicate that the reviewer is one of the top reviewers
by popularity. Customers may comment or vote on the reviews, indicating whether they found a review
helpful to them. If a review is given enough "helpful" hits, it appears on the front page of the product. In
2010, Amazon was reported as being the largest single source of Internet consumer reviews.
Amazon Media sales
You may have noticed that unlike some retailers, Amazon displays relevant Google text ads and banner
ads from brands. This seems in conflict with the strategy of focus on experience since it leads to a more
cluttered store. However in 2011 Amazon revealed that worldwide media sales accounted for
approximately 17% of revenue.James Marcus then goes on to give a fascinating insight into a breakout
group discussion of how Amazon could better use measures to improve its performance. Marcus was in
the Bezos group, brainstorming customer-centric metrics. Marcus (2004) summarises the dialogue, led
by Bezos:
Amazon auctions were launched in March 1999, in large part as a response to the success of eBay. They
were promoted heavily from the home page, category pages and individual product pages. Despite this,
a year after its launch it had only achieved a 3.2% share of the online auction compared to 58% for eBay
and it only declined from this point.
Amazon runs data centers for its online services and owns generators or purchases electricity
corresponding to its consumption, mostly renewable energy.The US Navy has stated that its Relocatable
Radar remains operable regardless of an Amazon wind farm.The company also records data on
customer buyer behavior which enables them to offer or recommend to an individual specific item or
bundles of items based upon preferences demonstrated through purchases or items visited.On January
31, 2013, Amazon experienced an outage that lasted approximately 49 minutes, leaving its site
inaccessible to some customers.
On May 5, 2014, Amazon unveiled a partnership with Twitter. Twitter users can link their accounts to an
Amazon account and automatically add items to their shopping carts by responding to any tweet with an
Amazon product link bearing the hashtag AmazonCart. This allows customers to never leave their
Twitter feed and the product is waiting for them when they go to the Amazon website.
Amazon Vision & strategy
In their 2008 SEC filing, Amazon describe the vision of their business as to:
“Relentlessly focus on customer experience by offering our customers low prices, convenience, and a
wide selection of merchandise.”
The vision is still to offer "Earth’s biggest selection and to be Earth’s most customer-centric company.
Consider how these core marketing messages summarising the Amazon online value proposition are
communicated both on-site and through offline communications.
Of course, achieving customer loyalty and repeat purchases has been key to Amazon’s success. Many
dot-coms failed because they succeeded in achieving awareness, but not loyalty. Amazon achieved both.
In their SEC filing they stress how they seek to achieve this. They say:
"We work to earn repeat purchases by providing easy-to-use functionality, fast and reliable fulfillment,
timely customer service, feature rich content, and a trusted transaction environment.
vision and importance of technology
According to founder and CEO, Jeff Bezos, technology is very important to supporting this focus on the
customer. In their 2010 Annual Report (Amazon, 2011) he said:
Amazon Customers
There are over 76 million customer accounts, but just 1.3 million active seller customers in it’s
marketplaces and Amazon is seeking to increase this. Amazon is unusual for a retailer in that it identifies
“developer customers” who use its Amazon Web Services, which provides access to technology
infrastructure such as hosting that developers can use to develop their own web services.
Members are also encouraged to join a loyalty programme, Amazon Prime, a fee-based membership
program in which members receive free or discounted express shipping, in the United States, the United
Kingdom, Germany and Japan.
By 2008 Amazon was a global brand with other 76 million active customers accounts and order
fulfillment to more than 200 countries. Despite this volume of sales, at December 31, 2007 Amazon
employed approximately 17,000 full-time and part-time employees.
Competition
1) physical-world retailers, catalog retailers, publishers, vendors, distributors and manufacturers of our
products, many of which possess significant brand awareness, sales volume, and customer bases, and
some of which currently sell, or may sell, products or services through the Internet, mail order, or direct
marketing.
(2) A number of indirect competitors, including media companies, Web portals, comparison shopping
websites, and Web search engines, either directly or in collaboration with other retailers;
(3) Companies that provide e-commerce services, including website development; third-party fulfillment
and customer-service.
Sales Performance of Amazon
Today, competitive prices of products are available through third-party sellers in the ‘Amazon
Marketplace’ which are integrated within the standard product listings. The strategy to offer such an
auction facility was initially driven by the need to compete with eBay, but now the strategy has been
adjusted such that Amazon describe it as part of the approach of low-pricing.
Although it might be thought that Amazon would lose out on enabling its merchants to sell products at
lower prices, in fact Amazon makes greater margin on these sales since merchants are charged a
commission on each sale and it is the merchant who bears the cost of storing inventory and fulfilling the
product to customers. As with eBay, Amazon is just facilitating the exchange of bits and bytes between
buyers and sellers without the need to distribute physical products.
