This article will focus on the extraordinary rise and rise of Amazon, which has just been named as the most valuable listed company in the world.
The article will consider how and why Amazon has become so successful and will discuss any lessons that smaller retailers can learn from Amazon’s incredible success.
Amazon History
Amazon is a leading ecommerce retailer selling a myriad of products across several market segmentations including media and entertainment, clothes, electronics, software and food.
It has the largest ecommerce marketing forum in the world, and several successful companies have been created under the Amazon brand including Amazon Publishing, a publishing business, Amazon Studios, a film and media studio and Amazon Drive, a cloud computing business.
Most recently, Amazon has acquired broadcasting rights to high profile sporting events including world class tennis and football competitions, and has developed a range of original products including the Kindle reader for e-books and the Alexa virtual assistant system.
Amazon started its rise to fame in a garage in Seattle, Washington, as a second hand book retailer, named Cadabra. 25 years later, in 2019, Amazon is valued at $797 bn. Its founder and CEO Jeff Bezos is one of the world’s richest billionaires, achieving the coveted status of one of the world’s richest men before he reached the age of 35.
What Makes Amazon So Successful?
Amazon wasn’t always a successful company. It became successful after quite a number of years in the “doldrums”, so how did this come about, and what was it about Amazon’s approach that laid the foundations of a company that would enjoy such explosive success?
Growth, Customer-Centricity And AI
Many commentators have speculated that it was this focus on growth, customer – centricity and AI as opposed to profit-making that propelled Amazon to the successful position it now occupies alongside Apple, Microsoft and Alphabet as one of the world’s most successful ecommerce marketplaces.
In line with the general focus on growth as opposed to profit-making, in the nineties and early noughties, Amazon invested in creating a comprehensive network of distribution centres, including warehouses and data collection systems. Its 2017 acquisition of Whole Food Markets added a large portfolio of physical distribution premises to its repertoire.
This tactic has allowed it to create one of the most streamlined and customer-focused delivery strategies, which has in turn proven to be one of the key factors in its subsequent growth and success.
Amazon’s focus on growth has continued with a recent announcement that Amazon will launch 1000 UK apprenticeships before 2021. This new growth initiative is aimed at recruiting employees who will be paid at entry-level rates of between 9.50 - 10.50 GBP per hour, to salaries of 30k. The apprenticeships are available within the areas of robotics, IT, software engineering, leadership, technology, safety and HR, and the categories reflect the areas in which the ecommerce giant expects to grow in, in coming years.
Other commentators agreed that Amazon’s unique approach to selling is one of the reasons why it has enjoyed such a meteoric rise to success.
Over the years Amazon has placed a huge focus on AI, data collection and storage, which has allowed it to engage in targeted advertising campaigns aimed at customers buying products on its website.
Various methods are employed to deliver these advertising campaigns direct to customers. When a customer places an item in their Amazon shopping basket, a range of suggested products is generated and displayed during the checkout process. This clever marketing tactic allows for targeted marketing, direct to people who have shown their interest in related products.
Amazon customers are able to create their own “wishlist” of products, so they can store, compare and easily retrieve details of products they are interested in.
Amazon has a heavy reliance on stored data. Data relating to a customer’s previous orders is stored and analysed. The purchase history is used to create targeted advertising and marketing campaigns, based on the interests and preferences that customers have already indicated they have.
Amazon “Own Brands”
Additionally, Amazon has recently created a range of “own brands”. This move was not without controversy, as this changes its status as a marketplace where retailers display their products, to a hybrid marketplace and competitor to its own customers.
Amazon uses stored data to monitor pricing information rigorously to ensure that it is selling its own brand products competitively, however this has given rise to enormous controversy as the data it accesses to make these pricing decisions is actually data generated by its own customers’ use of the Amazon marketplace. Some argue that this data is subject to unauthorised use by Amazon, and this has triggered some interest from regulatory bodies. Some commentators have even gone so far as to speculate that this particular controversy may impact Amazon’s position as one of the world’s top retail giants, however what actions regulatory bodies may take remains to be seen.
Can Retailers Learn Any Lessons From Amazon, And Its Rise To The Top Of Global Ecommerce?
Amazon’s success is something that even the smallest retailer can learn from. Read on for a few tips on how to use the success enjoyed by Amazon to help improve the business prospects of even the smallest retailer.
1. The Importance Of Monitoring Data Relating To Price And Competitor Pricing
What is true for the largest most powerful retailer is also true for the smallest, and one of the most important aspects of ecommerce has shown itself to be data. Many are now describing data as the new gold, and this is because – the right data, acted upon in the right way, can be transformed into large profits.
Smaller retailers can emulate Amazon in cheap, but effective ways, like investing in competitor monitoring software.
