Critical analysis of Amazon
Table of Content:-
Amazon History from 1994
Amazon and Covid
Strategic Analysis of Covid
Functionality Analysis of Amazon
Reference Page
Amazon History from 1994
With the advent of the Internet in the 1990s, Jeff Bezos, the founder of Amazon, knew that lots of companies are going to be born out of the Internet. In 1994, When he was working in New York for the Quantitative Hedge fund, he came across a surprising statistic that the web usage would increase by 2300% per year. Considering this huge number, he planned to start a business with the context of that huge growth[1].
With the internet in his head, he started an e-commerce platform, where his company started to sell ‘Books’ on the platform in 1994 with the initial investment of $250,000 from his parents. He shortlisted books to sell out of 20 other products because there were more items in the book category than any other category. In his first official interviews, he mentioned that, in book spaces, there are more than 3 million books available in the printed form in many languages with more than half-million in English alone. He started inventory with a couple of thousands of best-selling books in the initial phase. With his obsessive attention to customer experience from the beginning, his company started making money. Within the first two months, the company sold books to all 50 states in the United States and 45 countries, with sales of $20000 per week[2].
With the expansion of business, Amazon then added music, electronics, software, household, videos and many more products to its wide platform. On May 16th, 1997, Amazon issued its initial public offering at $18 per share, this year in 2020, Amazon shares reached an all-time high of $3552 per share[3]. What’s interesting is in the year 2000 and 2008, after its IPO, share value reached $321 in 1998, and after that, it never went above $321 for 15 consecutive years. The biggest halt that most internet companies faced is in the year 2000 when every other internet company went through the biggest hurdle of their time and at the same time many companies were not even survived. Right before the market crash in 1999, Amazon’s valuation was 50 times more than its IPO. As the Dot Com bubble burst, Amazon lost 90 percent of its value in the next two years[4]. At this point, Amazon shared plummeted to its lowest $5.97 in September 2001. In his interview he mentioned that Amazon stocks were volatile in the 2000s, they can go up or down 20 percent any day and told the people that Stocks is not the company and Company is not the stock, both are not the same, therefore people should not lose hope if the stock is coming down for the company. He mentions that during 2000, when the stocks of the company were down, the internal progress of the company was going up and that kept all the people of the company motivated during those tough times[5]. I believe that the market crisis of 2000 and 2008 has helped him in preparing for the 2020 COVID crisis and that is the one reason why Amazon is tackling the situation in a much better way. In 2020, Even though Amazon faced many challenges in keeping the supply chain intact, it has faced several issues during the end of February and at the beginning of March.
There are several factors for the success of Amazon during the Covid-crisis. Still, the critical one is early preparation to tackle the situation effectively by allocating $4 Billion of the budget for the safety. At the time when the Covid situation was escalating in March through June, Amazon had brought more than 175,000 new workers and warehouses to turn the crisis into an opportunity[6].
After starting Amazon in 1994, one of the most excellent strategies that Amazon followed is one product at a time. Following the same strategy, it has now become the biggest customer-centric company in the world, which is what their mission statement says “Do whatever it takes to make the customer happy”[7]. With the focus changing from product to customer, amazon’s every strategy focuses on the customer experience.
The company’s obsessive with the customer can be seen from the statement that he gave during the interview, where he said - “Be afraid of our customers because those are the folks who have the money. Our competitors are never going to send us money.”[8]
In the last 25 years, Amazon has completely changed the perspective of the people and other companies and has changed the market to the customer-centric from product-centric. The company which started by selling Books Online is now selling more than 36 categories of products worldwide with more than 12.2 million products from clothes to toys, that too only on its online marketplace platform[9].
After founding Amazon, it has introduced several products to the market from Amazon web services to its Amazon’s branded hardware products. In 2000, to deal with the scaling of the online platform, Amazon started working on the Amazon Web Service(AWS), which they successfully launched in 2006 after investing billions of dollars in development and research[10]. AWS alone generated more than 35 billion dollars in 2019 and has captured 45% market by the end of the year 2019.
To cut the cost in SharpNode Technologies(link), Aditya’s startup back in India was using AWS to set up the cloud infrastructure, where his company was able to reduce the cost of cloud operations from $110 to $54 monthly. Once AWS was developed for Amazon owns scaling is now providing cloud infrastructure and is now generating massive revenue to Amazon. In the 3rd quarter of 2020, Amazon’s 57% operating income came from AWS and contributed to 12% of Amazon’s revenue[11]. In the recent event, Amazon’s AWS competed with Microsoft’s Azure for the $10 Billion deal with Joint Enterprise Defense Infrastructure’s military cloud computing contract of Pentagon[12], for which the decision went in the direction of Microsoft and Amazon went to the court by calling it a biased decision.
