Amazon Best in Class Case Study
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The document reviews Amazon's digital initiatives that position it as a leader in e-commerce, focusing on elements such as customer-centricity, innovation, and fast delivery. Key strategies include the Prime membership program, which boosts customer loyalty and spending, as well as various technological advancements for seamless shopping experiences. Overall, Amazon's approach emphasizes reducing consumer stress throughout the shopping journey while continually adapting to market demands.
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. 50834 63708 79785 33510 35418 43983 4644 7880 12219 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.
- 12. Guiding Choice
- 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