In this marketing tutorial we will conduct Amazon swot analysis to find out how amazon became one of the world’s most valuable brand. This will analyze its internal environment (strengths and weaknesses) and external environment (opportunities and threats) and how these strategic environmental factors affect the company as a whole.
Amazon is the world’s leading online retailer and cloud computing platform by market value and capitalization. Amazon was founded in 1994 by Jeff Bezos. In the first place, it started online bookstore which was the core business model. Later on diversified its product line to audio video streaming, baby products, audiobooks, videogames, beauty products, furniture, electronics, jewelry and apparels.
Amazon Prime is a subscription service which has a crucial importance in the business model of Amazon. It allows customers to spend more and become loyal customer of the platform. Amazon Web Services is an Amazon subsidiary and cloud computing infrastructure. AWS is a high margin business of 25% and drives 40% of revenue for Amazon.
Amazon Competitors. Amazon is facing strong competition within these segments like Ecommerce, Retail and Streaming segment. Amazon competitors are Walmart, Alibaba, eBay, Flipkart, Tesco, Target, Netflix and iTunes. Other competitors of amazon include Facebook and Google.
The Amazon story (Few Facts from Timeline)
- 1994: The founder Jeff Bezos started online bookstore
- 1997: In few years it reaches one million customer accounts
- 1998: Expended its business and started selling CDs and DVDs
- 1999: Expand into toys and electronics
- 2001: Amazon makes first profit in final quarter of fiscal year 2011
- 2002: Amazon Web Services AWS platform launches
- 2005: Launches Amazon Prime
- 2007: Launches the Kindle e-reader
- 2017: Acquisition of supermarket chain Whole Foods Market
Here will be doing Swot Analysis of Amazon
Amazon Strengths in Swot Analysis
Amazon is a strong brand. Over the years ecommerce giant Amazon has developed a strong brand which is its key strength. Customer trust this brand due to many reasons like huge products, great customer support, efficient delivery network and discounts.
Leading Online Retailer. Amazon is the dominant player in the U.S ecommerce market and according to emarketer.com it is expected to reach 47% sales in the 2019. Amazon.com ecommerce business is expected to grow 20% in revenue and reach $282.52 billion. In 2018, Amazon revenue was $232.887 billion, where as its Net income was $10.073 billion and having more than 600,000 employees.
eMarketer’s list of US Companies by online retail sales in year 2019
- Amazon: 47%
- Walmart: 4.6%
- Apple: 3.8%
- The Home Depot: 1.7%
- Costco: 1.3%
- Wayfair: 1.3%
- Quarate Retail Group: 1.3%
- Best Buy: 1.3%
- Macy’s: 1.2%
Amazon Competitive Advantage Adaptability and Change. There is no doubt that low cost, differentiation and information technology are the major swot strengths of amazon. I will further add two other competitive advantages i.e. adaptability and change. Amazon Inc. started as books seller and later they have adapted considerably. Now you can purchase anything you think and want within no time and Amazon has the capability to deliver even on same day to your door step. What I want to say is that Amazon achieved all the success because it values adaptability and change.
Amazon CRM. Amazon has successfully build its brand mainly around its customers. We can easily understand the importance of customer centric approach for Amazon.
We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.” Jeff Bezos, Founder & CEO of Amazon
Amazon has a powerful Customer Relationship Management (CRM) to gather and analyze data of consumer buying behavior and manage and interact with both potential and current customers.
Logistics and Distribution System. Amazon has an outclass logistics and distribution network to deliver its products around the globe. Amazon has launched its distribution network in 1997 with only two fulfillment centers and growing at a fast pace around the globe. It is not only one of the key strengths of Amazon but also competitive advantage that makes them apart from its competitors.
Amazon Acquisitions. The ecommerce industry giant Amazon has more than 140 subsidiaries started from A9.com 2003 to an American Supermarket Chain “Whole Foods Market”. The few acquisitions include Zappos, Diapers.com, IMDb.com, online pharmacy PillPack and Indian Grocery and Retail Chain More.
Amazon Weaknesses in SWOT Analysis
Low Margins. Just like other giants retailers Amazon is also facing very low profit margins which is one of its key weaknesses and affecting its profitability. Though this ecommerce and clouding computing company generated huge revenue of $232.887 billion, its net income was merely $10 billion in the FY 2018.
Amazon Worst Product Failures. Though amazon is a successful retail company on the earth but still facing failures. For example Amazon biggest failure was the fire phone which was released in 2014. Kozmo was another investment of $60 million which was a delivery service of small items like DVDs, office supplies and books etc. it was closed down in 2016. Other Jeff Bones failures include Destinations, Daily Deals, Amazon Register, Fulfillment by Amazon, and Amazon IOS Kindle Apple.
Physical Stores. Amazon business model is relying of online retail and cloud computing. It has a limited brick and motar presence that is a major weakness to attract those customer who like physical stores or unable to access internet.
Another swot weakness of Amazon is investment and acquisition of different companies which is a kind of hurdle in the company growth.
Amazon Opportunities in Swot Analysis
For any company Swot analysis opportunities are the external strategic factors that can be used to take advantage to grow the business. Here are some of the opportunities for amazon in ecommerce marketplace.
Global Expansion. For any giant retail business like Walmart and Ebay expansion is always in a opportunity because they have already a brand name and brand image and can easily gain the trust of customer. The same case is with Amazon. It is an opportunity for Amazon to expand its ecommerce business model in the developing countries especially in low competition markets. This move will not only increase their global presence but also a competitive edge to Amazon.
Physical Stores. For Amazon investing in physical stores means more retail market share. It is considered a great opportunity for amazon to invest in more physical stores to increase its brand presence and customer loyalty.
Local Ecommerce Platforms. Another opportunity for Amazon, to penetrate in the market to increase its brand presence, is to develop local ecommerce stores or acquire existing ecommerce platform. It will not only minimize the level of competition and capture the market share.
Action Against Selling of Counterfeit Products. Amazon 3P is a third-party marketplace where merchant are allowed to sell products in an unregulated environment. But Not now. This is one of the great opportunity for amazon and have already announce to take measures to stop selling of counterfeit items. Let’s us wait how Amazon will capitalize this opportunity for growth in the near future.
Amazon Threats in SWOT Analysis
Cyber Security. Amazon an online retailer is considered a juicy target for any hackers. Its stores the important data of customer like credit cards and other sensitive purchased data. Data breach is a key threat to Amazon. Any mishap (data breach & DDos attack) is inevitable and can affect the amazon stock, credibility and profitability.
Competition. Amazon is facing another threat of competition from local competitors and giant ecommerce retailers like Walmart, Ebay and Netflix. Local players like Flipkart, Daraz.pk Sky (Germany) and Hotstar are good example of local competition. These local players can negatively affect Amazon market share and profitability.
Government Regulations. These regulations fall under the umbrella of external environment of a company. In the recent past, Donald Trump has lashed out at Amazon for Antitrust issue and taxes. In December 2018 Indian government banned Amazon and flipkart, one of its local competitor, from selling of those companies products where they have an equity stake.