amazon technology case study

Roger Swannell

Case study on Amazon’s approach to innovation and competition in the knowledge economy

Admin on 13/03/2020

Introduction

Amazon is generally regarded as one of the most innovative companies in the world (Reed, 2017). In considering how Amazon approaches innovation within the knowledge economy we’ll frame the analysis of new technologies by looking at McKinsey’s research on disruptive technologies that have potential for economic impact, how Amazon has approached innovation in each of these new technologies, and consider how innovation has impacted Amazon’s revenue growth.

Amazon’s approach to innovation

Since beginning in 1995 as an online bookstore Amazon has expanded into ecommerce marketplace, digital advertising, cloud computing, groceries and apparel, and artificial intelligence industries. Amazon’s investment strategy for innovation is to act like a growth investor, spreading it’s investments across a diverse range of sectors and industries. This is a markedly different strategy to other tech giants who choose to focus the majority of their innovation efforts within their core competencies e.g. Facebook with social networks and Apple with consumer electronic devices (Bowman, 2017).

Jeff Bezo, CEO of Amazon, explains, “Because of our emphasis on the long-term, we may make decisions and weigh tradeoffs differently than some companies… We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations” (Bezos, 1997). It is through this approach to innovation that Amazon seeks to develop monopolies in all of the sectors that it enters.

McKinsey Global Institute’s report (Fig. 1) on disruptive technologies identifies “12 technologies that could drive truly massive economic transformations and disruptions in the coming years” (Manyika et al, 2013). Amazon is publicly investing in at least eight of the twelve technologies, through investing in companies that are working on new technologies, utilising the new technology to build organisational capacity and improve productivity, and through commercialising the new technologies in ways that enable Amazon’s business customers to implement within their companies.

Amazon is known for its secrecy around innovation, necessarily so in order to protect its trade secrets, but by looking at how Amazon approaches the six most impactful disruptive technologies we can gain an understanding of how Amazon approaches innovation.

Mobile Internet

“Increasingly inexpensive and capable mobile computing devices and Internet connectivity”

Amazon’s Kindle eReader, which launched in 2007, wasn’t the first eReader on the market but with it’s innovative WiFi hardware and Kindle Direct Publishing, the self-publishing platform, it enabled customers to have thousands of books available within seconds and authors to publish their writing without relying on the publishing industry (Fox Rubin, 2017). Whilst the design of the device was very similar to other eReaders, it was Amazon’s move to create its own ebook format and the Kindle Direct Publishing Network to allow ebooks to be published in its own format that fits with Amazon’s approach to innovation.

Whilst the majority of manufacturers were focused on developing eReader devices that could support .epub as the main format for ebooks, Amazon was instead establishing a core competency around its own format and publishing network. Developing the device was a complementary competency for Amazon, although one important enough for Amazon to ensure it controlled the device as part of the value chain for ebooks.

The digitization of books was a technological breakthrough which following Anderson and Tuishman’s evolutionary model of technological change, resulted in lots of technical variation in the formats available. Over the first decade the variations in formats reduced until the current situation of having two formats, epub and Amazon KIndle format, available. The ebook market hasn’t yet arrived at a single dominant design (Anderson & Tushman, 1990. Suárez & Utterback, 1995) however as Amazon currently dominates the eReader market with 60% of worldwide device sales in 2017 (Fox Rubin, 2017), only time will tell if the Amazon format for ebooks becomes the dominant design.

Automation of knowledge work

“Intelligent software systems that can perform knowledge-work tasks”

In 2018 Amazon “reorganised around Artificial Intelligence” (Morgan, 2018). This reorganisation focused other teams and departments at Amazon to utilise AI in their products and services, including warehouse management, recommendations on Amazon Music, Prime Video and on the ecommerce marketplace, Alexa and the Amazon Go store (Levy, 2018). This demonstrates Amazon’s approach to automating knowledge work. AI isn’t considered a single product that remains within a single team, it is a technology and capability that Amazon clearly regards as a core competency that should be utilised in as many ways as possible in order to give Amazon a competitive advantage in all of the sectors it operates in.

This is an example of what Tushman and Anderson explain when they say, “Technological innovation affects not only a given population, but also those populations within technologically interdependent communities” (Tushman & Anderson, 1986). Amazon leveraged the technological innovation of AI to gain benefits across all areas of its business, however it remains unclear whether this new technology was a competence-destroying because it required completely different skills and knowledge to operate or competence-enhancing because it built “on existing know how yet did not render skills obsolete” (Tushman and Anderson 1986).

Having realised the benefits Amazon went on to commercialise it’s AI by creating AutoGluon, a service that enables developers to build applications involving machine learning on top of AWS (Hepburn, 2020). “Commercial AI has enjoyed what we at Amazon call the flywheel effect: customer interactions with AI systems generate data; with more data, machine learning algorithms perform better, which leads to better customer experiences; better customer experiences drive more usage and engagement, which in turn generate more data.” (Sarikaya, 2019).

Internet of Things

“Networks of low-cost sensors and actuators for data collection, monitoring, decision making, and process optimisation”

The Amazon Dash, an internet-enabled button for making repeat purchases, was Amazon’s move into Internet of Things devices. On sale for less than four years the device fell foul of consumer protection laws in Germany, Amazon’s second biggest market at the time, where a court ruled that Amazon Dash didn’t provide customers with enough information to make informed purchases (Jagannathan, 2019). Although a regulatory and revenue-generating failure, the device may have been more of a success in establishing Amazon’s first-mover advantage into the market of consumer IoT devices and in collecting data on buying behaviour (Newman, 2016) to inform the next generation of devices.

Echo and Dot, the home speakers with the Alexa voice technology, soon replaced the Dash as a means of making purchases easier for consumers and as a means of collecting data on buying behaviour, data which could also be used to train the machine learning algorithms that powered Alexa. Voice-powered machine learning algorithms are intangible assets that require investment but have different economic characteristics to tangible assets (Haskell & Westlake, 2017):

• Sunk costs – represent an investment that is unlikely to deliver a return in the way a tangible asset would if resold as intangible assets are difficult to sell as they are often bespoke to the company developing them, as in the case of Alexa algorithms.
• Spillovers – are benefits competitors may gain from appropriating intangible assets such as the design of a device which is easy to reverse engineer. Amazon’s defense is to focus more on things that are difficult to copy such as bespoke algorithms.
• Scalability – a characteristic of an intangible asset that can be leveraged in ways that tangible assets cannot without increased investment, such as the Alexa algorithm which works on all Alexa powered devices, but also the ‘brand’ of Alexa as a likeable, humanised, ‘part of the family’ voice assistant in comparison to Google choice to call its voice assistant Google.
• Synergies – occur when intangible assets become more valuable together than in isolation. Alexa has more value because it connects to Amazon’s ecommerce systems and allows customers to make purchases, and because Amazon allows developers to build other services on top of the Amazon ecosystem that enables customers to control the heating and lighting in their homes.

Amazon’s approach to investing more in its intangible assets, such as algorithms, than in the physical devices seems to suggest that they recognise the competitive advantage intangible assets can give them a over other companies, but also that they recognise the risks Haskell and Westlake point out can be associated with this kind of investment (Haskell & Westlake, 2017). The economic value of intangible assets in the case of Alexa comes from strategic choices about how they are leveraged to drive purchasing behaviour in customers.

“Use of computer hardware and software resources to deliver services of the Internet ”

Amazon Web Services is a leading (Gartner, 2018) infrastructure-as-a-service provider. Gartner calls out AWS’ “prioritisation of being first to market” along with being the “most mature enterprise-ready provider, with the strongest track record of customer success” as key aspects of being a leading cloud provider (Bala, et al, 2018). AWS started from the needs of Amazon’s ecommerce business, which required reliable, scalable technology to power its growth in the early 2000’s. By 2003, providing infrastructure services and reliable, scalable data-centers was considered a core competency by Bezos and Amazon senior executives. When Amazon launched AWS in 2006 they were “first to market with a modern cloud infrastructure” (Miller, 2016). AWS holds 40% of the market share in cloud computing (Carey, 2019), a position it gained by building on core competencies it owned in other areas of its business and being years ahead of competitors (Miller, 2016).

Teece talks about the ‘perplexing’ problem of how many companies who are first to market with an innovation are not the ones to commercialise and profit from it. With AWS, Amazon demonstrated that it’s approach to innovation can deliver on significant commercial success. Teece’s framework for determining which company will win from introducing innovation involves understanding the appropriability; the environmental factors that affect the ability to capture profits from an innovation, the design phase; whether a dominant design has emerged, and the competencies necessary for the commercialisation of the innovation.

In the early 2000s, cloud infrastructure services had what Teece describes as a “tight appropriability regime” (Teece, 1986). The environments in which the technology for providing infrastructure services over the internet existed was easy to protect simply because competitors were not yet building their core competencies in cloud. Having a “tight appropriability regime” for cloud services gave AWS the time it needed to launch its products and services before the regime weakened and other entrants could imitate the technology.

At the time of launching AWS, cloud infrastructure services were pre-paradigmatic, the majority of infrastructure providers weren’t even considering cloud, so there was no dominant design. Teece says that, “when imitation is possible and occurs coupled with design modification before the emergence of a dominant design, followers have a good chance of having their modified product anointed as the industry standard, often to the great disadvantage of the innovator.” (Teece, 1986), but this did not happen to Amazon.

Amazon already owned the complementary assets required to commercialise AWS successfully (procurement, marketing, sales, etc.) which removed any bargaining power issues that may have arisen from contracting assets, and put AWS in a good position to quickly establish the dominant design for cloud infrastructure services and so leverage its position as a first-to-market pre-paradigmatic innovator and as a paradigmatic market leader.

Advanced robotics

“Increasingly capable robots with enhanced sensors, dexterity, and intelligence; used to automate many tasks”

In 2012, Amazon acquired Kiva Systems, a small robotics company for $775 million providing Amazon with mobile robots and the technical expertise to begin automating its warehouses and sorting facilities. (Del Rey, 2019). This automation of the work of pickers and packers enabled Amazon to increase efficiency in its warehouse operations by reducing the time taken to pick items for delivery to its customers (Simon, 2019), and so driving the success of its ecommerce business. In 2019 Amazon introduced machines to automate putting customer orders into boxes ready for delivery, a job that was previously performed by thousands of workers. It “would amount to more than 1,300 cuts across 55 U.S. fulfillment centers for standard-sized inventory. Amazon would expect to recover the costs in under two years, at $1 million per machine plus operational expenses.”, reported Reuters (Dastin, 2019). Amazon currently has more than 200,000 mobile robots working inside its warehouse network, alongside hundreds of thousands of human workers.

Amazon, as a low margin business, seeks to organise its supply chain more effectively than its competitors to maximise profits (Teece, 1986). Automation increasingly allows for this in Amazon’s fulfilment business as it replaces the routine work (Autor, Levy & Murnane, 2003) of pickers and packers. In making capital investments in technologies to replace workers with robots Amazon could be said to be taking a skills-biased approach; that is, that it favours more highly skilled workers such as programmers, engineers and mechanics at the cost of lower skilled workers and assumes thats increased productivity for the company comes from fewer highly skilled workers over more lower skilled workers. Ordinarily we would expect that companies would make decisions about how much to invest in automation technologies by considering economic factors such as the cost of labour in a particular geographic market however, from what we’ve seen of Amazon’s investment strategy in innovation it seems more likely that Amazon is playing the long game with automation and betting on machines being capable of performing non-routine cognitive and manual tasks in the future (Frey & Osborne 2013) and so replacing lower skilled workers completely.

The adoption of automation in warehouses and fulfilment centres has been congruent with Amazon’s approach to innovation involving massive investment in technology that provides increased internal capabilities enabling Amazon to become a market leader and then selling that capability to businesses to deliver long term revenue gains. The question of whether robots will replace workers, at least in Amazon warehouses, seems to have an inevitable answer.

Autonomous or near-autonomous vehicles

“Vehicles that can navigate and operate autonomously or semi autonomously in many situations”

Amazon has invested $700 million in Rivian, the electric vehicle manufacturer and $530 million in Aurora, an autonomous driving startup. “For Amazon, this small investment is a good way to enlarge their bet on the E.V. [electric vehicle] market without having to tool up a plant to find out if it will fly. Over time, the Rivian investment could give Amazon a starting point to own and operate an in-house package delivery business.” (Mitchell, 2019).

Amazon has been developing delivery drones “that can fly up to 15 miles and deliver packages under five pounds to customers in less than 30 minutes.” (Vincent, 2019). Developing delivery drones and getting FAA approval might be considered a big enough innovation for most companies, but Amazon goes a huge step further by developing its own Air Traffic Control System for drones. “The system also gives aviation authorities, like the FAA, the ability to track the drones in the airspace to ensure safety and create “no fly zones” in times of emergency. The traffic management system is easy to use for various operators in the same airspace because it will connect via the internet” (Amazon, 2019). In a similar strategic play to the Kindle, Amazon realises that controlling the platform that controls the devices creates considerable more competitive advantage than simply developing the best drones.

Developing drones and autonomous electric vehicles will reduce Amazon’s reliance on third-party delivery partners and own the supply chain (Prosser, 2019), and conceivably it could commercialise the service to compete with FedEx, UPS, etc., and thus drive increased revenue for the company, but in order to do so it needs to protect the design of the drones and vehicles from competitors. Archibugi & Pianta explain that, “technological change impinges on codified and tacit knowledge… innovations can either be embodied in capital goods and products or disembodied, i.e. the know-how included in patents” (Archibugi & Pianta, 1996). As it is almost impossible to protect designs for publicly available machines like drones through trade secrets in the way Amazon does for its software and algorithms, Amazon needs to file patents to protect its disembodied codified knowledge in order to continue to be innovative.

In 2019 Amazon filed over two thousand patents (Capriel, 2019) many for drones and autonomous vehicles, and since 2010 Amazon has grown its patent portfolio from less than 1,000 active patents in 2010 to nearly 10,000 in 2019 (Columbus, 2019), a ten-fold increase in less than a decade (Fig. 2).

Patents can be used strategically by companies in a number of ways; to protect inventions with the intention of commercialising them, or simply to prevent competitors from entering the space. This makes the number of patents filed a poor indicator of innovation, and so it seems that the number of patents Amazon has filed has increased over time because they have become involved in more sectors and industries rather than because they have become more innovative.

Amazon’s sources of competitive advantage

These six examples demonstrate Amazon’s superior ability over its competitors and how they employ the same approach towards innovation; not constrained to sectors or industries that they have previously operated in, investing huge amounts to own the sector they move into, building core competencies in their value chain to protect their own competitiveness, and making new technologies available outside their own ecosystem to allow their customers to leverage the technology in ways that support and scale Amazon’s business model, in many cases the customer becoming reliant on Amazon in their value chain, for example Netflix using AWS (Uenlue, 2018).

Amazon’s economic growth from innovation

Amazon’s approach to innovating across multiple sectors and industries has given them significant competitive advantage and commercial success, growing from $6.92 billion in 2004 to $280.52 bn in 2019 (Clement, 2020), an almost 4000% increase.

The breakdown of Amazon’s commercial performance by it’s main areas of business in 2018 shows it’s longstanding ecommerce business as the main revenue producing business (Day & Gu, 2019):

• Ecommerce: $234.61 bn sales
• Cloud computing: $25.6 bn in revenue
• Groceries: $25.4 bn in sales
• Online apparel: $24.61 bn in sales
• Consumables: $23.6 bn in sales
• Digital advertising: $7.4 bn in revenue

Of the six disruptive innovations discussed above, only cloud computing, where Amazon is the market leader, generates significant income. This reflects Amazon’s approach to innovation involving long-term investment to establish commercial success.

Amazon has earned its reputation as one of the most innovative companies in the world. Amazon’s approach innovation can be broadly summed up in three parts:

• Large investments and acquisitions in software and hardware startups spread across multiple sectors and industries. This puts Amazon in control of the value chain and reduces the risk of suppliers holding strong bargaining positions.
• Use the technology that is produced to develop efficiency and productivity gains in products and services in a diverse range of sectors and ensure competitive advantage over the long term.
• Commercialise those products and services, allowing other companies to leverage them, generating revenue and creating lock-in network effects (Katz & Shapiro, 1994) for those companies and Amazon’s customers.

This approach to innovation has enabled Amazon to develop significantly successful businesses in ecommerce, cloud computing, digital advertising and retail, and is likely to contribute to Amazon’s continued success into the future.

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Predicting The Future Of Demand: How Amazon Is Reinventing Forecasting With Machine Learning

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What if you could use data to predict what a customer will buy, one year before they even know they want it?

Automating through machine learning (ML) allowed Amazon.com to predict future demand for millions of products globally in seconds. Leaders at the multinational tech giant successfully reinvented their data infrastructure to improve buying systems, automate the placement of inventory in fulfillment centers, and deliver on their promise of two-day shipping to customers.

Through a comprehensive predictive model built entirely on the cloud, Amazon.com is using data to make better decisions, streamline operations, and deliver winning consumer experiences.

Reinventing manual product forecasting through machine learning

Predicting customer demand is no easy task in e-commerce since delayed inventory or inaccurate shipments can be costly and disrupt the supply chain. Although 80% to 90% of all planning tasks can be automated, many industries still rely on manual forecasting.

E-commerce retailers sometimes need to forecast hundreds of millions of products, and “no amount of human brain power can forecast at that scale on a daily basis,” says Jenny Freshwater, vice president of Traffic & Marketing Technology at Amazon.com, and former VP of Forecasting. Freshwater’s team led forecasting of over 400 million products at Amazon.

Engineering teams, no matter how advanced, can’t do it all: assess historical trends, develop unit sales projections, and conduct independent research for such a high volume of products. Even when combined with more sophisticated models, legacy systems, like outdated computing software or manual inventory logs, won’t be as accurate as machine learning models.

And when demand spikes unexpectedly, the burden on the supply chain can become even more difficult to handle without modern forecasting methods. When toilet paper sales surged by 213% at the height of the Covid-19 pandemic, Amazon used AI-driven predictive forecasting to respond quickly to unforeseen demand signals and increase adaptability to market fluctuations Freshwater notes, “Of course, we could have never anticipated that spike prior to COVID, but our models reacted quickly to the new demand trend.”

Freshwater recommends that retailers reprioritize their machine learning roadmaps to cope with the unexpected. The pandemic was the trigger for her team to make changes and implement new ideas. The team reinvented inputs to their models, including using medical data, COVID case counts and macroeconomic data, and shifted from forecasting based on a number with confidence intervals to scenario-based forecasting. “What we found was that the work that we had to do around the pandemic, almost all of it, from adding new data, to new features, to scenario forecasting, we had thought of before, but had never prioritized, because it wasn't urgent at the time,” she says. “With the pandemic hitting, we reprioritized. And many of the things that we had wanted to implement in the past are now in production.”

How Amazon.com became a leader in product forecasting

According to Freshwater, Amazon’s journey with machine learning began about 10 years ago to improve forecast accuracy. “We started to use machine learning because our moving average models were just not as accurate as we had hoped they would be.”

Company leaders saw a need to use data and machine learning to deliver on customer promises and achieve cost-effective functionality at scale. With those goals in mind, Amazon.com set out to become an AI-driven leader in product forecasting.

To accelerate the process in the face of rising demand, the company partnered with Amazon Web Services (AWS) to build “machine learning models that have grown in terms of magnitude of data, the features that we use to predict demand, as well as the complexity of the algorithms, to where today, we're using neural network models to predict demand for the products that we sell on Amazon.” Freshwater says, “We looked at how our human forecasts were performing and how our machine learning forecasts were performing. And it was night and day in terms of the difference.”

Amazon.com uses machine learning on AWS to aggregate and analyze purchasing data on products, and run their forecasting models. Additionally, the company uses browsing and purchasing data to provide more tailored product recommendations. Machine learning allows for data experimentation that enables data scientists to create a better and more personalized experience for customers.

For Freshwater, prototyping and iteration was key to achieving machine learning success. ”We used a prototyping approach, looking at specific use cases, measuring the results against our existing models, and, at a certain point, we were able to achieve a 15 times greater improvement than we'd ever achieved before through these neural network models,” she says. “So, it was very much an iterative process.

Key takeaways for business leaders using predictive models

ML on the cloud is key to deriving valuable insights from data and making better business decisions. Consider these practices to maximize ML modeling in your reinvention journey.

• Trust the model. Regular monitoring of millions of products takes up valuable engineering time and resources. Freshwater says nearly all of Amazon’s “forecasting is automated through machine learning models, and human beings and business users only interact with the forecast and override it when they have some information that the models couldn't possibly have.” Leaders should encourage teams to selectively interact with the forecast, letting the models work while business users focus on other critical tasks. Overrides should be considered when you are confident you have more qualitative or trend-focused information than the model.
• Define a clear data strategy. It’s impossible to think of machine learning – and getting real value out of ML models – without first having a data strategy in place. At Amazon, preparing the data for ML use was a key part of the strategy. “When I talk to people about our journey from our old modeling to the new, I guess that about 40% of the time was actually spent in preparing the data,” says Freshwater. “Features are really all about getting the data in the right place. Without really spending that time and effort, we would risk either getting poor results or biased results because the data didn't properly represent our decision set.” Building a data strategy that aligns with business goals, prioritizing data cleansing, and making data representative of what you’re trying to predict or optimize is key for leaders starting their ML journey.
• Know what you’re measuring. Early on in your reinvention journey, it’s important to be crisp about what you’re measuring and how you know you’ve improved. Freshwater recalls, “In our problem space, we were forecasting for more and more products every year. So just by looking at year over year comparisons, it wasn't good enough. We had to implement a series of benchmarking models that used completely different scientific methodology to know if versus the benchmark, our new models were better.” Spend time upfront defining your measurement and success criteria to prevent time wasted on churn.
• Build a data-driven culture. Getting the most out of your machine learning initiatives requires nurturing a cultural of innovation and data-driven thinking across the organization. “Reinvention projects really are about being able to take risks and being able to fail fast,” says Freshwater. “Pick people who are OK with several failures before a success. I think that culture needs to be encouraged when you’re working on any prototype – because the first results aren't always a winner. If they are, maybe you're not thinking big enough.” When experimenting with machine learning, make sure you have people at all levels of the organization who are passionate about the prospect of what ML can deliver. Freshwater adds, “Given that Amazon is such a data-driven culture, we were able to move the needle almost entirely towards machine learning, just by looking at the fact that our models were much more accurate from a forecasting accuracy perspective.”

