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 ecommerce 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?
Establishing an ecommerce business is just one way for online sellers to get notices, and for buyers to get products across the country. Amazon had a huge influence on that with its innovative way of doing business, setting an example for online ecommerce businesses across the world.
History of Ecommerce Businesses
Before we start talking about the Amazon store, ecommerce marketing and online stores in general, we need to look at the history of an ecommerce business and how it came to be.
Commerce and Trade Are At the Root of Humanity
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, ecommerce 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 ecommerce. 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.
Amazon Ecommerce Business History
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.
Throughout its existence, Amazon ecommerce business faced all the challenges you can think of when it comes to selling products online: From marketing costs, marketing strategies and catering to the growing Amazon customers, thus sending new ecommerce trends for small businesses looking to sell products online.
How Does Amazon Ecommerce Work?
Although Amazon’s business model derived from a standard ecommerce business 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 store 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. If you’re one of online sellers, you can use Fulfillment by Amazon to send inventory directly to Amazon Fulfillment centers where specialists take care of the entire process for you.
Having such a strong infrastructure allowed Amazon to establish an ecommerce store with high customer satisfaction and satisfaction for everyone selling online.
Resources, Partners, and Channels of Amazon Ecommerce
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.
Amazon’s Warehouses are Massive
For the first one, we must admire its enormous warehouses, technological infrastructure, and executives in various departments. Without them, nothing would be possible.
Selling on Amazon is Accessible to Everyone
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 Amazon Marketplace is Use-Friendly
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.com, Inc. (NASDAQ: AMZN) announced financial results for its third quarter ended September 30, 2023. Net sales increased 13% to $143.1 billion in the third quarter, compared with $127.1 billion in third quarter 2022.
These are the latest results, with the fourth quarter of 2023 still not announced. Still, this shows you how profitable Amazon business is and why so many small businesses want to emulate it by allowing online stores to sell products on their platform.
Still, hardly anyone will manage to compare to the Amazon store. There’s so much money invested and the platform caters to both the sellers and Amazon shoppers.
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 trustworthy ecommerce business. 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 keep attracting potential customers by offering quick delivery times, low costs of products and the assurance of quality.
Also different sellers on Amazon get decent deals and can rely on Amazon when it comes to order fulfillment, the ability to maximize product listings and expand their online store. Amazon is also aware of mobile commerce and how popular it gets, and they’re making sure to allow easy access for everyone who wants to use Amazon.
Amazon is Successful Because it Helps Sellers
Amazon offers a lot to sellers. They get everything they need with the Amazon ecommerce business, eliminating the things they need to take care of while still turning a profit.
- Global Marketplace Exposure: Amazon provides sellers with a massive global platform to reach millions of customers worldwide. Sellers can tap into Amazon’s extensive customer base and benefit from the platform’s reputation and trust. When you’re selling products on Amazon, you know millions of people can find it and buy it.
- Fulfillment Services (FBA): Amazon offers the Fulfillment by Amazon (FBA) program, allowing sellers to store their products in Amazon’s fulfillment centers. In an Amazon fulfillment center, the company takes care of packing, shipping, and customer service, easing the logistics burden for sellers. Sellers cut fulfillment costs and they also don’t need to set up the infrastructure, which makes it easy for an online and brick and mortar store. Having fulfilment services makes it so much easier for sellers as they help them cut selling fees.
- Advertising and Marketing Tools: Amazon provides various advertising options such as Sponsored Products, Sponsored Brands, and Display Ads. Sellers can use these tools to increase the visibility of their products and target specific customer segments. That means that they don’t have to invest so much money in marketing. However, it’s always encouraged to have a web page, product pages social media channels, etc. While you may have a seller account on Amazon, you want to drive traffic and show buyers your product. Amazon makes marketing easier, but you still need to work your way around search engines.
- Customer Service and Returns: Amazon handles customer service inquiries and manages returns, ensuring a positive shopping experience for customers. Sellers can leverage Amazon’s customer support infrastructure, enhancing their brand reputation. What this means is that customer experience will be better, which will likely drive new customers as you start selling more and more products.
- Data Analytics and Insights: Amazon provides sellers with access to detailed analytics and insights through tools like Seller Central. Sellers can analyze sales trends, customer behavior, and other data to make informed decisions and optimize their business strategies. This will help you do market and product research, see what other businesses are doing and come up with product ideas that will help you stand out from the crowd.
Amazon is Successful Because It Helps Buyers
Just like it is the case with sellers, Amazon is the best ecommerce business for buyers across the world. Here’s what they do to make buying easy for everyone.
- Vast Product Selection: Amazon offers a wide range of products, including both popular and niche items, providing buyers with a diverse selection to choose from. In an online store, customers can find literally everything they need.
- Customer Reviews and Ratings: Amazon allows buyers to read reviews and ratings from other customers who have purchased and used the product. Positive and negative reviews help customers make informed decisions by providing insights into the quality, performance, and reliability of a product.
- Fast and Convenient Shipping: Amazon Prime members enjoy fast and often free shipping on eligible products. The convenience of quick shipping options, including one-day or two-day delivery, enhances the overall shopping experience for buyers.
- Secure Payment Options: Amazon provides a secure and trusted platform for online transactions. Buyers can choose from various payment methods and benefit from Amazon’s secure payment processing, instilling confidence in the purchase process.
- Responsive Customer Service: Amazon offers customer support to address any issues or inquiries promptly. Buyers can contact Amazon’s customer service for assistance with orders, returns, or other concerns, contributing to a positive shopping experience.
Amazon Has 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.
Collected data from customers allowed Amazon to offer exactly what we need at all times.
To Keep Up With Everything Amazon Uses Outsourcing Services
This enterprise isn’t just a perfect example of a successful ecommerce company and an online business; 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.
What’s the Amazon Effect?
The “Amazon effect” in retail, and particularly ecommerce, 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.
Amazon Created and Molded Ecommerce
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.
How to Set Up an Online Business like Amazon?
We’re not going to sit here and advise you on setting up an ecommerce store just like the one Amazon has – if we knew how to do that, we’d set up our own Amazon store.
However, with our outsourcing experience and tracking Amazon’s business decisions, there’s a possibility to learn a lot from the best.
If you want to set up a new online business in the ecommerce niche, make sure you provide nothing but the best for your customers. That can mean offers from sponsored brands, quick support, quick delivery, etc.
The reason Amazon ecommerce store is successful is that they offer the best for buyers and sellers and they allow people to review products and make informed decisions. They also deliver everything super-quickly, react to complaints and solve them.
The Role of Marketing for Online Sellers?
To put the business idea into practice and reach your first customers, you need to come up with smart marketing strategies. At this point, Amazon is a recognizable brand worldwide, but they are using their social media pages and online channels to reach customers, offering them best deals.
And as a small business, you’d have to perfect social media marketing and search engine optimization to even be visible. Ecommerce marketing plays a major role and that’s something to pay attention to.
Maybe You Can Become the Next Amazon?
In spite of everything Amazon has built, their online store wouldn’t be what it is today without outsourcing to the experts worldwide.
Outsourcing is a great way to get your business to the next level, especially if you can’t hire full teams in-house. We suggest you contact Morph for any questions about outsourcing and look for your partners outside your country – just like Amazon.