You know that song that goes: CEO, entrepreneur, born in 1964… You know that’s the guy who owns the company we’re about to talk about today. And now you’re going to sing the song for the rest of the day; you’re welcome. Amazon e-commerce changed everything, there’s no doubt about that, but how did they do it? And why did all the rest follow? Why is Amazon so successful?
E-commerce is just one way to sell or buy goods and services, but currently, 79% of shoppers shop online at least once a month. And Amazon had a huge influence on that with its innovative way of doing business. Let’s see what’s so interesting about them.
First, Let’s Have a Brief Look at the History of E-commerce
Before we start talking about the future of eCommerce, it would be good to have a recap of how it came to this.
Commerce has always been the lifeblood of humanity. It was the way to learn new things, hear the news, meet new people, and spread diseases lol (you know that merchant ships brought almost every illness to some country, right?). However, e-commerce was born in the 1960s with the development of EDI – Electronic Data Interchange. And that wasn’t because we tried to avoid spreading diseases. That came in 2020.
After EDI, Michael Aldrich invented “teleshopping,” which can be seen as the forerunner of today’s e-commerce. Then there was Minitel, an online service that was accessed through telephone lines and connected users to a computing network. It had 7 million users until the success of the internet, which came three years later.
In the early 1990s, the World Wide Web was introduced, and online shopping became popular as soon as the National Science Foundation (NSF) lifted its restrictions on commercial use of the NET. After that, almost all of the types of eCommerce business models showed up, and everyone probably wondered how to start an eCommerce business. Encryption solved some security issues with online shopping, and everyone lived happily ever after. And then the big guys came.
Now, About the History of Amazon E-commerce
In 1994, Amazon rode the dot com wave that emerged and morphed from a garage startup to a setter of innovation trends in eCommerce. It started as an online bookstore with rented storages where they could keep all the books being sold. Unlike a regular bookstore that can fit only a limited number of titles, Bezos decided to create the largest bookstore in the world by not having a brick-and-mortar shop and keeping everything online.
Since 1998, there haven’t been any books available on this website. They decided it was time to sell movies and, after that, music, gifts, home improvement items, and software.
In 1999, Amazon evidently chose the right eCommerce business model and let third-party merchants sell their products via this website. Over time, in 2005, Amazon Prime introduced a number of customer loyalty programs, free shipping, and other benefits and conveniences that grew the customer base and brought in revenue.
Amazon probably faced all possible pros and cons of eCommerce since they offer almost everything you could imagine and continue to grow in all directions.
How Does Amazon E-commerce Work?
Although Amazon’s business model derived from a standard e-commerce model a long time ago, that is still what it is at its core. But to be more precise, Amazon is a two-sided online marketplace that sells products and services from various categories. Buyers and sellers easily interact with each other, so everyone’s needs are fulfilled. Also, this company manages everything from production and packaging to shipping and delivery.
Resources, Partners, and Channels of Amazon E-commerce
A company that measures its worth in billions must have a very vast web of elements used to keep everything running smoothly. In Amazon’s operating model, we can see some key parts of its way of functioning – its resources, partners, and channels.
For the first one, we must admire its enormous warehouses, technological infrastructure, and executives in various departments. Without them, nothing would be possible.
Partners are sellers who use Amazon to reach their ideal customers and trade with them. This option makes all three sides happy – merchants can interact with customers without a hassle, customers can find what they’re looking for for a reasonable price, and Amazon earns money from having sellers use their marketplace.
The channels used to reach customers also make the purchase process very convenient since we can find everything on their website, via an app, or visit a store such as Amazon Go.
How Does Amazon Make Money?
Amazon’s main revenue stream comes from retail, with both online and offline stores making up the majority of it. Amazon announced $106.5 billion in retail sales for the third quarter of FY 2022. $27.7 billion of those belong to its foreign business division and $78.8 billion to its North American business segment.
Also, Did You Know That Amazon Outsources?
This enterprise isn’t just a perfect example of a successful e-commerce company; it’s also one of the best examples of business process outsourcing with its management of inventory. Amazon is renowned for its flawless and effective shipping service; however, this is due to a significant outsourcing choice.