Amazon has paved the way for predicting the future, but they’re just getting started. Your organization too can reinvent itself using AI technologies and data. Learn more at aws.amazon.com/data/ .

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Amazon.com marketing strategy 2023: E-commerce retail giant business case study

What goes into the Amazon marketing strategy secret sauce? Our business case study explores Amazon's revenue model and culture of customer metrics, history of Amazon.com and marketing objectives

In the final quarter of 2022, Amazon reported net sales of over $149.2 billion. This seasonal spike is typical of Amazon's quarterly reporting , but the growth is undeniable as this was the company's highest quarter ever.

There is no doubt that the e-commerce retail giant continues to lead the way in e-commerce growth. The Amazon marketing strategy we are familiar with today has evolved since it was founded in 1994.

I've highlighted the Amazon marketing strategy case study in my books for nearly 20 years now since I think all types of businesses can learn from their digital business strategy. Their response to the pandemic is impressive but not entirely surprising for a brand that is ' customer obsessed '.

From startups and small businesses to large international businesses, we can all learn from their focus on the customer, particularly at this time, testing market opportunities made available by digital technology, and their focus on testing and analysis to improve results.

Their focus on customer experience put Amazon in the role of a thought leader in e-commerce experience. However, whether due to diminished customer service, or increasing customer expectations, or a mixture of the two, fulled by a global pandemic - notably, 2020 was the first time Amazon's ACSI customer satisfaction rating dropped below 80 since launch, to 65%.

With customer satisfaction now measuring at 79% in 2022 , customer satisfaction in Amazon has risen again, but is still not as high as it once was.

Currently, Forbes gives a consensus recommendation to buy Amazon stock, giving a return on assets (TTM) of 1.73%. The stock performance is not as high as we saw in 2020 and 2021, but it did show some growth in late 2022 - early 2023.

I aim to keep this case study up-to-date for readers of the books and Smart Insights readers who may be interested. In it, we look at Amazon's background, revenue model, and sources for the latest business results.

We can also learn from their digital marketing strategy, since they use digital marketing efficiently across all customer communications touchpoints in our RACE Framework :

• Reach : Amazon's initial business growth based on a detailed approach to SEO and AdWords targeting millions of keywords.
• Act : Creating clear and simple experiences through testing and learning.
• Convert : Using personalization to make relevant recommendations and a clear checkout process that many now imitate.
• Engage : Amazon's customer-centric culture delights customers and keeps them coming back for more.

Looking to optimize your marketing strategy? We've got marketing solutions for your e-commerce business. From startups to retail giants, our bespoke marketing training empowers e-commerce marketers to plan, manage and optimize their marketing strategies, with marketing tools proven to generate growth. Find out more.

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Amazon's growth and business model evolution

Forbes credits Amazon's success to 3 rules which it breaks, but we 'probably shouldn't'!

• Strategy is about focus - although Amazon has an incredible number of strands to the business today.
• Don’t throw good money after bad - with criticism in particular of Amazon's investment in groceries.
• Your core competencies determine what you can and can’t do - developing the Kindle with no hardware manufacturing experience.

In this way, Forbes outlines a 'risky' approach to marketing strategy which, for Amazon, paid off in dividends. So, there is plenty to learn from studying this company, even if we decide not to replicate all tactics and strategies.

Amazon.com mission and vision

When it first launched, Amazon’s had a clear and ambitious mission. To offer:

Earth’s biggest selection and to be Earth’s most customer-centric company.

Today, with business users of its Amazon Web Service representing a new type of customer, Amazon says:

this goal continues today, but Amazon’s customers are worldwide now and have grown to include millions of Con-sumers, Sellers, Content Creators, Developers, and Enterprises. Each of these groups has different needs, and we always work to meet those needs, by innovating new solutions to make things easier, faster, better, and more cost-effective.

20 years later, Amazon are still customer-centric, in fact, in the latest Amazon Annual report , 2021, Jeff Bezos of Amazon explains customer obsession.

"We seek to be Earth’s most customer-centric company and believe that our guiding principle of customer obsession is one of our greatest strengths. We seek to offer our customers a comprehensive selection of products, low prices, fast and free delivery, easy-to-use functionality, and timely customer service. By focusing obsessively on customers, we are internally driven to improve our services, add benefits and features, invent new products, lower prices, increase product selection, and speed up shipping times—before we have to."

Amazon business and revenue model

I recommend anyone studying Amazon checks the latest annual reports, proxies, and shareholder letters. The annual filings give a great summary of eBay business and revenue models.

The 2020 report includes a great vision for Digital Agility (reprinted from 1997 in their latest annual report) showing testing of business models that many businesses don't yet have. Amazon explain:

"We will continue to measure our programs and the effectiveness of our investments analytically, to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures".

They go on to explain that business models are tested from a long-term perspective, showing the mindset of CEO Jeff Bezos:

We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.

The latest example of innovation in their business model is the launch of Amazon Go, a new kind of store with no checkout required. Boasting a "Just Walk Out Shopping experience",the Amazon Go app users enter the store, take the products they want, and go with no lines and no checkout.

More recently, there have been a range of business model innovations focussed on hardware and new services: Kindle e-readers, Fire Tablet, smartphone and TV, Echo (using the Alexa Artificial Intelligence voice-assistant), grocery delivery, Amazon Fashion and expansion to the business-oriented Amazon Web Services (AWS). Amazon Prime, an annual membership program that includes unlimited free shipping and then involved diversification to a media service with access to unlimited instant streaming of thousands of movies and TV episodes.

AWS is less well-known outside of tech people, but Amazon is still pursuing this cloud service aggressively. They now have 10 AWS regions around the world, including the East Coast of the U.S., two on the West Coast, Europe, Singapore, Tokyo, Sydney, Brazil, China, and a government-only region called GovCloud.

Amazon marketing strategy

In their 2008 SEC filing, Amazon describes the vision of their business as to:

“Relentlessly focus on customer experience by offering our customers low prices, convenience, and a wide selection of merchandise.”

The vision is still to consider how the core Amazon marketing strategy value proposition is communicated both on-site and through offline communications.

Of course, achieving customer loyalty and repeat purchases has been key to Amazon’s success. Many dot-coms failed because they succeeded in achieving awareness, but not loyalty. Amazon achieved both. In their SEC filing they stress how they seek to achieve this. They say:

" We work to earn repeat purchases by providing easy-to-use functionality, fast and reliable fulfillment, timely customer service, feature-rich content, and a trusted transaction environment.

Key features of Amazon include:

• editorial and customer reviews;
• manufacturer product information;
• web pages tailored to individual preferences, such as recommendations and notifications; 1-Click® technology;
• secure payment systems;
• image uploads;
• searching on our websites as well as the Internet;
• browsing; and the ability to view selected interior pages and citations, and search the entire contents of many of the books we offer with our “Look Inside the Book” and “Search Inside the Book” features.

The community of online customers also creates feature-rich content, including product reviews, online recommendation lists, wish lists, buying guides, and wedding and baby registries."

In practice, as is the practice for many online retailers, the lowest prices are for the most popular products, with less popular products commanding higher prices and a greater margin for Amazon.

Free shipping offers are used to encourage increase in basket size since customers have to spend over a certain amount to receive free shipping. The level at which free shipping is set is critical to profitability and Amazon has changed it as competition has changed and for promotional reasons.

Amazon communicates the fulfillment promise in several ways including the presentation of the latest inventory availability information, delivery date estimates, and options for expedited delivery, as well as delivery shipment notifications and update facilities.

This focus on customer has translated to excellence in service with the 2004 American Customer Satisfaction Index giving Amazon.com a score of 88 which was at the time, the highest customer satisfaction score ever recorded in any service industry, online or offline.

Round (2004) notes that Amazon focuses on customer satisfaction metrics. Each site is closely monitored with standard service availability monitoring (for example, using Keynote or Mercury Interactive) site availability and download speed. Interestingly it also monitors per minute site revenue upper/lower bounds – Round describes an alarm system rather like a power plant where if revenue on a site falls below $10,000 per minute, alarms go off! There are also internal performance service-level-agreements for web services where T% of the time, different pages must return in X seconds.

The importance of technology and an increased focus on Artificial Intelligence and Machine Learning

According to founder and CEO, Jeff Bezos, technology is very important to supporting this focus on the customer. In their 2010 Annual Report (Amazon, 2011) he said:

“Look inside a current textbook on software architecture, and you’ll find few patterns that we don’t apply at Amazon. We use high-performance transactions systems, complex rendering and object caching, workflow and queuing systems, business intelligence and data analytics, machine learning and pattern recognition, neural networks and probabilistic decision making, and a wide variety of other techniques." And while many of our systems are based on the latest in computer science research, this often hasn’t been sufficient: our architects and engineers have had to advance research in directions that no academic had yet taken. Many of the problems we face have no textbook solutions, and so we — happily — invent new approaches”… All the effort we put into technology might not matter that much if we kept technology off to the side in some sort of R&D department, but we don’t take that approach. Technology infuses all of our teams, all of our processes, our decision-making, and our approach to innovation in each of our businesses. It is deeply integrated into everything we do”.

The quote shows how applying new technologies is used to give Amazon a competitive edge. A good recent example of this is providing the infrastructure to deliver the Kindle “Whispersync” update to ebook readers. Amazon reported in 2011 that Amazon.com is now selling more Kindle books than paperback books. For every 100 paperback books Amazon has sold, the Company sold 115 Kindle books. Kindle apps are now available on Apple iOS, Android devices and on PCs as part of a “ Buy Once, Read Anywhere ” proposition which Amazon has developed.

Some of the more recent applications of AI at Amazon are highly visible, for example, the Amazon Echo assistant and technology in the Amazon Go convenience store that uses machine vision to eliminate checkout lines.

In their 2017 report, they describe the increased use of machine learning and AI ‘behind the scenes’ at Amazon:   "much of what we do with machine learning happens beneath the surface. Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more. Though less visible, much of the impact of machine learning will be of this type – quietly but meaningfully improving core operations".

Amazon Customers

Amazon defines what it refers to as three consumer sets customers, seller customers and developer customers.

There are over 76 million customer accounts, but just 1.3 million active seller customers in it’s marketplaces and Amazon is seeking to increase this. Amazon is unusual for a retailer in that it identifies “developer customers” who use its Amazon Web Services, which provides access to technology infrastructure such as hosting that developers can use to develop their own web services.

Members are also encouraged to join a loyalty program, Amazon Prime, a fee-based membership program in which members receive free or discounted express shipping, in the United States, the United Kingdom, Germany, and Japan.

We've got marketing tools and templates to help you compete in a challenging environment, grow your market share, and win more customers. Join thousands of savvy Smart Insights Business Members using our marketing solutions integrated across the RACE Framework to drive the results they need.

As we know, e-commerce marketing is all about the customers. Our RACE Growth System down your customer journeys into a simple 5-step structure of plan - reach - act - convert - engage. Create a winning retail e-commerce marketing strategy with Smart Insights, to acquire and retain more customers, and accelerate your ROI. Get started today.

Competition

In its 2017 SEC filing Amazon describes the environment for our products and services as ‘intensely competitive’. It views its main current and potential competitors as:

• 1) online, offline, and multichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products we offer and sell to consumers and businesses;
• (2) publishers, producers, and distributors of physical, digital, and interactive media of all types and all distribution channels;
• (3) web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers;
• (4) companies that provide e-commerce services, including website development, advertising, fulfillment, customer service, and payment processing;
• (5) companies that provide fulfillment and logistics services for themselves or for third parties, whether online or offline;
• (6) companies that provide information technology services or products, including on- premises or cloud-based infrastructure and other services; and
• (7) companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices.

It believes the main competitive factors in its market segments include "selection, price, availability, convenience, information, discovery, brand recognition, personalized services, accessibility, customer service, reliability, speed of fulfillment, ease of use, and ability to adapt to changing conditions, as well as our customers’ overall experience and trust in transactions with us and facilitated by us on behalf of third-party sellers".

For services offered to business and individual sellers, additional competitive factors include the quality of our services and tools, their ability to generate sales for third parties we serve, and the speed of performance for our services.

From Auctions to marketplaces

Amazon auctions (known as zShops) were launched in March 1999, in large part as a response to the success of eBay. They were promoted heavily from the home page, category pages and individual product pages. Despite this, a year after its launch it had only achieved a 3.2% share of the online auction compared to 58% for eBay and it only declined from this point.

Today, competitive prices of products are available through third-party sellers in the ‘Amazon Marketplace’ which are integrated within the standard product listings. A winning component of the Amazon marketing strategy for marketplaces was the innovation to offer such an auction facility, initially driven by the need to compete with eBay. But now the strategy has been adjusted such that Amazon describe it as part of the approach of low-pricing.

Although it might be thought that Amazon would lose out on enabling its merchants to sell products at lower prices, in fact Amazon makes greater margin on these sales since merchants are charged a commission on each sale and it is the merchant who bears the cost of storing inventory and fulfilling the product to customers. As with eBay, Amazon is just facilitating the exchange of bits and bytes between buyers and sellers without the need to distribute physical products.

Amazon Media sales

You may have noticed that unlike some retailers, Amazon displays relevant Google text ads and banner ads from brands. This seems in conflict with the marketing strategy of focus on experience since it leads to a more cluttered store. However in 2011 Amazon revealed that worldwide media sales accounted for approximately 17% of revenue!

Whilst it does not reveal much about the Amazon marketing strategy approach in its annual reports, but there seems to be a focus on online marketing channels. Amazon (2011) states “we direct customers to our websites primarily through a number of targeted online marketing channels, such as our Associates program, sponsored search, portal advertising, email marketing campaigns, and other initiatives”.

These other initiatives may include outdoor and TV advertising, but they are not mentioned specifically. In this statement they also highlight the importance of customer loyalty tools. They say: “while costs associated with free shipping are not included in marketing expense, we view free shipping offers and Amazon Prime as effective worldwide marketing tools, and intend to continue offering them indefinitely”.

How ‘The Culture of Metrics’ started

A common theme in Amazon’s development is the drive to use a measured approach to all aspects of the business, beyond the finance. Marcus (2004) describes an occasion at a corporate ‘boot-camp’ in January 1997 when Amazon CEO Jeff Bezos ‘saw the light’. ‘

At Amazon, we will have a Culture of Metrics’, he said while addressing his senior staff. He went on to explain how web-based business gave Amazon an ‘amazing window into human behaviour’.

Marcus says: ‘Gone were the fuzzy approximations of focus groups, the anecdotal fudging and smoke blowing from the marketing department' - the Amazon marketing strategy was reborn!

A company like Amazon could (and did) record every move a visitor made, every last click and twitch of the mouse. As the data piled up into virtual heaps, hummocks and mountain ranges, you could draw all sorts of conclusions about their chimerical nature, the consumer. In this sense, Amazon was not merely a store, but an immense repository of facts. All we needed were the right equations to plug into them’.

James Marcus then goes on to give a fascinating insight into a breakout group discussion of how Amazon could better use measures to improve its performance. Marcus was in the Bezos group, brainstorming customer-centric metrics. Marcus (2004) summarises the dialogue, led by Bezos:

"First, we figure out which things we’d like to measure on the site", he said.

"For example, let’s say we want a metric for customer enjoyment. How could we calculate that?"

"There was silence. Then somebody ventured: "How much time each customer spends on the site?"

"Not specific enough", Jeff said.

"How about the average number of minutes each customer spends on the site per session" someone else suggested. "If that goes up, they’re having a blast".

"But how do we factor in the purchase?" I [Marcus] said feeling proud of myself.

"Is that a measure of enjoyment"?

"I think we need to consider the frequency of visits, too", said a dark-haired woman I didn’t recognize.

“Lot of folks are still accessing the web with those creepy-crawly modems. Four short visits from them might be just as good as one visit from a guy with a T-1. Maybe better’.

"Good point", Jeff said. "And anyway, enjoyment is just the start. In the end, we should be measuring customer ecstasy"

It is interesting that Amazon was having this debate about the elements of RFM analysis (described in Chapter 6 of Internet Marketing), 1997, after already having achieved $16 million of revenue in the previous year. Of course, this is a minuscule amount compared with today’s billions of dollar turnover. The important point was that this was the start of a focus on metrics which can be seen through the description of Matt Pounds work later in this case study.

Amazon marketing strategy experiments!

Amazon have created their own internal experimentation platform called a “Weblab” that they use to evaluate improvements to our websites and products. In 2013, they ran 1,976 Weblabs worldwide, up from 1,092 in 2012, and 546 in 2011. Now many companies use AB testing, but this shows the scale of testing at Amazon.

One example of how these are applied is a new feature called “Ask an owner”.  From a product page, customers can ask any question related to the product, Amazon then route these questions to owners of the product who answer.

From human to software-based recommendations

Amazon marketing strategy has developed internal tools to support this ‘Culture of Metrics’. Marcus (2004) describes how the ‘Creator Metrics’ tool shows content creators how well their product listings and product copy are working. For each content editor such as Marcus, it retrieves all recently posted documents including articles, interviews, booklists and features. For each one it then gives a conversion rate to sale plus the number of page views, adds (added to basket) and repels (content requested, but the back button then used).

In time, the work of editorial reviewers such as Marcus was marginalised since Amazon found that the majority of visitors used the search tools rather than read editorial and they responded to the personalised recommendations as the matching technology improved (Marcus likens early recommendations techniques to ‘going shopping with the village idiot’).

Experimentation and testing at Amazon.com

The ‘Culture of Metrics’ also led to a test-driven approach to improving results at Amazon. Matt Round, speaking at E-metrics 2004 when he was director of personalisation at Amazon describes the philosophy as ‘Data Trumps Intuitions’. He explained how Amazon used to have a lot of arguments about which content and promotion should go on the all important home page or category pages. He described how every category VP wanted top-center and how the Friday meetings about placements for next week were getting ‘too long, too loud, and lacked performance data’.

But today ‘automation replaces intuitions’ and real-time experimentation tests are always run to answer these questions since actual consumer behaviour is the best way to decide upon tactics.

Marcus (2004) also notes that Amazon has a culture of experiments of which A/B tests are key components. Examples where A/B tests are used include new home page design, moving features around the page, different algorithms for recommendations, changing search relevance rankings. These involve testing a new treatment against a previous control for a limited time of a few days or a week. The system will randomly show one or more treatments to visitors and measure a range of parameters such as units sold and revenue by category (and total), session time, session length, etc. The new features will usually be launched if the desired metrics are statistically significantly better.

Statistical tests are a challenge though as distributions are not normal (they have a large mass at zero for example of no purchase) There are other challenges since multiple A/B tests are running every day and A/B tests may overlap and so conflict. There are also longer-term effects where some features are ‘cool’ for the first two weeks and the opposite effect where changing navigation may degrade performance temporarily. Amazon also finds that as its users evolve in their online experience the way they act online has changed. This means that Amazon has to constantly test and evolve its features.

With the latest announcement from Google to sunset their Google Optimize A/B testing , digital marketers will do well to look out for new technology to assist in their testing efforts. We'll keep our members updated with announcements

Amazon.com technology marketing strategy

It follows that the Amazon technology infrastructure must readily support this culture of experimentation and this can be difficult to achieved with standardised content management. Amazon has achieved its competitive advantage through developing its technology internally and with a significant investment in this which may not be available to other organisations without the right focus on the online channels.

As Amazon explains in SEC (2005) ‘using primarily our own proprietary technologies, as well as technology licensed from third parties, we have implemented numerous features and functionality that simplify and improve the customer shopping experience, enable third parties to sell on our platform, and facilitate our fulfillment and customer service operations. Our current strategy is to focus our development efforts on continuous innovation by creating and enhancing the specialized, proprietary software that is unique to our business, and to license or acquire commercially-developed technology for other applications where available and appropriate. We continually invest in several areas of technology, including our seller platform; A9.com, our wholly-owned subsidiary focused on search technology on www.A9.com and other Amazon sites; web services; and digital initiatives.’

Round (2004) describes the technology approach as ‘distributed development and deployment’. Pages such as the home page have a number of content ‘pods’ or ‘slots’ which call web services for features. This makes it relatively easy to change the content in these pods and even change the location of the pods on-screen. Amazon uses a flowable or fluid page design unlike many sites which enables it to make the most of real-estate on-screen.

Technology also supports more standard e-retail facilities. SEC (2005) states: ‘We use a set of applications for accepting and validating customer orders, placing and tracking orders with suppliers, managing and assigning inventory to customer orders, and ensuring proper shipment of products to customers. Our transaction-processing systems handle millions of items, a number of different status inquiries, multiple shipping addresses, gift-wrapping requests, and multiple shipment methods. These systems allow the customer to choose whether to receive single or several shipments based on availability and to track the progress of each order. These applications also manage the process of accepting, authorizing, and charging customer credit cards.’

Data-driven Automation

Round (2004) said that ‘Data is king at Amazon’. He gave many examples of data driven automation including customer channel preferences; managing the way content is displayed to different user types such as new releases and top-sellers, merchandising and recommendation (showing related products and promotions) and also advertising through paid search (automatic ad generation and bidding).

The automated search advertising and bidding system for paid search has had a big impact at Amazon. Sponsored links initially done by humans, but this was unsustainable due to range of products at Amazon. The automated programme generates keywords, writes ad creative, determines best landing page, manages bids, measure conversion rates, profit per converted visitor and updates bids. Again the problem of volume is there, Matt Round described how the book ‘How to Make Love Like a Porn Star’ by Jenna Jameson received tens of thousands of clicks from pornography-related searches, but few actually purchased the book. So the update cycle must be quick to avoid large losses.

There is also an automated email measurement and optimization system. The campaign calendar used to be manually managed with relatively weak measurement and it was costly to schedule and use. A new system:

• Automatically optimizes content to improve customer experience
• Avoids sending an e-mail campaign that has low clickthrough or high unsubscribe rate
• Includes inbox management (avoid sending multiple emails/week)
• Has growing library of automated email programs covering new releases and recommendations

But there are challenges if promotions are too successful if inventory isn’t available.

Your Recommendations

Customers Who Bought X…, also bought Y is Amazon’s signature feature. Round (2004) describes how Amazon relies on acquiring and then crunching a massive amount of data. Every purchase, every page viewed and every search is recorded. So there are now to new version, customers who shopped for X also shopped for… and Customers who searched for X also bought… They also have a system codenamed ‘Goldbox’ which is a cross-sell and awareness raising tool. Items are discounted to encourage purchases in new categories!

See the original more detailed PDF article on Amazon personalization / recommendation collaborative filtering system .