Amazon has got several other products and has acquired several companies as well. Some of the other key products are[13]:-
1. Amazon Prime
2. Amazon Consumer Electronics
3. Amazon Videos
4. Amazon Delivery
5. Amazon Business
6. Amazon Pay
7. Amazon Cloud
Apart from several products, Amazon also owns several innovative and futuristic companies as well and with time Amazon has acquired and merged with more than 100 companies worldwide, some of the key companies that are working under the umbrella of Amazon are[14]:-
1. Blue Origin
2. Annapurna Labs
3. Twitch
4. Audible.com
5. Goodreads
6. Kuiper Systems
7. Whole Foods Market
8. IMDb
9. Zoox
10. Zappos
11. Kiva Systems
Amazon and Covid-19
When the world was preparing for the new year celebration on 31st December 2019, China was indulged in identifying the new virus that arose from the seafood and poultry market[15]. On December 31, 2019, after receiving several dozen cases, Chinese authorities officially confirmed the new virus, which was later named as COVID-19. On January 11th, 2020 China reported its first death from the illness caused by the virus. As the Coronavirus started spreading across the world, the United States received its first Case on January 20, in Amazon's headquarter state Washington and soon 30th January World Health Organization declared Coronavirus as a global health emergency. Next day, the Trump administration started imposing travel restrictions on the entry of immigrants and nonimmigrants from China[16], and finally, W.H.O. proposed the official name of the virus as Covid-19 on February 11.
Fig 1 - Comparison of Dow, S&P, and NASDAQ in 2020 till June(20)
As the cases started escalating in the United States, Trump declared the national emergency on March 13, and soon Centers for Disease Control and Prevention(C.D.C) recommended no gathering with 50 or more people at any event to reduce the impact of the virus on new people[18]. March 16th was Doomsday for the most of the companies as the share for many companies went, and Dow Jones saw its most extensive one-day point loss from 1897 of points 2997.1, which is the biggest in the history of Dow Jones[19]. At the same time, S&P saw its first worst quarters in history as they lost more than 500 points in March alone, which can be seen in Figure 1.
At the time when the share market was coming down, Amazon sales and stock price were heading up, and that was not possible without the early preparation and Covid safety measure. Even before the President, Donald Trump declared the national emergency on March 13th; Amazon started its practice to tackle the Covid, i.e. on 28th February(21).
On 28th February, to protect the employee and staff, Amazon cancelled all its large gatherings, paused the visit of external people to the warehouses and moved all the meetings to online, not only this Amazon also started conducting the interviews virtually as a part of the hiring process(22). Next week on 6th March, Amazon joined hands with Google, Facebook, and Microsoft and recommended employees to work if they can do it from home because of coronavirus(23).
On 11th March, when the cases started increasing in the United States, Amazon gave the relief fund of $25 million to support their external delivery services and their staff. Soon on 15th March, they started an unprecedented ‘unattended delivery’ system under which a customer can check out the product with the option of delivering the product at drop-off location without coming in contact with the delivery person. In mid of March, the supply chain disrupted and halted because of coronavirus, which was followed by the empty retail stores as people stocked the essential items. As the Covid was escalating and retail stores were empty, people started ordering the products from online stores, as a result of which Amazon saw the surge in online orders as people preferred to stay indoors. To meet the unexpected growing demands from the customers, Amazon started hiring more than 100,000 people, while increasing the pay of delivery and warehouse workers by $2 per hour in the United States(24). The demand was so high that products were out of stock for the product category ‘Household Staples’ and started telling customers that the delivery time may go up for certain products like tissue paper and sanitizer. To meet the requirement of people, the company generated the statement “We want those people to know we welcome them on our teams until things return to normal and their past employer can bring them back” as a result of which it has got the support from companies like Lyft(25).
On March 21, Jeff Bezos sent an email to all the Amazon employees to boost their confidence stating "This isn't business as usual, and it's a time of great stress and uncertainty. It's also a moment in time when the work we're doing is its most critical. We've changed our logistics, transportation, supply chain, purchasing, and third party seller processes to prioritize stocking and delivering essential items like household staples, sanitizers, baby formula, and medical supplies. We're providing a vital service to people everywhere, especially to those, like the elderly, who are most vulnerable. People are depending on us"(26).
Amazon started taking the necessary steps in the warehouses and the delivery to assure the safety of its workers and customers by continuous testing of its staff and surficial sanitisation of its products. As the demand increased for the products, it automatically invited the opportunity for some sellers to the increase of pricing of the products, as a result of which many sellers started selling products at an overpriced rate. Following which Amazon took the necessary steps to prevent the customers from paying higher than their actual price as a result of which amazon have to ban the several sellers(27).
To tackle Coronavirus effectively in April, and at the time when the people were most afraid, Amazon invested more than $800 millions on COVID-19 safety measure, where the company had established 2,298 handwashing stations and distributed more than 100 million+ masks to its staff and workers(28). Amazon was not only dealing with the online stores, but they were also providing free disposable masks for Whole Foods Markets customers.
In May, when the people were being laid off from the jobs, Amazon again took a giant step in offering it’s 650,000 full and part-time employees backup family care benefits through Care.com, which boosted the shaking confidence of the existing employees(29).
Pic 1 - Amazon donations help families in need care for their pets(31)
Amazon hasn’t achieved its massive success because of lack of competitors or providers, but because of its sheer amount of dedication to tackle the situation effectively rather than faltering again like in the year 2000 and 2008. Amazon has spent more than a Billion in helping the most impacted businesses and people by providing them with the relief fund, laptops, masks, free amazon services, kindle to ease out their lives and business. Amazon expects to spend $4 billion or more in tackling the covid expense and keeping the employee and customer safe. In total Amazon has hired more than 175,000 employees, donating $5 million in amazon devices, more than 12,200 laptops to students and working with food banks in 25 cities in the United States to deliver more than 6 million meals to the most impacted population(30).
