Amazon.com is (operating under Amazon) is one of the leading E-commerce retailer and cloud computing provider. It is an online global marketplace that is available in 12 countries over 5 regions.
This essay will uncover the transformative effects of Amazon on the retail industry for dot-com and brick-and-mortar retailers. This essay aims to explore how Amazon has changed the shipping industry and personalised shopping for consumers through looking at the company’s historical development, business model, social ecology and innovative influence on internet use.
“Nobody seriously doubts that Amazon is anything but the titan of twenty-first century commerce” (Khan, 2017, p. 712).
Amazon’s is recognised for its immense range of products and services it offers. Its ability to provide more and more using convenient and fast methods feeds into consumer gratification. The culture of commerce is slowly shifting to online thanks to Amazon and it’s ever advancing nature. Consumers now want to experience features such as personalised services, mobile experiences and quicker check out times. Finding the best deals, having a wide variety of products, product descriptions and fast and free shipping are also expected thanks to Amazon.
The History of Amazon
Amazon.com was founded by computer science graduate and at the time working as wall street hedge fund analyst, Jeff Bezos in 1994. It originally started as an online bookstore site under the name “Cadabra”. After receiving feedback about the name sounding too similar to ‘cadaver’, Bezos changed it to Amazon in 1995 after the largest river in the world.
Bezos initially wanted Amazon to be ‘The Everything Store’, it was the intention of him and his former boss David Shaw for Amazon to be an online company that acts as a third party company connecting customers and manufacturers together to sell almost every product out there to a worldwide market.
Due to issues of practicality, Bezos initially decided that books would be the first category on Amazon as “They were pure commodities; a copy of a book in one store was identical to the same book carried in another” (Stone, 2014, p.22). It assured customers would receive exactly what they bought. It was a category that allowed for Bezos to provide a wider range of books than the brick-and-mortar retailers could ever stock, he wanted to provide an unlimited selection for all books out there.
In the May of 1997 the company went public and two years later in December 1999 it was valued at 61.7 its initial price (Filson, 2004). Once Bezos could successfully capture a diverse selection of around 2.5 million book titles, it allowed his company to start to turn towards the direction of selling other products.
In 1998 Amazon bought the companies Planet All and Junglee Corporation, a service provider that helps consumer search online to find products from a database. This act helped Bezos to start “looking at a broader range of products” beyond the music compact disks they had launched through its music store. Its success with books allowed it to have room to become an everything store, just as Bezos envisioned it. It then started to diversify its offerings by including videos, toys and electronics.
Since then, Amazon has added to its website every other product and commodity out there, all categorised by departments. It has also since launched several services and ideas such as Amazon Marketplace and Amazon Warehouse, acting as a facilitating intermediary for any individuals looking to directly put up their items at fixed prices and selling used or return items a much lower costs respectively.
In 1998, its product diversifications were paralleled by expanding geographically through the launch of its first international website for book in the UK and the German Telebook (Ritala et al, 2014).
The order of these events in Amazon’s history allow it to develop into one of if not the top e-commerce company to date.
Amazon’s subsidiaries also give it transformative effects for our internet. Alexa, a data analytic tool and Amazon Web Services which provides cloud computing services to start ups and companies such as Airbnb and Netflix, pivotal online entertainment and accommodation services that have become transformative themselves.
Amazon’s Success and Business Model
The founder and CEO of Amazon.com Jeff Bezos first saw a changing presence in technology’s advancement with the internet back in 1994 and took the opportunity to branch into it through the world of retailing. Galloway emphasises that “E-commerce would be a shadow of itself, had Bezos not brought his vision and focus to the medium” (Galloway, 2017, p.23).
Amazon’s success and popularity is predominantly owing to its diverse selection in goods and commodities of any kind. “Amazon is a smorgasbord of selection” (Stone, 2014, p.8). Which is why it has an increasing presence amongst users daily. The fact that the business situates as an online dot-com platform means it can scale to the hundreds and millions of customers that can access it and cover every retail industry out there (Galloway, 2017). Being virtual means it is able to omit the costs of rent unlike brick-and-mortar stores and save costs on employees (Galloway, 2017).
One reason why Amazon was able to take off as a non-traditional online retailer was because its focus was on customers and what suited their needs and wants, not what every similar retailer was doing. Bezos is adamantly determined for Amazon to be a customer oriented company rather than competition focused. He told his employees at a meeting that they should not “be worried about our competitors because they’re never going to send us any money anyway.” (Stone, 2014, p.48).
Amazon is willing to take risks and launch ideas that will positively influence customer experience. Moritz emphasises that “By shifting the focus from price alone to total consumer experience, Amazon is having its own effects – and in some cases, its ripples seem to be crashing into Wal-Mart’s ripples” (Moritz, 2017, pg 1). Though sometimes this focus doesn’t always yield a positive outcome. Several ideas that Amazon launched has since been shut down such as Amazon Webstore, Amazon Auction and Amazon zShops and re-modelled as what we know as Amazon Marketplace today.
With selection being one if its core priorities, Amazon introduced Marketplace to allow individual sellers to access the number one e-commerce platform, offer more to its customer base and outrun any competition (Galloway, 2017).
Amazon’s mission statement “Amazon.com seeks to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online” is reflected in the many features that the site offers including offering the lowest prices possible and personalisation features like “one-click buying, extensive customer and editorial product reviews, gift registries, gift certificates, wish lists, restaurant and movie listings, travel, and photo processing”.
