Amazon.com is the world’s largest online retailer. It was started by Jeff Bezos in 1995 as a online book seller. Today, the company works in many industries and has even created some of its own market segments. This article looks at the some of the company’s guiding principles which make it so successful.
Amazon.com is a company that is first and foremost concerned with pleasing customers. The company does that by building trust with its customers. Bezos thinks that one of the best ways to ensure customer loyalty is by keeping prices on products down. Bezos wants people to know that they would have a hard time finding the product they look for at a better prices. One of the prime examples of this behavior is with the Kindle e-book reader. The device, which allows customers to access a variety of digital media, is sold at no profit. The company makes a profit by selling products on the device. According to Bezos, internal company studies show that people would be willing to pay more than the current retail price (between $69-379 depending on the model). Bezos chooses not to raise prices because any short-term profits would ultimately come at the expense of eroding customer trust.
Pioneers of Innovation
Amazon.com started as online book seller but is a now player in many industries because of the companies willingness to pioneer inovation. Here are some of the areas it has greatly improved through the years.
Warehouse management/delivery innovation. One of the ways Amazon.com became a dominant player in e commerce is by revolutionizing the way companies store and manage their inventory. Bezos remembers the days of Amazon when he would ship products by personally taking them to the post office. Today Amazon has over 25 million square feet of warehouse space. On Cyber Monday the company was ready to handle 300 orders per second.
New devices. Amazon.com is a pioneer in creating new market segments. The most obvious example of that innovation in action is the Kindle e-reader. The e-reader is an impressive technological feat because it gives customers instant access to a huge amount of digital media. This is a revolutionary technology because it eliminates physical delivery of a product. Products that do not need to be printed and shipped can be offered at a lower price. The company can make the same profit margin on a product but sell it to more customers because the pool of consumers willing to buy the product at a lower price is proportionately larger.
Web services. Amazon.com is a major innovator in web services/hosting services because the company needed to handle its own customer base. The company soon realized that the system it developed to handle its own clients could be expanded to handle other business that need web hosting services. The economies of scales provided by helping other business manage online information reduces the costs of running Amazon’s own site and gives it an unexpected source of revenue. Amazon currently helps many large and small companies as well as many governments handle their data needs.