Only a year after its inception, Amazon was just selling books. Within a month, the company was already shipping books to more than 40 countries and expanding sporadically. Since then, Amazon emerged as an unstoppable juggernaut, accounting $141.92 billion worth in e-commerce sales last year. So, how did Amazon manage to pull off such an impressive run? Here are the four game-changing strategies Amazon imbued into its e-commerce business model to increase productivity and beat its competition.
1. Become truly omnichannel
Omnichannel retailing is the next key stage for every growing e-commerce venture. However, very few know how to successfully accomplish it. Omnichannel simply means using a creative combination of online and physical channels to generate sales by providing customers continuously, seamless experience from whichever channel they use to shop, be it a device or any store location. The concept of this strategy is to build a unified brand experience for the customer, eliminating any administrative, logistical or financial impediments from the system.
For example, if you buy a pair of sneakers from Nike using your smartphone, you have the option to pick them up from the nearest store or have them delivered to your home. Similarly, if you wish to return those sneakers for any reason, you can simply send them by mail to their designated store. In this entire transaction, your relation with Nike flows from through one channel to the other, minimizing your efforts and improving the quality of your shopping experience.
Amazon succeeded in its Omnichannel approach by incorporating these key components into its business model. Amazon not only succeeded in building a successful omnichannel strategy but kept optimizing it, using key metrics such as sales, marketing and logistics to streamline its retailing activities across all active channels simultaneously. This allowed the eCommerce giant to merge all complex channels as one entity and achieve its ultimate mission of becoming, “Earth’s most customer-centric company.”
2. Logistics and supply chain management
Supply chain management and logistics make two critical components of any online retaining business. Despite shipping cost being the biggest of its business expenses, Amazon successfully runs a flowing supply chain and logistics network that handles everything from warehousing, fulfillment, sortation, to shipping, transportation and even delivery services.
From managing millions of SKUs in warehouses and fulfillment centers to packaging, distributing and shipping millions of products to the doorstep of the customer’s home, Amazon is a logistics mean-machine. From its 95 warehouses and fulfillment centers, 29 sortation centers and around 149 facilities outside the U.S., Amazon’s physical footprint accounts for more than 250 million square feet of leased space worldwide.
The insides of its fulfillment centers are equipped with a meticulously coordinated system of slides, conveyor belts and lifting machines. These centers do everything from attaching labels to boxes, check weighing, shipping locations and delivery protocols.
In 2017, Amazon shipped 5 billion items through its Prime business from the U.S. Postal Service, private carriers and regional shippers. While 40% of its packages are shipped through the Post Office, Amazon has been keenly working to launch its own independent delivery service. Currently, Amazon has a network of more than 7,000 of its own trucks and 40 airplanes. Recently Amazon has also introduced its own branded delivery vans to strengthen its ground network and minimize the delivery time for customers. The initiative has invited entrepreneurs to invest as minimum as $10,000 and run their own local delivery network of up to 40 vans.
3. Impeccable customer service
Good customer service is a direct determinant of how successful your online business can become. In e-commerce, bad customer service is usually the area in your sales model where conversions are leaking. Good customer service helps retain your customers, keeping them associated with your brand and motivating them to spread word of mouth to other prospects. If you are aware of this practice, retaining existing customers is 25 times cheaper than finding a new one. Moreover, a well-formed customer service strategy helps engender trust within your customers, improving customer-merchant relationship, generating loyalty and serving an impetus for repeat business. According to Sage, loyal customers are worth up to 10 times the amount they initially spend.
Because of Amazon’s commitment to world-class customer service, the e-commerce giant has invested millions of dollars in developing a range of tools to help customers accurately track their packages, or quickly initiate return or exchange requests.
As a result, it has brought simplicity and convenience to the online shopping experience, while giving customers the incentive to speak positively about the brand. Amazon’s impeccable customer service has also significantly contributed to building powerful brand equity for the online retailer in the market.
Similarly, Amazon actively uses social media to engage with its shoppers, learn about their experiences and use the data to rework on its strategies and improve the quality of its customer service. By intertwining its online marketing strategies with social media, Amazon has achieved immense success in increasing the lifetime value of its customers and turning them into passionate followers who advocate for the brand.
Amazon’s dedication to its efforts in providing the highest standards of customer service was recognized when Amazon customer service team has won multiple awards for its commitment to addressing issues for customers and providing helpful solutions to their problems.
4. Building an empire from ideas
Last but not least, one of Amazon’s biggest secrets behind its success is the assimilation of innovative ideas. While most companies consider ideas as disposable thoughts, Amazon has always placed an asset value on them. Amazon’s founder Jeff Bezos was keen on building a continuous pipeline of unconventional concepts, grand innovations and futuristic ideas to serve as a mechanism of growth. Bezos believes a continuous stream of ideas is what fuels the growth of a company and enables it to maintain its competitive edge in the market.
Indulging in newer technologies, Amazon has set the tone for many aspects of customer’s future in e-commerce. With its ever-growing affinity toward Artificial Intelligence (AI) and machine learning, Amazon has taken things leaps ahead by reorganizing the company’s management, administration, sales and financial operations with AI.
Currently, AI is being widely used across different departments in the company. For example, Amazon has been using machine learning technology to generate product recommendations and produce more accurate product forecasts for a very long time.
The company also uses an AI management strategy ‘Flywheel’ to drive knowledge throughout the organization, connecting one department with the other and influencing the efforts of their respective teams to build innovative products.
From self-learning voice-powered AI Assistants such as Alexa, to trend-tracking AI bots used in Amazon Go, and powerful recommendations engine that is responsible for generating 35% of the company’s revenues, Amazon has been on the forefront of AI technology, contributing a major chunk of research and development into its business applications. Thanks to Amazon, Virtual Personal Assistants (VPA) such as Alexa have become so popular that VPA-enabled speakers are expected to experience sales worth $2.1 billion by 2020.
For many of you who have read this article, you can either take note and embrace the e-commerce stratagem Amazon used to become the juggernaut it is today, or pay no heed to these tips and risk at losing relevance in the online market.
To fully understand how Amazon established itself as the e-commerce market leader, it is imperative that you study these key strategies and use them to overcome the challenges and establish a robust footprint in the online market.