STRATEGIC ANALYSIS OF AMAZON
1. Company Locations
Amazon has several office locations and a warehouse network of fulfillment centers across the globe. According to Craft, Amazon has 232 office locations across 35 countries in the world with its headquarters in Seattle. In 1997, Amazon launched its warehouse network with two fulfillment centers sizing 93,000 square foot and 202,000 square foot in Seattle, Washington and New Castle, Delaware respectively (Mwpvl International). The company soon opened more centers in the US and in 1999, expanded into Europe with its first centers in Germany and UK. It wasn’t until 2005 that the network began to expand at an exponential rate across the world.
2. Amazon Distribution Network
Currently Amazon has about 1466 active warehouse centers around the world with a plan to build another 316. These centers include the following:
A. Fulfillment centers: These are divided into four types including:
I. Small Sortable Fulfillment centers: They generally stock items that can all fit in one box or can be described as less than 18”.
II. Large Sortable Fulfillment centers: They generally stock larger items and are usually items larger than 18”.
III. Non- Sortable Fulfillment centers: They generally house items that are not able to be fitted into a box or a conveyor belt for automated sorting.
IV. Specialty sites: They fulfill specialty items sold by Amazon such as textbooks, jewelry, clothing and shoes
B. Pantry and Fresh food Facilities: Amazon pantry facilities service perishable and frozen merchandise while Amazon pantry facilities service dry grocery merchandise.
C. Prime Now Hubs: These are typically smaller facilities that stock a limited line of products (about 15,000) that are in high demand such that the customer orders in high population metropolitan cities can be delivered within 1-2 hours of order placement. The products in these hubs service Amazon Prime members
D. Outbound Sortation Centers: For its sortation centers, Amazon utilizes a system that was started back in 2014. They are typically buildings that facilitate organizing outbound packages based on different geographical regions and carriers. In this case, packages are transferred to an air hub (for out of region packages) or to an amazon delivery station or to a USPS post office that is responsible for a given zip code.
E. Delivery Stations: represent the final phase of the delivery network. All packages from the fulfillment centers and sortation centers end up in the delivery stations before being dispatched to the customer through local couriers. Usually, they are positioned within larger metropolitan cities and often near the airport.
F. Customer return centers: This is where all Amazon customer returns are processed.
G. Inbound Cross Dock (IXD centers): These centers receive and consolidate products from vendors and then ship these products to other fulfillment centers within the Amazon network. They are very similar to import distribution centers in the sense that they are used as inventory receiving, break bulk and storage buffers for overseas import containers coming from foreign vendors. They are usually located close to major ports to minimize inbound ground transportation expense from the port to the IXD facility.
H. Amazon/Whole Foods Retail Food Distribution Centers: In August of 2017, Amazon acquired Whole Foods and as such took ownership of the Whole Foods retail grocery distribution network which focuses on perishable merchandise for its retail stores.
I. Amazon Air Gateway Network: These are facilities that are located close to airports and used to convey customer packages on Amazon Prime flights from one region to the other. The planes fly to a central package sortation hub in Hebron, Kentucky where packages are sorted out by region and planes are re-loaded to fly home with packages that were shipped from other fulfillment centers in the network. This main hub is connected to 25 other hubs across different regions in the United States and is responsible for Amazon fast and efficient delivery service. For example, a customer order is able to be picked up in Seattle and delivered to Miami within 1-2 days with Amazon not having to rely on UPS OR FedEx. The system is unique to Amazon as no other retailer in the world utilizes this system. As a matter of fact, the company plans on introducing this system to Europe and building a center like the one in Kentucky in Frankfurt, Germany. That way, orders from countries in the region can be attended to within 1-2 business days.
3. Products and services
Amazon has over 60 products and services. However, in this section, its main products and services would be briefly described, and the remaining would be described in the appendix.
I. Amazon.com : This is the largest e-commerce store in the world. Not only does it make its own products available, it offers a platform for merchants to provide their goods and services to customers. This is the main focus of this research effort.
II. Amazon Web Services: offers a suite of cloud-computing services that make up an on-demand computing platform.
III. Prime Video: is a premium video subscription service that gives subscribers access to millions of movies and TV shows. Subscription to Amazon Prime gives access to prime video.
IV. Amazon music: is a premium music subscription service featuring tens of millions of songs and thousands of expert-programmed playlists and stations.
V. Fire Tablets : an electronic tablet designed by Amazon.
VI. Fire Tv : a tiny box you connect to your HDTV. It’s the easiest way to enjoy over 250,000 TV episodes and movies on Netflix, Amazon Instant Video, and HBO NOW, plus games, music, and more.
VII. Echo and Alexa: Echo is a hands-free speaker you control with your voice. Echo connects to the Alexa Voice Service to play music, provide information, news, sports scores, weather, and more—instantly. All you have to do is ask. Alexa is basically the voice control system.
VIII. Kindle E-readers and Books : Amazon Kindle is a series of e-readers by Amazon.com that enable users to browse, buy, download and read e-books, newspapers, magazines and other digital media via wireless networking to the Kindle Store. (matrics360)
4. Business model and strategy
Amazon has a very diversified business model with certain key principles and key players responsible for its function. The company is guided by four key principles which are: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence and long-term thinking . (Amzn Annual report)
The key players that contribute to the functionality of the business are the company’s online stores, physical stores (including Whole foods), Amazon Prime subscription services, Amazon Web Services, Advertisement and Third-party Seller Services. Based off these key parts of the business, the business model can be said to be divided into three functionalities:
I. Amazon Retail : This group consists of the company’s online stores (its e-commerce business), physical stores and Amazon Prime subscription services. For the company, cost leadership is very important as it aims to provide its customers goods of the highest quality at the lowest prices, easiest convenience and the fastest means. This cost strategy gives the company a comparative cost advantage over its competitors. In its Annual report, the company states:
“We strive to offer our customers the lowest prices possible through low everyday product pricing and shipping offers, and to improve our operating efficiencies so that we can continue to lower prices for our customers. We also provide easy-to-use functionality, fast and reliable fulfillment, and timely customer service.” (Amzn annual report).