With internal logistics, Amazon has outsourced the administration of its inventories. Their vendors account for more than 50% of deliveries and transactions. The product holds a strong demand thanks to outsourcing. To avoid storing in-demand items in its inventory, Amazon ships these items and products via sellers instead of using wholesalers. In addition, Amazon runs and manages inventories with ease using Appath Cloud software.
Why Is Amazon So Successful?
How did Jeff Bezos’ empire rise? Some might even say that it turned into an unstoppable force; the fact is that everything started as a small online bookstore, and somehow it grew to become one of the largest retailers on the globe. How did it happen?
Cheap prices and making life more and more convenient each day seem to be a pretty good recipe for becoming the most trusted company in its industry. Customers even trust it with the conversations they have at home by speaking with Alexa – Amazon uses that fact and creates an enormous database of what and how people like and want.
Amazon understood how and why people spend money on the internet and realized that that phenomenon is ever-changing. They follow all of the eCommerce trends with their impeccable customer service skills. Even when all of us were working from home, they found a way to manage that situation.
Talking About a Unique Business Model
How is it that they always have the best prices for what we’re looking for? Amazon’s business strategy hinges on giving customers the lowest costs possible while maintaining pricing that is competitive and responsive to market developments. The company accomplishes this by utilizing machine learning, artificial intelligence, and over 1 billion gigabytes of data from its 200 million customers and 1.5 billion products.
There’s dynamic pricing, where the price of a product changes several times during a day; psychological pricing, where you can see massive price discounts on top-selling items while raising the cost of uncommon items; and finally, monitoring of the competition and repricing, where they use algorithms to constantly compare prices to a competitor and lower them.
Amazon became the “everything store,” and its marketplace grew with the data it collected from its customers over the years. Now, it covers almost all industries that one could imagine.
Now, We Also Have Amazon Effect
The “Amazon effect” in retail, and particularly e-commerce, refers to a significant shift in customer expectations brought on by Amazon’s intense concentration on meeting those demands. Additionally, the name itself acknowledges Amazon’s dominance in online sales, which is largely responsible for the industry’s transformation.
Regardless of the sector or nature of the goods, consumers today demand a flawless and immediate buying experience. Customers are also promised a practically seamless purchasing experience thanks to the Amazon effect.
The biggest example of the Amazon effect is the rising popularity of online shopping among customers. As a result, this tendency impacts struggling brick and mortar stores, which may lead to bankruptcy or partial store closures.
Because of the impact of the digital market on traditional company models in terms of customer expectations and new competitive environments, we may claim that the Amazon effect is also a product of those factors.
We Can Say That Amazon Is Some Way Created and Molded E-commerce
E-commerce has been in constant evolution since the day it was created, and with its ever-changing model of work, Amazon shapes it every day. This company has had the biggest impact on how we purchase, sell, and conduct business. The business has been among the most innovative in the world during that time, and it currently controls the majority of the e-commerce sector. The company has not only been able to adapt to the ongoing changes in shopping and technological developments. It has set a bar for eCommerce customer service and shown a very impactful difference between scaling and growth.
In just 20 years, the number of online shoppers in the US grew to 70%, and most people shop online every day. Amazon did the exact opposite of most other online retailers at the time and broadened the range of goods and services it provided to customers.
They were able to consistently satisfy the interests and expectations of their clients’ thanks to their decision to broaden their offerings in accordance with market developments. As a result, Amazon solidified its position as a market leader in e-commerce and aided in its development for the benefit of customers.
Maybe You Can Become the Next Amazon?
This company wouldn’t be what it is today without outsourcing. But you need to know how to outsource smartly. It’s not just about finding someone who will give you low prices; for a solid customer base, your company will need high-quality customer support and inbound sales. That is possible only when you partner up with good e-commerce outsourcing companies. If you have someone reliable to take care of your customers, you’ll be able to grow and scale while also building a base of loyal customers. If you’re interested in finding something like that, don’t be shy – contact us.