With features like this, Amazon.com is really close to becoming ‘The Everything Store’. Virginia Commonwealth University professor Kelly O’Keede exclaims “There’s virtually nothing left that they haven’t touched”.
Recently, in August 2017 acquired Whole foods a US supermarket chain for $13.7 billion dollars. The reason Amazons invested in the industry of groceries because it will make it feasible for them to deliver fresh groceries and perishable goods. (Moritz, 2017). In fact Amazon Fresh has taken off offering same say delivery of fresh goods.
The strategy to operate a large scale brick-and-mortar store has also helped Amazon to place Whole-foods’ own in-house brand onto its Amazon website, offering a bigger selection than before. By breaking the tradition to remain a dot-com company, Amazon will optimise its physical presence amongst fast to reach consumers in urban spaces (Galloway, 2017).
Amazon’s Internet and Social Ecology
Amazon’s users are customers and consumers who utilise e-commerce and online shopping to purchase products.
Amazon Web Services users include start-ups and companies requiring cloud computing and data storage services, these include Netflix and Airbnb.
Amazon retail relies on suppliers such as wholesale partners for its products. Though the site offers products from all around the world, with most of its suppliers based in the USA, UK and Japan.
Amazons 5 key suppliers are:
Applied Optoelectronics – Optical device, laser transmitter and fibre optics developers and manufacturers based in Texas and China.
Wellnet Corporation – Electronic Settlement and Authentication service based in Tokyo, Japan.
TrueBlue – Staffing and full time management solutions outsourcing based in Tacoma, Washington
GoPro – Video Camera and accessories producer based in California
Nautilus – Fitness equipment developer and manufacturer based in Vancouver, Washington
Amazon It has policies for the regulation of its users. It has legal policies for the conditions of use to the site. There is also a privacy notice about how Amazon handles the information it receives.
In the USA, The Federal Trade Commission regulates any consumer complaints or unfair business practices for Amazon.com.
Being a dot-com company, Amazon relies on various postal services for the delivery of their products. Depending on the region, Amazon will use these different postal services based on what is available per region. In the US, Amazon relies on postal service partners like United States Postal Service who are important for deliveries particularly on Sundays. Parcel select, FedEx and UPS are also postal partners of Amazon.
Amazon also relies on affiliated sites, web developers and Amazon sellers for its success. It’s established a network of partner merchant sites and that advertise Amazon products through their site. The Amazon Associates Program offer referral fees to these website owners, web developers and sellers when people follow the links they created on their sites to advertise Amazon products. This program is free to sign up and was designed not only to increase sales but also improve the value proposition amongst customers (Thierry, 2009).
Though Amazon does aim to have a customer oriented business model, they aren’t totally ignorant to competitors. Ritala et al, 2014 emphasise the key importance of Amazon.com’s coopetition approach as a way to create more customer value. Through recognising how competitors can also be collaborative partners to fulfill different roles online commerce. Amazon marketplace draws on collaborating with independent sellers to use the e-commerce site to allow customers to choose between the Amazon product or the sellers new or used product when placed side by side on the same page (Ritala et al, 2014).
Amazon as an E-commerce has both offline brick-and-mortar competitors as well as other E-commerce competitors.
Competitors in the offline retail sector in USA:
- Home Depot
- Barnes and Noble
Competitors in E-Commerce:
Amazon’s Cloud Computing and Computer Power (Amazon Web Services) has its separate competitors as infrastructure for ICT.
Competitors in Cloud Computing and Computer Power:
- Microsoft Azure
- Google Cloud
- Alibaba Cloud
- IBM Cloud
- Rack space Public Cloud
- Cisco Cloud
How Amazon Has Transformed and Innovated The Internet
The Amazon Effect
The term, The Amazon Effect relates to how Amazon has changed the traditional forms of commerce and practices of retailing and shipping by being a digital marketplace.
Amazon proposes that its testing Drone Delivery Service which can possible deliver packages in 30 minutes or less
Firstly, Amazon.com has pioneered a way in terms of targeting consumers as it knew the scale of people that it could reach through an online presence. Its initial launch online occurred just at the right time when the technological shift of the internet was becoming more prevalent in people’s daily life. Amazon’s innovation to offer an incredibly vast selection of products cater to consumers wants and allow Amazon to be a one stop shopping platform. Shopping features such as the ability to compare and purchase from other independent sellers, leave and access reviews offer a more personalised service which is what satisfies customers’ consumer habits. Amazon.com always seeking to launch new ideas with its customer oriented focus in mind. Innovations such as Amazon Marketplace, 1-click shopping where customers can access a fast check out without having to re-enter information for each purchase and Amazon prime which offer 2 day shipping capture consumer wants. This has put pressure for many physical stores to have an online presence.
The Amazon Effect on Shipping
Being a central E-Commerce entity, shipping and delivery is essential to Amazon. Amazon Prime which offers 2 day shipping for paying and subscribed customers is changing the way of deliveries with the emergence of fast and free shipping. It creates an expectation from other companies to offer similar fast paced shipping rates. Amazon has completely transformed the shipping industry because it has catered to the demands and the way people shop. What some call the ‘Amazon Effect’ refers to how Amazon have changed industries such as “the need for transport industries to adapt to Amazon’s practices”.
Overall, Amazon has become a major leader in E-commerce, contributing to consumers turning their shopping habits from traditional brick-and-mortar stores to online retailers. It has paved a way for online retailers to create a more personalised shopping experience. Amazon has changed the shipping and business sector, “The company has nearly perfected the art of instant gratification, delivering digital products in seconds and their physical incarnations in just a few days (Stone, 2014, p.8).
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