An analysis of Amazon’s model

How to sell products with e-commerce? This must be the question every companie asks themself when they decide to sell online! When a company takes the decision to go online, it intends to stand out from its competitors. Obviously, it must take an analysis of their strengths and weaknesses. It will also try to target successful companies and have them as a model for growth. Therefore, which important player is there on the web? You surely guessed … Amazon! However, Amazon is not just the best seller on the web. You will discover in this article that Amazon is much more than that!

Seller

Let’s start with what we know the most from Amazon. It’s no surprise to anyone, Amazon is an undisputed leader in online sales. In the 1990s, Jeff Bezos (CEO of Amazon) had only one idea in mind, to sell books via the web. Today, Amazon sells about everything on its site; Electronic, sports equipment, clothing and much more. How did Amazon manage to have so many products available online? It’s simple. If a company wants to sell online, they can do it directly on Amazon’s transaction site. However, you should not forget that Amazon will charge a commission to offer its service. The advantage of doing business with this big player is that it gives a monster visibility to the companies registered on its site. On the other hand, it does not only give visibility to a single company, it gives it to all of those who want to sell on its platform. So for the retail market, it can be your biggest ally as well as being the biggest adversary. One of Amazon’s strengths is doing a tight follow up with every business on their website in order to provide the best service. In other words, if a company receives poor ratings, its products will be downgraded and another more successful company with similar products will be put forward. Companies must therefore be very careful to offer the best possible service or they’ll lose a monster opportunity to sell on Amazon.

The distributor

Why do customers enjoy buying so much on Amazon? It’s no secret, it’s for the quick delivery! We can’t hide it, Amazon is the undisputed leader in distribution. This is what made this company successful. The number of Amazon warehouses has exploded in the past 15 years to meet the growing consumer demand. The giant has invested a lot of time and money to optimize its distribution processes. However, this kind of service is certainly not free for the company that uses Amazon warehousing and order picking. Due to its exorbitant costs, it is usually only the “best sellers” who can afford to use Amazon’s logistics services. What many consumers ignore is that much of the merchandise sold on Amazon does not come from Amazon warehouses. Very often, companies selling on Amazon use a 3PL (Third-party logistics) to take care of the order fulfillment and shipping. So when you receive something from Amazon, the order hasn’t necessarily been shipped from an A-warehouse and no one knows. It is important to remember that Amazon provides very tight shipping monitoring and that it reserves the right to downgrade companies that do not deliver the goods on time. Since the company offers an extraordinary distribution service, Amazon even offers consumers the possibility to have better delivery times with Amazon Prime. This business model is something special on the market… The customer can buy and receive in the same day. It helps prioritize orders and provide an even more competitive service. As you can see, we could talk about the distribution of Amazon for a while. Being in the logistics business ourselves, we cannot ignore how impressive this Amazon division is.

The producer

Amazon has one of the best sales and distribution networks in the world. What more can we expect from him? Why not let him makes his own products! In recent years, Amazon has stocked its virtual tablets with several products already present on its website. Whether with batteries, clothes, devices like Alexa, etc. Not only do companies on its website compete with others, they also compete with Amazon itself! Despite everything, they have no choice but to stay on the site, because as statistics show over the past few years, almost one person out of two begins their shopping on the web with a visit to the Amazon platform. For the consumer, this is very positive, because if Amazon produces something, it will do it at a lower cost and therefore sell it at a lower price.

The Host

The company will not only help you sell on its online platform, it can also host your website! It’s amazing what this company can provide you with AWS. We still feel the question coming; AWS? AWS is called Amazon web Service. Are you going to tell us that it’s not that amazing to host websites? Imagine a business so good that it can afford to host the websites of its competitors! In addition, Amazon’s technology services don’t stop there. You want to create a video game, a mobile application, a database, its offer will meet your needs. Although this division is less known to the public, the list is really long. Amazon has put a lot of energy into offering so many related services.

The actor

In addition to offering products and services, Amazon offers the ability to consume media such as music (Amazon Music), movies and TV series (Amazon Prime Video). Again, he is both a distributor and producer of content. Available with the Prime subscription, this division allows consumers to combine service like Netflix (for video) & Spotify (for music). All in one place without having to manage multiple individual subscriptions like its competitor. Even if it is not directly related to the other divisions, this division is much more useful than one might think! It’s a big “+ value” that makes it easier to purchase the premium subscription. This division, which focuses more on the media, is an excellent “sales channel” for subscription sales.

Let’s face it, Amazon has a hell of a diverse offer. It is not surprising to see such incredible growth in this business. The business model is fully integrated and no one can ignore its success. We hope you enjoyed this second blog and that it helped you better understand the key role that Amazon plays in our industry, which is order picking and logistics. Finally, we are really starting to enjoy writing these articles and we are already looking forward to the next theme! The next one will be likely linked to today’s article! Indeed, we will deal with the explosions of e-commerce following the Covid-19.

If you have any questions, comments or suggestions about an article, or would like to suggest article topics to us, please do not hesitate to contact us and we will be happy to discuss them together.

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