He also describes the challenge of techniques for sifting patterns from noise (sensitivity filtering) and clothing and toy catalogues change frequently so recommendations become out of date. The main challenges though are the massive data size arising from millions of customers, millions of items and recommendations made in real time.

Amazon marketing strategy for partnerships

As Amazon grew, its share price growth enabled partnership or acquisition with a range of companies in different sectors. Marcus (2004) describes how Amazon partnered with Drugstore.com (pharmacy), Living.com (furniture), Pets.com (pet supplies), Wineshopper.com (wines), HomeGrocer.com (groceries), Sothebys.com (auctions) and Kozmo.com (urban home delivery). In most cases, Amazon purchased an equity stake in these partners, so that it would share in their prosperity. It also charged them fees for placements on the Amazon site to promote and drive traffic to their sites.

Similarly, Amazon marketing strategy was to charge publishers for prime-position to promote books on its site which caused an initial hue-and-cry, but this abated when it was realised that paying for prominent placements was widespread in traditional booksellers and supermarkets. Many of these new online companies failed in 1999 and 2000, but Amazon had covered the potential for growth and was not pulled down by these partners, even though for some such as Pets.com it had an investment of 50%.

Analysts sometimes refer to ‘Amazoning a sector’ meaning that one company becomes dominant in an online sector such as book retail such that it becomes very difficult for others to achieve market share. In addition to developing, communicating and delivering a very strong proposition, Amazon has been able to consolidate its strength in different sectors through its partnership arrangements and through using technology to facilitate product promotion and distribution via these partnerships. The Amazon retail platform enables other retailers to sell products online using the Amazon user interface and infrastructure through their ‘Syndicated Stores’ programme.

For example, in the UK, Waterstones (www.waterstones.co.uk) is one of the largest traditional bookstores. It found competition with online so expensive and challenging, that eventually it entered a partnership arrangement where Amazon markets and distributes its books online in return for a commission online. Similarly, in the US, Borders a large book retailer uses the Amazon merchant platform for distributing its products.

Toy retailer Toys R’ Us have a similar arrangement. Such partnerships help Amazon extends its reach into the customer-base of other suppliers, and of course, customers who buy in one category such as books can be encouraged to purchase into other areas such as clothing or electronics.

Another form of partnership referred to above is the Amazon Marketplace which enables Amazon customers and other retailers to sell their new and used books and other goods alongside the regular retail listings. A similar partnership approach is the Amazon ‘Merchants@’ program which enables third party merchants (typically larger than those who sell via the Amazon Marketplace) to sell their products via Amazon. Amazon earn fees either through fixed fees or sales commissions per-unit. This arrangement can help customers who get a wider choice of products from a range of suppliers with the convenience of purchasing them through a single checkout process.

Finally, Amazon marketing strategy has also facilitated formation of partnerships with smaller companies through its affiliates programme. Internet legend records that Jeff Bezos, the creator of Amazon was chatting to someone at a cocktail party who wanted to sell books about divorce via her web site. Subsequently, Amazon.com launched its Associates Program in July 1996 and it is still going strong.

Here, the Amazon marketing strategy has created a tiered performance-based incentives to encourage affiliates to sell more Amazon products.

Amazon Marketing strategy communications

In their SEC filings Amazon state that the aims of their communications strategy are (unsurprisingly) to:

• Increase customer traffic to our websites
• Create awareness of our products and services
• Promote repeat purchases
• Develop incremental product and service revenue opportunities
• Strengthen and broaden the Amazon.com brand name.

Amazon also believes that its most effective marketing communications are a consequence of their focus on continuously improving the customer experience. This then creates word-of-mouth promotion which is effective in acquiring new customers and may also encourage repeat customer visits.

As well as this Marcus (2004) describes how Amazon used the personalisation enabled through technology to reach out to a difficult to reach market which Bezos originally called ‘the hard middle’. Bezos’s view was that it was easy to reach 10 people (you called them on the phone) or the ten million people who bought the most popular products (you placed a superbowl ad), but more difficult to reach those in between. The search facilities in the search engine and on the Amazon site, together with its product recommendation features meant that Amazon could connect its products with the interests of these people.

Online advertising techniques include paid search marketing, interactive ads on portals, e-mail campaigns and search engine optimisation. These are automated as far as possible as described earlier in the case study. As previously mentioned, the affiliate programme is also important in driving visitors to Amazon and Amazon offers a wide range of methods of linking to its site to help improve conversion.

For example, affiliates can use straight text links leading direct to a product page and they also offer a range of dynamic banners which feature different content such as books about Internet marketing or a search box. Amazon also use cooperative advertising arrangements, better known as ‘contra-deals’ with some vendors and other third parties. For example, a print advertisement in 2005 for a particular product such as a wireless router with a free wireless laptop card promotion will feature a specific Amazon URL in the ad. In product fulfilment packs, Amazon may include a leaflet for a non-competing online company such as Figleaves.com (lingerie) or Expedia (travel). In return, Amazon leaflets may be included in customer communications from the partner brands.

Our Associates program directs customers to our websites by enabling independent websites to make millions of products available to their audiences with fulfillment performed by us or third parties. We pay commissions to hundreds of thousands of participants in our Associates program when their customer referrals result in product sales.

In addition, we offer everyday free shipping options worldwide and recently announced Amazon.com Prime in the U.S., our first membership program in which members receive free two-day shipping and discounted overnight shipping. Although marketing expenses do not include the costs of our free shipping or promotional offers, we view such offers as effective marketing tools.

Marcus, J. (2004) Amazonia. Five years at the epicentre of the dot-com juggernaut, The New Press, New York, NY.

Round, M. (2004) Presentation to E-metrics, London, May 2005. www.emetrics.org.

By Dave Chaffey

Digital strategist Dr Dave Chaffey is co-founder and Content Director of online marketing training platform and publisher Smart Insights. 'Dr Dave' is known for his strategic, but practical, data-driven advice. He has trained and consulted with many business of all sizes in most sectors. These include large international B2B and B2C brands including 3M, BP, Barclaycard, Dell, Confused.com, HSBC, Mercedes-Benz, Microsoft, M&G Investment, Rentokil Initial, O2, Royal Canin (Mars Group) plus many smaller businesses. Dave is editor of the templates, guides and courses in our digital marketing resource library used by our Business members to plan, manage and optimize their marketing. Free members can access our free sample templates here . Dave is also keynote speaker, trainer and consultant who is author of 5 bestselling books on digital marketing including Digital Marketing Excellence and Digital Marketing: Strategy, Implementation and Practice . In 2004 he was recognised by the Chartered Institute of Marketing as one of 50 marketing ‘gurus’ worldwide who have helped shape the future of marketing. My personal site, DaveChaffey.com, lists my latest Digital marketing and E-commerce books and support materials including a digital marketing glossary . Please connect on LinkedIn to receive updates or ask me a question .

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So much has been written about Amazon’s outsized growth. But Harvard Business School professor Sunil Gupta says it’s the company’s unusual approach to strategy that has captured his scholarly attention. Gupta has spent years studying Amazon’s strategy and its founder and former CEO Jeff Bezos.

In this episode, Gupta shares how Amazon upended traditional corporate strategy by diversifying into multiple products serving many end users, instead of having a narrow focus.

He argues that some of Amazon’s simplest business strategies — like their obsession with customers and insistence on long-term thinking — are approaches that companies, big and small, can emulate.

Key episode topics include: strategy, innovation, leadership, scaling, Jeff Bezos, long-term thinking, customer focus.

HBR On Strategy curates the best case studies and conversations with the world’s top business and management experts, to help you unlock new ways of doing business. New episodes every week.

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HANNAH BATES: Welcome to HBR On Strategy , case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business.

So much has been written about Amazon’s outsized growth. But Harvard Business School professor Sunil Gupta says it’s the company’s unusual approach to strategy that has captured his scholarly attention.

Gupta has spent years studying Amazon’s strategy and its founder and former CEO, Jeff Bezos.

In this episode, Gupta shares how Amazon upended traditional corporate strategy by diversifying into multiple products serving many end users instead of focusing more narrowly.

And he argues that some of their simplest business strategies – like their obsession with the customer and insistence on long-term thinking – are approaches that companies, big and small, should emulate.

If you’re interested in innovation strategy, this episode is for you. It originally aired on HBR IdeaCast in November 2020. Here it is.

ALISON BEARD:  Welcome to the HBR IdeaCast from Harvard Business Review.  I’m Alison Beard.

If you had to name the most successful business leader alive today, who would you say?  I can’t hear you from my basement podcasting room, but I would bet that for many of you, the answer is Jeff Bezos, CEO of Amazon.  This is a man who over the past 25 years turned his online bookstore startup into a diversified company currently valued at $1.6 trillion.

Amazon is a digital retailing juggernaut, it’s also a web services provider, media producer, and manufacturer of personal technology devices like Kindle and Echo.  Oh, and Bezos also owns the Washington Post and Blue Origin, a space exploration company.  Forbes tells us he is the richest person in the world.

How did he accomplish so much?  How did he change the business landscape?  What mistakes has he made along the way?  A new collection of Bezos’s own writing, which full disclosure, my colleagues at Harvard Business Review Press have published, offer some insights.  Here’s a clip from one speech that’s included.  The book is called Invent and Wander.

And our guest today, who has spent years studying both Amazon and Bezos, is here to talk with me about some of the key themes in it, including the broad drivers of both the company and the CEO’s success.  Sunil Gupta is a professor of business administration at Harvard Business School and cochair of its executive program, and cochair of its executive program on driving digital strategy, which is also the title of his book.  Sunil, thanks so much for being on the show.

SUNIL GUPTA:  Thank you for having me, Alison.

ALISON BEARD:  So Invent and Wander.  I get that Bezos is inventive.  You know, he created a new way for us to buy things – everything.  How is he also a wonderer?

SUNIL GUPTA:  So he’s full of experiments.  His company and his whole style is known for experimentation, and he says that in so many words that if you want big winners, then you have to be willing to have many failures.  And the argument is, one big winner will take care of a thousand failed experiments.  So I think that’s the wandering part.  But also his experiments are not aimless.  There is a certain thought and process behind what experiments to do and why they will connect to the old, old picture of what Amazon is today.

ALISON BEARD:  And your expertise is in digital strategy.  How does he break the traditional rules of strategy?

SUNIL GUPTA:  So for the longest time the way, at least I was taught in my MBA program and the way we teach to our MBA students and executives, is strategy is about focus.  But if you look at Amazon, Amazon certainly doesn’t look like it’s focusing on anything, so obviously Jeff Bezos missed that class, otherwise it’s a very, very different thing.

And then you’d say, why is it that so called lack of focus strategy seems to be working for Amazon?  And I think the fundamental underlying principle that he’s guiding his whole discussion of strategy is, he’s changed the rules of strategy.  So the old rules of strategy were, the way you gained competitive advantage is by being better or cheaper.  So if I am selling you a car, my car is better of cheaper.  But the inherent assumption in that strategy statement is, I’m selling one product to one customer.  And what Amazon is basically arguing is, the digital economy is all about connection.  We have got to connect products and connect customers.  Let me explain why that is so powerful.

So connecting products, here the idea is, I can sell you, this is a classic razor and blade strategy.  I can sell you a razor cheap in order to make money on the blade.  So I can sell you Kindle cheap in order to make money on the ebooks.  Now, at some level you might say, hey, razor and blade have been around forever.  What’s so unique today?  I think unique today is razor could be in one industry and blades could be in completely different industrys.

So for example, if you look at Amazon’s portfolio of businesses, you sort of say, not only Amazon is an e-commerce player, but also is making movies and TV shows, its own studio.  Well, why does it make sense for an e-commerce player, an online retailer to compete with Hollywood.  Well, Walmart doesn’t make movies.  Macy’s doesn’t make movies?  So why does it make sense for Amazon to make movies?

And I think once you dig into it, the answer becomes clear that the purpose of the movies is to keep and gain the Prime customers. Two day free shipping is fine, but if  you ask me to pay $99 or $119 for two day free shipping, I might start doing the math in my head, and say, OK, how many packages do I expect to get next year?  And is the Prime membership worth it or not?

But once you throw in, in addition to the two-day free shipping, you throw in some TV shows and movies that are uniquely found only on Amazon, I can’t do this math.  And why is Prime customers important to Amazon?  Because Prime customers are more loyal.  They buy three or four times more than the non-Prime customers, and they’re also less price sensitive.

And in fact, Jeff Bezos has said publicly that every time we win a Golden Globe Award for one of our shows, we sell more shoes.  So this is, and he said it in your book, Invent and Wander, also, that we might be the only company in the world which has figured out how winning Golden Globe Awards can actually translate into selling more products on the online commerce.

So this is a great example of the razor being in a very different industry and blade being in another industry.  Take another example.  Amazon has a lending business where they give loans to small and medium enterprises. If Amazon decides to compete with banks tomorrow, Amazon can decide to offer loans to the small merchants at such a low price that banks would never be able to compete.  And why would Amazon be able to do that?  Because Amazon can say, hey, I’m not going to make money on loans, as much money on loans, but I’ll make more money when these businesses, small businesses grow and do more transactions on my marketplace platform.  And I get more commissions.  So again, loan can become my razor in order to help the merchants grow and make money on the transaction and the commission that I get from that.  The moment I make somebody else’s, in this case the banks, core business my razor, they will make a very hard time competing.  So I think that’s the key change, the fundamental rules of strategy and competition in that direction.

The second part of connection is connecting customers, and this is the classic network effect.  So marketplace is a great example of network effects.  The more buyers I have, the more sellers I have.  The more sellers I have, the sellers I have, the more buyers I get, because the buyers can find all the items.  And that becomes flywheel effect, and it becomes a situation where it’s very hard for a new player to complete with Amazon.

ALISON BEARD:  In this diversification that Amazon has done, how have they managed to be good at all of those things?  Because they’re not focused.  You know, they’re not concentrated on an area of specific expertise.  So how have they succeeded when other companies might have failed because they lacked that expertise, or they were spreading themselves too thin?

SUNIL GUPTA:  So I think it depends on how you define focus.  Most of us, when we define focus, we sort of define focus by traditional industry boundaries, that I’m an online retailer, therefore going into some other business is lack of focus.  The way Amazon thinks about is focus on capabilities.

So if you look at it from that point of view, I would argue that Amazon had three fundamental core capabilities.  Number one, it’s highly customer focused, not only in its culture, but also in its capability in terms of how it can actually handle data and leverage data to get customer insight.  The second core capability of Amazon is logistics.  So it’s now a world class logistics player.  It uses really frontier technology, whether it’s key word, robotics, computer vision, in its warehouse to make it much more efficient.

And the third part of Amazon’s skill or the capability is its technology.  And a good example of that is Amazon Web Services, or AWS.  And I think if you look at these three core capabilities, customer focus and the data insight that it gets from that, the logistics capability, and the technology, everything that Amazon is doing is some way or the other connected to it.  In that sense, Amazon, and there’s no lack of focus, in my judgment on Amazon.

Now, if he starts doing, starts making cream cheese tomorrow or starts making airplane engines, then I would say, yes, it’s got a lack of focus.  But one of the other things that Jeff Bezos has said again and again is this notion of work backwards and scale forward.  And what that means is, because you’re customer obsessed, you sort of find ways to satisfy customers, and if that means developing new skills that we don’t have because we are working backwards from what the customer needs are, then we’ll build those skills.

So a good example of that is, when Amazon started building Kindle, Amazon was never in the hardware business.  It didn’t know how to build hardware.  But Bezos realized that as the industry moved, people are beginning to read more and more online, rather, or at least on their devices, rather than the physical paper copy of a book.  So as a result, he says, how do we make it easier for consumers to read it on an electronic version?  And they’re spending three years learning about this capability of hardware manufacturing.  And by the way, Kindle came out long before iPad came out.  And of course, that capability now has helped them launch Echo and many other devices.

ALISON BEARD:  Right.  So it’s the focus on the customer, plus a willingness to go outside your comfort zone, the wander part.

SUNIL GUPTA:  Exactly.

ALISON BEARD:  Yeah.  How would you describe Bezos’s leadership style?

SUNIL GUPTA:  So I think there are at least three parts to it.  One is, he said right from day one that he wants to be a long-term focus.  The second thing is being customer obsessed.  And many times he has said that he can imagine, in the meetings he wants people to imagine an empty chair.  That is basically for the customer. And he says, we are not competitor focused.  We are not product focused.  We are not technology focused.  We are customer focused.  And the third is, willingness to experiment.  And fail, and build that culture in the company that it’s OK to fail.

ALISON BEARD:  What about personally, though?  Is he a hard charger?  Is he an active listener?  What’s it like to be in a room with him?

SUNIL GUPTA:  Oh, he’s certainly a hard charger.  I mean, he’s also the kind of guy, when he hires people, he says, you can work long, hard, or smart.  But at Amazon, you can choose two out of three.  And I think this is similar to many other leaders.  If you look at Steve Jobs, he was also a very hard charging guy.  And I think some people find it exhilarating to work with these kind of leaders.  Some find it very tough.

ALISON BEARD:  Do you think that he communicates differently from other successful CEOs?

SUNIL GUPTA:  So the communication style that he has built in the company is the very famous now, there’s no PowerPoints.  So it’s a very thoughtful discussion.  You write six-page memos, which everybody, when their meeting starts, everybody sits down and actually reads the memo.

In fact, this was a very interesting experience that I had.  One of my students, who was in the executive program, works at Amazon in Germany.  And he is, he was at that point in time thinking of moving to another company and becoming a CEO of that company.  So he said, can I talk to you about this change of career path that I’m thinking about?  I said, sure.  So we set up a time, and five minutes before our call, he sends me an email with a six-page memo.  And I said, well, shouldn’t he have sent this to me before, so I could at least look at it?  He says, no, that’s the Amazon style.  We’ll sit in silence and read it together.  And so I read it together, because then you’re completely focused on it.  And then we can have a conversation.  But this discipline of writing a six-page memo, it’s a very, very unique experience, because you actually have to think through all your arguments.

ALISON BEARD:  You also mentioned the long term focus, and that really stood out for me, too, this idea that he is not at all thinking of next year.  He’s thinking five years out, and sometimes even further.  But as a public company, how has Amazon been able to stick to that?  And is it replicable at other companies?

SUNIL GUPTA:  I think it is replicable.  It requires conviction, and it requires a way to articulate the vision to Wall Street that they can rally behind.  And it’s completely replicable.  There are other examples of companies who have followed a similar strategy.  I mean, Netflix is a good example.  Netflix hadn’t made money for a long period of time.  But they sold the vision of what the future will look like, and Wall Street bought that vision.

Mastercard is exactly the same thing.  Ajay Banga is giving three year guidance to Wall Street saying, this is my three-year plan, because things can change quarter to quarter.  I’m still responsible to tell you what we are doing this quarter, but my strategy will not be guided by what happens today.  It will be guided by the three-year plan that we have.

ALISON BEARD:  There are so many companies now that go public without turning any profit, whereas Amazon now is printing money, and thus able to reinvest and have this grand vision.  So at what point was Bezos able to say, right, we’re going to do it my way?

SUNIL GUPTA:  I think he said it right from day one, except that people probably didn’t believe it.  And in fact, one of the great examples of that was, when he was convinced about AWS, the Amazon Web Services, that was back in the early 2000s, when a majority of the Wall Street was not sure what Jeff Bezos was trying to do, because they say, hey, you are an online retailer.  You have no business being in web services.  That’s the business of IBM.  And that’s a B2B business.  You’re in a B2C business.  Why are you going in there?

And Bezos said, well, we have plenty of practice of being misunderstood.  And we will continue with our passion and vision, because we see the path.  And now he’s proven it again and again why his vision is correct, and I think that could give us more faith and conviction to the Wall Street investors.

SUNIL GUPTA:  Oh, absolutely.  And he’s one of the persons who has his opinion, and you always surround yourself with people better than you.

ALISON BEARD:  How has he managed to attract that talent when it is so fiercely competitive between Google, Facebook, all of these U.S. technology leaders?

SUNIL GUPTA:  So a couple of things I would say.  First of all, it’s always good fun to join a winning team.  And all of us want to join a winning team, so this certainly is on a trajectory which is phenomenal.  It’s like a rocket ship that is taking off and has been taking off for the last 25 years.  So I think that’s certainly attractive to many people, and certainly many hard charging people who want to be on a winning team.

And a second thing is, Amazon’s culture of experimentation and innovation.  That is energizing to a lot of people.  It’s not a bureaucracy where you get bogged down by the processes.  So the two type of decisions that we talked about, he gives you enough leeway to try different things, and is willing to invest hundreds of millions of dollars into things that may or may not succeed in the future.  And I think that’s very liberating to people who are willing to take on the ownership and build something.

ALISON BEARD:  But don’t all of the tech companies offer that?

SUNIL GUPTA:  They do, but if you think about many other tech companies, they’re much more narrow in focus.  So Facebook is primarily in social media.  Google is primarily in search advertising.  Yes, you have GoogleX, but that’s still a small part of what Google does.  Whereas if you ask yourself what business is Amazon in, there are much broader expansive areas that Amazon has gone into.  So I think the limits, I mean, Amazon does not have that many limits or boundaries as compared to many other businesses in Silicon Valley.

ALISON BEARD:  So let’s talk a little bit about Bezos’s acquisition strategy.  I think the most prominent is probably Whole Foods, but there are many others.  How does he think about the companies that he wants to bring in as opposed to grow organically?

SUNIL GUPTA:  So some acquisitions are areas where he thinks that he can actually benefit and accelerate the vision that he already has.  So for example, the acquisition of Kiva was to improve the efficiency and effectiveness of the systems that he already put in place in his warehouse.  And logistics and warehouse is a key component or key part of Amazon’s business, and he saw that Kiva already was ahead of the curve in technology that he probably wanted to have that in his own company.  So that was obvious acquisition, because that fits in the existing business.

Whole Foods is kind of a slightly different story, in my judgment, because I some ways, you can argue, why is Amazon, an online player, buying an offline retail store, Whole Foods?  And in fact, they bought it at 27% premium.  So that doesn’t make sense for an online retailer commerce to go to offline channels.  And I think, in fact, part of the reason in my judgment is, it’s not just Whole Foods, but it’s about the food business, per se.  And why is Amazon so interested in food?  In fact, Amazon has been trying this food business, online food delivery for a long period of time without much success.  And Whole Foods was one, another way to try and get access to that particular business.  And why is that so important to Amazon, even though you could argue, food is a low margin business?

