Analysis of Amazon’s E-commerce Strategies
Amazon is an e-commerce platform founded by Jeff Bezos in 1994 in Seattle, USA. With millions of employees amazon is a global leader in e-commerce. Amazon’s products includes groceries, electronics, baby products, media products, watches, toys and games, jewellery, scientific items, personal care products and many more. Amazon is known to provide the best customer experience.
Amazon uses different e-commerce strategy and business models for value creation of customers, competitive advantage as well as cost partnership (O’Brien, 2017). Few of them are listed below,
- Emails-
Amazon uses three types of emails which includes cart abandonment emails, special offers email and transactional emails. The cart abandonment emails are sent to the customers to remind them that their product is joined to their shopping cart but the transaction process is still incomplete. This makes a customer friendly with the website.
The special offer emails are send according to the customer’s shopping history. Whenever there is any sort of offer on the products which a customer regularly buys Amazon sends them mail regarding the offer.
The transactional emails are basically the “thank you” mails sent to the customers after they buy a product. These mails also include personalized products guidance. This is a good trick to catch buyers.
- Self-service support-
Recently, it was observed that customers prefer self-service support in preference to emails and phone support. Amazon provides ample field of information with the help of which customers finds all the answers they need by themselves. Amazon also offers a comprehensive product characterization which gives all the information about the product. The review page and the images of the product along with the description gives customers an impression of believe with Amazon.
- Actualize the experience-
Whenever a customer visits the amazon’s homepage he encounters suggestions like, “Recommended for you”, “Inspired by your shopping trends”, which provides the relevant products used by that customer. It also provides a Gift Organiser Tool, which keeps a record of birthdays and certain moments. Apart from this, Amazon gives customers capability to save items in their shopping carts, have a look at their order history. The customers can also see the products which are in trend.
- Smart site adoption: the power of page speed
Amazon offers an exceptional experience of site load time. According to a study, the time taken for a webpage to load is inversely proportional to customers experience and sales. Therefore, Amazon has invested a lot of money to give the best infrastructure to its customers. Its site usability is within seconds. The 1- click ordering works good if a customer buys multiple products at the same time.
- Mobile-first knowledge-
Amazon’s mobile site is super accessible to handle, get information and purchase items. Various features like auto-fill on the search engine and one-click ordering are introduced. Along with this, smart categorization and search functionality made the experience easy.
- Customer’s loyalty-
The main aim of Amazon is to maintain customer’s loyalty in them. Therefore, Amazon provides features like,
- Free returns:Amazon provides free returns to the customers which make them relax that if they don’t like the product or if there is any problem they can return it easily.
- Fast two-day shipping:Amazon’s two-day shipping with a Prime membership enhances the customer’s experience. They guarantee that the customer will get his package within two days and complementary to that shipping will be free.
- Easy checkout:Amazon has made shopping easy with its one-click feature. Customers don’t have to enter their credit cards details for every time they make an order and hence can check out easily (Currie, 2004).
There are various types of weaknesses in Amazon’s e-commerce strategies which includes
- Declining margins: Amazon is getting low profit margins because of broad delivery network and price battles with other e-commerce sites.
- Less focus on products: Few of the products launched by Amazon are a big flop which causes loss to the company.
- Tax avoidance affairs which caused disruption of the brand image: Due to the tax avoidance issues in U.S and U.K. Amazon gained negative publicity in these countries where maximum revenue of the company is developed.
Transaction Fee Revenue Model
Amazon generates revenue through the transaction fees which the customers pay for any transaction on the site. To participate the customers register on the website. The chunk of the fees can be fixed or calculated by percentage.
Revenue Model of Amazon
Affiliate Revenue Model
In this revenue model, the merchants display and trade their products with links to the partner-websites. It is based on commission which would be paid only when the company earns from those advertisements. The merchants sell their services and the affiliates get their commissions.
Sales Revenue Model-
Many wholesalers and retails sell their products on Amazon. As the customers prefer to buy products online because it is time saving and convenient to them. As a result, the products of merchants are sold on a huge scale (Amazon, 2016).
Although Amazon’s business models are attaining profits as compared to other e-commerce sites. And there was a price-appreciation of e-commerce stocks in last few years .Amazon’s annual revenue is very high still the company acknowledge that they never earned any profit (Amazon, 2016). Amazon has made buying products very easy for the customers by the user-friendly strategies they adopted. Amazon gives free shipping to the customers which is not easy but is a financially effective decision.
The strategy of product review on-site was ultimately very effective in attracting customers to Amazon from its competitors. The cross-sell was a very good strategy used by Amazon as it has a section named “customers who bought this item also bought” which provided customers with the products which they may need. The strategy of free return was a big hit as the customers were able to trust the brand (Figueiredo, 2000). They knew if they won’t like the product they can return it without any loss. Hence, Amazon’s business models and e-commerce strategies proved to be beneficial for the company. I believe these strategies are sustainable and attracted many customers to Amazon. Therefore, Amazon is one of the leading e-commerce sites today (Sampson, 2008).
