Amazon : the winning bet !

© copyright image : Amazon

Firstly, Amazon is an e-commerce pioneer. Indeed, it launched this activity at a time when no one would bet a penny on this technology. Jeff Bezos retrospectively explains that he entered the online sales segment because he missed the early days of the Internet. He is therefore a pioneer of online commerce. Initially, Amazon focused on selling books: it was a true digital bookstore. Then, the Seattle-based firm began selling music and videos in 1998, which is when it started its international activities by acquiring digital booksellers in the United Kingdom and Germany. From the following year, Amazon began selling more diverse items, including video games, consumer electronics, home improvement items, software, games, and toys.

While Amazon has revolutionized the digital world, the company also owes its success to its cutting-edge logistics organization.

On the other hand, the American company has also succeeded in its logistics management. Thus, most of its employees work in warehouses to prepare orders. To gain productivity, Amazon has implemented a new work organization based on the principles of scientific division of labor. We distinguish between pickers and packers. Firstly, pickers are those who go to the shelves of giant warehouses to fetch the appropriate products ordered by customers. Secondly, packers, on their side, have all the objects passing in front of them and are responsible for preparing orders by directly filling the boxes.

Moreover, Amazon uses many different transportation services to deliver packages. Amazon-branded services include :

 

• First, Amazon Air : a cargo airline for bulk transport, with last-mile delivery handled either by Amazon Flex, Amazon Logistics or local postal services.
• Also, Amazon Flex : a smartphone application that allows individuals to act as independent contractors, delivering packages to customers from personal vehicles without uniforms. Presented as a way to earn extra income, this application actually acts as an interface based on the Uber model.
• Or, Amazon Logistics : a service where Amazon contracts with small businesses (nicknamed “Delivery Service Partners“) to make deliveries to customers. Each company has a fleet of about 20 to 40 Amazon-branded vans, and the subcontractors’ employees wear Amazon uniforms. Since December 2020, it operates in the United States, Canada, Italy, Germany, Spain, and the United Kingdom. This service is promising and continues its international development.
• Then, Amazon Prime Air : an experimental drone delivery service. It has been much talked about, but currently, this service is still in the testing phase.
• Finally, Amazon Hub Locker : this is a pickup point service that belongs directly to Amazon. Often located in shopping centers or gas stations, they offer an alternative to home delivery.

Amazon’s exponential growth does not come without controversy. American and Italian employees have rebelled following the group’s growth, explaining that they were working in indecent conditions, with a certain work overload. In the United States, a social movement even demanded the establishment of unions within the company.

The installation of warehouses is also controversial. Amazon does create jobs, but more and more French politicians accuse the Seattle firm of destroying more than it creates. Moreover, the construction of mega-warehouses provokes the anger of environmental associations who accuse the American giant of having artificially transformed agricultural land.

© copyright image : Amazon

Amazon’s strength is also diversification. Jeff Bezos sought to diversify his services early on, notably through external growth (acquisition of companies deemed promising and integratable into the Amazon group). Here’s an overview of the lesser-known gems belonging to Amazon, which will show you the extent of the Seattle firm.

Amazon Web Services (AWS) is an Amazon subsidiary that provides on-demand cloud computing platforms and APIs to individuals, companies, and governments, on a pay-as-you-go basis. These web services provide a variety of particularly rich abstract core technical infrastructures. This is precisely the point that constitutes one of the keys to its success.

The AWS technology is implemented in server farms around the world and maintained by the Amazon subsidiary. Fees are based on pay-per-use. As part of the subscription contract, Amazon ensures the security of subscribers’ systems. AWS operates from many global geographic regions, with 6 server farms in North America.

Amazon markets AWS to subscribers as a way to obtain large-scale computing capacity more quickly and cheaply than building an actual battery of physical servers. All services are billed based on usage, but each service measures usage in different ways. In 2017, AWS held 33% of the entire cloud (IaaS, PaaS), while the next two competitors, Microsoft Azure and Google Cloud, held 18% and 9% respectively. Although little known, this Amazon activity is nevertheless the one that brings the most profits to the entire group.

Consequently, Amazon decided to launch a paid loyalty program that offers a whole range of premium services. It’s called Prime, it’s a paid subscription program to Amazon that is available in many countries and allows users to access additional services otherwise unavailable or available for an extra charge to other Amazon customers. Services include same, one, or two-day delivery of goods and streaming services for music, video, e-books, games, and groceries. In April 2021, Amazon reported that Prime had more than 200 million subscribers worldwide. Amazon loves this subscription business model which it uses for other products, like AWS or its connected bracelet that offers health data.

A user who subscribes to Prime is strongly encouraged to take advantage of all the included services: such as their free book on Audible, or their streaming on Prime Video. Thus, Amazon uses this loyalty program like an octopus that forces its customers to use other services and therefore increase customer value, lifetime, and average basket size.

Amazon Kindle is a series of e-readers designed and marketed by Amazon. Amazon’s Kindle devices allow users to browse, buy, download, and read e-books, newspapers, magazines, and other digital media via a wireless network to the Kindle store. All Kindle devices integrate with Kindle store content and, as of March 2018, the store had over six million e-books available in the United States.

It’s thus a true revolution in the book sector that Amazon is carrying out, digitalizing this commodity and offering more references than any library in the world could contain. Amazon has simultaneously launched an offensive in the audiobook niche with its Audible application.

Twitch is another great example of diversification strategy. To compete with Google in online video, Amazon bought Twitch, which is the flagship platform for streamers to broadcast live and interact with their subscribers during their video game sessions. Since then, Twitch has opened up to more classic formats, even including political interviews.

So, Alexa is a smart speaker that relies on artificial intelligence technologies. It is capable of interacting with voice, playing music, creating to-do lists, setting alarms, streaming podcasts, playing audiobooks, and providing information on weather, traffic, sports, and other real-time information, such as news.

But Alexa can also control several smart devices, like the Fire TV Cube, serving as a home automation system. Moreover, users can extend Alexa’s capabilities by installing “skills” (additional features developed by third-party providers, in other settings more commonly called applications) such as weather programs and audio features.

Thus, Amazon manages to monetize its smart speaker beyond the initial purchase. For it to play an audiobook or music, it’s almost essential to use Amazon’s services in these areas. Additionally, the owner of a smart speaker becomes captive to the American giant’s services. So, it’s a bit the same principle as with Amazon Prime.

© copyright image : Amazon

Thus, Amazon is today a company in a dominant position. And from being a digital pioneer, it has become one of the world leaders, among the famous GAFAM. Firstly, this domination is exercised through the development of synergies between its products and the creation of captive markets. Secondly, we must admit that Jeff Bezos’ company is particularly advanced in its sales techniques. Thirdly, it’s the company that invented affiliation, and which today is growing by reinventing flash sales.