Why Is Amazon So Successful? Factors Explained Sellics
Why Is Amazon So Successful? – Factors Explained Sellics Download our DSP Deep-Dive (H1 2022) for insights from our latest data Read More x Get Started Get Started Amazon Marketing Tips
You may have noticed a trend: Amazon’s success is built on serving the customer and the customer only.
The problem is that we don’t buy high ticket items every day, and when we do, we buy them from a retailer that we know and trust. And, the only way to build trust is through a series of consistent and positive shopping experiences. Amazon wants to earn your loyalty so that you buy everything there. “Fathead” Products“Long Tail” ProductsHigh demandLow demandHigh profit Low profitMainstream Niche/specific/hard to findStrong brandLess brand-dependentThese products sell themselves and sell often.Individual demand is low, but as a whole, the cumulative sales make up 58%I.e. The Instant PotI.e. An avocado slicerThe Fathead vs. Long Tail Problem Typically, having a vast selection would mean being a “superstore” (also called Horizontal E-Commerce), which comes with the burden of investing in a super large inventory. In this case, prohibitively so. If Amazon approached this problem the traditional way, that would mean purchasing and storing nearly one hundred and twenty million products as of April of this year. To put that in perspective, a typical Walmart Superstore carries 120,000 items, and up to 3 million online. Clearly, the traditional superstore model can’t respond to Amazon’s vision of superior selection (“long tail” products). Another conventional strategy for Amazon could have been to forego the “superstore” model and institute a marketplace instead, like Ebay. That would mean no responsibility over inventory, but at the cost of not having control over product selection. But a marketplace environment cannot attract major brands accustomed to selling wholesale B2B (“fathead” products). So neither could properly deliver on Amazon’s desire for a superior customer experience, including both a high-demand selection of products and an unprecedentedly large range.
Amazon Success Story How to Become the Most Successful Store in the World
Save as PDF By Franz Jordan. Last updated on January 30th, 2020. Share In this article you can learn about: 3 core factors of Amazon Success: Selection, Price & Delivery Amazon tools called Buy Box and Prime Amazon Flywheel concept and even more From a consumer standpoint, it’s easy to understand Amazon’s success. Amazon is the largest and most successful retailer in the western world because they built the best customer experience. Customers expect 3 core things when they buy products online: Large Selection: Consumers always want to find the product they are looking for and, of course, this product should be in stockLow Price: Consumers want to pay as little as possible for a productFast Delivery: Consumers want to get their orders as quickly as possible What set Amazon apart is the long-term strategy for success, even in the face of the relatively short-term loss of profit. For perspective: It took Amazon 14 years (!) to make as much as they did in the 3rd quarter of 2019. Because they wanted to be the biggest, they had to be the best, and to be the best, they had to become the biggest. Here’s how they did it: The Amazon flywheel This logic or mechanism perpetuating growth is called the ‘Amazon Flywheel‘. Let’s start with Customer Experience: If customers have a great (and consistent) shopping experience on the platform, they will reliably return to it, and even suggest it to their friends. This creates Traffic.Sellers will certainly follow traffic – they need to put their products in front of the eyes of consumers. More sellers means more product selection.More product selection, means a better Customer Experience (“they have everything!”). With these four elements feeding the growth of the platform, you now have economies of scale. Meaning lower cost structure, leading to lower prices, which again ultimately will feed the growth cycle by offering customers the best Customer Experience.You may have noticed a trend: Amazon’s success is built on serving the customer and the customer only.
1 Amazon Success Selection Factor
So if you want to have the world’s largest store, you must have the world’s best selection. But, this is easier said than done. In any store or product line, a small number of products will make the most margin and the most money while many others make very little or none at all. This is known as:1 1 The Fathead vs Long Tail Problem
It might sound tempting to limit your product selection to those high-demand, high-ticket items as these generate the most profit.The problem is that we don’t buy high ticket items every day, and when we do, we buy them from a retailer that we know and trust. And, the only way to build trust is through a series of consistent and positive shopping experiences. Amazon wants to earn your loyalty so that you buy everything there. “Fathead” Products“Long Tail” ProductsHigh demandLow demandHigh profit Low profitMainstream Niche/specific/hard to findStrong brandLess brand-dependentThese products sell themselves and sell often.Individual demand is low, but as a whole, the cumulative sales make up 58%I.e. The Instant PotI.e. An avocado slicerThe Fathead vs. Long Tail Problem Typically, having a vast selection would mean being a “superstore” (also called Horizontal E-Commerce), which comes with the burden of investing in a super large inventory. In this case, prohibitively so. If Amazon approached this problem the traditional way, that would mean purchasing and storing nearly one hundred and twenty million products as of April of this year. To put that in perspective, a typical Walmart Superstore carries 120,000 items, and up to 3 million online. Clearly, the traditional superstore model can’t respond to Amazon’s vision of superior selection (“long tail” products). Another conventional strategy for Amazon could have been to forego the “superstore” model and institute a marketplace instead, like Ebay. That would mean no responsibility over inventory, but at the cost of not having control over product selection. But a marketplace environment cannot attract major brands accustomed to selling wholesale B2B (“fathead” products). So neither could properly deliver on Amazon’s desire for a superior customer experience, including both a high-demand selection of products and an unprecedentedly large range.