The impact of emerging technologies and social media year-to-year continues to astonish businesses and consumers alike. Ecommerce has become a staple of a growing business, and one of the most recent but fast-growing giants in the market is Amazon. So how did the online empire of Amazon emerge, and how did it grow so quickly?
Prior to 2001, Amazon didn't even turn a profit, and the numbers grew very slowly for many years. But in 2016, the company began to grow suddenly. It’s quarterly net profits that were well under half a billion quickly became close to the one billion mark.
And in 2019, profits somehow have continued to climb. In Q1 Amazon's net profits peaked at a hefty 3.56 billion dollars. Amazon took almost 50% of e-commerce sales in 2018, a figure sure to rise this year. Amazon’s reputation is so large that it’s common to hear about the “Amazon Effect, referring to the competitive difficulty retailers in many industries often face trying to keep up with Amazon.
An Integrated Marketing System
Not only does Amazon sell its own services and merchandise, but it also owns the platform by which many other businesses market their products. For smaller retailers, the latter step is probably unlikely for the near future. However, there is much to be gained by pursuing other opportunities for vertical integration.
A business should always be looking for ways to consolidate their supply chain. This can take the form of franchising, contracting, or direct incorporation. Amazon has a long history of such experiments, from establishing their own publishing imprint to developing their own delivery service. They also arrange unique deals with their manufacturers which allow them to freely enter and participate in the operations of their own brands.
Developing your own web platform to engage directly with consumers is essential. In the digital environment, those who own and operate apps, websites, and databases are important links in the chain. Amazon Web Services, which provides cloud computing and storage tools for businesses, is a powerful example of vertical integration in the digital world – they also use AWS for their own retail sites.
Horizontal integration is also key – putting new products into new markets is on many companies' to-do lists, and Amazon sells much more than books now. Famously, they purchased Whole Foods in 2017, a surprising entry into a new market with the hidden benefit of adding new information about consumer habits to their databases. All these moves, while seemingly risky in many cases, make headlines and expand Amazon's reach dramatically.
Innovative Customer Experience
Not long ago, a web-integrated approach to retail was simply called “multichannel”: brick-and-mortar stores and online selling would work in tandem but were viewed as two separate, but parallel, aspects of the business. Today, the “omnichannel” model is gaining prominence.
The concept of omnichannel marketing is like that of a vertical marketing system in that it calls for a unified approach to retail, but where vertical integration largely affects behind-the-scenes operations, an omnichannel strategy directly targets customer experience. The idea is that customers should be able to move seamlessly between various connected platforms and services while experiencing a unified brand experience.
For example, one should easily be able to purchase things in one way – say, on Amazon.com – and return them in another, such as a physical location, seamlessly. Amazon unveiled yet another one of their famous experiments this year when they made a deal allowing Amazon customers to return their products in Kohl's stores, which handle the packing and shipping themselves. This move appears to have greatly benefited both companies.
One of the biggest differences between a traditional business model and an omnichannel approach is the way shipping is handled. Large companies are not just shipping from distribution centers to stores—fulfillment centers have been introduced to package and ship parcels individually to consumers.
Amazon has contracts with several shipping companies around the US, including UPS and FedEx, which provide them with cheaper shipping rates in exchange for the extra business. FedEx recently allowed their express shipping contract with Amazon to expire, so they may be looking for new retailers to contract with. Developments like this are worth paying attention to.
Amazon has also received a great deal of media attention in recent years for its interest in radical new ways to deliver goods faster than ever before. The most remarkable example of this is their testing unmanned aerial vehicles as a way to ship small products directly to customers' doors in 30 minutes or less.
We haven't yet exhausted the many ways Amazon is dedicated to new technologies. As climate concerns and renewable energy efforts make headlines more and more, Amazon pays attention.
Products and business practices viewed as “green” are still all the rage with both consumers and companies. This trend shows few signs of slowing down as demand continues to increase and smaller companies invest more frequently in the renewable energy industry.
Major players are getting involved too. In fact, it seems Amazon is determined to take the lead in environmental awareness and renewables investment going forward. In February, they announced their intent to make at least 50% of their shipments have a net carbon impact of zero, a plan fittingly named “Shipment Zero. Amazon has 61 ongoing renewable energy projects across the globe, two of which were just announced at the start of August.
They have also started shipping more of their items in lightweight plastic mailers rather than boxes to fit more items in fewer trucks and planes. Producing these mailers emits fewer greenhouse gases and uses less petroleum than making boxes from recycled cardboard, experts told The Washington Post.
While there are environmental pros and cons to most types of packaging, other companies would do well to explore innovative alternatives to stay ahead of the curve.
Amazon is also pushing for better practices from its various manufacturers: they have outlined a program requiring some manufacturers to change their packaging to make it sturdier, less expensive, and more eco-friendly. Brands that comply early will be rewarded with a credit of $1 per item shipped, but after August 1st, non-compliant items will incur a surcharge of $1.99 each, Forbes reported.
With all the expansion and innovation behind Amazon's rocket to prosperity, it's not surprising that many business owners would fear the Amazon Effect. However, with increasing worry about the impact of big business and tech companies, more avenues for smaller trustworthy competitors may be opening up in the near future.
But this is not to say that important lessons can’t be taken from the rise of the Amazon ecommerce empire. If your business hasn’t created an avenue for online sales, or is looking to increase your conversion rate, consider getting in touch with SeoTuners today. With affordable SEO solutions that include web design, social media, custom link building, SEO penalty recovery, and more, we’re confident we have a solution for all your marketing needs. Contact us today to learn about how we can help you grow your business online.