A very key component of Amazon retail business is the prime subscription service. Essentially it is a monthly/annually subscription service that gives members access to free shipping on the millions of items available in the stores. An even more exciting benefit of the subscription service is that goods can be delivered in as early as 45 minutes depending on location and time of order. To top this, Amazon prime subscription gives its members access to Amazon Prime Video, a service that gives access to unlimited movies and TV series. Through these monthly subscriptions, Amazon is able to generate a flow of cash and revenue.
II. Amazon Marketplace : Amazon also plays the role of an online shopping mall by offering a third-party selling platform and advertisement services which allows vendors to offer their products for sale. The company charges a commission based on a formula involving the sale price of the item, a shipping credit, a referral fee of 6-25% of the sale price, a variable closing fee and a $0.99 fixed closing fee. (Web marketing strategy). The marketplace basically has three services:
a) Amazon Webstore: Merchants are able to put their whole stores on the amazon website and offer their goods and services for sale. The merchants pay $24 per month plus 2% of sales. (Web marketing strategy)
b) Sell on Amazon: Through this services, independent vendors are able to put some or a good portion of their goods on Amazon. Merchants pay $39.99 per month, plus a commission varying generally between 15% and $1.35 per item. (Web marketing strategy)
c) Checkout by Amazon: Similar to instant checkout service like Paypal, Google checkout and even recently joined Apple pay, Amazon is able to incorporate a payment feature to the shopping cart where buyers with an amazon account can simply login to their Amazon account instead of having to re-enter their card details. (Web marketing strategy)
III. Amazon Web Services (AWS): This Amazon’s very secure cloud services platform. The platform offers businesses of all forms including start-ups, enterprises, government agencies and academic institutions to scale and grow by providing compute power, database storage, content delivery and other functionalities. (web service blog)
As we can see, every unit of Amazon works hand-in-hand to form an ecosystem which meets its priority needs, the customers. The company recognizes its customers to be consumers (serviced by Amazon retail), sellers (serviced by Amazon marketplace), developers and enterprises (serviced by AWS) and content creators . In serving content creators, Amazon states:
“We serve authors and independent publishers with Kindle Direct Publishing, an online service that lets independent authors and publishers choose a 70% royalty option and make their books available in the Kindle Store, along with Amazon’s own publishing arm, Amazon Publishing. We also offer programs that allow authors, musicians, filmmakers, app developers, and others to publish and sell content.” (Amzn Annual report)
5. Market share and Future projections
Amazon remains the leading e-retailer in the United States. The company has grown so much in all aspects and has carved a niche in the e-commerce industry. As one would expect, this growth has not happened all of a sudden. The company has experienced consistent and sustained growth over time. From a net worth of $5.26 billion at the end of 2003, its first profitable year in business (Computer world), Amazon has grown to be worth $1.7trillion today. (business insider)
In the last quarter of 2019 and in the first quarter of 2020 (pre-covid), the company had a net sale of $87.4billion and $75.5billion. (Amazon annual report) One can argue that we see a decrease because of the impact of the virus and the struggle to meet the insane needs of its consumers. However, the company since then has been able to adjust to the its customer’s demands and this has reflected across the company sales for the remainder of the year. As a matter of fact, in its third quarterly report, the company projects a 28%-38% increase in net sales for the final quarter of the year compared to the previous year. To clearly describe this numbers, the projected increase means the company expects to make between $112 billion and $121 billion. (Amazon Q3 report)
The company is such a dominant force in the US e-commerce market that it holds a giant share of 45% which is expected to rise to an impressive 47% in the coming year (Statista). This projection is looking more and more feasible as the company’s net sales which directly affects its net income continues to increase. Again, to paint a clearer picture of its dominance in the e-commerce industry, “Walmart is a distant second at just 7% followed by eBay at 5% and Target at just 2%.” (Yahoo finance).
In the stock market, the company’s shareholders are also smiling to the bank. Just before the peak of the Pandemic, precisely on the first of March, the company traded at $1900. Today, it trades at $3200, a 68% increase since the time. Hypothetically, this means that if someone had invested $10000 on Amazon stock in March, it would be worth about $168,000 today.
Figure xx: Amazon net sales over all quarters from 2018 to a projected Q4 of 2020
From the graph, we can see a seasonality factor/trend. The last quarter of the year tends to have higher increase in sales revenue than the remaining part of the year. This can be attributed to the spending habits of customers who tend to spend more during the end of the year and holidays. According to (drum), November and December are the biggest two months by far in terms of sales volumes. Single’s Day (worth $38.4bn in 2019), Black Friday ($7.4bn) and the Christmas shopping period all combine to make these the peak months for online retail.
Figure xx : Graph showing the percentage of sales per month in the US
As the semester rounds up, we plan to perform a monthly forecast on Dec 1 utilizing seasonality indexes to make projections for next year. A graph of the time-series would be included in this section.
