Amazon

CASE STUDY

Amazon’s story is an inspiration for online retailers. What started as a digital book store turned into the world’s largest eCommerce platform. This case study will detail how Amazon got started. It explores key aspects of the business. In the end, it reveals how Amazon become the second-most valuable company in the world.

Company Vision and Mission

The company has operated with the same clear vision since the beginning. It strives “to be Earth’s most customer-centric company.” It calls itself “customer-obsessed.” Leaders are instructed to “start with the customer and work backwards.” Putting customers first is central. It is in the company’s DNA.

Amazon does not stop after making customers happy once. Making a customer happy is basic. It wants to make customers ecstatic at all times. Amazon’s mission statement reflects its vision statement: “We strive to offer our customers the lowest possible prices, the best available selection, and the utmost convenience.” When it achieves its mission, Amazon also achieves its vision.

Amazon takes risks to reach its mission. For example, the company launched Amazon Auctions (also called Zshops) in 1999. The goal was to compete with eBay. It proved to be less successful than eBay. So, the company pivoted the idea. It changed into Amazon Marketplace. Sellers from all over the world could now market their products. The model offers competitive advantages for buyers. People use it to find a broad range of items at low prices. Buyers and sellers are happy. The marketplace is now a key part of the business.

Customers are central to every move Amazon makes. For example, reviews help users decide what to buy. Sellers with positive reviews get more exposure. Those who do not fit Amazon’s standards do not get exposure. Some are kicked off the site. Other features add convenience. Prime shipping offers two-day guaranteed delivery. Independent fleets deliver packages seven days a week. Strategic purchases expand Amazon’s operations to other markets. Every time Amazon updates its operations, it does so in anticipation of customer needs.

Early Business Model

Jeff Bezos had one critical advantage over today’s eCommerce websites. He recognized the potential of the internet for online shopping. The idea of buying and selling products online seems obvious now. It’s hard to imagine a time when it didn’t exist. In 1995, Seattle was a tech hub. It was the ideal place to build an internet-based business. And so, it’s where Bezos set up shop.

Bezos always planned to sell a range of items. He wanted to delight customers with things they didn’t know they needed. The company’s initial name, Cadabra, describes the “ah-ha!” feeling Bezos wanted. Yet, it was misunderstood by some as “cadaver.” He changed the name to Amazon, after the South American river. It was generic enough to keep him from getting stuck selling only one type of product. Besides, it is a symbol of the company. Much like the river, the company planned to be the biggest of its kind.

It started as an updated version of a catalogue store. Instead of ordering through the mail, people would order online. In the beginning, Amazon sold one in-demand item, books. Using $10,00 of his own money, Bezos started the company in his garage. The basic website launched in 1995. There were no Google ads. There was no Facebook. Bezos relied on word-of-mouth advertising from happy customers. The company sold many types of books. Yet, Amazon became popular among college students. Its earliest fans were tired of overpaying for textbooks from their campus bookstore.

The internet was still evolving. Amazon delivery didn’t exist. Instead, Bezos drove books to the post office for mailing. His few employees worked 60+ hours a week. They didn’t complain. Instead, the company was focused on the future. It prioritized innovation over profits. The self-proclaimed “world’s largest bookstore” had earned $15.7 million in revenue by the end of 1996. It did not turn a profit until Q4 of 2001.

Culture of Metrics

Word of mouth advertising worked at first. As it grew, Amazon needed a better way to understand user behaviour. Getting and using customer data is key to Amazon’s success. With data, the company can help people find items they will love. Often, customers discover things they did not even know existed in the first place.

Amazon needed to know how happy customers were. In 1997, Bezos declared the company to be “a culture of metrics.” Data mining was new. It had not been used on such a large scale. Yet, Bezos knew the internet provided ways to understand customer behaviour. He also knew data could help the company make better business decisions.

Since then, Amazon has been using data to decide which new services to roll out. It also A/B tests to make changes to the website and user experience. Through Big Data collection, Amazon takes a 360-degree view of customers. Amazon knows where you live, what you buy, and whether you leave reviews. It uses all the information it gathers to considers every customer’s lifetime value. It then targets each customer to deliver the best experience.

The company also uses data to create a customer-centric experience. It creates profiles for each user. It then matches like-minded customer profiles. Users can find products based on what others have bought. Further, it uses data for pricing. Knowing what competitors are charging helps Amazon stay competitive. It can price items at a rate that will encourage customers to buy them.

An online store isn’t like a brick-and-mortar store. You can’t just walk in and look around to see everything in the store. Amazon needed a way to help customers find things when they weren’t exactly sure what they wanted. Traditional retailers can strategically place items to encourage impulse buys. Amazon replicates this using customer data to drive the customer experience. Based on past purchases, users see products they might like. They read reviews to figure out which items to buy and what sellers to avoid. Algorithms place popular items at the top of the list. At every stage, data helps customers.