The main challenges of disruptive innovation were that companies were forced to do the same thing they were doing from so long.
Microsoft adopted The Pyramid Model which was a disruptive Business Model. The pyramid model is mostly used by all the companies who generates majority of their revenues by affiliates and resellers. The company lets the revenue stream upwards with the least possible effort. Microsoft thought of implementing the pyramid model because it is cost-effective way of constructing the business as the company have to pay only the sales people a percentage of the earned profit. There is less sales staff and the profit is maximised.
The main challenges Microsoft faced from disruption innovation was that Microsoft has been totally dependent on PCs and laptops for their business but current technology is all about mobile devices. Mobile devices can perform all the functions of PC with an advantage that they are cheap. As the mobile device technology came into consideration Microsoft’s computers drifted away. The disruptive business models of Microsoft were Windows phone, Windows 8 and tablets.
Apart from this Microsoft launched Surface which allows user to have a simple touch-screen interface of a tablet. It is used to make drawings or take notes and it runs on mobile, web apps as well as traditional desktop machines. This was a transformation of Microsoft from software business to hardware business (Weiss, 2012).
Today, Surface is a good product for anyone who wants services of a laptop. But when it was launched it was not a success. Microsoft responded to the potential disruptive threats of surface by the following ways,
- Microsoft combined the old and new technologies with Surface. Surface was fully functional on traditional desktop programs as well as windows 10.
- Microsoft targeted the existing customers: Microsoft advertised Surface as a tablet which is like a laptop. Hence, the target customers of Surface were almost those who owned a laptop.
- Microsoft used the pre-existing technologies: Surface was built by using the pre-exiting technologies. It was meant to do all the things a laptop can do(Akdeniz, 2014).
Microsoft did not recognise the potential threats in a timely fashion and was very late. Microsoft launched its Windows phone in 2015 which was a big flop (Angell, 2016). Because there were many established mobile device companies who were offering the same prices at lower prices. Despite knowing the fact that, if Surface was a hit it will slow down the sales of laptops Microsoft launched it (Silverthorne, 2002).
Microsoft continued innovating Surface and kept bringing it to the market. Along with this, Microsoft didn’t compromise with the performance of Surface. The company took a good care that the utility and compatibility of the Surface is maintained properly. The company kept enhancing the features of Surface so that it can get popular and hence Microsoft was effective in addressing challenges from disruptive business models (Middleton, 2015).
If I were a high-level consultant to senior leadership at Microsoft, in terms of emerging threats from disruptive technologies I would have adapted the following strategies:
- I would have redesigned the company and define the business on the ground of the needs of the customer. The main aim would be to meet the customer needs and the product and services would be secondary.
- I would have not given up on the new disruptive ideas. Rather than that I would have tried them slowly on small scales and then see how they are affecting my current business.
- I would have planned the range of possible future and not long term goals. As a result, the company will easily adapt to the new challenges and technologies without any loss(Vries, 2015).
References
Angell, B. (2016).2015: A Year of Microsoft Driven Disruption and Innovation in The Enterprise IT Space. Retrieved from https://blog.juriba.com/2015-microsoft-driven-disruption-innovation
Akdeniz, C. (2014). Disruptive Innovation Explained. Germany: Can Akdeniz.
Amazon. (2016). Annual Reports. Retrieved from https://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsAnnual
Costa, E. (2016). Global E-commerce Strategies for Small Businesses. USA: MIT Press.
Currie, W. (2004). Value Creation from E-Business Models. Burlington: Elsevier.
Figueiredo, J.M. (2000).Finding Sustainable Profitability in Electronic Commerce. Retrieved from https://sloanreview.mit.edu/article/finding-sustainable-profitability-in-electronic-commerce/
Middleton, R and Grable, M.C. (2015). Emerging Risk: Opportunities Threats of Disruptive Technology. Retrieved from https://www.actuaries.org.uk/documents/e8-emerging-risks-opportunities-and-threats-disruptive-technology
O’Brien, M. (2017). What’s your Amazon Strategy? The evolution of ecommerce. Retrieved from https://www.clickz.com/whats-your-amazon-strategy-the-evolution-of-ecommerce/113646/
Sampson, G. (2008). Electronic Business. UK: The British Computer Society.
Silverthorne, S. (2002). The Secret of How Microsoft Stays on Top. Retrieved from https://hbswk.hbs.edu/item/the-secret-of-how-microsoft-stays-on-top
Vries, A. (2015). 3 strategies for Overcoming the Threat of Disruption. Retrieved from https://chiefexecutive.net/3-strategies-for-overcoming-the-threat-of-disruption/
Weiss, A. (2012). Microsoft’s Surface and Disruptive Innovation. Retrieved from https://awareci.com/2012/10/27/microsofts-tablet-computer-not/
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