Amazon is built around one thing: customer happiness.
Amazon was founded in 1994, and since 1995, the company has set out to be “Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”
Its mission statement is clear: do whatever it takes to make the customer happy. In this article we'll examine the strategies behind Amazon's success.
Why is Amazon so successful?
So what are Amazon’s strengths? The answer is a relentless commitment to the customer experience. Everything that Amazon does — every strategic move, every investment — is guided by its goal to be the most customer-centric company in the world. Every step along the way is designed to serve customers as best as humanly possible.
Amazon has largely succeeded in this mission, as you can read about in our Complete Guide to Selling on Amazon in 2020. Over the last 25 years the company has introduced a wide variety of innovations to the market that have forever changed e-commerce. From a consumer perspective, these innovations ensure that Amazon is the place to shop for anything and everything.
Amazon Repricing Software for your business?
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Amazon’s business promotion strategy is complex, especially since the company competes in three major industries.
What are Amazon’s strengths?
Amazon has a culture of testing ideas rigorously and then doubling down on the things that are effective. And as a company that’s not afraid to fail, and will put money on the line to develop a product or service, even if the product poses some risk of failing.
Data: The sheer amount of data that Amazon has on consumers is mind-boggling. Amazon not only uses that data to improve its own operations and product offering, but also sells that data to advertisers through the Amazon DSP program.
Prime membership: Consumers know and love Amazon, and there is a high loyalty to the company among Prime members.
A recent survey by Consumer Intelligence Research Partners (CIRP) suggests that over 100 million people in the United States have an Amazon Prime account. CIRP estimates that 58% of Prime Members pay the full $119 yearly fee, 36% pay on a monthly basis, and the remaining 6% are on a free trial.
CIRP also estimates that Prime members spend double the amount of non-prime members on Amazon — an average of $1,400 every year.
Worldwide recognition: Amazon has a powerful influence on any new market it enters. Amazon has been able to leverage its brand recognition globally, which makes it such a threat to new markets. Amazon now has 31% of the market share in Germany and 47% market share in the UK.
Logistics: Amazon has a logistics system that is far superior compared to other global retailers, and this is one of the key ways Amazon is able to deliver on its goal of being the earth’s most customer-centric company. From distribution centers near large cities to an advanced robotics system for improved efficiency, Amazon invests deeply in its logistical systems.
Learn more about the history of Amazon’s logistics strategy and warehouses in this fascinating episode of Land of the Giants.
Agility: Despite its size, Amazon can make decisions quickly that enable it to stay ahead of the game. The company has several built-in systems that keep teams and decision-making flexible and fast. One famous system is the “two-pizza rule,” which keeps problem-solving teams small and forces decision making.
What are Amazon’s weaknesses?
Just because Amazon is so big doesn’t mean it’s untouchable. The company also has several weaknesses that make it vulnerable.
Fragmentation: Amazon is an “everything” company. It runs a media operation that produces top-quality television series and movies, a cloud-based web provider, and an online retailer, all wrapped into one.
This could be a strength as Amazon can dominate multiple industries, but it also limits the company’s ability to focus on one strategic goal.
Not brand friendly: There are some categories where brand value is more important than others. Amazon has traditionally done poorly in these categories where brand is important, such as fashion and home goods.
Limited brick-and-mortar presence: Amazon has a more limited brick-and-mortar presence compared to competitors like Target and Walmart.
But this is changing as Amazon adopts a strategy to move from pure-player to omnichannel giant. Amazon started this journey with its acquisition of Whole Foods grocery stores in August 2017 as its first foray into the world of grocery shopping. The company also recently announced it would open its own line of grocery stores that are separate from the Whole Foods chain.
But Amazon doesn’t just have grocery stores; it also has four other types of physical shops around the United States: Amazon Books, Amazon 4-Star, Amazon Go, and Amazon Pop Up.
