Amazon: Key Success Factors
Mapping the reasons for Amazon’s industry leadership and growth is a difficult task. There is hardly an area of innovation left untapped (often, re-invented) by the company.
Amazon’s mission is to be a “customer focused company”, and this guides any decision made by the company.
The company is guided by 4 principles:
- customer obsession rather than competitor focus,
- passion for invention,
- commitment to operational excellence, and
- long-term thinking.
Here is an analysis of some of the elements making Amazon a best in class company.
1. Loyalty and Pricing.
The Prime membership program offers a variety of benefits, from faster delivery to video and music content. It is key to Amazon’s sustained growth, due to Prime Members more frequent and larger purchases.
The Amazon private label further strengthens price-competitiveness.
Subscribe and Save and Amazon Pantry offer discount for bulk or repeat purchase. Payment cards and point system offer additional benefits. “Digital Day”, “Prime Day” are special members’ events.
2. Supporting decisions.
Almost a given today, Amazon.com was a pioneer in customer reviews, and has improved the personal recommendation and Q&A system.
A “personal stylist” app which helps you decide between two outfits; a 7 day trial period for apparel
3. Fast and convenient.
As quick delivery is often a barrier in e-commerce, Amazon uses various tools (from algorithms, through warehousing, to couriers), to deliver products within as little as 1 hour (and mostly, 2 days).
While a patent for drone-based delivery is the center of media attention, Amazon is rumored to be building its own delivery services. An X-Ray service lets customers “see” what’s in their closed box through the app.
Understanding that shoppers have different motivations for each category, Amazon expands lucrative categories (e.g., grocery, outdoor equipment) in the form of micro-sites. It seems that the company is starting to create mini-businesses with each operating as a separate entity, for a focused competitive positioning.
Amazon Go, the new Amazon supermarket, and the Whole Foods Market acquisition, stem from looking at grocery as an independent platform, creating differentiation and competitive capabilities as would be expected from an entirely separate business.
5. Content as a Service.
Beyond products and services, Amazon sees content as a strong benefit for today’s digital consumer. This pertains to both production of original content for Prime Video members, and sales of content, such as through Amazon Music Unlimited. Amazon Devices such as Fire TV, Echo etc., support streaming of content.
Prime Reading is an unlimited reading portfolio for U.S. Prime members. Audible, acquired by Amazon, ventured the company into the growing audiobook arena. With Alexa (Amazon Echo’s AI), content is delivered ever more seamlessly.
Orders made through Dash Buttons, a physical connected button enabling the online order of everyday goods (an IoT platform), increased over 5x during 2016. Dash Buttons expanded beyond the US to Austria, Germany, and the UK.
Amazon Echo (Alexa), the company’s AI platform, allows a seamless shopping experience, beyond the company’s variety.
The brick and mortar Amazon Go and Amazon Bookshop, which are digital at core, are a demonstration of anywhere-anyhow shopping.
7. Curation and specialty items.
The company offers variety that is a mixture between leading supplier products, and small artisanal manufacturers. In both cases, the company offers some products that cannot be purchased elsewhere.
Amazon Surprise is an example for how the company acts as a direct-to-consumer platform for small, artisan brands, “curated” by Amazon. It operates through a “Surprise” dash button, to encourage impulse confectionery purchase.
With its private label and growing service offering, Amazon is an ever-growing threat to manufacturers, not only to retailers. But at the same time, it provides a ground-breaking curation and distribution platform where small suppliers can grow – and as such, the opportunities that Amazon offers are greater than the threat it creates for product and service providers.