It’s hard to imagine a time when Amazon wasn’t a dominant force in the ecommerce market. The behemoth has grown into one of the biggest businesses in the world, having acquired corporations, creating and selling their own products like Alexa and Kindle tablets, not to mention their highly successful television streaming arm, Amazon Studios. Amazon’s incredible strength as a corporation came from careful, smart strategy to engage the entire world. Its rise is study in flawless ecommerce growth strategy.
The Power of Amazon
Amazon’s annual revenue was reported at $232,887 million US in 2018, a massive jump from back in 2005 when revenues were reported at $8490 million US. The company’s twenty-five year run has been nothing but a massive success. Amazon carries everything from drones to t-shirts to pet supplies, and yes, even books. To accommodate this massive inventory, even if third-party sellers take up much of the space these days, Amazon employed 646,500 as of the end of 2018 according to Statista, making them the biggest technology employer in the world.
Amazon’s impact is so powerful that in 2017 the company launched a nation-wide campaign in the U.S. to entice cities to apply as Amazon’s second headquarter location. NPR reported that the new location would require a $5 billion U.S. investment by Amazon, and provide 25,000 jobs, all of which would give an average salary of $150,000 U.S. Cities all over the States pitched their advantages in an attempt to lure Amazon. The corporation’s local presence would dramatically change local economy for the better. In the end, Virginia, near the capital, D.C., won.
Bloomberg states that Amazon is the world’s biggest provider of cloud-based services, and while the corporation is poised to significantly grow internationally, it faces competition from similar ecommerce giants, like AliExpress, a subsidiary of China powerhouse Alibaba. But for such a continually successful, fast-growing company, total global presence seems inevitable.
Like many tech stories, Amazon began in a residential home in the northwestern United States. On July 5, 1994, Jeff Bezos launched a company called Cadabra, later known as Amazon, out of his house in Seattle. Bezos was only thirty years-old and had a good hunch the internet was going to be a big thing, and he wanted to get in early, so he made a 10,000 investment in Amazon, and from there, it boomed.
The initial company name Cadabra referenced a magician’s claim, “abra cadabra!” before revealing a magic trick, however this sounded too much like a dead body cadaver, so the name needed to change. Amazon came from the Amazon River, which is the world’s largest river. At the time, Amazon was logged as “Earth’s Biggest Book Store.” Indeed, it held every book you could imagine.
Nine months later the company birthed its first sale. On April 3, 1995, John Wainwright bought “Fluid Concepts & Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought” by Douglas Hofstader. At the time of purchase, Wainwright thought he would get free books based on a disclaimer, but instead they charged his card.
Wainwright found Amazon through word of mouth. What he unknowingly visited was the beta site used by 300 testers for a year before the real launch. The site didn’t actually go live until July 16, 1995. For a start-up, before there were “start-ups,” Amazon did exceedingly well. In their first two months their average sales were $20,000 per week. By then end of the calendar year, Amazon received 2200 daily site visits, and it sold $511,000.
In its early days in 1995 Amazon was solely an online bookseller. An innovative idea, buyers could get low priced books that might not be available at box chains or independent brick and mortar retailers. Amazon established a trusted base, a reliable, well-curated online resource. Amazon had what book buyers wanted, it was inexpensive, and it was convenient. The appeal was basic and practical.
Growing Up: How Amazon Expanded
In 1997 Amazon got an IPO; at the time the shares were worth $1.96. The company flourished, building from every success. Amazon’s growth has had exponential growth over the past 15 years, as indicated by its IPO.
By 1999, Amazon sold books, entertainment, home goods, toys, and video games. At the time, the flywheel concept was the core of Amazon’s growth strategy. Everything was built to support the foundation of another aspect of the company. Maybe more significant, way ahead of today’s SEO and digital marketing practices, CNN reports Amazon launched the 1-Click button patent. The advantage? To gather data about its customers in order to better serve and advertise to them. For customers, the appeal was simple: buying was just easier. Amazon knew that the best way to expand and serve their audience, was to target directly to them – give the people what they want. That meant they had to know who they were and how they behaved.
The Marketplace launched in 2000, in which third party vendors could sell wares on Amazon’s site for the first time. Now, Amazon could take a portion of the sales without any warehouse overhead. In just five years, Amazon paved new paths of revenue with each small success.
Prime’s Power and the Kindle Fires up New Revenue Streams
One of the most notable shifts in Amazon’s expansion was its integration of Prime, a membership option that guaranteed two-day or less free shipping. Memberships were an annual fee. Customer loyalty and even more insight on spending habits were available from this move. The program still exists and offers other options outside of shipping. In 2011, Prime members had access to instant streaming video play. You could rent a movie, and watch it on Prime. This was an early precursor to what’s become Amazon Studio’s original programming, all available for streaming with a Prime membership. There’s the flywheel concept in action early on – pay and play may have always part of the plan.