And I would say, part of the reason is, food is something, grocery is something that you buy every week, perhaps twice a week.  And if I, as Amazon, can convince you to buy grocery online from Amazon, then I’m creating a habit for you to come onto Amazon every week, perhaps twice a week.  And once you are on Amazon, you will end up buying other products on Amazon.  Whereas if you are buying electronics, you may not come to Amazon every day.

So this is a habit creation activity, and again, it may not be a very high margin activity to sell you food.  But I’ve created a habit, just like Prime.  I’ve created a loyal customer where you think of nothing else but Amazon for your daily needs, and therefore you end up buying other things.

ALISON BEARD:  And Amazon isn’t without controversy.  You know, and we should talk about that, too.  First, there are questions about its treatment of warehouse employees, particularly during COVID.  And Bezos, as you said, has always been relentlessly focused on the customer.  But is Amazon employee centric, too?

SUNIL GUPTA:  So I think there is definitely some areas of concern, and you rightly said there is a significant concern about the, during the COVID, workers were complaining about safety, the right kind of equipment.  But even before COVID, there were a lot of concerns about whether the workers are being pushed too hard.  They barely have any breaks.  And they’re constantly on the go, because speed and efficiency become that much more important to make sure customers always get what they are promised.  And in fact, more than promised.

Clearly Amazon either hasn’t done a good job, or hasn’t at least done the public relations part of it that they have done a good job.  Now, if you ask Jeff Bezos, he will claim that, no, actually, they have done things.  For example, they offer something called carrier choice, where they give 95% tuition to the employees to learn new skills, whether they’re relevant to Amazon or not.  Pretty much like what Starbucks does for its baristas, for college education and other things.  But I think more than just giving money or tuition, it requires a bit of empathy and sense that you care for your employees, and perhaps that needs, that’s something that Amazon needs to work on.

ALISON BEARD:  And another challenge is the criticism that it has decimated mom and pop shops.  Even when someone sells through Amazon, the company will then see that it’s a popular category and create it itself and start selling it itself.  There’s environmental concerns about the fact that packages are being driven from warehouses to front doors all over America.  And boxes and packaging.  So how has Bezos, how has the company dealt with all of that criticism?

SUNIL GUPTA:  They haven’t.  And I think those are absolutely valid concerns on both counts, that the small sellers who grow to become reasonably big are always under the radar, and there are certainly anecdotal evidence there, small sellers have complained that Amazon had decided to sell exactly the same item that they were so successful in selling, and becoming too big is actually not good on Amazon, because Amazon can get into your business and wipe you away.  So that’s certainly a big concern, and I think that’s something that needs to be sorted out, and Amazon needs to clarify what its position on that area is, because it benefits from these small sellers on his platform.

And your second question about environmental issues is also absolutely on the money, because not only emission issues, but there’s so many boxes that pile in, certainly in my basement, from Amazon.  You sort of say, and it’s actually ironical that Millennials who are in love with Amazon are extremely environmentally friendly.  But at the same time, they would not hesitate to order something from Amazon and pile up all these boxes.  So I think Amazon needs to figure out a way to think about both those issues.

ALISON BEARD:  And at what point will it have to?  I mean, it seems to be rolling happily along.

SUNIL GUPTA:  Well, I think those issues are becoming bigger and bigger, and it’s certainly in the eye of the regulators, also, for some of these practices.  And not only because it’s too big, and there might be monopoly concerns, but these issues will become larger, and any time you become a large company, you become the center of attraction for broader issues than just providing shareholder value.

ALISON BEARD:  Yeah.  So those are weaknesses possibly for the company.  What are some of Bezos’s personal weaknesses that you’ve seen in studying him and the company?

SUNIL GUPTA:  So I think one thing that stands out to me, and at least in the public forums, I have not seen any empathy.  And it’s, I mean, we talk about that the leaders have, should have three qualities.  They should be competent.  They should have a good character.  And they should have compassion.  So he’s certainly very competent.  I mean, he’s brilliant in many aspects, right, from the computer vision and AI and machine learning, to the nuances of data analytics, to the Hollywood production, etc.  He also seems to have good character, at least I have not heard any personal scandals, apart from his other issues in his personal life, perhaps.

Those characteristics of competence and character make people respect you.  What makes people love you is when you show compassion, and at least I haven’t seen compassion or empathy that comes out of him.  I mean, he certainly comes across as a very hard charging, driven person, which probably is good for business.  But the question of empathy is perhaps something lacking right now.

ALISON BEARD:  Yeah.  The other issue is his just enormous wealth.  He did invent this colossally valuable company, but should anyone really be that rich?

SUNIL GUPTA:  Well, I guess that’s, you can say that’s the good or the bad thing about capitalism.  But I think, and again, my personal view is there’s nothing wrong in becoming rich, if you have been successful and done it with hard work and ingenuity.  But how you use your wealth is something that perhaps will define Jeff Bezos going forward.  I think Bill Gates is a great example how he actually has used his wealth and his influence and his expertise and his brilliance into some certain thing that actually is great for humanity.

Now, whether Jeff Bezos does that down the road, I don’t know, whether his space exploration provides that sort of outlet which is both his passion as well as good for humanity, I don’t know.  But at some point in time, I think it’s the responsibility of these leaders to sort of say, my goal is not simply to make money and make my shareholders rich, but also help humanity and help society.

ALISON BEARD:  If you’re talking to someone who’s running a startup, or even a manager of a team at a traditional company, what is the key lesson that you would say, this is what you can learn from Jeff Bezos?  This is what you can put to work in your own profession?

SUNIL GUPTA:  So I would say two things that at least I would take away if I were doing a startup.  One is customer obsession.  Now, every company says that, but honestly, not every company does it, because if you go to the management meetings, if you go to the quarterly meetings, you suddenly go focus on financials and competition and product.  But there’s rarely any conversation on customers.  And I think, as I mentioned earlier, that Jeff Bezos always tells his employee to think of the imaginary chair in which a customer is sitting, because that’s the person that we need to focus on.  Howard Shultz does the same thing at Starbucks, and that’s why Starbucks is so customer focused.

So I think that’s the first part.  And the argument that Bezos gives is, customers are never satisfied.  And that pushes us to innovate and move forward, so we need to innovate even before the rest of the world even sees that, because customers are the first ones to see what is missing in the offering that you have.

And the second I would say that I would take away from Jeff Bezos is the conviction and passion with what you do.  And many times that goes against the conventional wisdom.  And the Amazon Web Services is a great example of that.  The whole world, including the Wall Street Journal and the Wall Street analysts were saying, this is none of Amazon’s business to do web services.  But he was convinced that this is the right thing to do, and he went and did that.

And part of that conviction may come from experiments.  Part of that conviction comes from connecting the dots that he could see that many other people didn’t see.  I mean, that’s why he went, left his job, and went to Seattle to do the online bookstore, because he could see the macro trends as to what the Internet is likely to do.  So, I think that’s the vision that he had.  And once you have the conviction, then you follow your passion.

ALISON BEARD: Sunil, thanks so much for coming on the show.

SUNIL GUPTA:  Thank you for having me. Alison.

HANNAH BATES: That was Harvard Business School professor Sunil Gupta, in conversation with Alison Beard on the HBR IdeaCast .

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The Integration of Digital Business Models: The Amazon Case Study

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• Carlo Bagnoli 10 ,
• Andrea Albarelli 11 ,
• Stefano Biazzo   ORCID: orcid.org/0000-0003-3373-2964 12 ,
• Gianluca Biotto 13 ,
• Giuseppe Roberto Marseglia 14 ,
• Maurizio Massaro   ORCID: orcid.org/0000-0001-6461-2709 15 ,
• Matilde Messina 13 ,
• Antonella Muraro 16 &
• Luca Troiano 17  

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The final chapter involves the description of the Amazon case study. The intention is to reconnect the various categorizations illustrated in the previous chapter to a real-world example for the purpose of presenting a successful case of business disruption as Amazon is known to have disrupted retail. The analysis aims at highlighting the fact that Amazon combines all the business model frameworks described in the preceding chapters as well as investigating their coexistence within a single organization.

The present chapter also explains a few methodologies which have been developed in order to guide companies through the process of disrupting their existing business models and facilitating the shift towards an innovative framework. Digital technologies can ease the above-mentioned transition as firms are required to select the technological advancements enabling them to accomplish particular organizational goals.

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Carlo Bagnoli

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Bagnoli, C. et al. (2022). The Integration of Digital Business Models: The Amazon Case Study. In: Digital Business Models for Industry 4.0. Future of Business and Finance. Springer, Cham. https://doi.org/10.1007/978-3-030-97284-4_4

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Amazon Marketing Strategy: Case Study

The Amazon Marketing Strategy has been largely responsible for the company’s meteoric rise to becoming one of the most powerful players in the global market. Dissimilar to conventional marketing approaches, Amazon’s strategy has revolutionized the way businesses operate, reach out to customers, and leave a lasting impact on their shelves, both virtual and physical.

This article will explore Amazon’s marketing goals and objectives, target audience, marketing mix, key strategies, marketing channels, and provide insights on how to apply Amazon marketing strategy to your own business. 

By understanding and leveraging Amazon’s strategies, brands can enhance their own marketing efforts and achieve significant growth.

Amazon Marketing Goals and Objectives

Amazon’s marketing strategy aims to create a seamless shopping experience, increase customer loyalty, and expand its market share. It revolves around customer satisfaction through data-driven decision-making. This approach has helped Amazon maintain a competitive edge and achieve sustained growth. The primary goals and objectives of Amazon’s marketing strategy include:

• Customer Satisfaction : Ensuring a high level of customer satisfaction through excellent service and a user-friendly shopping experience.
• Market Expansion : Continuously expanding its market presence by entering new regions and launching new product categories.
• Brand Loyalty : Building and maintaining strong brand loyalty through programs like Amazon Prime, which offers exclusive benefits and faster shipping.
• Innovation : Investing in innovative technologies to improve operations and enhance the customer experience.

Who is Amazon Target Audience?

Amazon’s target audience encompasses a wide range of individuals, reflecting the company’s broad appeal and diverse customer base. To effectively understand who Amazon’s customers are, it’s essential to analyze their customer segmentation from various perspectives: demographic, geographic, behavioral, and psychographic aspects.

Examining the demographic segmentation , Amazon primarily targets adults aged 18 to 60, with a significant proportion falling within the 35-49-year-old age bracket. This age group represents a critical segment that actively engages in online shopping and has the financial means to purchase products from Amazon. In addition, this demographic represents a sizable market segment that is likely to have access to technology and is already accustomed to online shopping practices.

When exploring Amazon’s geographic target audience , it becomes evident that the company’s vast customer base primarily comes from the United States. More than 60% of Amazon’s website traffic is from the US alone. This highlights the dominance of Amazon in the American market and its efforts to capture a significant share of the e-commerce sector within the country.

From a behavioral standpoint , Amazon’s customer segmentation sets apart casual customers (non-Prime) from those with a Prime membership. The behavior of these two groups differs significantly in terms of purchasing frequency. While 37% of casual customers make multiple purchases throughout the year, those with a Prime membership go a step further. Nearly half of Prime members make at least one purchase every week, and a compelling 74% purchase monthly. This data highlights the appeal and loyalty that Amazon Prime membership generates, often leading to increased engagement and frequency of purchases.

Psychographic segmentation also plays a vital role in understanding Amazon’s target audience. Widespread customer surveys, analysis of purchase patterns, and engagement data have provided insights into the preferences, hobbies, and interests of Amazon customers. Amazon caters to various psychographic segments such as technology enthusiasts, bookworms, fitness enthusiasts, home improvement enthusiasts, fashion-forward individuals, and many more. By identifying and catering to the psychographic needs and preferences of its customers, Amazon can successfully offer tailored shopping experiences and personalized product recommendations.

To illustrate how Amazon efficiently reaches and entices its target audience, consider several examples. Firstly, by targeting adults between the ages of 18 and 60, Amazon acknowledges that this demographic constitutes a significant proportion of online shoppers, possesses purchasing power, and uses technology consistently. Consequently, Amazon tailors its marketing strategies and initiatives to effectively reach this age group through various digital channels such as social media, email marketing, search engine optimization, and targeted online advertising.

Furthermore, with a predominant customer base in the United States, Amazon directs many of its marketing efforts toward reaching American consumers. The company invests in national campaigns, partnerships with popular institutions, sponsorship of major events, and targeted advertising on regional platforms. Additionally, Amazon positions its warehouses strategically throughout the country to offer prompt shipping and delivery services, ensuring it caters efficiently to the needs and preferences of American customers.

Amazon’s segmentation by behavioral aspects enables the company to personalize its marketing efforts. By focusing on emphasizing the benefits of Prime membership such as faster shipping, exclusive discounts, and access to various services like Prime Video and Prime Music, Amazon can ignite loyalty and encourage their development as loyal, returning customers. This approach fosters greater trust and familiarity between Amazon and its customers, upholding the formation of a dedicated consumer base.

Moreover, the utilization of various psychographic segments offers Amazon the opportunity to resonate with a broad range of customer types. By carefully curating product suggestions, recommending items related to specific hobbies or interests, and providing customization options, Amazon leverages intricate algorithms to captivate its customers. Catering to different personalities, aspirations, and financial statuses speaks volumes about Amazon’s adaptable marketing strategies, solidifying its reputation as an e-commerce giant capable of satisfying everyone’s preferences and needs.

Marketing Mix of Amazon

Amazon’s marketing mix, also known as the 4Ps, involves various strategies that align with its extensive range of products. This mix includes the product offerings, place or distribution channels, promotional activities, and pricing strategies employed by the company.

Amazon’s product mix is undeniably vast. The company initially started as an online bookstore and gradually expanded into an online retail giant. Besides retail goods and services, the company has diversified its product line to include various products . One such product is Amazon Prime, which provides subscribers with free shipping, and access to Prime Video, Prime Music, and more.

In addition, Amazon has ventured into consumer electronics, such as e-readers, smart speakers, and streaming devices. The Kindle e-reader, Echo smart speakers, and Fire TV have gained significant popularity.

Another crucial part of Amazon’s product mix includes digital content distribution services. It offers various e-books, music, movies, and TV shows through its digital platforms like Kindle Store, Amazon Music, and Amazon Video.

Amazon’s product mix also includes Amazon Web Services (AWS), a cloud computing platform. AWS offers a range of services such as storage, computing power, server hosting, database management, and more. This has allowed Amazon to tap into the business-to-business (B2B) market successfully.

Amazon Publishing, another part of its product mix, allows authors to self-publish and sell their books through the Kindle Direct Publishing platform. This has revolutionized the publishing industry, empowering aspiring authors to reach a wide audience with ease.

Amazon has also expanded into physical retail with the acquisition of Whole Foods Market. This move provided Amazon with brick-and-mortar retail stores, allowing customers to make purchases offline as well.

Amazon adopts various pricing strategies as part of its overall marketing mix. One of their key strategies is a market-oriented pricing approach. By considering the price competitiveness of their products alongside rival offerings, Amazon strives to offer products at competitive price points, often ensuring that customers receive good value for their money.

Additionally, Amazon employs a differential pricing strategy. It offers different pricing tiers for its services, targeting different customer segments. For instance, Amazon Prime offers multiple subscription options, catering to customer preferences based on the frequency of usage.

Amazon also employs a freemium pricing strategy for several of its products and services. By offering a baseline service for free, they entice customers to upgrade to paid versions. The AWS free tier is a prime example.

Lastly, Amazon utilizes a pay-as-you-go pricing strategy for its cloud services, AWS. Rather than requiring an upfront payment or subscription, customers are charged for the actual usage of the service. This allows businesses to have flexibility and scalability for their computing needs.

Amazon’s distribution channels include its online platform, physical stores like Amazon Go, and partnerships with third-party sellers.

Amazon’s official e-commerce platforms, websites, and apps serve as the primary distribution channels for its products. Customers can access Amazon’s wide range of offerings from anywhere in the world through its user-friendly websites or mobile apps. The company leverages a robust logistics network, including fulfillment centers and last-mile delivery services, to ensure fast and reliable shipping.

Also, with its physical stores like Amazon Go and Whole Foods Market, Amazon has brick-and-mortar stores in its distribution channels. This allows customers to physically visit their supermarkets and experience the convenience of shopping at both traditional retail stores and online.

Amazon’s strategic use of various distribution channels allows it to reach a wide audience and provide a seamless shopping experience, regardless of the customer’s location.

Advertisement plays a significant role in Amazon’s promotional mix. Through its extensive online and offline advertising campaigns, Amazon reaches millions of potential customers worldwide. With an ample marketing budget, Amazon utilizes various channels such as TV, radio, print media, digital ads, and sponsored advertisements on social media platforms.

Sales promotions are another component of Amazon’s promotional mix. Special deals like “Deals of the Day” and “Lightning Deals” encourage customers to make purchases by offering time-limited discounts. In addition, Amazon conducts seasonal sales like “Prime Day” and “Black Friday” that boost sales significantly.

Public relations activities, such as strategic partnerships and collaborations, help Amazon maintain a positive brand image. Launching new services with the involvement of well-known companies or educational institutions garners attention and credibility.

While Amazon excels in digital marketing, it also utilizes direct marketing initiatives. For instance, customers receive personalized emails based on their browsing behavior, which highlights products they may be interested in. Direct communication via mail and text messages also keeps customers informed about upcoming sales and promotions.

What are Amazon Marketing Strategies?

Customer-Centric Approach

Amazon’s customer-centric approach is one of the core pillars of its marketing strategy. It encompasses a wide range of tactics and initiatives that are all aimed at enhancing the shopping experience for their customers. By putting the needs and desires of their customers at the forefront, Amazon has been extremely successful in building strong relationships and driving repeat business.

One of the key aspects of Amazon’s customer-centric approach is its personalized recommendation system. By analyzing customer behavior and purchase history, Amazon is able to offer highly targeted recommendations that are tailored to individual preferences. For example, when a customer purchases a book, Amazon’s algorithm can suggest similar books that the customer may find interesting. This not only enhances the overall shopping experience but also increases cross-selling opportunities. 

Consider the “Customers who bought this also bought” feature on Amazon product pages. When a customer views a specific product, Amazon displays a list of other products that customers who have bought the same item often purchased. This serves as an effective cross-selling tactic as it exposes customers to related products they may be interested in, thus encouraging additional purchases.

To further reinforce their customer-centric approach, Amazon ensures a hassle-free returns process. They understand that customer satisfaction goes beyond the purchasing experience and extends even after the product has been received. Amazon’s generous return policy allows customers to easily return items they are unsatisfied with or received incorrectly. The ease and convenience of their return process earn customer trust and loyalty. This positive experience not only promotes customer satisfaction but also assists in building long-term relationships with their customers.

Another significant element of Amazon’s customer-centric approach lies in its exceptional customer service. Maintaining prompt and efficient customer support is crucial for any business, and Amazon recognizes this. They have invested heavily in establishing excellent customer service channels to address any concerns or issues customers may have. Whether it is through phone support, email communications, or their live chat feature, Amazon ensures their customers receive timely assistance for a positive shopping experience.

One of the reasons Amazon values customer loyalty and retention is the profitability it brings. Research reveals that acquiring a new customer can cost five times as much as retaining existing customers . By prioritizing their customers and focusing on building strong relationships, Amazon increases the chances of repeat business and reduces customer churn. When customers have positive experiences, not only are they more likely to continue shopping on Amazon but they are also more inclined to recommend the platform to others.

Innovation and Technology

Amazon’s commitment to innovation and technology is one of the primary factors that sets it apart in the e-commerce industry. The company consistently invests in advanced technologies to deliver excellent customer experiences, streamline operations, and maintain its position as a global market leader. With a customer-centric approach, Amazon focuses on developing disruptive technologies that revolutionize not only its internal processes but also the way customers interact with the brand.

One of the most notable examples of Amazon’s innovation and technology is its voice-controlled virtual assistant, Alexa. Introduced with the Amazon Echo smart speaker, Alexa has become an integral part of many households worldwide. With Alexa, customers can simply use their voice to interact with Amazon, including purchasing products, managing their shopping lists, and even controlling various compatible smart home devices. This advancement has made online shopping more intuitive and convenient, offering a seamless experience where customers can just ask Alexa to order products without browsing through a website or mobile app.

Amazon also leverages artificial intelligence (AI) and machine learning (ML) algorithms to optimize its operations and enhance the overall customer experience. Through AI-powered algorithms, Amazon constantly analyzes customer behavior, purchase patterns, and preference data to generate personalized product recommendations. By tailoring product selection for each customer, Amazon creates a more personalized shopping experience, boosting customer satisfaction and driving loyalty.

In addition, Amazon’s inventory management systems utilize AI and ML to predict customer demand and automate stock replenishment processes. With advanced algorithms, the company can optimize inventory levels, reducing overstock and ensuring products are available when customers need them. This not only improves efficiency and reduces carrying costs but also decreases instances of stockouts and disappointed customers. By harnessing the power of AI, Amazon commits to consistently delivering on its promise of fast and reliable product delivery.

Amazon Go stores are another groundbreaking innovation from the company. These stores utilize an array of technologies to offer customers a cashier-less shopping experience. Automated cameras, sensors, and computer vision technology enable customers to simply pick up items they need while Amazon’s retail platform tracks the products they select. Upon leaving the store, customers are automatically charged for their purchases through their Amazon accounts. The Amazon Go concept prioritizes speed and convenience, as customers can seamlessly shop without the need for traditional checkouts and cashier lines.

Moreover, Amazon persists in improving its logistics capabilities through innovative technologies. The company has experimented with delivery drones to expedite the shipping process, especially for lightweight, small packages. Amazon believes that utilizing unmanned aerial vehicles will ultimately decrease delivery time and enhance efficiency, although regulatory challenges are slowing down widespread adoption. Nevertheless, it exemplifies Amazon’s quest for cutting-edge solutions to improve logistics performance and exceed customer expectations.

Market Expansion

Amazon continuously seeks opportunities to expand its market presence by entering new regions and launching new product categories. This approach allows Amazon to diversify its offerings, capture a larger share of the market, and ultimately drive growth.

A prime example of Amazon’s market expansion strategy is the acquisition of Whole Foods in 2017. With this strategic move, Amazon not only established its foothold in the brick-and-mortar retail space but also sought to integrate online and offline retail. The acquisition provided Amazon with instant access to a well-established customer base, a nationwide network of physical stores, and recognized brand equity. By combining its e-commerce capabilities with Whole Foods’ physical presence, Amazon expanded its reach and further solidified its position as a leading retailer globally.