Amazon marketing
Amazon does not reveal much about its marketing approach in its annual reports, but there seems to be
a focus on online marketing channels. Amazon (2011) states “we direct customers to our websites
primarily through a number of targeted online marketing channels, such as our Associates program,
sponsored search, portal advertising, email marketing campaigns, and other initiatives”. These other
initiatives may include outdoor and TV advertising, but they are not mentioned specifically. In this
statement they also highlight the importance of customer loyalty tools. They say: “while costs
associated with free shipping are not included in marketing expense, we view free shipping offers and
Amazon Prime as effective worldwide marketing tools, and intend to continue offering them
indefinitely”.
A common theme in Amazon’s development is the drive to use a measured approach to all aspects of
the business, beyond the finance. Marcus (2004) describes an occasion at a corporate ‘boot-camp’ in
January 1997 when Amazon CEO Jeff Bezos ‘saw the light’. ‘At Amazon, we will have a Culture of
Metrics’, he said while addressing his senior staff. He went on to explain how web-based business gave
Amazon an ‘amazing window into human behaviour’. Marcus says: ‘Gone were the fuzzy approximations
of focus groups, the anecdotal fudging and smoke blowing from the marketing department.
A company like Amazon could record every move a visitor made, every last click and twitch of the
mouse. As the data piled up into virtual heaps, hummocks and mountain ranges, you could draw all sorts
of conclusions about their chimerical nature, the consumer. In this sense, Amazon was not merely a
store, but an immense repository of facts. All we needed were the right equations to plug into them’.
Amazon has a culture of experiments of which A/B tests are key components. Examples where A/B tests
are used include new home page design, moving features around the page, different algorithms for
recommendations, changing search relevance rankings. These involve testing a new treatment against a
previous control for a limited time of a few days or a week. The system will randomly show one or more
treatments to visitors and measure a range of parameters such as units sold and revenue by category
(and total), session time, session length, etc. The new features will usually be launched if the desired
metrics are statistically significantly better. Statistical tests are a challenge though as distributions are
not normal (they have a large mass at zero for example of no purchase) There are other challenges since
multiple A/B tests are running every day and A/B tests may overlap and so conflict. There are also
longer-term effects where some features are ‘cool’ for the first two weeks and the opposite effect
where changing navigation may degrade performance temporarily. Amazon also finds that as its users
evolve in their online experience the way they act online has changed. This means that Amazon has to
constantly test and evolve its features.
Amazon Technology
It
follows that the Amazon technology infrastructure must readily support this culture of experimentation
and this can be difficult to achieved with standardised content management. Amazon has achieved its
competitive advantage through developing its technology internally and with a significant investment in
this which may not be available to other organisations without the right focus on the online channels.
As Amazon explains in SEC (2005) ‘using primarily our own proprietary technologies, as well as
technology licensed from third parties, we have implemented numerous features and functionality that
simplify and improve the customer shopping experience, enable third parties to sell on our platform,
and facilitate our fulfillment and customer service operations. Our current strategy is to focus our
development efforts on continuous innovation by creating and enhancing the specialized, proprietary
software that is unique to our business, and to license or acquire commercially-developed technology
for other applications where available and appropriate. We continually invest in several areas of
technology, including our seller platform; A9.com, our wholly-owned subsidiary focused on search
technology on www.A9.com and other Amazon sites; web services; and digital initiatives.
Round (2004) describes the technology approach as ‘distributed development and deployment’. Pages
such as the home page have a number of content ‘pods’ or ‘slots’ which call web services for features.
This makes it relatively easy to change the content in these pods and even change the location of the
pods on-screen. Amazon uses a flowable or fluid page design unlike many sites which enables it to make
the most of real-estate on-screen.
Technology also supports more standard e-retail facilities. SEC (2005) states: ‘We use a set of
applications for accepting and validating customer orders, placing and tracking orders with suppliers,
managing and assigning inventory to customer orders, and ensuring proper shipment of products to
customers. Our transaction-processing systems handle millions of items, a number of different status
inquiries, multiple shipping addresses, gift-wrapping requests, and multiple shipment methods. These
systems allow the customer to choose whether to receive single or several shipments based on
availability and to track the progress of each order. These applications also manage the process of
accepting, authorizing, and charging customer credit cards.Customers Who Bought X…, also bought Y is
Amazon’s signature feature. Round (2004) describes how Amazon relies on acquiring and then crunching
a massive amount of data. Every purchase, every page viewed and every search is recorded. So there are
now to new version, customers who shopped for X also shopped for… and Customers who searched for
X also bought… They also have a system codenamed ‘Goldbox’ which is a cross-sell and awareness
raising tool. Items are discounted to encourage purchases in new categories.
advertising of Amazon
Online advertising techniques include paid search marketing, interactive ads on portals, e-mail
campaigns and search engine optimisation. These are automated as far as possible as described earlier
in the case study. As previously mentioned, the affiliate programme is also important in driving visitors
to Amazon and Amazon offers a wide range of methods of linking to its site to help improve
conversion.For example, affiliates can use straight text links leading direct to a product page and they
also offer a range of dynamic banners which feature different content such as books about Internet
marketing or a search box.
