Three digital engines to reshape and dominate retail
Amazon.com: a digital shop around the corner…
… and a digital colossus.
Did you know: all these companies belong to Amazon…
Did you know: Amazon is also…
AmazonBasics Amazon-branded electronic products
AmazonFresh sells and delivers groceries in Seattle
AmazonStudios online social movie studio
Amazon WarehouseDeals offers discounts on refurbished products
Did you know: Amazon has had one of the fastest growths in the Internet’s history… Revenues reached within first 5 years $2,8 bn
Amazon and eBay results from 1995 to 2000, Google from 1998 to 2003. Even though Zynga and Groupon appear to have an even quicker growth, they haven‟t been compared because 1- sales have not been officially disclosed 2- they haven‟t reach their fifth year
Did you know: Amazon Web Services drives these companies…
Did you know: Amazon.com is a giant…
Y/Y growth for Q1 2011 +38% Market cap $90 bn Customers 137 m
3 × growth of 2 × market cap 2 × # customers
Annual revenue $34 bn Internet traffic rank 16th Retail brand 1st Paid out $1.2 bn
15 × more than
16% more than before before to buy
Source: Amazon.com, Alexa, Brandz. Market capitalization as of April 2011.
Why? A vision…
From 1994, Jeff Bezos knew he could create a retail website that would not have the limitations physical businesses encounter.
“You could build a store online that simply could not exist in any other way. You could build a true superstore with exhaustive selection; and customers value selection.” Jeff Bezos
… served by great execution & innovation
Digital Engine: A digital lever providing a significant advantage to outperform one's competitors
High fixed and variable costs No real-time metrics Slow innovation process Limited reach Limited space Slow inventory turnover
Negligible variable costs Real-time optimization A/B testing and full-size prototypes No physical frontier: worldwide market Unlimited inventory and categories Ever-improving metrics & optimization
One by one, Jeff Bezos carefully assessed the true advantages the Internet would give him, and pushed them to their boundaries
Digital engine #1
How Amazon fosters a very classical business model with the Internet’s specific advantages.
Not that disruptive of a model: “sell and deliver stuff to customers” Amazon perfectly understood the old-economy retail cocktail: low prices, large selection, convenience/customer experience.
“I can't imagine that ten years from now [customers] are going to say: „I really love Amazon, but I wish their prices were a little higher‟” Jeff Bezos
Jeff Bezos’ 3 big ideas
1 2 3
Digital enables limitless inventory Digital boosts customer care Digital allows high margin, lowest prices
In 15 years,
Amazon went from 1 category (books) to 16 main categories
Amazon began with books…
Market was large and fragmented. Contrary to the concentrated music industry, no player would have the power to freeze out a new entrant.
A book does not have to be accurately described: it is a universal and simple object.
Search would make it easy for customers to find books among the entire database.
Book distributors were already exchanging digitalized listing.
Amazon repeatedly appears first on Google‟s results page.
Source: Robert Spector, Amazon.com: Get Big Fast (2002)
… and needed to get big fast
With great size comes a better ability to negotiate volume discounts. Suppliers ignore Amazon.com at their own risk.
Brand & trust
It is logical to amortize high fixed costs over a great number of customers. Variable costs are very low on the Internet.