Amazon’s entry into emerging markets also plays a significant role in its market expansion strategy. For instance, the company made a strategic attempt to acquire the Indian local e-commerce giant Flipkart in 2018 ( Flipkart rejected the deal however, and sold to Walmart ). In addition, Amazon actively partners with local businesses and sellers in various countries to boost its presence and offer localized products and services. This approach not only allows the company to cater to specific regional needs but also helps it navigate regulatory requirements and establish strong relationships with local communities.

Amazon’s market expansion strategy also involves continuously expanding its product category offerings. While initially starting as an online bookstore, the company gradually expanded its range to include electronics, household goods, apparel, and much more. By diversifying its product offerings, Amazon appeals to a broader range of customers and attracts new customer segments. For example, the launch of Amazon Devices, including the highly popular Kindle e-readers and Fire tablets, not only serves as a source of revenue but also ties customers more closely to the Amazon ecosystem.

In addition to acquiring existing businesses and broadening its product categories, Amazon actively experiments with innovative business ventures and digital services. One notable example is the Amazon Prime membership program. Through this initiative, Amazon provides fast and free shipping, access to exclusive content and deals, and perks like Prime Video and Prime Music. By creating a loyal customer base through the Prime program, Amazon unlocks various avenues for cross-selling and upselling. For instance, Prime members are more likely to purchase Amazon Echo devices, emphasizing the strategy of integrating hardware and software within the Amazon ecosystem.

Content Marketing

Content marketing allows Amazon to effectively engage with its customers and build trust. By leveraging content marketing initiatives such as Amazon Originals and user-generated reviews, Amazon has been able to create a deep connection with its audience and establish itself as a reliable source of products and information.

One of the prominent content marketing initiatives by Amazon is Amazon Originals, which includes a vast array of exclusive TV shows and movies available for streaming through its Prime Video service. By releasing high-quality, original content, Amazon aims to attract and retain subscribers to its Prime membership program. The compelling and diverse selection of Amazon Originals not only keeps consumers engaged but also differentiates Amazon’s Prime Video platform from its competitors such as Netflix and Hulu. The ability to produce and distribute exclusive content has also allowed Amazon to tap into the growing trend of “binge-watching,” further strengthening its position as a major player in the streaming entertainment industry.

Amazon’s unique content marketing emphasizes user-generated reviews, creating a community where customers freely leave reviews and ratings. These reviews provide valuable insights, helping prospective buyers make informed decisions. This transparency builds trust, as customers trust fellow consumers’ opinions more than advertisements or brand-provided descriptions. By facilitating an honest platform for sharing thoughts, Amazon has become a go-to destination for impartial product reviews, enhancing its reputation as a trusted online marketplace.

Moreover, Amazon utilizes content marketing as a means to attract and support content creators through services like Kindle Direct Publishing (KDP). KDP empowers aspiring authors and publishers to self-publish their books and reach a wide audience of Kindle e-book readers. This author-friendly platform enables independent authors to turn their passion into published works accessible to millions of Amazon users. 

By facilitating self-publishing and favoring e-books through its dedicated e-reader devices, Amazon has revolutionized the publishing industry and transformed the way writers distribute their work. The vast selection of books made available by KDP not only enhances the value proposition of Amazon’s Kindle devices but also augments its content ecosystem, strengthening customer loyalty.

By investing in content marketing initiatives like Amazon Originals, user-generated reviews, and convenience for content creators through services like KDP, Amazon consistently strives to enhance engagement, trust, and loyalty from its customer base. Content marketing has proven to be a powerful tool in driving traffic to Amazon’s platform and creating a sense of exclusivity and authenticity around the brand.

An example illustrating Amazon’s successful content marketing strategy is the hit TV series “The Marvelous Mrs. Maisel.” Produced and released as an Amazon Original, this critically acclaimed show has won multiple awards and garnered a vast fanbase. The growing popularity of “The Marvelous Mrs. Maisel” has not only attracted more subscribers to Amazon Prime Video but has also defined the streaming service as a provider of high-quality original content. By investing in such a groundbreaking series, Amazon has utilized content marketing to catapult itself into the homes and hearts of millions of viewers worldwide.

Another example showcasing Amazon’s astute utilization of user-generated reviews can be observed in its customer review system for products. Amazon prioritizes transparency in customer experiences and feedback, providing shoppers with valuable insights needed to make confident purchasing decisions. The inclusion of detailed reviews, along with ratings, enables customers to evaluate products from the perspective of those who have already tested them. This commitment to engaging its customer base through user reviews has resulted in Amazon becoming a trusted online marketplace and contributed to its domination in e-commerce.

On the content creator front, a notable example is Kindle Direct Publishing. Talented authors who self-publish their works using KDP are given an opportunity to gain exposure and connect with countless readers via Amazon’s extensive digital platform. This democratization of publishing revolutionized the traditional industry, allowing authors who were once passed over by traditional publishers to independently distribute their books. By offering a convenient and reader-friendly platform, Amazon empowers content creators, both large and small, inspiring them to produce and distribute their works to a global audience with ease.

Data-Driven Decision Making

One of the key ways in which Amazon utilizes data-driven decision-making is through personalized recommendations. Using advanced algorithms and customer browsing history, Amazon is able to recommend relevant products to each user. These recommendations are often based on previous purchases, viewed items, or items added to the user’s wishlist. By using data analysis, Amazon can offer personalized and dynamic recommendations, increasing the chances of conversion and delivering a personalized shopping experience to each customer.

Another data-driven decision-making strategy Amazon employs is predictive analytics. By analyzing past purchasing behavior and other customer data, Amazon can make accurate predictions about future buying patterns and trends. This helps them anticipate customer demands and optimize their marketing strategies accordingly. For instance, if Amazon sees that there is a notable increase in the sale of a particular product category during a specific season, they can ramp up their marketing efforts for these products, ensuring they are well-stocked and prominently promoted during that period.

In addition, Amazon leverages data-driven decision-making to optimize its advertising strategy. As part of its journey to diversify revenue streams, Amazon launched its advertising platform, Amazon Ads. The platform allows businesses to advertise their products on Amazon’s site. By analyzing customer behavior, search patterns, and purchase history, Amazon provides highly targeted and relevant advertising options for businesses. This not only increases the chances of successful product placements but also maximizes the ROI for advertisers.

Omni-Channel Marketing

Amazon’s omnichannel marketing strategy is an important aspect of its overall marketing approach, aimed at providing a consistent and seamless shopping experience for customers. By focusing on omni-channel marketing, Amazon strives to ensure that customers can enjoy a comprehensive and integrated experience regardless of their preferred shopping channel, whether it’s online, in physical stores, or through mobile apps.

One key advantage of Amazon’s omni-channel marketing strategy is the ability for customers to access and make purchases from the platform in a variety of ways. Whether customers are searching for products on Amazon’s website, using the mobile app to browse, or even visiting a physical store, the company strives to enable customers to connect with the brand and make purchases seamlessly. This omni-channel approach eliminates the need for customers to be tied to a specific channel, giving them the freedom to choose how they interact with and shop from Amazon.

To create this seamless experience, Amazon integrates various channels, ensuring that customer interactions are consistent and synchronized. For example, Amazon utilizes a unified customer account system, which enables users to access their account, shopping cart, and payment methods across multiple devices. This means that customers can start shopping on their laptops and resume their browsing and purchasing activities seamlessly on their mobile devices, all within the same organizational framework offered by Amazon.

Another element of Amazon’s omni-channel strategy is its integration of physical stores into the overall shopping experience. Despite being primarily an online retailer, Amazon has expanded into brick-and-mortar retail with physical stores. These stores not only serve as additional touchpoints for customers to experience Amazon’s products but also provide opportunities for seamless integration between online and offline shopping.

Amazon also understands the significance of mobile commerce and has leveraged this understanding to enhance its omni-channel strategy. Apart from the native shopping app, Amazon has optimized its website for mobile devices, offering a mobile-friendly interface, fast-loading pages, and intuitive navigation. This ensures that customers can easily access and navigate Amazon via their smartphones and tablets, adding to the overall convenience and accessibility regardless of the devices used.

Through its omni-channel marketing strategy, Amazon also benefits from the vast amount of customer data it collects across channels. This enables the company to target customers with personalized marketing promotions and recommendations, tailoring its communication and offers to their preferences and purchasing behavior.

For example, customers who browse a particular category on Amazon’s website might later receive targeted emails related to products in that category or see customized advertisements across various platforms. By leveraging customer data in this way, Amazon maximizes the effectiveness of its marketing efforts and enhances the overall shopping experience by delivering content and promotions that are relevant and timely.

Amazon Marketing Channels

Amazon utilizes a mix of digital and traditional marketing channels to reach its target audience:

• Website and Mobile App : The primary sales platforms with personalized experiences.
• Social Media : Engages customers and promotes products.
• Email Marketing : Sends personalized offers and updates.
• Affiliate Marketing : Partners with bloggers and influencers.
• SEO : Optimizes content for search engines to drive organic traffic.
• TV and Radio Ads : Broad reach and brand awareness.
• Print Advertising : Catalogs and direct mail for specific campaigns.

Amazon’s strategic use of various marketing channels allows it to reach a wide audience and effectively promote its products and services. By leveraging both digital and traditional channels, Amazon can maximize its reach and drive traffic to its platform.

How To Apply Amazon Marketing Strategy To Your Business

To apply Amazon’s marketing strategy to your business, consider the following tips:

Focus on Customer Experience

Amazon’s unwavering commitment to customer satisfaction has been a key driver of its success. Instead of merely selling products, Amazon aims to provide a comprehensive and exceptional customer experience. To replicate this in your own business, there are several steps you can take:

• Invest in Artificial Intelligence: Amazon uses AI-powered algorithms to personalize the shopping experience for its customers. These algorithms track customer buying behavior, search queries, and browsing patterns to provide tailored recommendations. Consider implementing AI in your marketing efforts to gather data and provide customized product recommendations to your customers.
• Streamlined Returns and Customer Support: Amazon’s easy and hassle-free return policy has made it an industry leader in customer service. Customers are more likely to make a purchase knowing they can easily return or exchange products if they are not entirely satisfied. Utilize customer feedback and optimize your return process accordingly.
• Personalized Communication: Study your customer data to segment your audience and deliver highly relevant marketing messages. Amazon, for example, sends customized email campaigns suggesting other products related to the customer’s previous purchases. With personalized communication, you can foster customer loyalty and boost sales.

Leverage Data

By utilizing data analytics effectively, you can gain valuable insights into your target market and streamline your marketing efforts. Here’s how you can replicate Amazon’s data-centric approach:

• Implement CRM Systems: Customer Relationship Management (CRM) tools can help you analyze information about your customers and their interactions with your business. Use this data to segment your audience, craft personalized marketing campaigns, and measure the effectiveness of your initiatives.
• Conduct A/B Testing: Test different variables, such as ad copy, landing page design, or email subject lines, to see which variations yield the best results. Continuously monitoring and optimizing your marketing strategies based on data insights will enable you to constantly refine your approach, driving better ROI.
• Predictive Analytics: By adopting predictive analytics, you can identify trends, forecast future sales, and adapt your marketing strategies accordingly. Look out for tools that provide data-driven insights and allow you to proactively plan marketing activities.

Innovate Continuously

To remain competitive in today’s fast-paced market, it’s essential to contest complacency and constantly seek opportunities for improvement. Here’s how you can apply Amazon’s approach of continuous innovation:

• Customer Feedback and Reviews: Actively seek customer feedback and incorporate it into future product development and marketing strategies. Evaluating customer reviews and ratings can fuel innovation, as they provide actionable insights to enhance your products or services.
• Stay Ahead of Technology Trends: Embrace emerging technologies that can enhance your business operations and provide a better customer experience. Amazon, for example, revolutionized last-mile delivery by investing in drone technology through its Prime Air program. Determine which technological advancements can benefit your industry and look for opportunities to integrate them into your operations or marketing.

Expand Strategically

Identify new markets and product categories to diversify your business. By expanding your reach, you can capture a larger share of the market and drive growth.

Utilize Omni-Channel Marketing

Ensure a seamless shopping experience across all touchpoints. By providing a consistent and integrated experience, you can improve customer satisfaction and drive sales.

Amazon’s marketing strategy is a comprehensive and dynamic approach that has played a crucial role in its success. By focusing on customer experience, leveraging technology, and employing diverse marketing channels, Amazon has set a benchmark in the industry. Businesses can learn from Amazon’s strategies to enhance their own marketing efforts and achieve growth. The key takeaways from Amazon’s marketing strategy include the importance of customer satisfaction, innovation, data-driven decision making, and a seamless omni-channel experience. By applying these principles, brands can improve their marketing efforts and drive success.

In conclusion, understanding and implementing a well-rounded marketing strategy like Amazon’s can significantly benefit your business. Whether it’s through innovative advertising campaigns, effective use of SEO, or leveraging data to inform decisions, there are many ways to enhance your marketing efforts. By learning from Amazon’s success and adapting their strategies to your own business, you can achieve similar results and drive growth.

Who is Daniel Pereira ?

I love understanding strategy and innovation using the business model canvas tool so much that I decided to share my analysis by creating a website focused on this topic.

More About Me

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Amazon Business Strategy to Overthrow Walmart from Fortune 500 Throne

The study was first published on February 24, 2018, and then updated on February 13, 2020, February 4, 2021, February 18, 2022, February 15, 2023, and recently on April 2024 .

In 1994, Jeff Bezos was stunned after discovering the 2300% growth rate of the Internet, which eventually led him to think about starting an online business.

“ You know, things just don’t grow that fast. It’s highly unusual, and that started me about thinking, ‘What kind of business plan might make sense in the context of that growth?’.” – Jeff Bezos

When he asked his parents for money after sharing his idea, his dad’s first question was, “What’s the Internet?” This vividly indicates that people weren’t very aware of the Internet then.

Surely, selling things would be a problem for the young entrepreneur, but somehow, he found low-cost products that could be easily sold on the web.

With his parents’ financial help of $245,573, Bezos started Amazon in his garage. Fortunately, their investment is worth more than $30 billion – a 12,000,000% ROI.

In 1997, three years after its launch and post-IPO, Amazon’s estimated worth was $438 Million. The startup gradually evolved into a multinational corporation and now is worth a marvelous $1.6 Trillion. The E-commerce giant is the second US company to cross a trillion-dollar valuation after Apple when its stock price reached an all-time high ($2050.50) on September 4, 2018.

The Internet was surely a huge part of Amazon’s growth, but technological innovation, marketing strategy, and, most importantly, its business model are what make Amazon the most innovative company in the current era.

Amazon has grown significantly since its inception as a book-selling website and spread its wings to other areas like logistics, consumer technology, cloud computing, and most recently, media and entertainment – domains that did and would help Amazon tread the path to emerge as a trillion-dollar corporation.

This Amazon business strategy study compiles the ideas, innovations, technological research, partnerships, and, most importantly, the strategies responsible for growing Amazon to such heights. You will also find their sales numbers in every segment and a brief summary of their stock prices for the past few years.

Amazon has used and benefited from the strategies over the years. But wouldn’t this information have been immensely helpful to Amazon’s competitors a few years prior? It turns out they could have known Amazon’s moves beforehand.

In 2020, Amazon acquired Zoox, but one could have foreseen this decision had they been closely following the trail of patents that Amazon had created. One can find numerous patents on autonomous logistics in Amazon’s Portfolio.

It has been forecasted that this recent acquisition can heavily affect companies in the logistics, ride-hailing, and food delivery domains. Amazon’s patent portfolio held a tell-tale sign of its interest in these domains. Possessing this information before Amazon’s acquisition could have saved these companies from this now-present threat looming over their businesses.

If you wish to know about Amazon’s future plans and strategize your business moves accordingly, then going through Amazon’s patent portfolio is quintessential.

Fill out the form below to know which areas Amazon has been focusing on, the tech areas in which Amazon is working, which countries they are securing their IP in, and their acquisitions in various nodes in the form of an interactive dashboard.

While this study will give you more information about Amazon’s business strategy, it will also help you acquire some basic principles that could be applied to any kind of business.

Table of Contents

Why is Amazon believed to be the most successful company in the Future?

Milestones after milestones, on the path to striving towards its personal zenith, Amazon has been recognized as one of the most successful companies. This statement is not a mere theory but purely supported by facts. Let’s have a look at some of them.

Amazon’s Achievements

FastCompany magazine listed Amazon as the most innovative company of 2017. Further, Amazon also ranked 3rd in MIT’ s Smart Companies 2017 listing, following Nvidia and SpaceX.

BCG placed Amazon as the 3rd most innovative company in 2022, while Forbes placed Amazon 5th in 2022.

Source: Fortune

That’s not it.

Amazon ranked 8th on the Fortune 500 2018 list, 5th in 2019, and 2nd in the 2021, 2022, and 2023 lists. Since then, the company has been continuously listed on the coveted list, each with a rank better than the previous year.

Growing Revenue

Amazon’s revenue increased by 105% in the last five years—from $280 billion in 2019 to $574 billion in 2023. Finally, in 2023 alone, the revenue grew by 11% compared to 2022, touching the half-trillion mark second time.

The chart below portrays Amazon’s revenue for the past five years. In Billions. Mighty numbers, Amazon!

Launching its services to more markets and expanding horizons, Amazon—due to its eCommerce business model—increased its sales numbers, customers, and Revenue. Besides, its AWS business contributes hugely to Amazon’s revenue stream.

Amazon is expanding its operations for its three segments—North America, International, and AWS—where it offers its products and services to consumers, sellers, developers, enterprises, and content creators.

Below is the revenue distribution of Amazon in 3 major segments.

Unsurprisingly, a big part of Amazon’s revenue comes from North America. Internationally, the company’s revenue had decreased from $127.7 billion in 2021 to $118.0 billion in 2022 as it faces tough competition in big markets like India. But 2023 saw a growth in yearly comparison.

Further, AWS brings significant revenue every year as it becomes the biggest cloud service provider on the planet. In 2017, the company rendered over 90 cloud computing services with the Internet of Things (IoT) tools. Big shots, comprising Netflix, Unilever, GE, and NASA, form some consumer bases that use AWS for better web services.

With this pace, AWS revenue is expected to reach $100 billion in 2024.

Investors’ Expectations

Amazon is worth over 1.5 trillion dollars, yet it makes little profit. In 2022, Amazon was at a loss; in 2023, its profit grew to $36 billion, which is a huge improvement.

The reason for its huge market cap is investments. Investors took a huge interest in Amazon and bet a huge amount as they believed that Amazon could grow faster, longer, and bigger than almost any other firm.

Even though in 2022, Amazon stocks performed badly, the investor’s hope suggests Amazon be the most profitable firm than any other, at least in America. And they are expecting big profits in the future. Its sales already crossed the half-a-trillion-dollar mark. 2023 was a good year in terms of stock performance and revenue. But it still failed to surpass Walmart in revenue.

However, 2024 seems like a favorable year for Amazon to surpass Walmart in revenue.

These are some potential pinpoints that force us to believe that it would.

What is Amazon’s Business Strategy?

“We’ve changed, again, the automation, the size, the scale many times, and we continue to learn and grow there.” – Brian Olsavsky, CFO, Amazon

Amazon’s business strategy consists of investing in technologies, enhancing its logistics applications, improving its web services by fulfillment capacity, M&A strategy, R&D activities in logistics, experimenting with Fintech, and securing its inventions using patents.

Let’s have a brief look at some of those.

Amazon’s Diversified Patent Portfolio

Amazon’s patent history is as old as the company itself. With the first patent filed in 1995, it is easy to guess that the company now owns thousands of patents. Amazon gradually increased its patent filing activities in the company’s early years. 

The major increase in filing activity can be noticed from 2010 when Amazon became more than an online retailer. 

By 2011, Amazon had filed patents for multiple technologies, such as Cloud Computing , which was Amazon’s third biggest source of revenue. Amazon has also started filing patent applications for Augmented Reality, Speech Analysis (Alexa).

Amazon’s biggest patent share is in Logistics and Artificial Intelligence. In addition, Media Entertainment and E-commerce applications hold a fair share of the Amazon Patent Portfolio.

Amazon is a very diversified company, so the range of its patents can be very vast. 

However, it is clear that in some sectors, Amazon wants to be at the top.

In Logistics, Amazon now competes with traditional logistics companies such as FedEx and DHL. 

During the Pandemic, when all businesses were down, Amazon had something else to plan to make the global crisis an opportunity. 

Amazon leased 12 Boeing 767-300 cargo aircraft, bringing its air fleet above 80 jets. According to an industry consultant, it added 220 package facilities since the start of the year, ranging from urban delivery stations to giant warehouses.

The company is close to building a logistic system to deliver one-day packages for customers and overtake its logistics rivals.

Amazon has been filing patents for logistics for a long time, but the increase in activity can be seen after 2010.

In 2016, Amazon filed a record of 268 patents alone for Logistics. Amazon has been filing logistics patents for a long time, but in 2016, it went for big numbers. 

Amazon has covered almost everything for logistics, whether air, land, sea, or underground. Amazon has filed patents to deliver a shipment from any medium.

Amazon has hundreds of fulfillment centers all over the world. Also, Amazon wishes to be flying fulfillment centers that house drones to deliver packages. 

In Dec 2014, Amazon filed a patent for an Airborne Fulfillment center with drones for package deliveries. 

The idea seems futuristic, but it’s one of Amazon’s pillars: long-term thinking. This idea could become a mainstream medium for package delivery in the future. The important thing is that it shows how innovative Amazon can be when making item delivery as simple as it is . 

Further, Amazon filed for other fulfillment centers that house drones and cargo trucks. 

Besides Amazon’s Logistics , its AWS arm is significantly bigger than many big corporations, as it generated $90 billion in revenue with a $24 billion Operating Income in 2023. 

Amazon has been filing patents for Cloud Computing since 2010. In terms of revenue, Amazon is probably the biggest cloud computing company compared to Microsoft.

Also, Amazon is one of the top companies in Edge computing . With enough resources to build an edge portfolio, Amazon also owns tens of patents in Edge computing .

Further, Amazon’s Alexa Everywhere strategy seems to work, as the company is adding more features for its assistant and Alexa-enabled devices. Amazon has filed significant patents on Speech Recognition. 

They even filed an Alexa patent that can recognize your physical and emotional states and suggest relevant solutions.

For more Amazon Alexa Patents, Click here . 

