There is no doubt that the internet has revolutionized a wide variety of industries, from the ability to communicate across the world for free to being able to order groceries from your couch, however few companies have had as wide of an impact and created as much value to consumers through the use of technology as Amazon.
Amazon launched its services as an online book retailer in 19951, but what makes Amazon interesting and truly unique has been its evolution and breadth of influence over the past 11 years. Since 1995 Amazon has not only revolutionized how consumers shop for books, but how they shop for virtually anything, how they read and access media through its development of the Kindle and tablets, how they interact with their devices at home through the Echo and how they utilize cloud services through AWS.
The fact that Amazon has revolutionized and continues to influence so many pillars of our daily lives is no coincidence. Amazon has made big bets in segments where they saw opportunities to utilize technology and data effectively to provide better costumer experiences. In addition, they have remained disciplined during these new market entrances by realizing that innovation requires time and is often accompanied by failure and created a unique culture that welcomes risk taking and making mistakes2.
Amazon entered the books retailing business because it saw an opportunity to deliver customers a better shopping experience through the use of technology1. It did this by creating a marketplace that unlike existing book stores allowed consumers to 1) access a wide selection that would be impossible to find in any physical retailer due to inventory and size constraints 2) provide convenience to consumers by enabling them to research and find titles from their home 3) empower the consumer to access information and personalized costumer service through suggestions based on shopping history and peer reviews 4) benefit the consumer through competitive prices realized by economies of scale and lower fixed costs relative to running a brick and mortar shopping experience.
Although the initial vision was clear, delivering this service offering to consumers was not an easy task. First of all, Amazon had to change consumer sentiment towards online shopping as it was a phenomenon that was just developing. In addition, Amazon had to develop an infrastructure to process costumer payments online as well as the logistics capabilities to source and deliver the physical goods from their warehouses to costumers’ homes in a timely and cost efficient manner. As Amazon addressed these issues and began building a customer base, they began to leverage their operational expertise to expand beyond books and incorporated a wide variety of other products to their marketplace, again relying on the 4 key differentiators relative to competing physical stores. Due to the large investments required for Amazon to serve customers, Amazon benefits tremendously from economies of scale and we have seen them continue to fuel their growth and consumer acquisition through the introduction of Amazon prime which reduced the hurdle of paying for shipping through a monthly subscription granting unlimited shipping as well as a wide variety of ancillary services to make the Amazon prime offerings more attractive.
Amazon continues to drive towards providing its customers with a wide variety of goods and services at the lowest possible prices by utilizing technology to lowering distribution expenses by automating warehouses3 and continually testing new ways to improve delivery systems including development of drone delivery systems4 which they expect to launch once they receive regulatory approval. Some of these technological innovations have not only allowed Amazon to deliver goods at lower prices, but have also created less physically taxing conditions for warehouse employees showing how utilizing technology has significantly more benefits than monetary ones.
Amazon is a clear example of a company that has been harnessing and investing heavily in utilizing technology to create value for customers since day one. Although their success has come at others’ expense as they continue to disrupt a wide variety of markets, I would argue their customer service driven product offerings and culture have been hugely beneficial to the end consumer and the technology industry.
- Amazon.com, Inc., December 31, 1997 Form 10-K. Filed March 30, 1998. Amazon.com, accessed November 2016.
- Amazon.com, Inc., December 31, 2015 Form 10-K. Filed April 6, 2016. Amazon.com, accessed November 2016.
- Rebecca Greenfield, “Meet the little orange robots making amazon’s warehouses more humane,” The Atlantic, March 20, 2012 http://www.theatlantic.com/technology/archive/2012/03/meet-little-orange-robots-making-amazons-warehouses-more-humane/330348/, accessed November 2016.
- Amazon.com, “Amazon Primer Air” https://www.amazon.com/Amazon-Prime-Air/b?ie=UTF8&node=8037720011, accessed November 2016.