Marketing Strategy

Every company needs a marketing strategy. For Amazon, that involves four key pillars. First, offer the broadest range of products. It is a one-stop-shop. You can buy clothes one day and groceries the next. Then there’s an intuitive interface. The website is easy to navigate. It works on desktop and mobile. An app makes it a breeze to buy things from your account without logging in. View your history, return items, and see personalized recommendations all in one spot. Buy things from your phone and get them the next day.

Another marketing strategy is scalability. Because it has scaled over time, Amazon can explore new business segments. It can start from a small offering to become a major part of the business. Finally, the company relies on others to market for them. Affiliates link from their website to products on the platform. The affiliate program encourages influencers to advertise for Amazon. Affiliates only get paid if their advertising works. This win-win strategy keeps Amazon’s name circulating without spending ad dollars.

On the platform, Amazon uses algorithms to show customers high-demand products. It adjusts prices to remain competitive. It also bids on ads to draw customers to those in-demand items. Once a customer is on the website, they are likely to buy an item at the highest price.

Amazon uses traditional marketing methods, as well. Email marketing, social media campaigns, TV ads, internet ads, events, and print marketing are part of the marketing strategy.

Unlike other companies, Amazon targets unique users. Data is critical. With user data, the company can advertise things that are the most relevant to a particular user. It also markets to users through its products. Users will watch ads on Amazon TV, hear them on their Echo devices, read them on Kindle, or see them on the website. These ads are all targeted to show users items they may be interested in based on their past behaviour.

Company Growth

Bezos knew he wanted to sell more than books. Technology evolved, and his company grew. With it, he found new ways to delight customers. The company now owns over 40 subsidiaries. It has evolved into TV, gaming, and music streaming. Customers can get groceries delivered to their doors using AmazonFresh. There is almost no market the company has not touched.

Such growth did not happen overnight. Bezos was strategic when building his business. He started with one niche product. After books, the company sold CDs and DVDs. From there, it expanded to home improvement items, video games, and software. It broadened its scope in 2000 after it launched the marketplace. Opening up to third-party sellers allowed the company to expand its scope. More recently, it developed Amazon Web Services (AWS). This cloud computing platform helps businesses of all sizes grow and scale.

Amazon’s success came from planning and making strategic decisions to expand. It did not start by offering everything at once. It built a loyal customer base. From there, it grew to provide items its customers were likely to buy. Over time, it was able to extend its reach. Now, it serves individuals, businesses, government agencies, and more.

Bezos did not focus on being profitable. He took a customer-centric approach. This meant adding services customers wanted. Often, this came at the expense of profits. The year 2016 was the first time the company had gains in all four quarters.

Growth has always been a priority. Along with a customer-first approach, a growth-mindset has guided the company since the beginning. With a clear focus, Amazon has gained massive reach. It has become a dominant force in the eCommerce market. By strategically growing, Amazon has been able to broaden its customer base. It can provide a range of options for customers at all stages of their lives.

Customer Loyalty

The key to any business is customers—specifically, customer retention. Retaining existing customers is much more cost-effective than getting new ones. Research shows that it costs 5 – 25 per cent more to get a new customer than keep an old one.

Amazon has managed to keep customers. More importantly, it is able to re-engage them in different ways. A customer might pay for Amazon Prime, Amazon Music Unlimited, and Amazon Web Services. They might own a Kindle and an Echo. They could shop for shoes at Zappos and play video games on Twitch. Amazon reaches customers at all stages of life. It offers discounts to college students to bring them into the ecosystem.

Part of what keeps customers returning is the fact that Amazon keeps expanding and buying more companies. Yet, people would not keep using Amazon’s services if they did not enjoy them. Customers return to Amazon because they trust the company. They know what to expect. They appreciate consistency. They enjoy using products and services from a familiar brand.

The subscription-based model has also been crucial for Amazon’s success. According to a recent survey, 93 per cent of Prime customers keep the service after a year. Also, 98 per cent of Prime customers continue the service after two years. Amazon Prime members spend $1300 a year on the platform. In contrast, non-members spend $600. For subscribers, shopping on Amazon is a no-brainer. They often don’t consider shopping anywhere else.

The Amazon ecosystem is impressive. It is also necessary to keep customers loyal. Once a customer is in Amazon’s ecosystem, there is little reason for them to leave. This is in part because of the company’s commitment to customer service and satisfaction. It puts customers first. By doing so, Amazon continues to deliver products and services people want and need.

We can trace every part of Amazon’s success back to its vision and mission. The company puts customers first and delivers amazing experiences. These core values are the root of the company. They encourage growth and keep customers coming back for more.

We can help you launch your eCommerce business. Start with a free training video. This guide will teach you what you need to know to build a website, find customers, and make money in 90 days or less.

Get your free training

If you feel like you’re ready to step up and become an eCommerce store owner get our free training by clicking the button below.