This way, retailers can learn to set their prices strategically to compete with competitors on price. Smaller retailers can often make the mistake of thinking that because they are small, they should avoid expenditure such as buying price monitoring software. This is often a false economy as introducing a professional price monitoring strategy can actually help retailers know when they can increase their prices, as well as when they should decrease their prices.
2. Develop Wishlist Functionality
Making simple changes to a website, particularly to the way that a brand interacts with customers at the stage of basket checkout can pay large dividends for even the smallest of retailers. Customers can use this feature to store, compare and easily access products they are interested in. As such, customers are more likely to return and make purchases, when they have had the time to think and reflect on whether they want to make a purchase.
3. Retain And Analyse Purchase History
Retailers will often benefit from collecting some sort of data relating to the history of purchases customers are making from their websites. This allows a retailer to understand trends relating to the sales of their products such as when the largest numbers of purchases are being made.
Retaining information like purchase history also enables retailers to determine which customers are the most valuable customers to a given brand. For example a customer who has made five purchases in a period of six months is more valuable than one who has made a low value purchase once in a six-month period. It might be beneficial to treat so called “super customers” slightly differently, perhaps by targeting more frequent marketing messages at them, of offering them discounts for more repeat purchases, or bulk purchases.
4. Align Marketing Strategy With Data Strategy
Standalone marketing strategies, not aligned to any kind of data strategy are becoming much rarer, since marketers have discovered how successful a marketing strategy can become, when it is properly aligned to a data strategy.
Retailers contemplating a marketing outreach strategy need to consider the quality of the data they are using to base their marketing outreach activities on.
Some marketing campaigns are simply based on random data (from consenting parties) that is purchased from external businesses specialising in the sale of data for marketing purposes. In a lot of cases these campaigns are just based on random factors, i.e. if enough people are contacted, there is a chance that some of these people will be interested in the messages relayed and they will become new customers, or at least develop some brand awareness of the products or services that are being sold.
On the other hand, data can be manipulated from the beginning to increase the chances that a marketing outreach campaign will reach people who are more likely to be interested in the products and services. Large datasets can be purchased based on gender, age, ethnicity and so on, so that campaigns can be tailored to relevant audiences.
Another approach is for retailers to gather their own data, in-house, and use this as the basis for marketing campaigns. This can be achieved in a number of ways, for example asking people to subscribe to mailing lists, magazines, information campaigns or asking customers to opt into marketing campaigns, at the point of sale. Data gathered this way can be segmented in very precise ways, for example people who have decided to opt into information campaigns and who have also made multiple purchases can be targeted more aggressively. This allows for more targeted marketing campaigns to be developed, and these have a higher chance of success.
For larger retailers, an increasingly common strategy is to develop a partnership or to purchase a smaller brand which already has a large amount of data that is useful to them. This allows immediate access to a large amount of extremely useful data, which can be leveraged in multiple ways, for example in highly segmented and targeted marketing campaigns.
5. Evaluate
Many smaller retailers don’t take the subject of evaluation seriously enough. For every marketing campaign, an evaluation strategy should be developed to gauge the success of individual campaigns.
Evaluation strategy aims to measure the success of an individual marketing campaign and these strategies can take many forms, like measuring how many new customers have been acquired, or measuring the aggregate spend or profit over a certain period, compared to the period immediately prior to the campaign.
Evaluation methods should be devised to ensure that only outcomes related to the marketing campaign are measured, so for example a simple “how did you hear about us?” questionnaire can be offered at the point of sale to new customers.
6. Forecasting
For mid-size to larger retailers, forecasting activity can make a really positive impact on operations, and logistics. Some large retailers create forecasting models based on data gathered at the point of sale. This data is then used to predict what products will sell better than expected, and what products are not performing as well as expected.
This information can then be used to make sure that supply chains are managed more optimally, to reduce instances where products are “sold out” or unavailable, and to ensure that marketing campaigns are tailored to take account of how products are selling.
7. If Handling Data – Take Security Seriously
Even if a smaller retailer is storing and analysing a customer’s data the importance of security cannot be discounted. A serious security breach can cause customers to lose confidence in a brand quickly and sometimes for good. Retailers should be careful to store data on password-protected devices and ensure that computers are protected by reputable anti-virus software.
Equally, stored data that is valuable to the business should be backed up, to ensure that any data losses don’t cost valuable profits, or interruptions in marketing campaigns.
Amazon’s Success Holds Some Valuable Lessons For Smaller Retailers
Amazon has grown to become a giant of ecommerce, but their success in in some ways a blueprint to help other similar retailers achieve sales growth and success.
The success of the Amazon brand shows us how valuable data is to businesses whether they are small or large. A comprehensive data strategy, combined with a good marketing strategy can work wonders for the smallest of retailers with the smallest of advertising budgets.
