In E-commerce, Industry by JP Drake

Our Take Aways from Business Boomers: Amazon

Business Boomers: Amazon’s Retail Revolution‘ was a documentary recently aired on BBC 2. It covered the monumental increase in Amazon’s reach, influence, sales and business operation since it’s founding days in 1994, when it was nothing but Jeff Bezos, a garage and a couple of desks made from doors (seriously).

Amazon LogoBroadcast originally on Monday 21st April and at just under one hour long, Business Boomers is well worth a watch, so get yourselves over to BBC iPlayer using the link above before you miss out.

It covered just about everything from the company’s own business philosophies, to the perspective of Amazon customers and more interestingly, Amazon rivals, giving an overall picture how the company fits into today’s society.

Love it or hate it, if you’ve got an opinion on Amazon we’d be chuffed to hear your thoughts on the retail giant so drop us a comment below!

 

Why is Amazon so relevant today?

Well, “British people now do more of their shopping online than any other nation (Ofcom) and in 2013, tens of millions of British customers used Amazon to buy 4.5 billion pounds’ worth of goods” (BBC). That’s the equivalent of £70 worth of goods to every man woman and child or half of all online sales!

Given one of the opening statements in the BBC documentary, it’s really no surprise that Amazon has become so successful so quickly because the company was “fundamentally designed from the ground up to dissolve and destroy other businesses by undercutting them” (Amazon actually admit in some cases to selling bestselling products at a loss). Indeed it is this undercutting on price that is a primary reason why book sellers in particular are full of contempt for Jeff Bezos’ company. And probably part of the reason why,  across Britain 1 bookshop closes every week.

However, for Amazon customers, the image of the retail giant is nothing like as damning. For the consumer, (especially those in remote locations such as John  O Groats up in the North of Scotland), Amazon provides a vital outlet for residents to access and buy items that would otherwise require a serious amount of effort. For them, Amazon represents the primary advantage of e-Commerce: convenience.

To demonstrate the scale of Amazon’s truly amazing customer awareness, the BBC documentary ran an experiment with school children. When presented with the word “Amazon”, the class of London school children were asked to choose which definition of Amazon they thought of first: retail giant or the Brazilian rainforest and river. Needless to say, the majority first thought of our business boomer, Amazon the retail giant.

 

So What is the Amazon Philosophy?

Well first and foremost is Jeff Bezos’ favourite mantra: “start with the customer and work backwards”, which is drummed into Amazon staff at every available opportunity. When the company gets a customer complaints, this core value means it’s not enough to simply handle that complaint, staff are expected to drop everything, and not just fix that complaint in that one moment, but fix it forever so that complaint cannot come up/occur again.  You are expected to change the mechanism.

Another Amazon core value is frugality, or to be frugal. This in theory at least was the reason for the recycled door desks to furnish the very first Amazon HQ. These two philosophies, a customer centric focus and a belief in spending resources wisely are definitely too qualities we can attribute a large proportion of Amazon’s success to and therefore, recommend it as a strategy for other retailers to learn from!

 

 How Has Amazon Grown So Much So Quickly?

In short, thanks to the Flywheel Effect. When Amazon started out in business, it was during a time when WallStreet was in the habit of giving businesses a “free pass”, allowing them to grow without actually having to make any money. You might be shocked to hear that despite the value of the company and its staggering rate of growth, to this day, Amazon continues to make very little profits! This contributes to its power in the retail and publishing sectors because non-profit companies are notoriously hard to compete with!

This type of growth was defined as the Flywheel effect. For Amazon, this flywheel was made to fly even faster when they introduced the Amazon Marketplace. This not only created new jobs at the company, but opened up the Amazon platform to a new realm of customers. Today more than 40% of all units sold on Amazon worldwide are sold by third party sellers on Marketplace.

Since then the company has expanded their services time and time again and with each expansion or new product launch, there is a new in-let for new customers and a new encouragement for existing customers to keep returning to Amazon.

Essentially, every Amazon service you use, makes you want to use other Amazon services and the more you use these the more you will use the others.

The Amazon Flywheel EffectAs well as the launch of “marketplace”, another major leap forward for Amazon in terms of growth, came with the launch of Kindle. The Amazon e-reader (better known as kindle) was actually first launched in 2007, although the first really serious one didn’t arrive until 2009 This was their first consumer product. It was inspired by what Apple did with iTunes and the iPod and as well as offering a new product for consumers to buy, the kindle simultaneously created a new publishing business, allowing anyone to upload their writing and self-publish on the platform.

This has been so popular that today, 1 in 5 of Kindle’s best sellers list are self-published works, and Amazon is now the most important player in the publishing industry.

Could The Times Be Changing?

As powerful as Amazon seems to be today, not everyone out there has succumbed to the pressure. The French government in particular continues to offer stiff opposition to the company’s growth there by currently limiting the discount it can offer on books to just 5% and looking at restricting their free p&p offers as well. Elsewhere, retailer Lush hit out at Amazon after first, removing their products from the site and then taking them to court (and winning) after it discovered Amazon was trading on their company name.

There has also been an outcry to boycott the company, led by UK consumers after it was discovered the company pays lower tax to the UK government due to having subsidiaries in Luxembourg. So it seems not everything is as rosy as it once looked for Amazon.

More over, the competition between online and offline retailing is heating up even further, largely thanks to the increased use of smartphones and the better in-store experiences they enable. The trend suggests that online and offline shopping are starting to blur and some online retailers such as Ebay, are already taking steps to take advantage of this, considering services like click and collect and check in.

So, at a current value of $170 billion dollars after just 20 years in business, can Amazon continue to grow and develop it’s services to dominate for another 20? Well actually we’re not so sure but what do you think?

Is Amazon turning us into nothing more than lazy and frankly slightly guilty consumers?

 

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