Amazon might be the number 1 distributor of the last decade, re-inventing industries through Ecommerce, through a strategic focus on the customer. This report examines some of the tactics used by Amazon across industries.
פייסבוק מול סנאפצ'ט ושאר העולם - מחקר מגמות וחדשנות במדיה חברתית
Amazon Best in Class Case Study
1. Amazon: Best in Class Case Study
Ruth Lewin Chen, Hamutal Schieber | July, 2017
2. Introduction
• The purpose of this presentation is to review some of Amazon’s digital
initiatives, which make the company a leader in e-commerce.
• Amazon innovates frequently, and analyzing each and every initiative is
beyond the scope of this presentation; instead, we will focus on key
elements such as products and services, loyalty, mobile & IOT, curation
platforms and delivery.
• Amazon’s success, in one sentence, stems from the fact that it
reduces stress from each element of the shopping journey. It is true to
its mission of being a “consumer focused company”. Here, we aim to
explore how.
3. Overview
• Amazon.com is an international e-commerce
company offering products and services for
online purchase.
• According to Slice Intelligence, 43% of all online
retail sales in the US went through Amazon in
2016.
• At the end of 2016, Amazon’s workforce includes
180,000 in the United States from 30,000
employees in 2011.
• The company plans to create an additional
100,000 full-time jobs in the U.S. by mid 2018.
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2014 2015 2016
Net Sales, in $ Million
North America International Amazon Web Services
4. Amazon’s Mission: Customer Centricity
• Amazon.com opened its virtual doors on the World Wide Web in July 1995 with a specific mission: to be
“Earth’s most customer-centric company”.
• The company is guided by 4 principles: customer obsession rather than competitor focus, passion for
invention, commitment to operational excellence, and long-term thinking.
• “Customer” means: consumers, sellers, developers, enterprises, and content creators.
• Consumers: focus on selection, price, and convenience in selling hundreds of millions of unique products to
be sold by the company, as well as by third parties across dozens of product categories, online and through
mobile.
• Sellers: the company offers programs that enable sellers to grow their businesses, sell their products on
Amazon’s websites and their own branded websites, and fulfill orders through Amazon. The company earns
fixed fees, a percentage of sales, per-unit activity fees, interest, or some combination thereof, for seller
programs.
“There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully,
wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it,
customers want something better, and your desire to delight customers will drive you to invent on their behalf. No
customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it.”
Letter to Shareholders, Jeffrey P. Bezos, Founder and Chief Executive Officer Amazon.com, Inc., 2017
5. Amazon’s Strategy: Think like a Start-Up
• According to Amazon’s Founder and CEO, Jeff Bezos, large organizations are challenged with making high-quality,
high-velocity decisions. Here are a few keys for doing so:
1. “Never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those
decisions can use a light-weight process”.
2. “Most decisions should probably be made with somewhere around 70% of the information you wish you had. If
you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly
recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than
you think, whereas being slow is going to be expensive for sure.”
3. Use the phrase “disagree and commit.”
4. Recognize true misalignment issues early and escalate them immediately.
“Jeff, what does Day 2 look like?”
That’s a question I just got at our most recent all-hands meeting. I’ve been reminding people that it’s Day 1 for a couple of decades. I
work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic.
“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day
1.”
Letter to Shareholders, Jeffrey P. Bezos, Founder and Chief Executive Officer Amazon.com, Inc., 2017
6. Key Success Factors
Factor Description Innovation
Loyalty and
Pricing
The Prime membership program offers a variety of benefits, from faster delivery to video and
music content. It is key to Amazon’s sustained growth, due to Prime members more frequent
and larger purchases. The Amazon private label further strengthens price-competitiveness.
Subscribe and Save and Amazon Pantry offer discount for bulk or
repeat purchase. Payment cards and point system offer additional
benefits. “Digital Day”, “Prime Day” are special members’ events.
Supporting
decisions
Almost a given today, Amazon.com was a pioneer in customer reviews, and has improved the
personal recommendation and Q&A system
A “personal stylist” app which helps you decide between two outfits; a 7
day trial period for apparel purchases
Fast and
convenient
As quick delivery is often a barrier in e-commerce, Amazon uses various tools (from
algorithms, through warehousing, to couriers), to deliver products within as little as 1 hour (and
mostly, 2 days).