Amazon is not just dependent on in-house patent filing but also acquires patents. The famous Zoox acquisition is said to have made Amazon enter the self-driving vehicle market. However, besides Zoox’s position in the market, Amazon found its patent portfolio amazing . 

IAM also says that Zoox patents are the fifth most cited patent for self-driving technology by others. Further, it owns two of the three most-cited grants by other levels 4 and 5 patent owners.

“ Amazon’s plans to put a fleet of autonomous taxis as well as delivery vehicles on the road, the acquisition appears to have handed it a powerful stockpile of IP to secure freedom to operate in what is only going to become a more crowded field. ”, says IAM. 

Amazon Patent Prosecution Stats

We looked at Amazon’s pending patent applications in the US patent office. Below are our findings on how their patents perform in the patent office and their prosecution process.

Amazon has an impressive 97.26% grant rate for its patents.

Amazon has filed 14316 patent applications at USPTO so far (Excluding Design and PCT applications). Out of these 12764 have been granted leading to the grant rate of 97.26%. Not only this, the application Abandonment/Rejection rate of Amazon is meager at 2.47% and only 299 applications have faced abandonment or rejection. – Insights;Gate by GreyB

The data below is a bird’s eye view of Amazon’s pending patent applications at the US Patent Office. Our in-house prosecution intelligence tool – FIT – was used to perform this analysis. You can explore more about FIT from here.

Currently, Amazon has 1108 patent applications pending at USPTO. Under the lens, 654 patent applications are on the right track to a smooth grant; however, the rest of the 454 applications are facing great difficulty at the office. Some of them are already in the danger zone.

These patent applications are getting more than an average number of rejections or taking longer than the average time than other applications in similar tech areas. We segregated all these applications into 3 categories:

• SOS  – Facing High difficulty at USPTO
• At-Risk  – Applications that were running smoothly but of late have started displaying high probabilities of turning into an SOS application.
• On-Track  – Running smooth as butter

Below are the patent applications based on their group art units, how many of them are on the right track, and which ones need intervention:

These are the Top 4 tech areas where Amazon’s maximum number of applications is currently pending at the USPTO. The applications under the SOS column need immediate intervention from Amazon’s IP team.

This overviewed Amazon’s patent applications and their performance at USPTO. As mentioned above, the insights here were extracted from our in-house FIT tool. FIT also suggests the actions Amazon or any applicant can take to help their patent application get granted smoothly.

Fill the form below to know which areas amazon has been showering its attention on, the tech areas in which Amazon is researching , which countries they are securing their Patents in , and their acquisitions in various nodes in the form of an interactive dashboard .

Amazon’s Investment in Different Technologies

Amazon robotics.

For the past decade, Amazon has been investing considerably in robotic and drone technologies and has acquired many patents on them. Its warehouses alone house more than 45,000 robots.

In 2012, Amazon acquired Kiva Systems – a company that designs robots for picking and packing – for $775 million. By 2014, the company had 14,000 robots for its 10 warehouses. The following year, the count increased by 114% to 30,000 robots, and in 2017, the number increased by 50% to 45,000 robots across 20 warehouses.

In addition to acquisitions, Amazon also organizes challenges in different universities and institutes worldwide, offering a large sum of money for inventing a next-generation robot. In 2017, the prize money was $250,000.

Amazon Drones

Amazon is also researching drones for its initiative and future drone delivery service. In Britain, Amazon started its drone delivery service under Amazon Prime Air.

In October 2017, the US Federal Government also approved a drone delivery program. The administration stated that it wanted to open new opportunities and commercial uses for drones to create jobs.

Amazon recently filed numerous drone patents on package delivery, a parachute, and a floating airship warehouse. Also, it has patents on drone design for better maneuvering, secure landing, and long flights.

On an advanced level, they got a patent for a method to charge electric vehicles through drones. This shows their interest in automobiles as the future will require many methods to charge an EV. Further, there would be no surprise if Amazon ventures into the automobile domain.

But in Aug 2021, Amazon shut down the drone delivery program Prime Air in the UK as it removed more than 100 employees from the program, according to a report by Wired .

Five years ago, it was a big deal for Amazon, but the focus slowly shifted to autonomous vehicles, which saw Amazon make a huge acquisition. According to Amazon, people are still working on the project, but it is unclear and less likely that Amazon is giving priority to drone delivery.

Amazon Alexa

“These big trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organizations to embrace. We’re in the middle of an obvious one right now: machine learning and artificial intelligence .”  – Jeff Bezos 

Artificial intelligence is one tough area in which, despite having many competitors, Amazon got a big draw. It’s continuously focusing on AI and machine learning to enhance the customer experience. The segment AWS and its venture Alexa Internet is a big part of their investment in AI.

In October 2017, the company announced a  new research center in Germany focused on developing AI. During the same month, the company and Microsoft partnered to roll out new tools to make it easier for developers to use open-source artificial intelligence software. Developers can use Gluon, a Python-based application programming interface, to easily work with MXNet, the AI framework backed by public cloud market leader Amazon Web Services.

Amazon’s partnership with Microsoft also ensures collaboration in researching AI, where their personal assistants Cortana and Alexa would communicate with each other and offer services to the users.

“Ensuring Cortana is available for our customers everywhere and across any device is a key priority for us. Bringing Cortana’s knowledge, Office 365 integration, commitments, and reminders to Alexa are a great step toward that goal.” – Satya Nadella, CEO, Microsoft

In Jan 2021, Amazon announced Alexa Custom Assistant , a new service that lets device makers, automakers, and service providers create custom-branded voice assistants that are powered by and work in cooperation with Alexa. The Alexa Custom Assistant can be built into automobiles and consumer electronics, including smart displays, speakers, set-top boxes, fitness devices, and more, providing a complete, managed voice solution that substantially reduces cost, complexity, and time to market.

Alexa Everywhere – Strategy

Amazon announced its Alexa Everywhere strategy in 2017, and surprisingly, it became a huge success despite the presence of other top personal assistants in the market.

Alexa, Amazon’s AI-infused voice assistant, was first released with the original Amazon Echo smart speaker in November 2014. Since then, it’s been giving head-to-head competition to its rival Google Home, and now Apple has also joined the race with its Siri-enabled speaker, Homepod.

In 2017, Amazon announced that it would install Alexa (AI) in every Echo device and launched a number of new products. Currently, Amazon Echo and Echo Dot hold 2/3 market share of smart speakers, beating Google Home and Apple Homepod by a great margin. Amazon also announced two major Alexa integrations for non-Echo devices. Amazon further revealed that Alexa would be supported in BMW cars beginning next year.

Further, the Fire TV set-top box was launched with microphones embedded so consumers can shout Alexa commands across their homes.

Alexa, Play The Boys.

If that was not it, Alexa-based in-house drones were released, which could be called from anywhere around the house.

Alexa, Where’s my drone?

Alexa became more multilingual, allowing household members to interact with Alexa in two languages without changing the settings. In the U.S., the multilingual mode allows bilingual customers to code-switch from English to Spanish and vice versa. Amazon also launched a multilingual mode in new languages and countries, including Germany, Spain, France, Italy, and Japan.

Further, Amazon added new Alexa features that make customers’ daily lives more convenient, including sharing a shopping list with Alexa contacts by voice, video calling on Fire TV, and new Alexa Routines on Fire TV.

In Dec 2016, Amazon demonstrated the world’s most advanced physical store . In 2018, Amazon officially opened the store  to the public and showed the world that its machine-learning research could eliminate jobs.

In Feb 2020, Amazon opened the first cashier-less grocery store using “Just Walk Out” technology that powered 25 Amazon Go stores.

The store has no checkout point and, therefore, has no cashier to make payments for your purchases. The payment can be added automatically to the cart whenever you take a product from the shelves. After the purchase, the payment is automatically deducted from your account or digital wallet.

Amazon Web Services (AWS)

Amazon has recently acquired companies in the cloud computing space and invested in businesses based on the cloud. In early 2017, the company acquired many companies to strengthen its AWS Cloud business. Some of these include GameSparks, Thinkbox Software, and Harvest.ai. Additionally, Amazon invested in Grail, which is a potential future customer of Amazon’s cloud services.

To increase the usage of its cloud technology, Amazon Web Services (AWS) is investing some of its money in opening data centers in Britain and France.

In 2020, Amazon’s cloud segment, AWS, accounted for 58.9% of the company’s overall operating income.

Autonomous Vehicles

The tech and automotive industries are abuzz with the news that Amazon is acquiring Zoox, a California-based startup that develops autonomous driving technology, in a deal estimated to be worth over $1.3 billion.

Amazon announced in late June that they are acquiring Zoox “to help bring their vision of autonomous ride-hailing to reality”.

Although it was Amazon’s first strong move to participate in autonomous vehicles, certain pieces suggest the company’s interest in driverless vehicles before this deal.

The company has invested in Aurora, one of the top autonomous driving startups, and it has tested self-driving trucks powered by Embark, a self-driving freight startup. 

Amazon has been aggressively investing and researching in the domain of autonomous vehicles and various automated delivery methods.

In December 2020, Zoox revealed the first look at its fully functional, electric, autonomous vehicle, which features bidirectional driving and can reach speeds of up to 75 miles per hour.

Want to know about Zoox Patent Portfolio? Here is a glimpse: Zoox Patent Portfolio .

Amazon In the Entertainment Sector

Amazon prime video.

Amazon has been investing in TV series and movies, either through acquisition or production, as it strives to compete with streaming rivals Netflix, HBO, Hulu, and Disney. In 2022, Amazon bought MGM and acquired the rights to big franchises like James Bond.

Though Amazon Prime members can enjoy their streaming service as part of the membership, Amazon also launched a video-only plan for non-prime members at $8.99/month.

“Amazon planned to triple the amount of original content over the rest of the year, and it’s probably safe to assume that its torrid investment pace will continue into 2017.” –  Amazon CFO, Brian Olsavsky ,

In 2017, Amazon acquired many TV shows and movies. Amazon acquired Marvel’s Inhumans and Runaways to give good competition to Netflix, which also owns the right to stream some of Marvel’s shows.

Amazon also spent a large amount on some small-budget movies with excellent reviews. They paid $12 million for ‘The Big Sick’ even before its theatrical release. The amazing reviews—98% Rotten Tomatoes—made Amazon pay the price.

Amazon has over 126 million Prime members in the U.S., while Netflix has 73.94 million subscribers . After the success of Prime in the U.S., Amazon is pushing the same playbook in Europe.

Prime Video continues to launch Amazon Original series and movies globally. Amazon’s Original movie Borat Subsequent Moviefilm , starring Sacha Baron Cohen, generated tens of millions of customer streams globally on opening weekend.

In 2022, Amazon released the most expensive TV series, Lord of the Rings: The Rings of Power . Its superhero series, The Boys , is also regarded as the best superhero show of the year despite having big competition from Marvel and DC franchises.

Recently, its Fallout series, a video game adaption, is getting favorable reviews from the audience.

Amazon MGM Studios

Creating a video-streaming service alone will not help; that’s why Amazon created its own film and TV series production distributor, Amazon Studios, now Amazon MGM Studios. Amazon’s original content is too low compared to other services such as Netflix, Hulu, and HBO. But Amazon has planned to produce its own content with a great number.

The Studio focuses not only on English content but also on content related to a particular geography.

Much of Amazon’s original content has won major awards. For example, Manchester By the Sea, nominated for six Academy Awards, made Amazon Studios the first streaming service to nominate for the Academy Award for Best Picture. The Marvelous Mrs. Maisel and Fleabag are some top-performing and award-winning TV series created by Amazon.

Amazon Studios announced deals for upcoming Prime Video series and movies, including the Eddie Murphy comedy Coming 2 America , which premieres in March 2021 on Prime Video globally, and an unscripted docuseries and new coming-of-age series based on Jessica Simpson’s best-selling memoir Open Book .

On May 26, 2021, Amazon acquired MGM for $8.45 billion. With this acquisition, Amazon also acquired MGM’s vast content library of 4000 films, including classics such as 12 Angry Men, Basic Instinct, Legally Blonde, Silence of the Lamb, Rocky, and the James Bond franchise, as well as 17000 TV shows – including Fargo, Vikings, and The Handmaid’s Tale .

Prime Music

Amazon is not limited to providing video streaming; the company also has its own music streaming platform—tough competition for Spotify, YouTube Music, Apple Music, etc. Amazon has millions of songs in its library, which it offers to its Prime members. Prime Music is a gift for its prime members, as the company isn’t charging any extra cost for this music platform.

It’s cool, isn’t it?

Even for a better experience, Amazon integrated Alexa into its music app, which can help you find the songs you are searching for.

Further, Amazon Music signed an agreement to acquire an innovative podcast publisher, Wondery. Through this acquisition, Amazon Music aims to accelerate the growth and evolution of podcasts by bringing creators, hosts, and immersive experiences to even more listeners across the globe.

Becoming A Logistics Powerhouse

Amazon is opening small warehouses to support its grocery delivery service, Prime Now and Amazon Fresh. In Germany, where a rapid expansion in online grocery delivery is expected , Amazon has been running warehouse purchase plans to tap into the market opportunity.

Amazon Fulfillment Centers

In Jan 2020, Amazon said it had 110 active fulfillment centers in the US and 200+ globally.

Its plans include investing heavily in expanding fulfillment centers and other logistics capabilities. A key focus is driving further growth in sellers and packages through Fulfilled by Amazon (FBA).

Amazon Logistics App

To strengthen its logistics and delivery network, Amazon announced the development of an app to help truck drivers. Amazon aggressively hired for the project and announced its launch in 2017. In November 2017, they secretly launched the app Relay. The app makes it easier for truck drivers to pick up and drop off packages at Amazon warehouses. Besides, Amazon is also working on a second app that could connect truck drivers with cargo.

Amazon Prime Air

In March 2016, Amazon gave a public demo of its Prime Air delivery drones in the US. The concept has multiple regulatory barriers. However, the situation may improve, as in October 2017, the Trump Government issued an order giving local governments more authority to conduct tests of such new technologies.

Amazon is experimenting with a new delivery service that offers more products with free two-day delivery and relieves overcrowding in its warehouses.

The service, Seller Flex, began two years ago in India, and Amazon has been slowly marketing it to US merchants in preparation for national expansion. The trial began on the West Coast this year, with a broader rollout planned in 2018.

Amazon will oversee the pickup of packages from warehouses of third-party merchants selling goods on Amazon.com and their delivery to customers’ homes. Handling more deliveries is expected to provide Amazon greater flexibility and control over the last mile to shoppers’ doorsteps.

In October 2023, Amazon announced that it would expand its drone delivery service, Prime Air, to new locations. In addition to the existing locations, they plan to begin service in the UK, Italy, and a third US city by the end of 2024. The rollout will be gradual, starting in one location in each country and expanding over time.

Logistics Partnership

In October 2017, Amazon approached French supermarket operator Leclerc about a possible logistics partnership. This probable collaboration shows Amazon’s intentions to expand in the supermarket sector.

The partnership and other logistic investments became an immediate reason for the fall of other services as companies like UPS and FedEx’s share prices dropped drastically. UPS shares fell as much as 2.1% to $116.52, trading down 1.3% in New York on October 4th, 2017. FedEx dipped by 1.6% to $217.77 before recovering somewhat to $220.09 on October 4th, 2017.

Amazon Acquisition Strategy

Amazon has aggressively harnessed its merger and acquisition strategy, closing 35+ deals in the past 7 years. But the trend has been on the downward side since 2017, especially after COVID-19.

The chart below summarizes Amazon’s M&As from 2017 to 2023.

2020 saw a big drop in M&A activity, but it was also when Amazon surprised the world by acquiring Zoox for more than $1 billion, making it the company’s biggest acquisition. With it, Amazon entered the self-driving industry as well.

2021 saw the second-biggest acquisition of Amazon when it acquired MGM for $8.45 billion to boost its streaming service Prime Video. MGM owns 4000 movie titles and 17000 TV series, enough to attract customers to its streaming platform to binge on some classic movies such as 12 Angry Men, Basic Instinct, Legally Blonde, Rocky , and the evergreen James Bond movies.

Over the last few years, Amazon has made multiple acquisitions to strengthen its core e-commerce operations. It has also invested in technology companies such as Harvest.ai, a cybersecurity player, and Do.com, which are software for meeting productivity needs.

In June 2017, Amazon acquired grocery giant  Whole Foods for a whopping $13.7 billion. This was a big step forward for Amazon, strengthening its grocery e-commerce segment and opening doors to new opportunities.

Internationally, Amazon expanded its operations by acquiring other businesses , such as Souq.com, in the Middle East to grow e-commerce in the region.

Amazon made its first acquisition of 2018—its second-biggest ever—in a deal valued more than $1 billion, purchasing Ring, a video doorbell maker. This shows its interest in robust home security to flourish its Amazon Key service .

In 2022, Amazon announced two big acquisitions, i.e., One Medical and iRobot, both billion-dollar acquisitions. With One Medical, Amazon could create a healthcare ecosystem that it could include in its retail store, prime memberships, etc. Consider it similar to what Amazon has done with Whole Foods.

With iRobot, the company could potentially collect data from people’s homes, such as mapping and layout, thus raising concerns for privacy by the FTC. Eventually, the deal failed.

Here are the 10 biggest acquisitions of Amazon:

New Businesses and Emerging Markets

Amazon has been experimenting with fintech initiatives and intends to become a prominent player in the segment. In 2016, Amazon nearly lent out $1 billion in small loans.

In India, the company has been offering thousands of loans to e-sellers so suppliers can expand their operations and manage seasonal spikes.

Amazon expanded its financial reach by launching Amazon Cash, which allows users to add to their Amazon.com balance by showing barcodes at brick-and-mortar checkout locations.

“Amazon is the most formidable. If Amazon can get you lower-debt payments or give you a bank account, you’ll buy more stuff on Amazon.” –   Alex Rampell, Partner, Andreessen Horowitz

Amazon also makes big moves in emerging markets. One of the key international markets targeted by Amazon is India, which is perceived to be one of the fastest-growing e-commerce markets globally in the near future.

In Late 2016, Amazon’s CEO, Jeff Bezos, announced an additional investment of $3 billion in India, taking its net investment to over $5 billion in the country. This is more than the company’s total capital expenditure of $4.5 billion in 2016. It looks like Amazon sees huge potential in India.

In October 2017, Amazon announced an expansion in Brazil to enter the electronics and appliances marketplace. Amazon also expanded its operations in the Middle East, one of the fastest-growing e-commerce markets in the world. It acquired Souq in the UAE to serve the local market. In September, Amazon-owned Souq acquired Wing.ae, a startup building a network for Prime-style same-day and next-day deliveries for various e-commerce marketplaces.

On May 21, 2020, in the midst of a pandemic, Amazon launched a food delivery service in India. The service, known as Amazon Food, is currently available in Bangalore, but with top players having a setback, the company has enough resources to go big and be a worthy competitor.

In Nov 2020, Amazon opened another venture called Amazon Pharmacy that could disrupt US healthcare. With the service, the company offers prescription medications to customers’ doorsteps. Customers can now browse medications, create a secure pharmacy profile, and request or manage prescriptions on Amazon.com. Like other services, Amazon offers Prime members unlimited, free two-day delivery on Amazon Pharmacy orders with their membership.

Amazon Investment Landscape

Amazon is investing in a wider variety of industries. During the period of 2011-2013, Amazon slowed down its investment activities as it invested mostly in internet companies.

During 2014-2016, the company changed its investment strategies and started channeling investment in other industries like Media, Auto & Transport, and Mobile. Amazon also made a few other big investments, as they invested in the UK-based Yodel Delivery Network to expand its logistics network in the UK.

2016 Amazon partnered with Twilio to strengthen its text and voice messaging communication platform.

In 2017, Amazon invested in Grail , a healthcare startup that specializes in genomics for cancer diagnostics. This is Amazon’s first investment in the life science segment.

In the last few years, Amazon focused on late-stage deals where most of the investment amount fell into the $10M-$20M range.

Amazon founded the investment venture in 2015. The Alexa Fund provides up to $200 million in venture capital funding to fuel voice technology innovation.

As of Feb 4, 2021, Alexa Fund has made 102 investments in startups of different industries such as AI/ML, Education, Fintech, Gaming, Hardware, Health, Mobility, Robotics, Smart Home, and Voice Developer Tools. 

The maximum number of investments can be seen in Artificial Intelligence (10 startups), Healthcare (13 startups), and Smart Home (11 startups) sectors.

Here are the last 10 investments made by Alexa Fund:

Amazon Financial Analysis

Amazon revenue analysis.

In Feb 2024, Amazon announced its revenue for the 4th quarter of 2023 , and with that, we found its overall revenue for 2023. AWS arm was the most profitable segment, raking in $24 billion operating income alone, leading to record-breaking sales in 2023.

There are several reasons for Amazon’s immense revenue growth. While its online shopping business is the major source of revenue, its physical stores didn’t generate many sales due to the pandemic.

The subscription service also grew, but a significant growth happened due to third-party sellers, which accounted for 117.71 billion dollars, crossing the 100-billion mark for the first time. Amazon is a huge marketplace, and one can sell their products via Amazon, for which the company takes a margin of 15 to 20%.

Its online stores also achieved a record of crossing the 200-billion mark for the first time. Amazon now has two divisions with more than $100 billion in revenue.

Furthermore, advertising on Amazon is also increasing faster and accounted for $40 billion in 2023 . The potential of Amazon’s advertising business is such that analysts have affirmed that it could surpass AWS revenue by 2021. Naturally, it didn’t surpass AWS revenue, but it saw immense growth. Considering the AWS revenue, it’s highly unlikely that Advertisement can surpass AWS in the next 5 years.

From the revenue perspective, Amazon operations can be divided into three major segments: North America, International, and AWS .

North America Segment

The segment includes earnings from retail sales of consumer products (including sellers) and subscriptions through North America-focused websites. The major competitors in the North American region are Best Buy, Target, eBay, Peapod, and Netflix.

The chart above shows Amazon’s sales and operating income in North America over the last three years.

The segment is responsible for 61.2% of the total revenue.

North America has three sub-segments: Media, Electronics, and other general merchandise. Electronics and other general merchandise represent North America’s highest share of sales and have consistently grown.

International Segment

The international segment includes earnings from retail sales of consumer products and subscriptions through internationally-focused websites. The chief challengers are Alibaba Group in China, Woolworths in Australia, Rakuten in Japan, Flipkart in India, and JD.com in the United Kingdom.