Amazon Go is an especially interesting retail location. Consumers must have the Amazon Go app to enter the store, but once in, there are “no lines, no checkout.” Consumers can just pick the items they’d like off the shelf, then upon leaving the store Amazon will charge the customer’s Amazon account.
What are opportunities for Amazon?
Growth of voice: Alexa has been a strategic move for Amazon to get consumers even further locked into the Amazon system. While Alexa and the Amazon Echo both further the company’s mission of providing a great experience, the ultimate motivation for these products is to make the ordering process seamless.
Amazon Basics brand: Amazon’s ultimate goal is consumer data, but it’s not some Doctor Evil plan to take over the world. Amazon sees consumer data as the key to providing more value to its customers.
This is partially the motivation behind the growth of Amazon Basics, Amazon’s private label. What started out as the Amazon alternative for charging cables and batteries has exploded into all kinds of products, including kitchen accessories
Right now, Amazon understands the whole customer journey from the moment they sign up for an Amazon account, place an order, all the way up until they receive a product. But as soon as the product enters the customer’s house, the company loses track of how customers use the products. The closest they can get is reviews.
Technology and gadgets, notably the Amazon Echo and Amazon Alexa, let Amazon understand customers inside the home.
Alexa began as a standalone voice assistant to answer questions, but Amazon has evolved the technology to be more useful, both for consumers and Amazon as a company. You can now connect Alexa to a number of Amazon Basics items, such as a voice-controlled microwave.
Connecting voice with these products makes the product easier for consumers to use. But it also gives Amazon more insights into how you use the product. With the microwave, for example, Amazon knows how often you say “pop this popcorn.” It can then calculate how many times you’ve said “pop this popcorn,” compare that number to the number of popcorn bags in your last purchase via Amazon, and automatically reorder popcorn for you at a 10% discount.
This isn’t necessarily a bad thing, and it does give consumers freedom to do other things. And, more importantly for Amazon, these products make it easy to order something new through the marketplace.
What are threats to Amazon?
Data and online privacy: One of the biggest threats Amazon will face in the future is the continued debate over what is private data versus what is public data.
Legislation and regulations: Despite its power, Amazon is still subject to the laws and regulations of any country in which it operates. If any sweeping legislative changes are introduced in these countries, it could damage the company’s ability to operate as it does.
An example might be a new data privacy regulation. If major reform meant that Amazon could not collect as much consumer data as it does, it could harm the business.
At the more extreme end of the spectrum are antitrust laws that could force the company to break up its operations for the sake of competition.
What is Amazon’s markup strategy?
Amazon itself does not have a markup strategy. It’s up to Sellers to determine how much markup they want to add to their online products and set healthy margins.
For low margin products, consider raising the price or strategically bundling the product with a high-margin product. You can also try to cut production costs.
For high-margin products, it may be worth it to increase your marketing spend, shoot for cross- and up-sells, and devoting more time to the product.
What is Amazon’s positioning strategy?
Amazon’s brand is built on customer satisfaction. It wants to be known as the most customer-friendly company on the entire planet. This means Amazon wants to position itself as the most convenient company with the lowest prices and the best customer service out there.
Amazon largely achieves this goal, and it’s developed a strong brand as a result. A 2019 survey of 2,000 US shoppers found that 89% were more likely to buy products from Amazon than other e-commerce sites. The same survey found that Amazon was indispensable through the customer journey, especially when it came to reviews. As Kiri Masters writes in Forbes,
Two-thirds of respondents (66%) typically start their search for new products on Amazon, compared with one-fifth (20%) who start on a search engine such as Google…and when consumers are ready to buy a specific product, 74% go directly to Amazon.
Amazon repricing strategies
A successful repricing strategy should help you achieve your company goals. Here are 5 tips to build a successful repricing strategy:
- Define your commercial objective
- Build a pricing strategy (such as a charm pricing strategy)
- Choose your dynamic pricing method
- Establish pricing rules
- Implement, test, and evaluate the strategy
To learn more about Amazon pricing strategies, check out the Amazon pricing article.