While a patent for drone-based delivery is the center of media attention,
Amazon is rumored to be building its own delivery services. An X-Ray
service lets customers “see” what’s in their closed box through the app.
Platform-
Specific
Understanding that shoppers have different motivations for each category, Amazon expands
lucrative categories (e.g., grocery, outdoor equipment) in the form of micro-sites. It seems that
the company is starting to create mini-businesses with each operating as a separate entity, for
a focused competitive positioning.
Amazon Go, the new Amazon supermarket, and the Whole Foods
Market acquisition, stem from looking at grocery as an independent
platform, creating differentiation and competitive capabilities as would
be expected from an entirely separate business.
Content as a
Service
Beyond products and services, Amazon sees content as a strong benefit for today’s digital
consumer. This pertains to both production of original content for Prime Video members, and
sales of content, such as through Amazon Music Unlimited. Amazon Devices such as Fire TV,
Echo etc., support streaming of content.
Prime Reading is an unlimited reading portfolio for U.S. Prime
members. Audible, acquired by Amazon, ventured the company into the
growing audiobook arena. With Alexa (Amazon Echo’s AI), content is
delivered ever more seamlessly.
Omni-Channel Orders made through Dash Buttons, a physical connected button enabling the online order of
everyday goods (an IoT platform), increased over 5x during 2016. Dash Buttons expanded
beyond the US to Austria, Germany, and the UK.
Amazon Echo (Alexa), the company’s AI platform, allows a seamless
shopping experience, beyond the company’s variety.
The brick and mortar Amazon Go and Amazon Bookshop, which are
digital at core, are a demonstration of anywhere-anyhow shopping.
Curation and
specialty items
The company offers variety that is a mixture between leading supplier products, and small
artisanal manufacturers. In both cases, the company offers some products that cannot be
purchased elsewhere.
Amazon Surprise is an example for how the company acts as a direct-
to-consumer platform for small, artisanal brands, “curated” by Amazon.
It operates through a “Surprise” dash button, to encourage impulse
confectionery purchase.
Source: Schieber Research Analysis, June 2017
7. Loyalty
• Amazon Prime, Amazon’s
loyalty program launched on
2005, benefits members with
unlimited movies and TV
shows, music, reading,
discounts and more.
• Amazon Prime members spend
more on Amazon and they buy
more frequently; thereby
making the Prime program a
key to Amazon’s sustained
growth. Amazon offers a 30-day Prime free trial.
8. Loyalty
• Amazon Prime members enjoy a 2-day
shipping for free (sometimes, Same-Day
shipping is offered). This has been the
leading reason for joining Prime, according to
RBC Capital Markets.
• Prime Now service for ultra-fast delivery
offers Prime members 2-hour delivery. It also
features a one-hour delivery from popular
restaurants.
• Deliveries can be made using the Prime
Now app or with www.primenow.com.
• The company sees fast delivery as a strong
driver for e-commerce growth, and recently
obtained a patent for shipping packages
through drones.
9. Loyalty
• In October 2016, Amazon
launched Prime Reading, an
unlimited reading portfolio for U.S.
Prime members.
• It also launched the Prime Photos
service in the U.S., an unlimited
storage of photos, plus an
additional 5 GB for videos and
other files.
• And, in 2017, Amazon began
offering Prime members an “outfit
compare” feature which lets
customers upload two photos of
themselves wearing two different
outfits, then receive a verdict from
an Amazon stylist, telling them
which one looks better.
10. Supporting Decisions
• Amazon was the first to offer personalized recommendations, wish-lists, and reviews. Today, the company offers an
industry-specific review system.
• In August 2016, Amazon launched
Amazon Vehicles, a car research
destination and automotive
community. Amazon Vehicles
contains information required when
shopping for vehicles, parts and
accessories. The information
includes specifications, images,
videos, and customer reviews.
• It is important to note that although
Amazon isn’t selling any cars yet, but
it seems that it is moving closer to
doing so. For example, Amazon
partnered with Hyundai to let potential
customers order up test drives
through Amazon’s website.