Also building off the flywheel was the Kindle. The first of its kind, this tablet was initially seen as a probable loss for Amazon. According to analysts early reactions on Business Insider in 2011, the cost of Kindle’s hardware production was only covered by the one-time purchase of the equipment. Even then, Amazon had a reputation of building, and the Kindle was the foundation. Insider accurately forecast a new digital market for Amazon to profit from: digital books, a publishing house, e-book self-publishing capabilities. They predicted that Instant Video wasn’t making any money – yet, but it had potential. We now know that the feature provided an opportunity for its studio division, an Emmy award winning entity.
Beyond Amazon – Acquisitions and Domination
If Amazon wasn’t already seen as a savvy innovator, their calculated acquisitions put them in position as an ecommerce force to be reckoned with. In time, they purchased many businesses, like Zappos.com, IMDB.com, and, in a major move in 2017, Whole Foods – with a Prime shoppers got a discount, and now they could order their groceries online and have them delivered, too, right in line with Amazon’s initial ecommerce concept.
Everything in Amazon’s realm centers around ecommerce. The goal? Total ecommerce domination. Bezos has never been shy about that intent. Acquisitions create more outlets to integrate with every aspect of a consumer’s life. Amazon could create an entirely digital retail future… maybe.
While many claims state that Amazon has driven physical storefronts out of business, Amazon has recently begun opening their own retail outlets. Maybe real estate has value after all. A convenient aspect of these locations is the return policy: a customer can return an item that was shipped to them to an Amazon store. Books and limited merchandise can also be purchased – it is, effectively, the bookstore concept Amazon went head to head with twenty-five years ago. Amazon now offers a delivery pad, or Hub Locker, so items can be sent and locked away until the buyer is ready to retrieve the wares. In major cities like New York and Chicago, this convenience is major.
Beyond Borders: Investing and Amazon
Amazon touches all corners of every American’s life, and like the American cities who were looking for Amazon’s presence, countries are also keen to know how to invest in Amazon, and locally reap the benefits Amazon’s economic capabilities. However, around the globe Amazon doesn’t have the same power as an e-commerce essential site as it does in the U.S. Hurdles include battling competition that may have modeled themselves on Amazon, a strange ironic turn of events. Behemoths like Alibaba’s AliExpress, JD.com, and MercadoLibre, all outdo Amazon in certain markets. MercadoLibre is even opening distribution centers throughout LatAm to improve logistics, making them an even harder entity to battle.
One strategy Amazon has in place for global expansion is to expand on the Prime feature. An interview with David Knijnik, the co-founder of Quartile, which handles Amazon’s advertising, on emarketer.com, Knijnik indicated the concept is to lure in more consumers, thus hooking them in as loyal customers.
In the same fashion it began, Amazon isn’t taking the whole world at once. Currently, one area of focus is India, which is a current hotbed in the ecommerce wars. According to Forbes, Amazon is thinking locally, even though India anything but close to Seattle. Also on Amazon’s radar is Latin America. In 2017, Amazon began selling electronics in Brazil, and in 2018, retail expanded to clothing, and in the same year, they opened their third-party marketplace. Before this, Amazon merchandise in Brazil was limited to books. Like in India, Amazon is taking small steps, slowly integrating into the market.
Enticing to Brazilians is the easy return policy Amazon employs, which according to Mintel, is a challenging ordeal for at least a third of Brazilians. Amazon’s been slowly dipping its toe into LatAm – Mexico and Chile have already seen smaller, targeted stores. The hesitancy behind Amazon’s slow move may have to do with the fact that they’re taking on Latin American ecommerce master, MercadoLibre.
Still, Brazilians are a savvy bunch, embracing new international businesses that have the right approach. China does well in Brazil, as seen in AliExpress expansion navigated the Brazilian territory seamlessly. Facing off with MercadoLibre can be done, with the right tactic.
Last month Amazon made a bold, familiar move – it launched its coveted Prime service in Brazil. Like the tactic in India, they’re betting on the loyalty to make them rise to the top. Unlike the competition in India, however, Amazon faces an already established, well-loved ecommerce mega corp in MercadoLibre. According to Bloomberg, Amazon only has two distribution centers in Brazil, and therefor less selection. Prime is intended to change the playing field. With Prime, they’re also introducing a Portuguese speaking Alexa digital device, which has been “tailored for Portuguese speakers and can sing soccer team anthems—a gesture to the nation’s ardent fans.”
Alibaba beats Amazon out in its hometown China, so to really globally dominate, Brazil is a particularly important market for Amazon to conquer. To do that, they have to overtake MercadoLibre. Can Prime do it all? Amazon’s investment in Brazil needs a smart approach.
Not entirely. So, thinking locally, Amazon is producing a documentary on Brazil’s soccer team. To please local buyers the inventory will change to fit their preferences. This is what Amazon does; it takes its time and learns who its customers are, but the company is always working on its next step, quietly as it may seem. As told to Bloomberg, Amazon Brazil’s Chief Alex Szapiro says Amazon is in no rush. “What happens in the United States today took 25 years. We want to do it fast, but doing it right.”