What business is Amazon in?

The Amazon business model is not a single entity, but rather a portfolio of business models.
The Amazon business model, initially centred around eCommerce, has over the years
evolved through multiple acquisitions and diversified into a portfolio of businesses and
revenue streams. Amazon’s businesses now incorporate and span segments ranging from
entertainment, music, cloud computing, food delivery and much more. From a relatively
simple single-sided eCommerce platform, Amazon has grown into a complex digital
ecosystem. Amazon has set its eye on Payments, Logistics, Pharmacy, Media & Consumer
Brands (among other sectors) over the last few years. Underlying this is, of course, its
continued investment in technology either through R&D or acquisitions.

However, an analysis of Amazon’s revenues showcases that greater than three-fourths of it

comes through Amazon’s online stores, physical stores and third-party seller services. This
indicates Amazon’s strong eCommerce focus even as of 2019. Even though it is rapidly
evolving into other business segments, AWS in particular, Amazon’s primary play still resides
in the Retail industry. The differentiator that has allowed for its continued disruption of the
retail industry is it’s technological underpinning. At the base of its eCommerce platform and
other businesses is technology. Therefore, I would classify Amazon as a Tech company in
the Logistics & eCommerce business.

What is Amazon’s overall proposition?

Amazon has multiple products and services that compete in many different markets. As a
result, they have many different value propositions. For example, AWS’s value proposition is
built around reliability, scalability and inexpensiveness. In contrast, Kindle’s value
proposition is around books on demand and reading on the go. In order to identify the
company’s overall proposition, we must delve into it’s corporate strategy.

Amazon’s generic corporate strategy can be described as concentric diversification.

This strategy is based on harnessing technological capabilities and following a cost
leadership strategy aimed at offering the maximum value for its customers at the lowest
price. The strategy involves a customer-centric focus where Amazon becomes the go-to
portal for their online shopping needs. Amazon’s strategy is driven by its sources of
competitive advantage:

 Technology
 Economies of scale
 Leveraging efficiencies between external drivers and internal resources
 Use AI to drive supply-side efficiencies and demand-side insights and growth

A deeper look into the company’s overall value statement can be explained as emanating
from its competitive advantages– low price, wide selection with added convenience
anytime and anywhere.
Who are Amazon’s competitors?
As big as Amazon is, the company still has its fair share of competitors. Streaming service
Netflix competes with Amazon Prime Video. Google Home products compete with Amazon’s
virtual assistant Alexa. In the cloud computing arena, Microsoft Azure and Google Cloud
both compete with Amazon Web Services (AWS). Amazon’s competitive environment for its
products and services can be described as intense. Its main types of competitors include:

 Physical, e-commerce, and omnichannel retailers, publishers, vendors, distributors,

manufacturers, and producers of the products Amazon offers and sells to consumers
and businesses
 Publishers, producers, and distributors of physical, digital, and interactive media of
all types and all distribution channels
 Web search engines, comparison shopping websites, social networks, web portals,
and other online and app-based means of discovering, using, or acquiring goods and
services, either directly or in collaboration with other retailers
 Companies that provide e-commerce services, including website development and
hosting, omnichannel sales, inventory, and supply chain management, advertising,
fulfilment, customer service, and payment processing
 Companies that provide fulfilment and logistics services for themselves or for third
parties, whether online or offline
 Companies that provide information technology services or products, including on-
premises or cloud-based infrastructure and other services
 Companies that design, manufacture, market, or sell consumer electronics,
telecommunication, and electronic devices
 Companies that sell grocery products online and in physical stores

How can competitors disrupt Amazon’s business?

Companies don’t need to be the next Walmart, Alibaba, or eBay to have success selling
online. An online store doesn’t need $1 billion in revenue to go up against Amazon. I list
down some key ways in which a company can not only co-exist but also disrupt Amazon.

Build & Be a Brand

Branding is powerful. Branding is the reason why Starbucks is able to charge $5 for coffee
and why Gucci can sell t-shirts for $500.
Amazon sells products manufactured by many different types of brands. But the nature of
Amazon’s platform makes every product feel brandless. It’s tough for customers to tell the
difference between one brand or another when they’re shopping on Amazon.

Companies need to establish a brand that customers recognize and trust. When customers
are loyal to a brand, they won’t shop elsewhere, even if the alternative option is cheaper or
more convenient.

Focus on Customer Retention

While there is a continuous focus on new customer acquisition to grow the business,
existing customers cannot be ignored. Repeat shoppers spend more money and convert at a
higher rate compared to new customers. Research shows that you have up to a 70% chance
of selling to a repeat customer, but that number drops as low as 5% for new customers.

Prioritise Website User Experience

Amazon is masterful at getting users to convert. The website, mobile app, and single-click
checkout process contribute to the company’s success. To beat with that, the website must
accommodate the customers. The pages need to load quickly, and navigation simplicity has
to be a priority as well. If customers can’t find what they’re looking for in just a click or two,
then they’ll go elsewhere for their needs.

Create a Solid Product Offering for its Niche

Amazon has a “winner-takes-all” approach to sales. They want to sell every product in every
category. If one thinks about it, their “niche” is really a lack of a niche. They sell to everyone.
Studies show that after customer experience, the second biggest reason a customer will
ditch your brand is dissatisfaction with the product itself. Just like companies can’t appeal to
the wide audience that Amazon markets to, Amazon can’t satisfy every need in every niche.
That’s where competitors have an opportunity to fill in the gaps.

Create Curated & Personalized Assortments: One Size Does Not Fit All
Another thing Amazon doesn't do well is curating the right content for the individual visitor.
This creates a great opportunity for others to differentiate. Even without a visitor logging in,
businesses can use browsing behaviour, overall consumer trends and real time visitor data
to personalize real-time experiences.

Focus on Conversions and Funnels

Conversions are the lifeblood of an online store. Traffic is great, but it’s useless if those
visitors aren’t converting. Amazon blows the competition out of the water in terms of
conversions. Competitors can increase ecommerce conversion rates by focusing on funnels
and guiding customers through the checkout process. The idea here is to figure out where
customers are being lost in the funnel and simplify those processes.