11. Guiding Choice
• Amazon is guiding customers’ purchase decision through
different tools: providing customers reviews, using filters
(varying according to the product category) and buying guides.
• In 2016 Amazon started focusing on banning “incentivized”
reviews from its website.
• The ban was meant to address the growing problem of less
trustworthy reviews that had been plaguing the retailer’s site,
leading to products with higher ratings than they would
otherwise deserve.
• Incentivized reviews are those where the vendor offers free or
discounted products to reviewers, in exchange for
recipients writing their “honest opinion” of the item in
an Amazon review.
• Data has shown that these reviewers tend to write more
positive reviews overall.
13. Buying Guides
Amazon’s website is featuring buying guides for different product categories such as laptops, mattresses,
TVs, backpacks and more. The guides include video.
14. Personalization
A tab on the website offers
personalized information such
as recommendations,
browsing history and editing
your personal profile on
Amazon.
15. Convenience
The mobile app allows to search for products through text, voice or the device’s camera, shopping and reading reviews.
16. Convenience
• In 2016, Amazon launched a feature on its mobile app in order to know what’s
inside a package before opening it.
• In order to use it, customers should peel off the top layer of the sticker, launch the
Amazon mobile app on their phones and select “scan it” feature.
• Pointing the smartphone’s camera at the code will load a page containing detailed
information about the product.
• The feature is particularly useful to for holiday shopping, when customers order
multiple items and would like to decide whether to open the packages or not.
17. Special Offers
“Today’s Deals” is a tab offering deals that can be sorted according to different parameters such
as: department (video, baby etc.); deal type; price; discount; and customers reviews.
18. Categories of Operation
Source: Slice Intelligence
• Slice Intelligence research demonstrates that the
company’s growth in 2016 has been driven by
electronics, home & kitchen, and apparel.
• Food represented 11% of the company’s growth, and
recent M&As indicate that the company believes
there is more potential to cultivate in the field.
• In June 2017, Amazon announced its acquisition
of organic food chain Whole Foods Market for
$13.7bn.
19. Platform-Specific: Grocery
• In 2007, Amazon Launched AmazonFresh, a grocery
shopping service.
• Amazon Fresh include different product categories such as
fresh fruit; dairy & eggs; prepared foods; household supplies
and more.
• The products can be sorted by sub-categories and special
dietary needs such as gluten-free.
• In 2017, the retailer launched AmazonFresh Pickup, a
service through which customers can order from
AmazonFresh and then reserve a pick-up time — in some
cases, as early as 15 minutes after ordering — and drive to
their selected location. There, shoppers can either park in a
dedicated space and have groceries delivered and loaded
into their car by an Amazon employee; or pick up orders in a
dedicated reception room.
20. Platform-Specific: Grocery
• At the end of 2016, Amazon launched “Amazon Go”,
described as “a new kind of store with no checkout
required.”
• In order to shop in an Amazon Go store, shoppers
should download the Amazon Go app. Customers use
the Go app to enter the store, and once inside, a
combination of sensors, computer vision and deep
learning keep track of what’s taken off and returned to
shelves inside a virtual cart. Once finished, the
shopper just walks out and the company charges their
Amazon account, along with a receipt.
• In May 2017, Amazon received the approval of the UK
Intellectual Property Office to trademark the slogans
“No Lines. No Checkout. (No, Seriously.)”, reflecting
Amazon’s intention to launch Amazon Go in the
country.
21. Platform-Specific: Beauty
• Amazon’s Luxury Beauty section on its website is growing. While in October 2013 only 24 brands were present on
the platform, in January 2017 202 brands were present.
• In order to attract more luxury beauty brands, Amazon features editor’s picks and new arrivals sections.
• Amazon is offering features similar to beauty-specific e-commerce sites like Sephora, Ulta, and Space NK.
• According to One Click Retail, as of March 2017, the US beauty market experienced a 2% YoY growth, whereas
Amazon’s beauty sales experienced a 47% YoY.
22. Bringing E-Commerce to Services
Amazon has entered the services industry, offering home and office services.