FUNCTIONALITY ANALYSIS
1. Organizational Structure
Amazon’s organizational structure is a very effective one. The company utilizes the classical hierarchal organizational structure which has been adopted by several successful businesses over time. As of December 31, 2019, the company reported to have employed approximately 798,000 full-time and part-time employees (Amazon 2019 Annual report).This large group is being led by the company’s founder Jeff Bezos , who has served as the President and Chairman of the Board of Amazon since founding it in 1994.
A key element of the company’s organizational structure is that it is functional one. Its leadership structure is based on the core business units of the company. There are a total of nine Senior Vice Presidents and Chief executive/Financial Officers who report directly to the president and lead various aspects of the business. The figure below illustrates Amazon’s organizational structure.
Image source: CNBC
Within this functional hierarchical structure is also a noticeable geographic leadership element . For logistics and differences in business goals, Amazon through its numerous subdivisions is led by different people in different regions of the world. For example, Amazon.com Inc., the e-commerce arm of the company, uses these divisions to make it easier to manage the e-commerce business based on the niceties of these regions, their regulatory framework, and any other challenges.(Organimi) Longevity and experience seems to be also one of the key components of the organizational structure of the company. According to the company’s annual reports each of the top SVPs and CEOs who report directly to the Chairman have been with the company for 12 years and above. This translates to the fact that the company is being run by a group of experienced leaders who have been at the company through thick and thin and have provided the company the much-needed stability for success.
With the ever- evolving market and customer demands which is the key focus of the company, Amazon has a very flexible organizational strategy . This is made possible by the use of smaller teams and the adoption of the “two pizza rule” introduced by Jeff Bezos. This rule for maximizing meeting effectiveness states that no meeting should be so large that two pizzas can’t feed the whole group (landing point). This translates to meetings being capped by a maximum of 8 or 9 people with the “the idea of working within small teams is believed to help diminish various innovation killers like groupthink and social loafing."(Business insider).
As a whole, these observed components of the company’s organizational structure have contributed to the company’s resilience, business diversification and this current situation, business success during the global pandemic.
Discussing the organizational structure of Amazon would not be complete without talking about the leadership principles of the company and style of its founder and CEO, Jeff Bezos. According to the company’s website (Amazon.com), its leadership principles are based 14 points which are:
1. Customer Obsession
2. Ownership
3. Invent and Simplify
4. Leaders Are Right, A Lot
5. Learn and Be Curious
6. Hire and Develop the Best
7. Insist on the Highest Standards
8. Think Big
9. Bias for Action
10. Frugality
11. Earn Trust
12. Dive Deep
13. Have Backbone; Disagree and Commit
14. Deliver Result
One can assert that the company is heavily focused on its customers satisfaction when it boldly describes on its annual reports that it “seeks to be Earth’s most customer-centric company”.(Amzn Annual report)
At amazon, it is all about the customer. Spearheading this mission is the company’s leader who practices transformational and servant leadership. Through transformational leadership, Jeff Bezos has been able to train, groom, inspire and motivate his employees to innovatively bring growth and success to the company. The servant leadership he takes adopts however takes an interesting form as it is to his customers and not necessarily his employees. For example, “while you might find other internet firms focusing on a fun, relaxed atmosphere for their employees, no-frills Bezos is proving the potency of another model: coddling his 164 million customers, not his 56,000 employees.” (Blazek).
These key components: hierarchical structure, functionality, longevity, flexibility and leadership focused on customer satisfaction have played a massive role in the exponential growth and expansion of world’s number one e-commerce company. It comes as no surprise that during this global pandemic, the sales of the company have skyrocketed. It’s dynamics group of employees has stepped-up to meet the need of customers that are now more pressing than ever in a very timely manner.
2. Human Resource
Amazon’s legion of 798,000 employees fondly called Amazonian’s is continuing to increase. After Walmart, the company is the largest private employers in the United States. The company engages the services not only full-time workers but also part-time employees and contractors that may be seasonal and temporary to supplement its workforce in meeting the needs of its customers. For example, during this pandemic, the company claims to have employed an additional 175,000 employees in the US. (Amazon.com).
Amazon has works councils, statutory employee representation obligations, and union agreements in certain countries outside the United States. Competition for qualified personnel in online retail industry has historically been intense, particularly for software engineers, computer scientists, and other technical staff. (Amzn Annual report)
Like any responsible employer, the tech giants are committed to the safety and well-fare of its human resource. In responses to the Covid-19 crisis, the company explicitly states that its top priority is ensuring the health and safety of employees as they expect to invest approximately $10 billion in 2020 on COVID-related initiatives to keep employees safe and get products to customers. (Amazon.com). This would include providing testing, temperature checks, masks, sanitizers and disinfectants for all its employees around the globe. It’s partners and contracted employees are also not left behind. Amazon has set up a $25 million relief fund for partner (e.g. delivery drivers) and seasonal associated facing financial hardship or quarantine. (Amazon.com).
The corporate employees of the business have also not behind in the company’s plan to take care of its workers. In an email to USATODAY, the company confirms that “Employees with work that can effectively be done from home can continue to do that work from home through June 30, 2021." This has reduced physical contact and has helped to avoid endangering the health and lives of workers.