Amazon International Segment Revenue increased to $131 billion in 2023,  with an operating loss of $2.6 billion . The segment has yet to become profitable, and it might take three or more years to become profitable.

The sales growth was due to increased unit sales, including sales by marketplace sellers. Changes in foreign currency exchange rates impacted International net sales. Increased unit sales were driven largely by continued efforts to reduce prices.

Amazon hosts the three major sub-segments, i.e., Media, Electronics, and other merchandise, internationally. With Prime Services, Electronics and other general merchandise successfully increased sales in the International segment, more than $30 billion.

AWS Segment

Like every year, AWS was the most profitable segment in 2023, thanks to the Amazon B2B strategy, which generated $24.6 billion in operating income .

The AWS segment is earning from global sales of computing, storage, database, and other service offerings for startups, enterprises, government agencies, and academic institutions. The major rivals in this segment are Microsoft, Google, Oracle, and IBM.

Amazon Stock Analysis

The year 2022 was generally bad for Amazon’s stock price. The company split its stock 20 to 1 in June 2022. Further, Amazon is one of the worst-performing stocks of 2022, as it declined more than 50% in 2022.

However, the market was in favor of Amazon in 2023.

After comparing the 52-week low and high, Amazon stock shows growth of almost 100%.

Amazon has 10.24 billion shares, or 60% of the total. Institutional holders hold 6.13 billion shares, or $1.1 Trillion.

Undoubtedly, the world’s richest man holds the most shares—937 billion—which makes his net worth $192 Billion. His net worth surpassed the $100 billion mark for the first time on November 24, 2017, when share prices increased by 2.5%. In November, he sold 1 million shares when the price reached an all-time high of $1100/share, which helped him make $1.1 billion.

With 233 billion shares, Mackenzie is the 2nd largest individual shareholder of Amazon making her net worth more than $27 billion. .

Amazon’s Business and Research Partnerships

• Amazon and Microsoft partnered to integrate Alexa and Cortana

In August 2017, Amazon and Microsoft partnered to integrate their Alexa and Cortana digital assistants better. This cross-platform integration would allow Alexa users to access some unique aspects of Cortana and vice-versa.

• Amazon and Ford partnered to access cars from a distance

Ford and Amazon teamed up to allow consumers to access their cars from a distance. This is done by bringing Amazon Echo into Ford’s cars. With the help of Alexa – Amazon’s cloud-based voice service, the car lets you control functions such as lighting, security systems, garage doors, and other Alexa smart home devices.

• Dish Network and Amazon Wireless Collaboration

Dish Network is looking to use an e-commerce platform, streaming service, home assistant (Amazon Echo), and proposed drone delivery services in collaboration with Amazon and T-Mobile USA. According to the deal, Dish will utilize its spectrum for wireless service in collaboration with Amazon and T-Mobile USA.

• Cognizant is a Premier Consulting Partner for AWS

Cognizant, in partnership with AWS , provides services like migration competency, big data, workspaces, healthcare and life sciences, financial services, and SharePoint. The AWS Cognizant Team (ACT) delivers the differentiating integration strategy and creates industry-specific and horizontal solutions for their mutual customers.

• Amazon and Accenture united

Amazon and Accenture combined to precipitate real innovation by combining AI tools into a contact center running from the cloud. Amazon offers Amazon Connect, a fully hosted, customizable, cloud-based contact center service. The collab structures such that Accenture would help its clients rapidly deploy Amazon Connect at scale and build vertical industry applications that use AWS AI services. The partnership will focus on delivering cloud transformation projects.

• Nokia announces a Strategic collaboration with Amazon Web Services

Nokia and Amazon Web Services (AWS) collaborated , given the rising need for “tighter integration” between networking and IT infrastructure. The partnership will improve cloud migration and software-defined wide-area networking (SD-WAN) services for enterprises, along with working across the development of 5G and Internet of Things (IoT) use cases.

• 2nd Watch Named AWS Management Tools Service Delivery Launch Partner

2nd Watch achieved AWS Service Delivery Launch Partner status for three Amazon Web Services (AWS) Management Tools in the AWS Service Delivery Program. The Partner Program is designed for those skilled at cloud infrastructure and application migration. It delivers value to customers by offering proactive monitoring, automation, and management of its customers’ environment.

• Ericsson wants a presence in Cloud Computing by merging with AWS

Ericsson, one of the top companies working on 5G, also wants to strengthen its position in cloud computing. In 2016, the Swiss giant worked with AWS to enhance its infrastructure for developing and deploying mobile apps.

For quite some time, Amazon has been focusing its efforts on cloud services and its personal assistant, Alexa, for which it has raised millions in Funding. Further, it is also trying to make Alexa a smarter assistant by hiring more AI talents .

The increase in AWS sales suggests it might become a favorite choice for corporations in the future. After record-breaking sales, Prime is getting bigger in India and the Middle East. Further, the company is trying to get a hold of the Indian Fintech market, for which, in December 2017, it funded a digital lending startup, Capital Float.

Last year, Jeff Bezos also announced its $1 billion investment in India for the next five years.

The company has hit $457 billion in revenue and has more than $1.6 Trillion in market capitalization.

Such huge sources could allow Amazon to enter any kind of business they want, which could be a problem for players in different domains. Zoox acquisition is a solid example as it could make other autonomous vehicle companies a run for the money.

However, when discussing Amazon’s most noteworthy competitor, Walmart is the prime choice.

Even though Amazon is way ahead of Walmart regarding market capitalization and revenue, it’s still behind Walmart. Sources predict that Amazon will overtake Walmart’s revenue by 2022, but it would take another year or two for Amazon to overthrow Walmart from Fortune 500 rank 1.

Amazon already surpassed Walmart as the world’s largest retailer in 2019, and in the coming one or two years, it will surpass Walmart’s revenue, too.

However, after its downfall, Walmart took new steps to become more than a retail company and collected resources to give Amazon tough competition. Walmart now understands the value of technology, as the company has started investing in technologies and patents to take on Amazon.

Related Study: Airbnb expanding into social media? A peek into Airbnb’s expansion plan

Authored by: Vipin Singh , Market Research.

Honestly, I’ve bookmarked this blog having crucial information. I might admire your work done in this blog post/article. I am happy to read. Please keep posting more and more. Thanks once again for posting.

I read your post and this blog is very good. You have good knowledge on this. This post really impressed me. Thank you for sharing your knowledge with all of us.

Mr. Singh, the quality of this analysis is beyond expected, thank you, looking forward to read more about your precise work. Congratulations!

Amazon has been notoriously secretive about its business strategy, but thanks to some diligence on the part of analysts and reporters, we have a pretty good idea of what the company is up to.Amazon’s business strategy can be summed up as follows:1. Focus on investing in technologies that will give it a competitive advantage.2. Enhance its logistic applications to further improve its web services.3. Improve its fulfillment capacity to keep up with customer demand.4. pursue a mergers and acquisitions strategy to acquire companies that can complement its core competencies.5. Increase its R&D budget to continue to innovate and staying ahead of the competition.

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5 Lessons for Digital Transformations from a Case Study On Amazon

Learn crucial digital transformation insights from Amazon's case study in just 5 lessons.

Within the rapidly changing digital landscape, Amazon is a prime example of a business that has effectively executed digital transformation . Its constant commitment to customer satisfaction, creative application of big data & artificial intelligence, supply chain optimization, robotics integration, & unmatched scalability have completely changed the e-commerce sector. Examining this Amazon case study in detail will reveal five priceless takeaways from its path that businesses of all sizes may apply. These lectures cover the fundamentals of automation, data-driven decision-making, operational effectiveness & the vital ability to grow & change in a world that is changing quickly. Because of its incredible success, organizations looking to succeed in the digital space can use Amazon as a beacon of light. So let’s discuss deeply what we can learn from Amazon & become successful in business. 

5 Lessons From Amazon’s Digital Transformations: 

1. customer experience:.

Customer experience is Amazon's top priority. The company is continually innovating to discover new methods to make the customer experience smoother. For example, Amazon presented a one-click checkout to make it more comfortable for customers to buy products. Amazon also uses artificial intelligence to suggest products to customers based on their previous purchases & browsing history.

Examples of Amazon's customer-centric initiatives:

• Amazon Prime: Amazon Prime is a membership program that offers customers various advantages, including free two-day shipping on millions of things & access to exclusive streaming content.
• Amazon Go: Amazon Go is a chain of cashierless convenience stores where customers can just pick up the items they want & walk out and their purchase will be automatically delegated to their Amazon account.
• Amazon Alexa: Amazon Alexa is a voice assistant that customers can use to shop, play music, get updates & handle their smart home devices.

2. Artificial Intelligence And Big Data:

Artificial intelligence & big data are essential for Amazon's digital transformation. The company uses AI to power its recommendation engine, fraud detection system & customer service chatbots. Amazon also uses big data to analyze customer behavior & trends. This data helps Amazon to improve its products, services & operations.

Examples of Amazon's use of AI & big data in trial:

• Amazon's recommendation engine: Amazon uses AI to suggest products to customers based on their past purchases & browsing history. This helps customers to browse new products that they are likely to be interested in.
• Amazon's fraud detection system: Amazon uses AI to detect & prevent fraudulent transactions. This helps to protect customers & Amazon from financial loss.
• Amazon's customer service chatbots: Amazon uses AI-powered chatbots to answer customer questions & resolve issues. This helps to provide customers with fast & efficient customer support.

3. Supply Chain Optimization:

Supply chain optimization is required for Amazon's success. The company has funded heavily in its supply chain to confirm that it can deliver products to customers quickly & efficiently. Amazon uses AI to optimize its stock levels & shipping lanes. 

Examples of Amazon's innovative supply chain optimization initiatives:

• Amazon's predictive inventory management system: Amazon uses AI to predict customer demand & ensure that it has the right products in stock at the right time. This helps to minimize stockouts & overstocking.
• Amazon's dynamic shipping routes: Amazon uses AI to customize its shipping routes based on real-time traffic situations & weather information. This helps to make sure that customers receive their products as fast as possible.
• Amazon's fulfillment center network: Amazon has a network of fulfillment centers all around the world. This allows the company to supply products to customers fast, even if they live in isolated areas.

4. Robotics

Robotics is another key element of Amazon's digital transformation. The company uses robots in its fulfillment centers to pick, pack & ship products. Robotics has helped Amazon to improve the efficiency and accuracy of its fulfillment operations.

Examples of Amazon's use of robots in practice:

• Amazon's robotic pickers: Amazon uses robotic pickers to pick items from warehouse shelves. This helps to speed up the picking process & reduce errors.
• Amazon's robotic packers: Amazon uses robotic packers to pack items into boxes. This helps to improve the accuracy & speed of the packing process.
• Amazon's robotic shippers: Amazon uses robotic shippers to move boxes around its fulfillment centers & load them onto trucks. This helps to enhance the efficiency of the shipping procedure.

5. The ability to Scale

Scalability is important for Amazon's growth. The company has created a scalable infrastructure that can manage millions of transactions per day. Amazon's scalable infrastructure lets the company to grow fast into new markets & launch new products & services.

Examples of Amazon's scalable infrastructure initiatives:

• Amazon Web Services (AWS): AWS is a cloud computing platform that Amazon delivers to businesses & individuals. AWS allows businesses to scale their IT resources up or down as required.
• Amazon's distributed computing platform: Amazon uses a distributed computing platform to manage its huge workload.

Challenges Faced During Amazon's Digital Transformation:

While Amazon's success in digital transformation is indeed remarkable, it's important to acknowledge that their journey was not without challenges. Understanding these challenges can provide valuable insights for organizations embarking on their own digital transformation efforts:

1. Changing customer expectations: 

Amazon's customers have come to expect a high level of convenience & service. The company has had to constantly innovate to keep up with these expectations.

2. Technological challenges:

Amazon has had to invest massively in new technologies like artificial intelligence & big data. This has been a challenge in terms of price, time & expertise.

3. Organizational challenges: 

Amazon has had to transform its organizational culture & structure to support its digital transformation. This has been a challenge for both employees & managers.

4. Competitive challenges: 

Amazon works in a highly competitive industry. The company has had to continually evolve its business model to stay ahead of its rivals.

Here are some specific examples of the challenges that Amazon met during its digital transformation journey:

• When Amazon first launched its online bookstore, it faced the challenge of convincing customers to buy books online. This was a new concept at the time & many people were hesitant to trust their credit card information to an online retailer. Amazon overcame this challenge by offering a number of customer-friendly features, such as free shipping & a generous return policy.
• As Amazon expanded its business into new areas like electronics & apparel, it faced the challenge of building relationships with new suppliers. Amazon had to develop a system for evaluating & onboarding new suppliers & it had to negotiate favorable pricing & terms.
• As Amazon's customer base grew, it faced the challenge of managing its inventory & shipping operations efficiently. Amazon had to develop sophisticated systems for tracking its inventory levels & optimizing its shipping routes.
• As Amazon joined new markets, it faced the challenge of adjusting its business model to regional cultures & rules. For example, Amazon had to learn how to capitulate with different tax laws & labor regulations in various countries.

Amazon has successfully overpowered all of these challenges & it is now one of the most successful businesses in the world. The company's digital transformation has been a critical factor in its victory.

In addition to the challenges listed above, Amazon has also faced challenges like

• Cybersecurity: Amazon is a prime target for cyberattacks & the company has had to invest laboriously in cybersecurity actions to rescue its customers' data.
• Counterfeit goods: Amazon has had to take steps to fight the sale of fake goods on its platform.
• Labor practices: Amazon has been criticized for its toil practices, especially in its fulfillment centers. The company has taken steps to grow its labor practices, but it continues to face scrutiny.

Key Technologies and Tools in Amazon's Digital Transformation:

Amazon's digital transformation success is underpinned by a strategic adoption of various cutting-edge technologies & tools. Understanding these key elements can offer valuable insights into their transformation journey:

1. Cloud computing: 

Amazon Web Services (AWS) is Amazon's cloud computing platform. AWS supplies a wide range of services, including computing, storage, networking, databases, analytics, machine learning & artificial intelligence. AWS permits Amazon to raise its IT resources up or down as required & to develop & deploy new applications quickly & efficiently.

2. Big data: 

Amazon uses big data to investigate customer manners & trends and to enhance its products, services & processes. Amazon collects data from different sources, including customer purchases, website visits & social media interactions. Amazon then uses this data to generate insights that can be used to grow the customer experience, develop new products & services, and customize operations.

3. Machine learning: 

Amazon uses machine learning to develop & improve its AI applications. Machine learning permits Amazon's AI applications to learn from data & improve their implementation over time.

4. Internet of Things (IoT): 

Amazon also uses IoT technology to improve its procedures & customer experience. For example, Amazon uses IoT sensors to track the movement of products through its fulfillment centers & to monitor the temperature & humidity in its warehouses.

In addition to these key technologies, Amazon also uses many other tools to sustain its digital transformation. For example, Amazon uses the following:

1. Software development tools: 

Amazon uses a variety of software development tools, including Git, Jira & Confluence. These tools help Amazon's developers to build & maintain high-quality software applications.

2. Project management tools: 

Amazon uses project management tools, like Asana and Monday.com, to track the progress of its digital transformation projects & to ensure that they are completed on time & within budget.

3. Communication tools: 

Amazon uses communication tools, like Slack & Zoom, to facilitate communication & collaboration between its employees.

4. Customer relationship management (CRM) software: 

Amazon uses CRM software to manage its customer relationships. CRM software helps Amazon to track customer interactions, identify sales opportunities & provide better customer service.

5. Enterprise resource planning (ERP) software: 

Amazon uses ERP software to manage its business processes like accounting, manufacturing & inventory management. ERP software helps Amazon to improve the efficiency & accuracy of its operations.

Conclusion:

Amazon's digital transformation journey serves as a beacon of creation, innovation & adaptability in a heavily evolving digital landscape. As we've explored the five key lessons from Amazon's case study, along with the challenges they encountered & the technologies that fueled their transformation, it's clear that the company's success is not a mere stroke of luck but a result of meticulous planning, strategic execution & relentless commitment to customer satisfaction. If you are looking for a digital transformation tool for your business partner with Hybrowlabs .

1. How did Amazon prioritize customer experience in its digital transformation?

Amazon placed customer satisfaction at the core of its digital transformation efforts by focusing on personalization, user-friendly interfaces & customer feedback. The company's commitment to providing a seamless shopping experience helped build customer loyalty & retention.

2. What role did artificial intelligence and big data play in Amazon's success?

Artificial intelligence & big data were instrumental in Amazon's success. These technologies powered customer recommendations, inventory management & fraud detection, leading to data-driven decision-making & improved operational efficiency.

3. How did Amazon optimize its supply chain through digital transformation?

Amazon optimized its supply chain by implementing real-time inventory management, demand forecasting & logistics efficiency. This streamlined operations reduced costs & enabled faster delivery to customers.

4. What were the key applications of robotics in Amazon's digital transformation?

Robotics played a crucial role in Amazon's warehouses, automating tasks like picking, packing, & inventory management. This automation enhanced speed, accuracy & cost-effectiveness in fulfillment operations.

5. How did Amazon's ability to scale impact its digital transformation journey?

Amazon's ability to scale was supported by its cloud computing platform, Amazon Web Services (AWS). This allowed the company to rapidly expand its operations & innovate, providing the necessary infrastructure & services for growth.

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Business Growth Strategy of Amazon: A Case Study

Amazon (NASDAQ: AMZN) is the undisputed leader in the e-commerce industry and the second-largest brand on the 2020 Fortune 500 list. It has achieved enormous growth in recent years, driven by increased online shopping worldwide and its cloud platform’s (Amazon Web Services – AWS) growth. AWS is the largest cloud technology platform globally, followed by Microsoft’s Azure and Google’s Cloud Platform. With a market cap of around $1.7 Trillion, Amazon is one of the few brands enjoying a higher than $1.5 Trillion market cap. Even during the pandemic, the company continued to enjoy rapid growth mainly driven by the increased online shopping worldwide and a shift towards digital and cloud technologies that seems to be permanent. Amazon’s cloud platform is enjoying superior growth and a larger consumer base than any other cloud platform. The company’s total net sales gained sharply in the first two quarters of 2020 as more people were shopping online from their homes. A shift towards digital and cloud technologies has also begun as businesses have started changing their operating models to cater to the changing demand pattern worldwide. During the first half of 2020 , the company’s net revenue from the AWS segment grew by more than 30% compared to the previous year. 

Among the other major factors that have been driving the growth of Amazon’s e-commerce and cloud platforms, one central factor is its focus on research and development. The company is the largest spender on research and development in the entire industry and its R&D expenses continue to rise faster each year. The tech industry is marked by heavy competition and Amazon maintains a heavy focus on R&D to retain its leadership position in the e-commerce and cloud industries. While the US is the largest market for Amazon products and services, the firm has expanded worldwide and established a global sales and distribution network. Its global network is highly resilient, which became evident during the pandemic. Amazon has achieved the biggest competitive moat in e-retail. It is also using its strong bargaining power to strengthen its price advantage and beat both physical retail and e-commerce brands trying to compete with it. Another notable factor is that Amazon has achieved a market cap of more than $1.5 trillion within a smaller time span as compared to Microsoft, its leading competitor in the cloud industry.

In this post, we will look at the core pillars of Amazon’s business growth strategy and how the company has achieved enormous growth in a short period. However, prior to that we will analyze the key customer segments that Amazon is targeting worldwide or who the main customers of Amazon are.

Table of Contents

Amazon’s Target Market:

Amazon is targeting a large audience globally as  the largest e-commerce and cloud brand in the world. While the target customers of Amazon’s e-commerce platform come from all age groups and all classes, it is mainly the tech savvy millennial customers that are its main audience. Amazon’s ecommerce platform has the highest penetration in the millennial customer segment or the 18-38 age group. This is the most tech savvy group of consumers or the people who grew up using technology. The smartphone usage rate is also the highest in the age group. While around 99% of the US population owns a cellphone of some kind, only 81% of the population owns a smartphone according to Pewresearch . Smartphone ownership is the highest in the 18-49 age group and while smartphone ownership is at 96% in the 18-29 age group. It is at 92% in the 30-49 age group. With growing smartphone usage in the United States and other parts of the globe, Amazon’s customer base has also continued to expand. It is because a very large portion of all the online shoppers, shop online from their mobile devices. 

Moreover, it was observed that of all the websites that the US consumers shop at, Amazon has the highest engagement rates or people spend higher time on the Amazon website compared to the other e-commerce websites. In 2019 , 70% of Amazon’s holiday shoppers made purchases from their mobile devices. According to emarketer , millennials are digital in most aspects of their lives and find it easy to incorporate digital into their lives. They are also the largest segment of e-shoppers. A per emarketer’s estimate 85.9% of millennials are digital buyers in 2020, 78% genXers and 60.9% baby boomers. Amazon being the largest e-commerce platform in the US, attracts the largest crowd from the millennial segment. Millennials have become the core audience of its e-commerce platform in the US and abroad. However, Amazon targets a wide user base that includes buyers from various segments including middle class consumers, upper middle class consumers as well as the higher end market. A very large number of customers check the portal to compare prices before going for their purchase. The millennials are tech savvy consumers but they are also price savvy and it is why apart from customer experience, the company also focuses on pricing so as to attract millennial shoppers in larger numbers. 

Amazon prime also has its largest portion of consumers among the millennial shoppers. The largest percentage of Amazon Prime members are in the 18-34 age group followed by the 35-54 age segment. The percentage of millennials in the US population that are Prime members grew sharply during the pandemic and shot very high in June 2020 reaching 81% compared to 69% in February 2020. At the same time, Prime membership rate among the internet using people aged 35-54 reached 68% which is quite impressive. 

Amazon AWS targets a more diverse segment of consumers that includes both the individual users and the corporate customers. The customer base of Amazon AWS is larger as compared to other cloud players and has continued to grow larger. Among the individual users of AWS are the highly educated IT professionals, developers and programmers (mainly in the millennial segment) that use the wide range of AWS services for various purposes including programming, app development, running websites and for global  deployment of their services. However, AWS offers a very wide range of products and services that target corporate customers from a wide range of industries including entertainment, education, telecom, manufacturing,  media, retail, finance and travel. One of the leading customers of AWS is Netflix. According to Amazon , “Netflix uses AWS for nearly all its computing and storage needs, including databases, analytics, recommendation engines, video transcoding, and more—hundreds of functions that in total use more than 100,000 server instances on AWS.” Among the other leading customers of AWS are Coursera, The Washington Post, Verizon, Twenty First Century Fox and McDonald’s. As the sales of AWS during the pandemic crept up sharply, the company’s focus on corporate users has grown sharply. 