23. Omni-Channel and IoT
• Launched in March 2015, Dash Button is Amazon's 1-Click ordering brought into the home. In October 2016, Amazon reported an
exponential growth for the Amazon Dash program. Dash button orders increased over 5x in 2016. According to the company, the
Dash Buttons programs expanded beyond the US to Austria, Germany, and the UK.
• In January 2017, Amazon launched a digital version of its Dash buttons. The virtual Dash buttons on the Amazon.com homepage
allow shoppers to click on the icon in order to stock up on essentials like laundry detergent, paper towels, or snacks. Prime members
can choose the “Add to your Dash buttons” option for many products.
•
24. Alexa
• Alexa is Amazons’ voice control system.Using unique streaming audio
players, Alexa can respond to voice commands from almost anywhere
within earshot. Saying “Alexa”, followed by what you want to happen, and it
will be done—as long as you’ve set up everything properly and are using
the correct command.
• Alexa enabled devices include Amazon Echo, Echo Dot and Amazon Tap.
• Recently, the company launched a service enabling Alexa to Alexa calls and
voice messages – including through the Alexa app. In June 2017, Amazon
released the Echo Show device, a Wi-Fi-enabled home device with a
seven-inch screen that plays media and responds to voice commands.
Echo Show enables making and taking video calls, with other humans and
it can be used to watch Amazon videos, YouTube, movie trailers and other
video content.
25. Alexa
• In January 2017, Amazon
launched a food delivery
service for Prime members.
• Meals can be voice-ordered
through Amazon
Restaurants through Alexa-
enabled devices including
the Amazon Echo and Echo
Dot.
• To place an order, customers
should say: “Alexa, order
from Amazon Restaurants”.
• The meal will be delivered to
their door for free in an hour
or less.
26. Content as a Service
• In 2016, Amazon launched Amazon Music
Unlimited, a service which provided access to a
library of “over 40 million” songs, priced at $ 79 a
year.
• In April 2017, Amazon launched “Subscribe with
Amazon”, a service which allows customers to pay
for subscriptions to third-party services and content
through their Amazon account.
• Shoppers can search subscriptions by categories
including education; lifestyle; news, magazines &
more; and productivity & software.
27. Curation and Small Businesses
• In January 2017, Amazon launched Prime Surprise Sweets, a service
of a "top-notch artisanal treats from across the nation“ supply ordered
through a Surprise “Dash” button.
• Amazon has a list of some example boxes on the site.
• Each box also comes with a note card that describes "every decadent
detail" of the confectionery making process, emphasizing that the order
also supported a small business.
• This conduct positions Amazon as a patron of small businesses, and
as a “curator” of artisan goods.
28. Curation: Promoting Innovation
• Amazon Launchpad offers products made by
startups, positioned as “unique and unexpected
products”.
• On July 2016, Amazon Launchpad launched
the creation of a Kickstarter Collection,
featuring Kickstarter products available for
purchase on Amazon.com.
29. Payments
• Amazon uses payment collaborations to add more value to customers in the US market, where cash-back is a
prominent loyalty and retention strategy. For example, Amazon and Chase Bank introduced in January 2017 a
Prime Rewards Visa Card With 3% Back on all Amazon.com purchases. Shop with Points Program benefits
credit cards’ holders with points that can be redeemed for Amazon.com purchases
• Gift cards are another payment method, and customers can reload their balance with a credit, debit, or pre-
paid card, or set up Auto-Reload which allows them to add gift card funds automatically to Amazon.com Gift
Card Balance on a schedule or when the balance drops below a certain amount.
30. Summary
• Amazon’s success stems from the fact that it reduces stress from each element of the
shopping journey. It is true to its mission of being a “consumer focused company”.
Consumer
Focus
Fast and
convenient
Platform-
Specific
Content as
a Service
Omni-
Channel
Curation
and
specialty
items
Supporting
decisions
31. Thank You!
The research was conducted by: Ruth Lewin Chen, Hamutal Schieber
Schieber Research | Market Research & Competitive Intelligence
www.researchci.com | hamutal@researchci.com
More articles and researches on Carmelon Digital
Marketing website:
http://www.carmelon-digital.com