Internet brought several new business ideas with it and online commerce was one of it. Undoubtedly, Amazon has been the king of this field. With years of operations it has not just capitalized on its initial core business model but has also successfully expanded into other related ventures.
One of the most successful web giants of all times, Amazon has several lessons to teach to start-ups and scale-ups as they look at disrupting their individual industries. Let’s look chronologically at Amazon’s history, its growth story, the way it has developed into new business lines and let’s make sense of these decisions in hindsight.
1. E-commerce: This is where it all began. In 1995 Jeff Bezos got inspired to open an online retail store and started with selling books on the store but soon expanded into DVD’s, software and now almost into anything and everything. Securing patents on its way has been a hallmark of the Amazon growth story. One Click checkout was one of first such patents which allowed them to make money both by bringing in more customers because of its superior service and also as license fee by allowing other players like Apple to use the technology. In a similar way, Amazon has experimented with each division of its service model. In Logistics, it has improved services by providing same day delivery to Amazon Prime customers, another way to improve customer experience, make them feel relevant and looked after. It has come a long way since it began operations in 1995 to now, when it’s the biggest e-commerce store in the world both by revenues and market capitalization.
Amazon’s model was not new when it began operations (though rare) and for sure was not difficult for people to imitate. In fact with time there were companies which did imitate the e-commerce platform across the world (think Flipkart, Alibaba, etc) but Amazon always stayed ahead of the curve by giving superior customer service and innovating new ways to bring customer a richer experience.
- Start lean by focusing on a narrow product/service sector and then build up as you learn and validate.
- Understand customer pain points and keep improving the customer journey around them.
2. Amazon Web Services: As the company was growing its e-commerce business, there was a definite need to be at the top of its technological stack. Amazon started with a monolithic architecture when it began its operations but as the business expanded, there was a definite need to move into a microservice architecture (Get more insights here). With time they faced additional problems in terms of adjusting the infrastructure for their growing IT needs. They needed an easy to use tech solution for keeping the infrastructure agile for each of their project. Thus they moved to IaaS solutions in 2006 or what we call the cloud services (Read more). Thinking strategically, AWS already had the first customer in place – Amazon e-commerce to fund its growth.
There was literally no competition for many years and it’s only recently that majors like Google and Microsoft, along with smaller competitors are trying to fill the void. AWS enjoys nonetheless a healthy 35% market share.
- Don’t shy away from investing in technology solutions which can grow your business.
- Technological needs should be well mapped to your business growth projections.
- Solving internal pain points is critical to having a great service and sometimes can become the next big market offering.
- Keep listening to your team to get insight into their issues and brainstorm together to find solutions
3. Amazon Kindle: Kindle is the outcome of futuristic thinking, great leadership and efforts spent by Amazon’s secret lab126. Amazon started thinking about expanding into the electronics market in early 2000’s and an e-reader was the best product for them to kick start their journey. It was an inorganic way to organically grow its first market offering. The decision did not come easy and it was only after a lot of internal discussions, brainstorming and market research that Amazon figured out that the E-reader market was largely untapped. This was followed by intense hard work of more than 3 years to come-up with the first device. Jeff Bezos was very clear about the requirement of keeping the product as simple to use and focused on the service as possible.
As we know, Kindle has been a huge success in the market and has helped Amazon become the leader in e-book market as well. The Fire tablets and phones followed suit, as a move into an adjacent field, but none of them achieved the same success as Kindle. The company is now working on using new technology like Machine Learning to its success and has already introduced Amazon Echo as the next gen product powered by Alexa.
- Having a good understanding of your product/customer is key to expand your offering.
- Choosing the right team, having a focused approach and keeping customers at the center of your product architecture is crucial.
- To use next gen technology but keeping product design as simplistic as possible. User experience is one of the key driving force.
4. Amazon Fresh and the Acquisition of Whole Food: Amazon was always interested in entering the billion dollar US grocery market but its initial few forays into the segment using inorganic expansion method met failure (during the dot-com bubble burst). Amazon Fresh was its re-entry into the segment in year 2007 serving a very selective market. For the initial 5 years, the service was only offered within Seattle. Then slowly the service was expanded to some of the other major cities in US and globally. Overall Amazon fresh has not seen the same exponential success seen by other divisions but that didn’t mean Amazon was letting off its vision. With its latest acquisition of the Wholefood chain for $13.5 bn it has made its intention super clear. It needs now to demonstrate how Whole Food will reform the Amazon Fresh Business.