Business  growth strategy of Amazon:

Research and development:.

Amazon is a highly innovative company, and its growth and fast rise to the above $1.5 Trillion market cap has been driven mainly by its continuous focus on innovation. Apart from its e-commerce platform, the company also offers a superior customer experience to its customers worldwide on its AWS platform. Amazon’s cloud platform has also found faster growth and popularity only through innovation.

Amazon’s e-commerce platform uses the A9 algorithm. In simpler words, Amazon’s search engine is like the Google search engine, a form of artificial intelligence that searches the Amazon marketplace for data and acts on its basis. It is a highly innovative search engine that ensures that the best products with the best margins and sold by the most customer-centric consumers are placed before the shoppers. Over time, the company has continued to improve its platform to provide a better search and more suitable suggestions. With continuous refinement, apart from higher conversion rates and engagement, Amazon’s search engine has also driven higher popularity of the e-commerce platform. Its focus on innovation drives Amazon’s popularity and higher engagement level. It is why the company continues to invest large sums each year in research and development. It is the biggest spender on R&D n the entire industry. Over the past few years, its R&D expenses have grown very fast. From 2018 to 2019, Amazon’s research and development expenses grew by more than $7 billion. IIn 2019, the company spent $35.9 billion on research and development compared to $28.8 billion in 2018. In its 2019 annual report, Amazon noted,

“We expect spending in technology and content will increase over time as we add computer scientists, designers, software and hardware engineers, and merchandising employees. Our technology and content investment and capital spending projects often support a variety of product and service offerings due to geographic expansion and the cross-functionality of our systems and operations. We seek to invest efficiently in several areas of technology and content, including AWS, and expansion of new and existing product categories and service offerings, as well as in technology infrastructure to enhance the customer experience and improve our process efficiencies. We believe that advances in technology, specifically the speed and reduced cost of processing power, the advances of wireless connectivity, and the practical applications of artificial intelligence and machine learning, will continue to improve the consumer experience on the Internet and increase its ubiquity in people’s lives. To best take advantage of these continued advances in technology, we are investing in initiatives to build and deploy innovative and efficient software and electronic devices. We are also investing in AWS, which offers a broad set of global compute, storage, database, and other service offerings to developers and enterprises of all sizes.” 

The technology industry is marked by intense competition and with time the competition is expected to intensify. Apart from the retail and e-retail brands, Amazon faces heavy competition from the leading cloud brands including Microsoft and Google , the other two leading players in the cloud industry. Apart from beating the growing competitive pressure, it is also important that Amazon differentiates its products and services from its competitors in the US, China, and the other leading markets globally. Overall, investing in research and development has become an indispensable part of Amazon’s business strategy since it is critical for maintaining its leadership in the industry.

Customer experience:

In the tech industry where competition is very high, maintaining customer loyalty requires a clear and sharp focus on customer experience. The more differentiated and superior customer experience a company offers, the higher user loyalty it will enjoy and the faster will be its growth.  Amazon’s focus right since its foundation has remained on customer experience and that has helped the company find faster growth in sales and revenue. Behind Amazon’s superior customer experience is the company’s focus on technology that drives higher user engagement and conversion.

Amazon’s search engine provides better suggestions and faster as well as more accurate search results than any competing online retail brand. Amazon also enjoys higher customer loyalty overall because of its technologically advanced e-commerce platform and its focus on customer service. Customer service is a critical part of the overall shopping experience. It is not just the quality of products sold by a brand that affects the consumers’ perception of the platform but also its pricing and marketing strategy as well as the overall shopping experience from landing to purchase and post-sales service.

Amazon has established a global distribution network so that it can make faster delivery possible. Amazon Prime service offers the same day and next deliveries which is faster than the competing retail websites. This means higher customer satisfaction and a superior customer experience resulting in higher customer loyalty and more repeat purchases by existing customers. Customer experience is a key driver of competitive advantage for the technology brands and this is how the top four including Amazon, Microsoft, Google, and Apple have differentiated themselves from the other brands. Amazon’s focus on customer experience is strong and in the coming years also it will continue to drive its growth. It is also one of the core pillars of Amazon’s business strategy. 

Focus on cloud and other latest technologies:

Amazon likes to remain ahead of others in terms of innovation. Its focus remains on the latest technologies and capabilities that are bringing transformative changes industrywide. Staying ahead of the innovation curve helps grow competitive advantage and keep the competitive pressure under control. Amazon has achieved swift growth across various segments, including e-commerce, cloud technology, and  Amazon Prime videos. However, Amazon’s cloud segment, which has acquired faster growth momentum in recent years, has become a key driver of revenue and global growth for the brand. The reason is that Amazon is not just great at understanding consumer needs, but it is also ahead of the others when it comes to innovation. This is why, despite Google’s strong position in the internet industry, it is trying to play catch up with Amazon in the cloud industry.

Amazon’s competitive edge in search advertising continues to grow stronger, driven by AI and smarter algorithms that better understand and analyze user needs and preferences. Amazon crossed the market cap of $1.5 Trillion faster than Microsoft, an older company because of bleeding-edge technology that is the main source of its competitive advantage in both the cloud and e-commerce industries. AI, machine learning, and a diverse range of cloud computing services that are driving major changes across the industry worldwide. While Amazon is the leader in the cloud industry, the edge it has gained is because apart from investing heavily in emerging technologies, the company was also smarter than the others in terms of innovation. Its market cap grew rapidly even during the pandemic because the industry moved fast to adopt cloud technology. A larger number of people started depending on the e-commerce channels, mainly for shopping.

Diverse portfolio:

The user base of Amazon has continued to expand fast. Apart from the increased number of smartphone users worldwide and growing adoption of digital technology worldwide among individual consumers as well as firms in various industries from education to food, fashion, automobiles, and telecom, the increased reliance of people on Amazon as their favorite online shopping destination also drove faster growth for the company. Amazon started as a similar bookseller but grew into the world’s largest e-commerce and cloud company. Its product portfolio has also continued to expand fast over the years. Amazon and third-party sellers that sell their products on the Amazon marketplace sell hundreds of millions of products. There is no other online shopping channel offering as diverse an array of products. This also drives competition among the third-party sellers higher that ultimately benefits the consumers.

In just four years since the launch of Alexa the company had sold more than 100 million Alexa-enabled devices and in the fifth year, Amazon has doubled the number. The company sells a nice range of devices with Alexa built-in including wearables and electronics. Amazon Prime includes shipping benefits as well as a large collection of movies, video shows, and documentaries. Apart from that users can also find their favorite and latest music albums on Amazon music. They can also buy memberships of the Amazon library to read from a large number of books available online. Overall, Amazon offers a very wide range of products and services that the customers can buy from its e-commerce site. While the e-commerce website is its main driver of revenue, Amazon Prime continues to remain a major driver of user loyalty. 

Amazon AWS also offers a diverse array of products meant to serve the varying needs of customers across several industries. Cloud computing is helping many industries find faster growth and serve their customers more efficiently including automobiles, media, telecom, healthcare, and education as well as other industry sectors like manufacturing, retail, and tourism. According to Amazon,

“Amazon Web Services offers a broad set of global cloud-based products including compute , storage , databases , analytics , networking , mobile , developer tools , management tools , IoT , security and enterprise applications . These services help organizations move faster, lower IT costs, and scale. AWS is trusted by the largest enterprises and the hottest start-ups to power a wide variety of workloads including: web and mobile applications, game development, data processing and warehousing, storage, archive, and many others.” 

Thus, you can see that the product portfolio of Amazon has grown highly diverse since the company started and continues to grow. It has become a major driver of competitive edge for the brand and Amazon’s business strategy includes widening its portfolio of products and services to grow its user base and maintain its lead in the tech industry.

Marketing is also a key driver of sales and revenue growth in the tech industry, and its shiniest example is the largest technology brand Apple Inc. Companies in the technology industry cannot survive only by focusing on product quality and investing in innovation. They also need to focus on the type of image they are trying to build. Brand recognition and brand image play a central role in driving the growth and success of technology businesses. 

Amazon’s growth from a bookseller to the e-commerce giant did not happen just because the company hacked into an excellent and highly profitable industry segment. The brand gained the support of its customers quickly and rose as a customer-centric company. Amazon marketed itself the right way and achieved the image of a customer-centric company that it has successfully maintained. Even today, its focus remains on improving its platform and services to provide the best quality experience to its customers worldwide. 

Apart from that, the retail industry and the technology industry are marked by heavy competition, and maintaining demand and achieving sales requires a strong focus on marketing. Marketing is important for demand creation and for achieving higher user loyalty and maintaining strong customer relationships. Amazon’s image of a customer-centric and highly innovative brand has also helped it achieve a distinct position in the industry and establish itself as a different brand compared to its competitors. The company also uses other channels for marketing and mainly digital channels. However, Amazon’s biggest driver of sales is its strong brand recognition, and that keeps driving users to its website. The company has gained strong brand recognition in the cloud segment, and AWS has become very famous since Amazon started providing cloud-based services. Amazon also invests a large sum in marketing and promotions to maintain the demand level and sales. In 2019, the company’s marketing expenses reached $18.9 billion compared to $13.8 billion in 2018. Apart from increased competition, the growth in marketing expenses also reflects Amazon’s focus on maintaining its market dominance. 

Market expansion:

Amazon’s market has continued to expand faster in recent years. With the increased use of smartphones and the internet worldwide, its customer base has also continued to grow. Now, it is a global e-commerce company. While the US remains its core market and the largest revenue source, Amazon has also established its dominance in several more markets in the European and Asian regions. In 2019, the United States accounted for around 69% of the total revenue of the company. Amazon has divided its business into two main geographic segments that include the Amazon United States and International. The international segment includes the business operations of Amazon in foreign countries.  The leading international markets of Amazon include the United Kingdom, Japan, and Germany. The company reports the other markets in its annual reports as the rest of the world. However, while Amazon has maintained a strong market position in the US, it has continued to strengthen its distribution network and warehouses in the foreign markets.

Amazon is just as relentless in its pursuit of international growth. Amazon has established more than 175 warehouses worldwide and the majority of them are located across North America and Europe. Amazon has also maintained a strategic focus on emerging markets like Brazil, Mexico, and India. In India, its main competitor is Flipkart, the Indian e-commerce brand owned by Walmart. Amazon continues to seek higher penetration of the international market and so strives to make its platform and products more attractive for customers internationally.  In the Indian market also it is a dominant player and enjoys nearly the same market share as its rival Flipkart.

Pricing: 

The pricing strategies followed by retail brands have a leading role in ascertaining their success or failure. For example, Walmart’s growth and success in the US were based mainly on its pricing strategy, which helped it gain the largest market share in the US physical retail. Costco has also focused on maintaining competitive prices and is enjoying a leading position in physical retail in the US market. While Amazon does not guarantee the lowest prices like Walmart, its sales have also been driven by the company’s overall competitive pricing strategy. 

A large array of products available on the platform are sold by third-party sellers. However, the company’s strategy has remained to drive price competition among sellers to ensure lower prices for the customers. Most of the products sold on the platform are available from multiple sellers. While on the one hand, this allows the customers access to a large array of products, it also ensures that they can buy it from the seller offering the lowest prices and best quality. Amazon’s search engine picks the best suggestions for customers based on their past activity. However, prices are still a key consideration for customers, a large number of which also use the website for comparing prices. Higher price competition on the platform has proved profitable for the customers who are attracted by the lower prices of products. Amazon has also followed a competitive pricing strategy on its cloud platform and the corporate customers buying these services in larger volumes can especially benefit from the competitive pricing strategy of the AWS platform. The competitive pricing strategy of the company has helped it maintain its leadership position in both the e-commerce and the cloud industries. 

A few last words:

Amazon has acquired stellar growth over the past several years. Its rise as the largest e-commerce and cloud business globally continues driven by its focus on innovation and customer service. As these factors have helped the company build a strong position in the industry, its position was further strengthened during the pandemic. In the coming years, the cloud will drive faster growth for Amazon. The post-pandemic world will be remarkable for the heavier use of digital technology and a swift movement towards cloud-based operating models. Amazon has set itself apart from its competition and will play a key role in helping businesses worldwide move their infrastructure to the clouds. While technological innovation has played a key role in growing the demand for Amazon products and services, other factors like marketing, pricing strategy, and the company’s continuously expanding product portfolio have also enabled a faster expansion of the brand worldwide.

Big Data Use Case: How Amazon uses Big Data to drive eCommerce revenue

Amazon is no stranger to big data. In this big data use case, we’ll look at how Amazon is leveraging data analytic technologies to improve products and services and drive overall revenue.

Big data has changed how we interact with the world and continue strengthening its hold on businesses worldwide. New data sets can be mined, managed, and analyzed using a combination of technologies.

These applications leverage the fallacy-prone human brain with computers. If you can think of applications for machine learning to predict things, optimize systems/processes, or automatically sequence tasks – this is relevant to big data.

Amazon’s algorithm is another secret to its success. The online shop has not only made it possible to order products with just one mouse click, but it also uses personalization data combined with big data to achieve excellent conversion rates.

On this page:

Amazon and Big data

Amazon’s big data strategy, amazon collection of data and its use, big data use case: the key points.

The fascinating world of Big Data can help you gain a competitive edge over your competitors. The data collected by networks of sensors, smart meters, and other means can provide insights into customer spending behavior and help retailers better target their services and products.

RELATED: Big Data Basics: Understanding Big Data

Machine Learning (a type of artificial intelligence) processes data through a learning algorithm to spot trends and patterns while continually refining the algorithms.

Amazon is one of the world’s largest businesses, estimated to have over 310 million active customers worldwide. They recently accomplished transactions that reached a value of $90 billion. This shows the popularity of online shopping on different continents. They provide services like payments, shipping, and new ideas for their customers.

Amazon is a giant – it has its own clouds. Amazon Web Services (AWS) offers individuals, companies, and governments cloud computing platforms . Amazon became interested in cloud computing after its Amazon Web Services was launched in 2003.

Amazon Web Services has expanded its business lines since then. Amazon hired some brilliant minds in the field of analytics and predictive modeling to aid in further data mining of Amazon’s massive volume of data that it has accumulated. Amazon innovates by introducing new products and strategies based on customer experience and feedback.

Big Data has assisted Amazon in ascending to the top of the e-commerce heap.

Amazon uses an anticipatory delivery model that predicts the products most likely to be purchased by its customers based on vast amounts of data.

This leads to Amazon assessing your purchase pattern and shipping things to your closest warehouse, which you may use in the future.

Amazon stores and processes as much customer and product information as possible – collecting specific information on every customer who visits its website. It also monitors the products a customer views, their shipping address, and whether or not they post reviews.

Amazon optimizes the prices on its websites by considering other factors, such as user activity, order history, rival prices, product availability, etc., providing discounts on popular items and earning a profit on less popular things using this strategy. This is how Amazon utilizes big data in its business operations.

Data science has established its preeminent place in industries and contributed to industries’ growth and improvement.

RELATED: How Artificial Intelligence Is Used for Data Analytics

Ever wonder how Amazon knows what you want before you even order it? The answer is mathematics, but you know that.

You may not know that the company has been running a data-gathering program for almost 15 years now that reaches back to the site’s earliest days.

In the quest to make every single interaction between buyers and sellers as efficient as possible, getting down to the most minute levels of detail has been essential, with data collection coming from a variety of sources – from sellers themselves and customers with apps on their phones – giving Amazon insights into every step along the way.

Voice recording by Alexa

Alexa is a speech interaction service developed by Amazon.com. It uses a cloud-based service to create voice-controlled smart devices. Through voice commands, Alexa can respond to queries, play music, read the news, and manage smart home devices such as lights and appliances.

Users may subscribe to an Alexa Voice Service (AVS) or use AWS Lambda to embed the system into other hardware and software.

You can spend all day with your microphone, smartphone, or barcode scanner recording every interaction, receipt, and voice note. But you don’t have to with tools like Amazon Echo.

With its always-on Alexa Voice Service, say what you need to add to your shopping list when you need it. It’s fast and straightforward.

Single click order

There is a big competition between companies using big data. Using big data, Amazon realized that customers might prefer alternative vendors if they experience a delay in their orders. So, Amazon has created Single click ordering.

You need to mention the address and payment method by this method. Every customer is given a time of 30 minutes to decide whether to place the order or not. After that, it is automatically determined.

Persuade Customers

Persuasive technology is a new area at Amazon. It’s an intersection of AI, UX, and the business goal of getting customers to take action at any point in the shopping journey.

One of the most significant ways Amazon utilizes data is through its recommendation engine. When a client searches for a specific item, Amazon can better anticipate other items the buyer may be interested in.

Consequently, Amazon can expedite the process of convincing a buyer to purchase the product. It is estimated that its personalized recommendation system accounts for 35 percent of the company’s annual sales.

The Amazon Assistant helps you discover new and exciting products, browse best sellers, and shop by department—there’s no place on the web with a better selection of stuff. Plus, it automatically notifies you when price drops or items you’ve been watching get marked down, so customers get the best deal possible.

Price dropping

Amazon constantly changes the price of its products by using Big data trends. On many competitor sites, the product’s price remains the same.

But Amazon has created another way to attract customers by constantly changing the price of the products. Amazon continually updates prices to deliver you the best deals.

Customers now check the site constantly that the price of the product they want can be low at any time, and they can buy it easily.

Shipping optimization

Shipping optimization by Amazon allows you to choose your preferred carrier, service options, and expected delivery time for millions of items on Amazon.com. With Shipping optimization by Amazon, you can end surprises like unexpected carrier selection, unnecessary service fees, or delays that can happen with even standard shipping.

Today, Amazon offers customers the choice to pick up their packages at over 400 U.S. locations. Whether you need one-day delivery or same-day pickup in select metro areas, Prime members can choose how fast they want to get their goods in an easy-to-use mobile app.

RELATED: Amazon Supply Chain: Understanding how Amazon’s supply chain works

Using shipping partners makes this selection possible, allowing Amazon to offer the most comprehensive selection in the industry and provide customers with multiple options for picking up their orders.

To better serve the customer, Amazon has adopted a technology that allows them to receive information from shoppers’ web browsing habits and use it to improve existing products and introduce new ones.

Amazon is only one example of a corporation that uses big data. Airbnb is another industry leader that employs big data in its operations; you can also review their case study. Below are four ways big data plays a significant role in every organization.

1. Helps you understand the market condition: Big Data assists you in comprehending market circumstances, trends, and wants, as well as your competitors, through data analysis.

It helps you to research customer interests and behaviors so that you may adjust your products and services to their requirements.

2. It helps you increase customer satisfaction: Using big data analytics, you may determine the demographics of your target audience, the products and services they want, and much more.

This information enables you to design business plans and strategies with the needs and demands of customers in mind. Customer satisfaction will grow immediately if your business strategy is based on consumer requirements.

3. Increase sales: Once you thoroughly understand the market environment and client needs, you can develop products, services, and marketing tactics accordingly. This helps you dramatically enhance your sales.

4. Optimize costs: By analyzing the data acquired from client databases, services, and internet resources, you may determine what prices benefit customers, how cost increases or decreases will impact your business, etc.

You can determine the optimal price for your items and services, which will benefit your customers and your company.

Businesses need to adapt to the ever-changing needs of their customers. Within this dynamic online marketplace, competitive advantage is often gained by those players who can adapt to market changes faster than others. Big data analytics provides that advantage.

RELATED: Top 5 Big Data Privacy Issues Businesses Must Consider

However, the sheer volume of data generated at all levels — from individual consumer click streams to the aggregate public opinions of millions of individuals — provides a considerable barrier to companies that would like to customize their offerings or efficiently interact with customers.

James joined BusinessTechWeekly.com in 2018, following a 19-year career in IT where he covered a wide range of support, management and consultancy roles across a wide variety of industry sectors. He has a broad technical knowledge base backed with an impressive list of technical certifications. with a focus on applications, cloud and infrastructure.

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Nonparametric Quantification of Uncertainty in Multistep Upscaling Approaches: A Case Study on Estimating Forest Biomass in the Brazilian Amazon

36 Pages Posted: 29 Aug 2024

Denis Valle

University of Florida - School of Forest, Fisheries, and Geomatics Sciences

University of Florida

Rafael Izbicki

affiliation not provided to SSRN

Renan Akio Kamimura

Bruna azevedo, silvio henrique menezes gomes, arthur sanchez, carlos alberto silva, danilo r. a. almeida.

The use of multistep upscaling approaches in which field data are combined with data from multiple remote sensors that operate at different spatial scales (e.g., UAV LiDAR, GEDI, and Landsat) is becoming increasingly popular. In these approaches, a series of models are fitted linking the information from these different sensors, often resulting in improved predictions over large areas. Quantifying the uncertainty associated with individual models can be challenging as these models may not generate uncertainty estimates (e.g., machine learning models such as random forest), a problem that is further exacerbated if the results from multiple models are combined within a multistep upscaling methodology. In this article, we describe a nonparametric conformal approach to quantify uncertainty. This approach is straight-forward to apply, is computationally inexpensive (differently from bootstrapping), and generates improved predictive intervals. Importantly, this methodology can be used regardless of the number of models adopted in the upscaling approach and the nature of the intermediate models, as long as the final model can generate predictive intervals. We illustrate the improved empirical coverage of the conformalized predictive intervals using simulated data for a two-step upscaling scenario involving field, UAV LiDAR, and Landsat data. This simulation exercise shows how increasing uncertainty in the first stage model (which relates biomass field data to UAV LiDAR data) leads to an increase in the severity of uncertainty underestimation by naïve predictive intervals. On the other hand, conformalized predictive intervals do not exhibit this shortcoming. Finally, we illustrate uncertainty quantification for a multistep upscaling methodology using data from a large-scale carbon project in the Brazilian Amazon. Our validation exercise using these empirical data confirms the improved performance of the conformalized predictive intervals. We expect that the conformal approach described here will be key for uncertainty quantification as multistep upscaling approaches become increasingly more common.

Keywords: forest biomass, Carbon, Machine learning, uncertainty, upscaling, lidar

Suggested Citation: Suggested Citation

Denis Valle (Contact Author)

University of florida - school of forest, fisheries, and geomatics sciences ( email ), university of florida ( email ).

PO Box 117165, 201 Stuzin Hall Gainesville, FL 32610-0496 United States

affiliation not provided to SSRN ( email )

No Address Available

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