Again, we see a response by the company that has been critical to its success during the pandemic. Protecting and looking after its employees during this pandemic has provided employees with the comfort and peace of mind concerning job security and health to be at a highly productive level, meeting its consumer needs.
3. Amazon’s Operations
In coordinating its business and managing its operations, Amazon is divided into 3 main operational segments. These are North America, International and Amazon Web Services (AWS).
North America: This segment focuses on the business operations of the company which include retail and export sales of consumer products and subscriptions from online North American online and physical stores. (Amzn Annual report)
International: This segment primarily comprises of the business operations of the company which include retail and export sales of consumer products and subscriptions from internationally focused online stores (Amzn Annual report).
Amazon Web Services (AWS): The AWS segment consists of global business operations concerning compute, storage, database and other service offerings for start-ups, enterprises, government agencies and academic institutions. (Amzn Annual report)
4. Amazon Marketing
Amazon utilizes several marketing strategies its mission to understand and serve its customers the best way they possible can. These strategies include and are not limited to:
I. Big Data : This is the main strategy utilized by Amazon and plays a huge role in other marketing strategies that the company uses. The product recommendation team at Amazon thought of innovative ways in which it could use the data accumulated by the company. The result was the big data revolution which transformed the way Amazon did business. (Annex cloud). Basically, the data of customers is used to create a customer profile of their preferences over a long period of time. These data and preferences are then utilized to make highly personalized and tailored recommendations for customers.
II. Email strategy : Like most companies Amazon use an email strategy in marketing its services and retaining its customers. However, the e-commerce giants don’t just spam its customers blindly like other companies. They have come up with a very refined strategy where every opportunity to market within transactional emails, seasonal sales and solicitations for reviews is taken advantage of. These emails lead to a turnover in purchase for the company. A very important key to the highly personalized recommendations that are based on a data profile of each customer. This includes everything ranging from age, gender, location, purchase history and even clicks on certain items.
III. Ratings and reviews : Although now common in most businesses, Amazon were one of the first companies to make use of reviews and ratings. In fact, this feature has been incorporated to the site since 1995. This is a very key component of business growth as Annex Cloud asserts that Ratings and Reviews add authenticity and trust while significantly easing customer doubt and increasing conversion and revenue rates. Again, the ratings and reviews on Amazon is personalized. Customers have access to the reviews of others before they make a purchase and also give their own reviews after the delivery of their own purchase.
IV. Customer loyalty : Through its Amazon Prime services which rewards customers by providing free shipping and access to Prime Video, Amazon has been able to increase customer turnover significantly. According to EMarketer, Jeff Bezos had revealed earlier in the year that Prime membership had surpassed 150 million. They go on to forecast that the number of US Amazon Prime memberships will generate about $9.91 billion in Worldwide sales for Amazon. A very significant amount for their investment in quick delivery to their customers.
V. Social media : In this day and age when social media has gone from being just an entertaining feature on a mobile device to a big aspect of the daily lives of a lot of people, many companies have seen a potential to better understand their customers and market their services. People post so much personal information on social media that companies are able to track data and show customers what they actually like. A fascinating study by the New York Times Consumer Insight Group revealed the motivations that participants cited for sharing information on social media. These include a desire to reveal valuable and entertaining content to others; to define themselves; to grow and nourish relationships and to get the word out about brands and causes they like or support (Simplilearn). How then has Amazon utilized this “free data”?
On sites like Facebook and twitter, Amazon makes a good effort to reply to customer comments and posts in a timely and polite manner. Also, instead of generic replies in attending to customers questions and concerns, it addresses the commenter by their first names thereby giving a human touch. Below is an example:
Image source: facebook.com
In general, Amazon utilizes social media to promote itself and its products and this is facilitated by customer and follower engagement.
APPENDIX
List of all Amazon products and Services(Matrix360)
1. Amazon (Amazon.com) — The largest Internet-based retailer in the world by total sales and market capitalization.
2. Amazon Advertising — Connect your brand to Amazon customers wherever they share, read, listen, purchase, research and download online, across devices.
3. Amazon Alexa — Amazon’s voice control system.
4. Amazon Appstore — Amazon Appstore for Android is an app store for the Android operating system operated by Amazon.com.
5. AmazonBasics — AmazonBasics offers quality and value on everyday products delivered straight to your door.
6. Amazon Books — Amazon Books is a chain of retail bookstores owned by online retailer Amazon.
7. Amazon Business — Everything you love about Amazon. For work.
8. Amazon Dash Button — Amazon Dash is a consumer goods ordering service which uses a proprietary device for ordering goods over the Internet.
9. Amazon Drive — Get unlimited online storage to backup, protect and share photos, videos and files from any device.
10. Amazon Echo — Amazon Echo is a hands-free speaker you control with your voice. Echo connects to the Alexa Voice Service to play music, provide information, news, sports scores, weather, and more—instantly. All you have to do is ask. Also check out, Echo Dot, Echo Dot Kids Edition.
11. Amazon Elements — Amazon Elements is a line of premium everyday essentials exclusively available to Amazon Prime members.
12. Amazon Fire OS — An Android-based operating system by Amazon for its Fire Phone and Kindle Fire range of devices.
13. Amazon Fire Phone* — A 3D-enabled smartphone designed and developed by Amazon.
14. Amazon Fire Tablet — A tablet designed and developed by Amazon.
15. Amazon Fire TV — Amazon Fire TV is a tiny box you connect to your HDTV. It’s the easiest way to enjoy over 250,000 TV episodes and movies on Netflix, Amazon Instant Video, and HBO NOW, plus games, music, and more.