Amazon also use cooperative advertising arrangements, better known as ‘contra-deals’ with some
vendors and other third parties. For example, a print advertisement in 2005 for a particular product such
as a wireless router with a free wireless laptop card promotion will feature a specific Amazon URL in the
ad. In product fulfilment packs, Amazon may include a leaflet for a non-competing online company such
as Figleaves.com (lingerie) or Expedia (travel). In return, Amazon leaflets may be included in customer
communications from the partner brands.
Our Associates program directs customers to our websites by enabling independent websites to make
millions of products available to their audiences with fulfillment performed by us or third parties. We
pay commissions to hundreds of thousands of participants in our Associates program when their
customer referrals result in product sales.
In addition, we offer everyday free shipping options worldwide and recently announced Amazon.com
Prime in the U.S., our first membership program in which members receive free two-day shipping and
discounted overnight shipping. Although marketing expenses do not include the costs of our free
shipping or promotional offers, we view such offers as effective marketing tools.Digital advertising is
affordable and trackable. Digital advertising continues to grow at a large rate and businesses are seeing
tremendous results. Our recommendation is to make digital advertising part of your overall strategy.
Looking for more information on how to implement a digital marketing strategy for your business? We
can help.
5 Things Digital Marketers Can Learn from Amazon Prime's 35 Percent Growth
Ten years ago, Amazon founder Jeff Bezos launched Amazon Prime, a special service for Amazon
customers that offered unlimited two-day shipping for an annual fee.
Amazon Prime is now more successful than even the most optimistic Amazon executive ever could have
predicted. This should be an inspiration to every digital marketer.
1. Keep your message simple.
Any entrepreneur knows that it’s easy to overcomplicate things. But this can create significant problems
when trying to grow a business. After all, how many customers can you expect to acquire if they don't
clearly understand your business model?
One of the main reasons that Amazon Prime is so successful is its simplicity. Amazon can easily
communicate the benefit of Prime: Customers receive unlimited two-day shipping for a flat annual
fee.Digital marketers would be wise to learn from this feature by making sure that the central message
of their marketing campaign is clear and to the point.
2. Organize special events.
Special events can make a huge difference with any digital marketing strategy. Amazon organized Prime
Day on July 15, 2015, to draw attention to the deals customers could get on Amazon Prime.The one-day
shopping event, exclusively for Prime members, turned out to be one of the most successful marketing
tactics Amazon has ever employed. Hundreds of thousands of Amazon customers joined Prime, and the
site had more sales than Black Friday.The success of Prime Day shows that special events don't need to
be reserved solely for a new product launch or grand opening. Digital marketers can also organize
special events to promote an existing product.You’ll be more successful if you get creative when
organizing your own events online. Facebook contests and sweepstakes are great ideas that have stood
the test of time, but the trick is to be original and offer something of value that incentivizes customers
to participate. The fantastic deals that Amazon offered on Prime Day are a great example of this.
3. Capitalize on winning strategies.
Amazon Prime works well with Amazon devices. In fact, many Amazon services complement one other,
which is one of the reasons that Amazon has always thrived as a brand.
Keep this in mind while creating your digital marketing strategy. If you find something that works,
brainstorm new ways to expand on it. For example, if one of your pieces of content goes viral, look for
ways to replicate it. Digital marketing is all about scalability, just like Amazon's growth strategy.
4. Don't sweat any initial criticism.
Prime Day was an enormous success for Amazon. However, you wouldn't know it if you followed the
event on Twitter. A number of customers complained about the lack of deals available, using the
hashtag #PrimeDayFail.Like Amazon, you can't expect to get everything right the first time you try
something new. That isn't to say that you shouldn't try to make sure things run as smoothly as possible -
- you just need to accept the fact you can’t please all the customers all the time, so don't write your
strategies off as failures if feedback isn’t 100 percent positive.
5. Learn from the mistakes of Amazon Prime.
Studying the winning elements of a marketing campaign, such as the launch and growth of Amazon
Prime, can be very valuable. But, remember that it's equally important to learn from what didn’t go
right.It's still too early to tell whether Amazon has made any significant errors with Prime. George
Anderson of Forbes noted that the company may have made some mistakes by growing too quickly and
making promises that it might not be able to keep.For example, shipping times have become somewhat
of an issue. As Anderson pointed out, Amazon had to start offering credits toward Amazon Instant Video
for Prime members willing to wait longer than the two days promised in the delivery contract.
The
time series shows the net revenue of Amazon.com's e-commerce and service sales from 2004 to 2016,
in billion US dollars. In the last reported year, the multinational e-commerce company's net revenue was
135.99 billion U.S. dollars, up from 107.01 billion US dollars in 2015.
