Amazon: Best in Class Case Study

Amazon is the e-commerce leader. Amazon’s success can be attributed to one main mission followed by the company to the letter – to be a “customer focused company”.

The company is guided by 4 principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.

 

Our analysis finds that the key success factors for Amazon are:

  1. Loyalty: Amazon Prime, Amazon’s loyalty program launched on 2005, benefits members with unlimited movies and TV shows, music, reading, discounts and more. Amazon Prime members spend more on Amazon and they buy more frequently; thereby making the Prime program a key to Amazon’s sustained growth.
    One of Amazon Prime’s offerings is a 2-day shipping for free which is a leading reason for joining the program.
  2. Supporting Decisions: Amazon was the first to offer personalized recommendations, wish-lists, and reviews. Today, the company offers an industry-specific review system.
    For example, in August 2016, Amazon launched Amazon Vehicles, a car research destination and automotive community. Amazon Vehicles contains information required when shopping for vehicles, parts and accessories. The information includes specifications, images, videos, and customer reviews.
    In addition, Amazon is guiding customers’ purchase decision through different tools: providing customers’ reviews, using filters (varying according to the product category) and buying guides.
    In 2016, the company started focusing on banning incentivized reviews from its website, addressing the issue of untrustworthy reviews.
    Another way for the company to support buying decisions is through buying guides for different product categories such as laptops, mattresses, TVs, backpacks and more.
  3. Fast and Convenient: The company offers a mobile app which allows searching for products through text, voice or the device’s camera.
    Amazon’s website personalized information also contributes to a more convenient and direct experience.
    In 2016, Amazon launched a feature on its mobile app in order to know what’s inside a package before opening it. The feature is particularly useful to for holiday shopping, when customers order multiple items and would like to decide whether to open the packages or not.
  4. Platform-Specific: Amazon understands that shoppers have different motivations for each category, thus it expands lucrative categories (e.g., grocery, outdoor equipment) in the form of micro-sites.
    For example, in 2007, Amazon Launched AmazonFresh, a grocery shopping service. Amazon Fresh includes different product categories such as fresh fruit; dairy & eggs; prepared foods; household supplies and more.
    As part of the focus on convenience, in 2017, the retailer launched AmazonFresh Pickup, a service through which customers can order from AmazonFresh and then reserve a pick-up time — in some cases, as early as 15 minutes after ordering — and drive to their selected location.
    The grocery platform is a growth engine for Amazon. Thus, on top of opening the Amazon Go brick and mortar chain, in June 2017, Amazon announced its acquisition of organic food chain Whole Foods Market for $13.7bn.
    The Amazon Go concept is described as “a new kind of store with no checkout required” in which customers use the Go app to enter the store, and once inside, a combination of sensors, computer vision and deep learning keep track of what’s taken off and returned to shelves inside a virtual cart. Once finished, the shopper just walks out and the company charges their Amazon account, along with a receipt.
    Another key platform for Amazon is Luxury Beauty. While in October 2013 only 24 brands were present on the platform, in January 2017, 202 brands were present. In order to attract more luxury beauty brands, Amazon features editor’s picks and new arrivals sections.
    According to One Click Retail, as of March 2017, the US beauty market experienced a 2% YoY growth, whereas Amazon’s beauty sales experienced a 47% YoY.
  5. Content as a Service: Beyond products and services, Amazon sees content as a strong benefit for today’s digital consumer. This pertains to both production of original content for Prime Video members, and sales of content, such as through Amazon Music Unlimited. Amazon Devices such as Fire TV, Echo etc., support streaming of content.
    In 2016, Amazon launched Amazon Music Unlimited, a service which provided access to a library of “over 40 million” songs, priced at $ 79 a year.
    In April 2017, Amazon launched “Subscribe with Amazon”, a service which allows customers to pay for subscriptions to third-party services and content through their Amazon account. Shoppers can search subscriptions by categories including education; lifestyle; news, magazines & more; and productivity & software.
  6. Omni-Channel: Launched in March 2015, Dash Button is Amazon’s 1-Click ordering brought into the home. In October 2016, Amazon reported an exponential growth for the Amazon Dash program. Dash button orders increased over 5x in 2016.
    In January 2017, Amazon launched a digital version of its Dash buttons. The virtual Dash buttons on the Amazon.com homepage allow shoppers to click on the icon in order to stock up on essentials like laundry detergent, paper towels, or snacks. Dash buttons are an example of how Amazon combines the physical and digital spaces in a seamless way.
    Alexa, Amazons’ voice control system, is another example of the integration of the digital world in the physical space. Using unique streaming audio players, Alexa can respond to voice commands from almost anywhere within earshot.
    In June 2017, Amazon released the Echo Show device, a Wi-Fi-enabled home device with a seven-inch screen that plays media and responds to voice commands. Echo Show enables making and taking video calls, with other humans and it can be used to watch Amazon videos, YouTube, movie trailers and other video content.
  7. Curation and Specialty Items: Amazon offers a variety that is a mixture between leading supplier products, and small artisanal manufacturers. In both cases, the company offers some products that cannot be purchased elsewhere.
    In January 2017, for example, Amazon launched Prime Surprise Sweets, a service of a “top-notch artisanal treats from across the nation“ supply ordered through a Surprise “Dash” button.
    Another example is Amazon Launchpad which offers products made by startups, positioned as “unique and unexpected products”.  
    On July 2016, Amazon Launchpad launched the creation of Kickstarter Collection, featuring Kickstarter products available for purchase on Amazon.com.
    In addition, Amazon’s private label, which is a growth engine for the company, offers unique products which can only be purchased through Amazon’s website.

Perhaps one of the secrets to the company’s success is its “start-up thinking”: rather than being led by the company’s size and current activities, it is relentlessly striving to re-invent and disrupt categories, leveraging digital, data and insights, and choosing to try – and sometimes fail – in the process of finding the customers’ unmet needs.

 

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