16. AmazonFresh — It is a grocery delivery service by Amazon.
17. Amazon Handmade — Discover genuinely handcrafted products created by Artisans around the world.
18. Amazon Home Services — Amazon Home Services is a new and simple way to buy and schedule professional services such as furniture assembly, house cleaning, and plumbing directly on Amazon.com.
19. Amazon Hub — Hub by Amazon is a comprehensive solution that frees you and your staff from daily package management, from high-rise buildings to garden-style apartments.
20. Amazon Inspire — Amazon Inspire is an open collaboration service that helps educators discover, gather, and share educational content.
21. Amazon Go — Amazon Go is a new kind of store with no checkout required.
22. Amazon Kindle — Amazon Kindle is a series of e-readers by Amazon.com that enable users to browse, buy, download and read e-books, newspapers, magazines and other digital media via wireless networking to the Kindle Store.
23. Amazon Launchpad — Amazon Launchpad offers online shopping of products from startups, with a great selection of new technology, innovative gadgets, electronics, wearable tech, workout, style, and home products from startups.
24. Amazon Locker — Amazon Lockers are secure, self-service kiosks where customers can pick up Amazon.com packages at a time and place that is convenient for them.
25. Amazon Mechanical Turk (MTurk.com) — An on-demand scalable workforce.
26. Amazon Merch — Merch by Amazon makes it easy for you to create, promote and market your branded merchandise.
27. Amazon Music Unlimited — Amazon Music Unlimited is a premium music subscription service featuring tens of millions of songs and thousands of expert-programmed playlists and stations.
28. Amazon Pay — Amazon Pay makes it simple for hundreds of millions of customers around the globe to check-in and check-out using information already stored in their Amazon account.
29. Amazon Prime — Enjoy fast free shipping, exclusive access to movies and TV shows, ad-free music, unlimited photo storage, and Kindle books.
30. Amazon Prime Air — Amazon Prime Air is a future service that will deliver packages up to five pounds in 30 minutes or less using small drones.
31. Amazon Prime Book Box — A subscription that delivers hand-picked children’s books every 1, 2, or 3 months.
32. Amazon Prime Music — Ad-free and on-demand music service for Amazon Prime members.
33. Amazon Prime Now — Prime Now offers household items and essentials you need every day plus the best of Amazon, with FREE 2-hour delivery.
34. Amazon Prime Video — Enjoy exclusive Amazon Originals as well as popular movies and TV shows.
35. Amazon Prime Video Direct — Prime Video Direct helps content creators and visual storytellers reach millions of Prime Video customers worldwide.
36. Amazon Robotics (formerly Kiva Systems) — It’s all about robotics.
37. AmazonSmile — Amazon donates 0.5% of the price of your eligible AmazonSmile purchases to the charitable organization of your choice.
38. Amazon Storywriter — A cloud-based screenwriting app.
39. Amazon Studios — Amazon Studios is a subsidiary of Amazon that focuses on developing television series and distributing and producing films and comics from online submissions and crowd-sourced feedback.
40. Amazon Sumerian — Amazon Sumerian lets you create and run virtual reality (VR), augmented reality (AR), and 3D applications quickly and easily without requiring any specialized programming or 3D graphics expertise.
41. Amazon Tap — A portable Bluetooth and Wi-Fi enabled speaker that gives you rich, full-range sound.
42. Amazon Video Direct — Helping content creators and visual storytellers reach millions of Amazon customers across hundreds of devices with the same distribution options and delivery quality available to major motion picture and television studios.
43. Amazon Vine — Amazon Vine is an internal service of Amazon.com that allows manufacturers and publishers to receive reviews for their products on Amazon.
44. Amazon Wag — Amazon’s pet product brand.
45. Amazon Warehouse Deals — Deep discounts on open-box and used products from Amazon.
46. Amazon Web Services (AWS) — Amazon Web Services offers a suite of cloud-computing services that make up an on-demand computing platform.
47. Amazon Wickedly Prime — A new line of distinctive food and beverages, available exclusively to Amazon Prime members.
48. Amazon Wireless — Cell phones with service powered by Amazon.com.
49. Amazon WorkDocs — Amazon WorkDocs is a fully managed, secure enterprise storage and sharing service with strong administrative controls and feedback capabilities that improve user productivity.
50. Amazon WorkSpaces — Amazon WorkSpaces is a fully managed, secure desktop computing service which runs on the AWS cloud.
51. Amazon Your Garage — Find parts and accessories that fit your vehicle and ask other owners for tips and advice.
52. A9 — A9.com is a subsidiary of Amazon that develops search engine and search advertising technology.
53. AbeBooks (AbeBooks.com) — Shop a vast selection of books, art and collectibles from independent sellers around the world.
54. Alexa (Alexa.com) — An Amazon company that provides commercial web traffic data and analytics.
55. Audible.com (Audible.com) — Audible sells digital audiobooks, radio and TV programs, and audio versions of magazines and newspapers.
56. AWS Cloud9 — AWS Cloud9 is a cloud-based integrated development environment (IDE) that lets you write, run, and debug your code with just a browser.
57. Book Depository — A UK-based online book seller with a large catalogue offered with free shipping to over 160 countries.
58. Box Office Mojo — Box Office Mojo tracks box office revenue in a systematic, algorithmic way, and publishes the data on its website.
