There are many companies that claim to have changed the way we live – but few who, in reality, have ever done so. Amazon truly can claim to have changed the way that the world shops, forever.
What has Amazon achieved?:
- It’s almost solely been responsible for driving mass adoption of online shopping (according to IMRG’s figures, 17p in every £1 spent in the UK was spent online in the first half of 2008)
- It invested early, shunning short-term profits to develop technology and infrastructure that have giving it a long-term advantage over its peers
- It pioneered and refined ‘collaborative filtering’ in the e-commerce space both in terms of website recommendations (‘customers who bought X also bought Y’) and also in terms of personalised email communications based on purchase history and items/categories viewed
- It proved how the online business model could be extended from music, books and films to include almost every household item – in fact Amazon's logo is an arrow leading from A to Z, representing its to sell many products
- It evolved it’s business model to
- Allow 3rd parties to sell ‘new’ and ‘used’ goods on their site (often in direct competition with Amazon itself)
- Allow 3rd party advertising to completely monetise it’s daily traffic
- Allow 3rd party companies to make use of it’s server capacity (storage and CPU) through charging companies on a per-usage for accessing its APIs (Twitter, for example uses Amazon for it’s server requirements)
- It’s taught everyone how a usable, e-commerce operation should work – it’s the benchmark for online e-commerce site design
Where does it go next?
- Clearly an untapped market for Amazon is in the B2B market – especially for office supplies, equipment and furniture
- Amazon Prime (it’s fee-based one-day delivery programme) goes someway to locking-in its high value customers – but with price comparisons for any product just one-click away, Amazon will need to consider how it maximises its share of customers’ online wallet
It’s biggest challenges?
- Gaining a foothold in the download marketplace as more and more media moves from physical formats to purely digital – this is one area that Amazon has not pioneered or kept pace with allowing iTunes and other providers to steel a march (Amazon feels like a follower here)
- Ensuring that it can continue to exploit tax loopholes for certain products (eg music/books/dvds delivered via offshore operations such as Jersey) to ensure it’s price advantage
- Competition – other online companies (eg Play.com) and bricks & mortar businesses (eg John Lewis) are sharpening up their online offerings and now provide real price and service led competition
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