13/10/2022
The Secret to Amazon's Dominance
We all know Amazon as the one-stop shop for anything and everything. Amazon is one of the world’s largest e-commerce companies, accounting for the majority of e-commerce sales worldwide. It is the world’s largest online marketplace, AI assistant provider, a live-streaming platform, and cloud computing platform measured by revenue and market capitalization.
But why did Amazon become so successful? Why does it have almost complete market dominance despite the existence of several other big competitors? We will explore some factors that we believe are the secrets behind Amazon’s success.
Long Term Vision
The one thing that sets Amazon apart from other companies is its commitment to creating a better overall customer experience. In the pursuit of truly making it a better experience for customers, Amazon prioritized capturing the market share to succeed in the long term over earning profits in the short term. As a result, Amazon suffered losses for a very long time. This was openly portrayed as a deliberate measure by Jeff Bezos when he told certain magazines that he planned on Amazon being unprofitable for a long time and even warned his investors that they will not see a return for a while. This may seem counterintuitive to many; how can a company even survive, let alone succeed, without earning profits? Amazon’s entire business strategy was to provide the best products at the lowest prices possible, thus undercutting its competitors. This enabled them to dominate the market, and invest in future growth, which they maintained to be more important than hitting quarterly earnings targets.
This business strategy has become increasingly acclaimed by several industry leaders and many companies are now trying to emulate this model of prioritizing market pe*******on and not worrying about profits.
This also swiftlets us up for the next factor.
Customer Experience
Now, this might seem fairly obvious, but you need to satisfy your customers if you want to become successful, yet it still seems like most companies aren’t as user-centric as they should be.
We saw how Amazon sacrificed profits to involve a richer user experience. Now let’s look at their success from a customer standpoint. They have tried to be the best in all aspects that are relevant to a customer.
A customer wants these three things while shopping online:
· A great variety of products to choose from
· Low Price
· Quick delivery
Amazon is so successful because it has managed to satisfy each of these aspects and thus elevate the consumer experience. ItItsodel of profit later, market share now allowed it to adequately compete against all competitors and provide the best products with the best deals that a consumer could get. They didn’t care if they lost money while trying to discount products, since it meant that consumers would now want to come back to Amazon to buy anything. When there are a lot of consumers, it also entices the sellers to list their products on Amazon, thus giving them a greater variety of products. And this self-sustaining cycle is the secret behind market dominance.
Diversify
The general advice given to anyone who wants to invest is to always diversify their investments into different sectors investigate risks and increase the chances of profit. This also holds for the case of big businesses, and Amazon is a thriving example of it.
The story of how Amazon started as a book-selling platform has become increasingly popular. And now, it literally offers anything that you need, from accessories to clothes, from food to electronics and tools, it truly lives up to its tagline- A to Z.And it’s not just limited to products, but they have also diversified into different services like Video and music streaming, book lending services, cloud services (AWS) and several future-oriented technologies like autonomous vehicles, Artificial Intelligence, robotics, and innovative logistics.
Expanding into new markets and product categories helps in attracting new business opportunities to grow an organization. But it is also noteworthy that Amazon’s diversification attempts are not solely positioned to expand the company’s investment portfolio but to also benefit and develop its core services. Amazon has spoken endlessly about its interest in self-flying drones, trucks, and other means of transportation to raise the efficiency of its e-commerce business. Thus, it is safe to conclude that regardless of the industry, every organization should always strive to diversify its operations and be fearless in pursuing diversification. It helps in getting more business opportunities, mitigating risks associated with just one particular sector, and overall increasing the efficiency of all core operations.
Ecosystem
This is another important factor that solidified Amazon’s dominance as an industrial leader. And the binding force behind Amazon’s ecosystem was Amazon Prime. Amazon Prime launched in 2005 and at that time it was simply a delivery membership that offered unlimited two-day shipping. But since then Prime has morphed into something much bigger, an ecosystem.
It has become the pinnacle of customer acquisition and retention. Prime offers several different services like television streaming, music streaming, cloud storage, etc. Even though they may seem like standard services in today’s day and age, they are surprisingly effective in attracting and retaining customers. Suppose you are not that big of a fan of Amazon’s core services, but enjoy a particular show or a movie that is exclusive to Prime. It incentivizes you to purchase the membership. Amazon has found that the more videos customers watch on Prime Video the more likely they are to renew their Prime membership. Then there’s Prime Music, which also seamlessly integrates with Alexa-enabled services. And when you have already purchased the membership, you are also very likely to use the other perks that come with it. This enables Amazon to lock customers and make it increasingly difficult for them to leave the ecosystem, thus ensuring the renewal of the subscription.
Conclusion
Amazon is one of the most successful companies in the world because of the several industry-defining strategies that they have undertaken to enrich consumer experience, and because of the continuous steps towards newer and innovative technologies. It continues to dominate the industry and provides a great example for upcoming ventures.