59. Brilliance Audio — Publishes audio books for consumers, resellers, and librarians in the United States.
60. Diapers* (Diapers.com)— An online specialty retailer for baby products.
61. Digital Photography Review — It’s all about digital cameras and digital photography.
62. Goodreads (Goodreads.com) — Share book recommendations with your friends, join book clubs, answer trivia. Note: Shelfari has merged with Goodreads.
63. IMDb (IMDb.com) — Find showtimes, watch trailers, browse photos, track your Watchlist and rate your favorite movies and TV shows.
64. Junglee* — Junglee.com is an online marketplace by Amazon designed uniquely for India.
65. LOVEFiLM* — A DVD rental and streaming video on demand service.
66. Ring (Ring.com) — Ring lets you monitor every corner of your property with Video Doorbells and security cameras.
67. Souq (Souq.com) — It’s the largest e-commerce site in the Arab world.
68. Twitch (Twitch.tv) — A live streaming video platform by Amazon.
69. Whole Foods Market — A supermarket chain that specializes in selling food products without artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats.
70. Woot — Daily Deals for Electronics, Computers, Home, Tools, Garden, Sport, Accessories, Kids, Shirt, Wine, & more.
71. Zappos (Zappos.com) — An online shoe and clothing shop.
Reference
1. Reference 1 - Jeff Bezos’s first interview in 1997
2. Reference 2 - https://en.wikipedia.org/wiki/History_of_Amazon
3. Reference 3 - https://www.macrotrends.net/stocks/charts/AMZN/amazon/stock-price-history
4. Reference 4 - Bubble Dot Com Crisis
5. Reference 5 - https://www.youtube.com/watch?v=hwskqpf0E6Y
6. Reference 6 - https://www.cnbc.com/2020/09/29/how-amazon-managed-the-coronavirus-crisis-and-came-out-stronger.html
7. Reference 7 - https://www.omniaretail.com/blog/the-strategies-behind-amazons-success
8. Reference - https://sunwords.com/2008/02/22/be-afraid-of-your-customers-not-your-competitors/
9. Reference 8 - https://www.sellbrite.com/blog/amazon-product-categories/
10. Amazon 9 - https://www.marketwatch.com/story/how-amazon-created-aws-and-changed-technology-forever-2019-12-03
11. Reference 10 - https://www.cnbc.com/2020/10/29/amazon-cloud-revenue-jumps-29percent-in-line-with-expectations.html
12. Reference 11 - https://www.forbes.com/sites/rachelsandler/2020/09/04/pentagon-awards-jedi-contract-to-microsoft-again-in-blow-to-amazon/?sh=21fa2866505f
13. Reference 12 - https://en.wikipedia.org/wiki/List_of_Amazon_products_and_services
14. Reference 13 - https://en.wikipedia.org/wiki/Amazon_(company)
15. Reference 14 - https://www.nytimes.com/article/coronavirus-timeline.html
16. Reference 15 - https://www.whitehouse.gov/presidential-actions/proclamation-suspension-entry-immigrants-nonimmigrants-persons-pose-risk-transmitting-2019-novel-coronavirus/
17. Reference 16 - https://www.who.int/emergencies/diseases/novel-coronavirus-2019/technical-guidance/naming-the-coronavirus-disease-(covid-2019)-and-the-virus-that-causes-it
18. Reference 17 - https://www.whitehouse.gov/presidential-actions/proclamation-declaring-national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/
19. Reference 18 - https://www.statista.com/statistics/274327/largest-single-day-losses-of-the-dow-jones-index/
20. Reference 19(Image) The Motley Fool
21. Reference - https://www.cnbc.com/2020/02/28/amazon-pauses-non-essential-travel-in-us-due-to-coronavirus.html
22. Reference - https://www.theverge.com/2020/2/28/21158029/google-amazon-travel-coronavirus-covid-china-italy-iran-japan-south-korea
23. Reference - theverge.com/2020/3/5/21166686/coronavirus-amazon-google-facebook-microsoft-twitter-seattle-staff-remote-work
24. Reference - https://www.cnbc.com/2020/03/16/amazon-to-hire-100000-warehouse-and-delivery-workers.html
25. Reference - https://www.cnbc.com/2020/04/16/jeff-bezos-releases-amazon-annual-shareholder-letter.html
26. Reference - https://www.geekwire.com/2020/internal-memo-jeff-bezos-tells-amazon-employees-hes-wholly-focused-covid-19-crisis/
27. Reference - https://sellercentral-europe.amazon.com/forums/t/account-suspended-due-to-price-gouging/273089
28. Reference - https://sellercentral-europe.amazon.com/forums/t/account-suspended-due-to-price-gouging/273089
29. Reference - https://www.aboutamazon.com/news/workplace/amazon-offers-backup-family-care-to-650-000-u-s-employees
30. Reference - https://www.theverge.com/2020/4/30/21243112/amazon-q1-2020-earnings-covid-19-coronavirus-jeff-bezos
31. Reference - https://www.aboutamazon.com/news/company-news/amazons-covid-19-blog-updates-on-how-were-responding-to-the-crisis
32. Reference - https://www.aboutamazon.com/news/company-news
We have edit to add this part
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Net sale (Billion)
Net sale (Billion) Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 51 52.9 56.6 72.400000000000006 59.7 63.4 70 87.4 75.5 88.9 96.1 121