amazon

22 Dec 2019

What is Amazon doing to its competitors when it comes to economy?

How does a company that sells books become a titan when it comes to a variety of new services? What Amazon has been doing in this decade is memorable. However, the path from what it was at the beginning to what we see now is not very clear. If you want to discover what happened, we from Finances Credit have some insights for you.

If you are not acquainted with what is Amazon, we explain it briefly. Today Amazon is a titan of e-commerce. It services involve logistics, payments, hardware, data storage, and media. If you are searching for a book, a gift or something for your house, the company website the go-to site. Besides that, Prime, Amazon’s signature membership program, has an estimated 85 million subscribers in the US. The range is absurdly wide.

amazon
What does Amazon have that makes it so distinct from other competitors? (Source: Pixabay)

What is the Amazon thing? What can we learn from it?

The Flywheel philosophy

Something you should know is that behind every Amazon business decision is the “flywheel” philosophy. This is a term that Jeff Bezos (Amazon´s CEO) borrowed from business consultant Jim Collins. Basically, it describes a cycle in which a company cuts prices to attract customers. If you are used to online shopping, you know that the prices of the company can be very different from those you would find while shopping on site.

The low prices increase sales and obviously attract more customers.  That being so, the company ends up benefiting from economies of scale. Since it is a cycle, the company can cut prices again, spinning the flywheel anew. This seems to be the best encapsulation of Amazon’s dual ambitions: customer-obsession and the mastery of the modern commercial world. It seems a lot for a company that sells books, but they did it.

Put your clients first

Because of the very philosophy that sustains Amazon, putting the client first is key. To Bezos, offering great customer service and keeping prices low were fundamental measures that guaranteed the company success. Because of that, the investment in its endlessly complex logistics empire is enormous. For instance, in 2012 Amazon purchased Kiva Systems, a company that makes robots for $775 million.

Despite its expensiveness, Amazon investments bring great results. If you want to see some of them in your own company, perhaps you could apply some of them at a low scale. Research how to do it effectively, make a plan and put in in practice. It may take a while, but the results will come.