The continuing rise of Amazon

Amazon’s mobile app

With the passing of Apple’s late CEO and co-founder Steve Jobs, the title of most innovative technology business leader can arguably go to Amazon founder and CEO, Jeff Bezos.

Here is a quick look at the rise of Amazon and some of the reasons behind the success of this mix of seemingly unrelated businesses.

Delivering a hassle-free retail experience

Started 18 years ago, as an online book retailer, Amazon has since redefined the retail experience (mostly for the better) by reducing if not eliminating many of the  pain points associated with shopping.

Today’s Amazon experience offers consumers a range of benefits:

  • Huge choice – Consumers can pick from 100s of thousands of products by category –  including books, music, videos, electronics, clothes, jewellery, toys – sold directly by Amazon or via their partner network.
  • Quick product search – In addition to its Website search, it offers Smartphone app user a bar-scanner to quickly check product availability and do price checks when shopping physical stores.
  • Low prices – Given its scale as a retailer, its market power allows it to offer many of its products at the best prices.
  • User reviews – It collects reviews from customers, giving new shoppers practical information and insights when choosing products.
  • Personalized suggestions – Using clients’ past browsing and purchase history it offers targeted recommendations facilitating the discovery process and driving additional sales.
  • Easy check-out – Buyers can easily purchase goods with 1-click using their Website or mobile and tablet apps.
  • Quick delivery & return – With Amazon Prime (called Premium in the France) it offers clients unlimited next day delivery for all shipments (2nd-day delivery in US), and provides them with ‘no-hassles’ returns.

On the other hand, through its current business model it cannot provide advanced levels of personalized shopping advice or assistance, nor can it allow consumers to touch or try out items prior to purchasing.

Regardless, with dedicated websites covering 10 major countries, serving over 200 M users worldwide, it has become the world’s largest retailer, and has forced other retailers to rethink their business.

Reinventing the reading experience

As a big reader, and married to a novelist, Bezos saw that long-form reading would be digitized, much as music and video had been.

By introducing the Kindle e-reader and online Kindle book store in 2007, Amazon became the first truly successful provider of e-reading devices and digital books, nearly 3 years before Apple introduced the iPad and iBook store.

Its current range of  Kindle devices includes e-readers and Fire tablets giving users access to a huge selection of books, magazines, newspapers, digital music, movies, streaming video and other media through its online store.

The relative success of Kindle (its hard to really say as they do not publicly disclose sales figures) can be attributed to various factors:

  • Large content selection – Books, music, video, games, apps, etc.
  • Usability – Great reading experience in all light conditions; 8 week battery-life; 1-click purchase.
  • Portability – e-readers are the size a paperback book, light weight (from 170 g – the weight of 2 apples).
  • Affordability – Starting at $69 for black and white e-reader to $299 for the HD touch-screen, Android-based colour tablet

While they may have been the early leader in the digital reading market, with the increasing number of new tablet devices and related print, audio and video services, Amazon will have to do more than just continue polishing their line of Kindles if they are to stay on top.

On-demand Corporate Web Services

As Amazon has continued on its upward growth path, it kept developing and expanding its in-house IT infrastructure and related systems.

In 2004 one of its engineers put forth a proposal describing how the company could profit by leasing out infrastructure capabilities to other IT-dependent firms. As a result, one of its South African-based teams built EC2, its first computing on-demand service.

Today Amazon Web Services (AWS) offers customers “a complete set of infrastructure and application services that enable you to run virtually everything in the cloud: from enterprise applications and big data projects to social games and mobile apps

AWS currently offers a wide range of services including on-demand computing power, content distribution, digital money transfer services, managed data storage, managed database services and a crowdsourced marketplace for performing human intelligence tasks (Mechanical Turk).

AWS’ customers benefit in a number of ways:

  • Replacing upfront IT Capex with lower variable cost
  • Reducing IT-related labour costs
  • High-system availability for a much lower cost than self-hosting
  • Benefiting from increasing savings as their usage grows

At the same time AWS has suffered a couple of high-profile outages affecting popular Internet companies like Pinterest, Foursquare and Netflix. Despite this, according to GigaOM it seems that AWS is on its way to becoming a US$ 2 B a year business (once again they do not disclose sales figures).

Amazon’s continued growth is based on 3 principals

In a recent interview with CNN Money, when asked what Amazon’s disparate services all had in common, Bezos mentioned 3 guiding principals:

  1. Customer obsession – “We start with the customer and work backwards; as opposed to competitor obsession”
  2. The willingness to invent – “If you are going to invent you have to be willing to be experimental,… to go down blind alleys,… and to be misunderstood for long periods of time”
  3. Long-term thinking – “We see it as an advantage that we don’t need payback on our initiatives….We are willing to go 4-7 years before we see meaningful financial results from our new initiatives.”

Since the beginning Bezos has always maintained that Amazon was a long-term investment. Despite some challenges during the 2001 dot-com bust, it has continued to deepen existing product categories and expand into new areas (e.g. food, wine), while creating several new businesses (and in some cases new markets).

This continued customer focus and approach to innovation, placing Amazon as the No. 2 most innovative company in 2012 according to Forbes magazine, has helped it deliver an average 5-Yr revenue growth of 32% and an income growth of 37% over the same period.

For the 2011 fiscal year it brought in US$ 48 B in revenue with US$ 862 M in operating profit (1.8% margin); enough to place it at the 206th spot of the Global Fortune 500 list of the world’s largest companies.

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2 Responses to “The continuing rise of Amazon”

  1. Today’s technology leaders also lead in marketing « Merkado | Technology Marketing Leadership Blog Says:

    […] leaders include companies such as Cisco, Intel, IBM, Microsoft, Adobe, Apple, Samsung, Google, Amazon and […]

  2. Intel: How a tech leader can lose its mojo | Merkado | Technology Marketing Leadership Blog Says:

    […] Assuming they could assemble the capabilities, by leveraging its brand equity Intel could also offer cloud computing services, much like Amazon’s AWS. […]

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