Amazon sales strategies
Being successful on Amazon comes down to working hard and thinking about the customer. The company rewards Sellers who put the customer first and offer a consistently great experience.
But what does that look like in real life?
If you want to sell on Amazon, you should have one goal: getting your listing into the so-called “Buy Box.”
The Buy Box is the box on the right side of any product listing. It has two major calls-to-action: Add to Cart and Buy Now.
If there are several third parties selling the same product, the Seller who “wins” the Buy Box is the Seller whose item gets added to shoppers’ carts when a customer clicks on either of these CTAs.
Statista estimates that 82% of Amazon sales go to the winner of the Buy Box. This number is higher for purchases on Amazon’s mobile platforms, whether that’s the app or web browser.
Winning the Buy Box is a complicated dance, and it requires work across all aspects of your Amazon business. Much like Amazon considers customer satisfaction in its every move, so to do its Sellers. To win the Buy Box, delivering an excellent experience should be at the top of your priorities.
Amazon takes a holistic view of Sellers when considering who to feature in the Buy Box.
If you craft your strategy carefully, you can create listings that consistently land in the Buy Box.
So, how do you build a sales strategy for Amazon? There are four steps.
1. Define your commercial objective on Amazon
What do you want to achieve out of selling on Amazon, and what do you want consumers to think of your Amazon store? Do you want to be seen as a luxury brand? Or do you want to have rock bottom prices?
These are all questions that you’ll answer when you define your commercial objective: the explanation of why your company exists and what its goals are.
2. Create a harmonious strategy based on the commercial objective
After defining your goals, you need to figure out how to make them actionable. This is where you’ll create a more traditional “sales” strategy.
Some factors to consider include:
There are countless other choices to make for your sales strategy, but these are a good place to start. Use your commercial objective as a compass for making decisions around your strategy; everything you do should strive to deliver on those overarching goals.
3. Put yourself in the customer’s shoes
Amazon is all about giving customers the best experience possible. In fact, Amazon wants to be the “world’s most customer-centric company.”
And, if you can optimize your sales strategy to provide a great experience, Amazon will notice. This means you may need to lower prices or adjust your promotions to meet the specific desires of Amazon’s audience.
4. Use tools
Finally, staying current with Amazon requires a lot of work. The only way to make it truly possible to stay up-to-date is to use automation tools.
For advertising, you may want to consider using optimizing your listings for Amazon’s search algorithm and using Amazon marketing tools like the DSP platform. This service can automatically create ads for you and test the effectiveness of each.
For pricing, consider using a competitive intelligence and Amazon repricing tool. These will help keep your store listed as the Buy Box option.
Who are Amazon's competitors?
Amazon is a tech company, media kingdom, and omnichannel retailer wrapped into one large conglomerate.
Because of the varied types of products and services, Amazon has numerous competitors from different industries.
In retail, some of Amazon’s biggest competitors include Target, Walmart, Best Buy, and Alibaba. For tech, IBM, Google, Salesforce, and Accenture all stand as competition. In the media arm of the company, competition comes from Netflix, Hulu, Disney, and Time Warner.
Conclusion
Amazon is a highly strategic company, and it has been since its inception. It will continue to use its customer-centric philosophy as a compass in the future.
If you’re a Seller who wants to succeed on Amazon, it behooves you to remember Amazon’s overarching goals. If you can incorporate Amazon’s strategy into your own, you’ll be able to succeed on the platform as well.
Learn more about price monitoring software and price monitoring for Amazon here.
Read about more interesting blogposts here:
- What is Dynamic Pricing?: The ultimate guide to dynamic pricing.
- What our the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand.
- What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring.
- What is Value Based Pricing?: A full overview of how price and consumer perception work together.
- What is Charm Pricing?: A short introduction to a fun pricing method.
- What is Penetration Pricing?: A guide on how to get noticed when first entering a new market.
- What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy.
- What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy.
- What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments.
- What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