What will be the next set of plans to further conquer the segment? According to some experts, Amazon might be looking at the vertical farming space as the final nail to dominate the grocery market and repeat the e-commerce success stories.
- Some actions don’t bring success in the short run. Setbacks are part of the path, they are learning opportunities to be seized and don’t necessarily imply quitting the game. If you still believe in your vision then, and can find the resources to pursue it, start preparing your next move .
- Without dedication, perseverance and determination you won’t change the game.
5. Amazon Echo & Alexa: Amazon Echo and the voice assistant Alexa installed on the speaker came as the next big success for Amazon after the failure of fire brand phones. As the story goes, its reported that Alexa is an offshoot from another secret project run in Lab126 which has not seen the market place. With Alexa, Amazon has entered into the voice enabled control devices where Google and Microsoft had entered first and has so far smashed everyone for a run against all odds. As you might imagine, Alexa has big ambitions, following Amazon’s business principle of providing its services to 3rd parties. AVS (Alexa Voice Services) is making sure to have Alexa installed in every possible smart device where there is a possibility of bringing the voice command, ranging from home assistance to cars. The Alexa kit makes it easier for 3rd parties to integrate the voice assistant with their devices without re-inventing the wheel. For Amazon, it’s a way of getting one step closer to having Alexa everywhere. To ensure that Alexa-enabled devices are at par with the credibility achieved by Echo, Amazon has created a testing report to evaluate different devices and send the feedback out to their manufacturers.
- Braving the market where competitors are already having first mover advantage needs superior product quality and strategic planning.
- Again: clarity of thought process and simplicity of design.
- Create symbiotic relationship with other players to boost growth speed.
7. Amazon Go: In 2016, Amazon opened up its completely owned hi-tech grocery shop to its employees in Seattle. The shop boasted of not having any billing counters thereby completely eliminating the pain of standing in long queues to get your shopping billed. Customers simply walk into the store by swiping their Amazon Go App. They are then free to move around the outlet and pick anything they like and leave the store. Simple! Customer’s linked credit card gets automatically charged for all the items picked from the store.
Amazon uses advanced technology like computer vision, deep learning and sensor fusion to make the store possible. Amazon clearly understands that it needs to look into nimble customer pain points and use its advanced technology prowess to give them a superior experience. We need next generation movies to keep inspiring technologists to realise the impossible dreams. It’s yet to be seen if Amazon will apply its business principle to use the technology to power Wholefood stores or even allow the 3rd party rivals to use the technology. Maybe we are only seeing the tip of the iceberg here?
- Think simple, being relevant and pursue your mission.
- Making new technologies available to the public is actually a research project, there will be delays and unknown unknowns, keep sight of the light at the end of the tunnel.
- Be inquisitive about how modern day technology can make life better.
- Be open to experiment and perform extensive testing before launching in the market
7. Amazon VR Technology: Among some of the latest filed patents from Amazon is its move into VR technology for fashion where it has already shown considerable interest in the past. Beta trials with Echo look, developing an algorithm which can design clothes looking at a set of pictures and now filing patent for a mirror which uses the technology developed at Body labs (acquired by Amazon an year ago) to give a virtual feel to the user of trying clothes in different conditions is a next step towards experimenting within the sector. It’s yet to be understood if and when the technology can get to mass market, but is surely giving us a feel around the bold steps Amazon is taking in fashion industry.
Amazon has been exploring and experimenting new technologies and novel solutions in several sectors. For examples using drones for delivery, projecting self destructive drones (if things go awry) & making acquisitions like the Wholefood chain, Body labs, Kiva to name a few. It has also marked success in completely unrelated industries (like Amazon studios). All of this confirms Amazon’s vision for the future. It’s no more just an e-commerce company, it has tapped customer at multiple touch points becoming a common home-name as Microsoft and Google and aiming at serving its customers for pretty much everything. From A to Z, as its logo suggests!
…and BTW, 23 years of bold and successful growth has also made Jeff Bezos the richest man on earth!
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