How Did Amazon Get So Big?

Alex Alex 06 April
How Did Amazon Get So Big?

In terms of revenue, Amazon is the biggest company in the world. They have over $232 billion in revenue, and that was just in 2018. '19's even bigger, and '20, '21 will be bigger as well. And did you know, as we're getting into the '20s, Amazon is growing at roughly 20% year over year. That's roughly $40 billion in more revenue each and every single year that they're adding to their bottom line.

Before starting Amazon, Jeff Bezos saw a report that web usage was growing 2300% per year. That's a lot. As a hedge fund manager at the time, after seeing those massive growth metrics, he realized that, hey, he should be listing out things that he could sell online. And after seeing a list of 20 possible products, eventually, he landed on books.

And why books? Because they're low cost and because it's a diverse niche that they could be sold to anyone. Books were a commodity. With a digital storefront, Amazon could offer a wider selection than any brick and mortar store. He couldn't be more right. Marketing all the books online in just one place is much more convenient to customers as well and it's easier for them to search one place than it is for them to go to multiple different bookstores and fronts to find what they're looking for.

At this point, Amazon was pretty much setting the standards for what could become the e-commerce industry. Having that kind of convenience all in one place stop could be a proven model for lots of other categories.

In the late 1990s, Amazon expanded to other commoditized media products, starting with music and movies, followed by electronics and toys.

By the mid 2000s, Amazon was a growing network of warehouses and also held kitchen items, sporting goods, video games, apparel and even jewelry. But it wasn't just about the products. It was about the user experience and service that they were offering. Think Walmart, but not having to leave your own couch and get what you want. That was an amazing concept, especially when it comes to marketing. So now, let's go into some marketing insights.

In 2008, Amazon listed their company vision as, "Relentlessly focusing on customer experience, "by offering our customers low prices, convenience "and a wide selection of merchandise." This definitely shined in their marketing approaches. Convenience was a huge factor.

Free shipping? Have you ever wondered how Amazon affords to pay for all that free shipping? Well, it's not cheap. It actually costs Amazon around $1 billion per quarter but how did they make money?

Well, then there's Amazon Prime. There are nearly 54 million Prime members. With a yearly fee of $99, simple math tells you that the revenue generated from Prime alone is roughly $5.4 billion a year, which allows Amazon to offer all the benefits that it does.

With one-click shopping, shopping is easier than ever, allowing customers to buy everything they could right from their couch. Automated deliveries is another big thing, right? Amazon knows when you're going to run out of paper towels and it can even notify you, show you at the right time and even has buttons where you can push so that way, you're like, "Hey, I need to automated toilet paper delivery "at this date and time." And they know that you rely on that toilet paper or toothpaste or whatever it may be, so they have fast delivery. In many cases, they're not just doing two-day delivery, they're doing same day, if not next day, worst case. And that's how they're building amazing customer loyalty, which gets me into my next point, right? So, the way they create crazy customer loyalty is they open up product reviews.

At the time when Amazon started doing this, people were like, "Whoa, "you would just let anyone review a product? "What happens if they say bad things?" Jeff Bezos was like, "That's good. "We don't want people buying products that are bad. "If they're bad, people shouldn't be "buying them on our platform."

So, he wanted to create an open, transparent product review system where anyone can talk about, "Hey, this is good, this is bad, "here's what I didn't like." And that's important, because 80% of your future profits will come from just 20% of your existing customers. And that's why you want to encourage amazing reviews with your products and services.

Amazon also has Prime Perks, which has helped them grow fast. Creating a Prime membership allows loyal customers, right? From free shipping to next day air, two day air, in some cases, some days, even same day delivery. By going above and beyond for your customers in your marketing, and continually offering more and more for the price, this is how you win over customers.

Now, another thing that Amazon did really well that we can all learn from is their email marketing. Now, the email verification for orders allows Amazon to collect people's information and create Prime accounts if they opt to. This allows Amazon to collect user data based on login information, and make the user experience much more personalized. Remember, that's where the web is going, it's all about personalized experiences versus showing generic stuff.

I never see Amazon recommending pet products to me because I don't have any pets. They'll recommend toothpaste, toilet paper, bottled waters, although I'm trying to cut back on buying bottled waters, and they won't give me novels like Harry Potter to buy, they'll recommend business books because they know that's what I'm buying all the time. And then, they'll even tell me and encourage me to use Audible because they see I'm buying so many business books.

Another thing that they've done really well is technological innovations. Look, marketing crap products is really hard but marketing good products makes life easier. Amazon Kindle came out a long time ago and what they started doing is like, hey, let's make it so it's really easy to read a book. In 2011, Amazon reported that they sold more Kindle books than paperbacks. For every 100 paperback books they sold, they sold 115 Kindle books.

Amazon is the undisputed leader in e-readers and it accounts for roughly 80% of e-book sales.

Fire Stick, this is an effort to compete with streaming services like Roku and Apple TV, Amazon has created the Fire Stick. It's become one of Amazon's most successful hardware hits with over 37 million active users worldwide. Amazon even recently began partnering with TV companies, like Toshiba, to create the Fire TV, its television paired with the Fire Stick capabilities, and Alexa.

Another thing that they've done is Echo slash Alexa, right? You've seen those Echo Dots or those Alexa devices. There are nearly 118 million home assistant devices in the US alone. According to a new report from Voicebot.ai and Voicify, it reconfirmed that Amazon's Echo is in the lead, noting that the powered smart speaker grew to 61% market share by the end of last year. These devices can also be used to buy products straight from Amazon. We do it all the time, my wife and I, we speak right into our Alexa device and we're just placing orders.

Another thing is Amazon's partnering with other businesses, from fulfillment by Amazon that allows businesses to sell their products right on Amazon and get the fast shipping. I was at the UPS store the other day sending a package out and the UPS store was filled with a ton of packages and I asked them, "What are all these packages "taking up the majority of the store?" They're like, "It's all Amazon returns." They've partnered with other companies to make your experience better, so you can just drop off packages at a close UPS store or any retailer that they've partnered with which, again, makes your experience better and that's one of their keys to their marketing, they're all about the user experience.

See, their secret to marketing isn't Google AdWords or SEO or Facebook Ads, everything that I mentioned is about making the experience for users better. And when you're thinking about your marketing, don't just think about how you're going to acquire more users, but think about how you can make the user experience better which allows you to grow through word of mouth, which is the best channel out there.

Comments (1)

  1. It's insane how fast Amazon is growing. They are legends at customer retention

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