The Rise of Amazon
In its fifteen years of existence, Amazon.com has transformed from a humble online bookstore (with a goal of 300,000 available titles – too many titles to fill even an independent bookstore) (Anderson, 2005) to now selling more than twenty million products inclusive of music, movies; it even stocks all twenty-nine colors of the KitchenAid 5-quart mixer (Anderson, 2005). Unlike Amazon’s original competitors – bookstores such as Barnes and Noble, Borders, and Ebay, the web service has stayed loyal and consistent with their customer base since its commencement in 1995. Their commitment to extensive visionary thinking, long-term strategies, streamlining, strategic investments, innovative thinking, and careful obsession and consideration of and over the customer have led them to the success that they, and their customers enjoy today (Treanor, 2010). Evidently, Amazon has expanded its business; this is clear through the products and services they offer, as well as through their ever-expanding customer – and competitor base. Although traditional competitors such as Barnes and Noble, and Ebay are still viewed as competitors today, Amazon’s foray into household items, media products, and even food have earned them competitors such as Walmart, Google, and websites such as Buy.com, and ShopRunner (Enright, 2010) which launched in October of 2010. Among over a dozen retailers, ShopRunner offers a shipping program very similar to Amazon’s – for products bought from contributing e-retailer websites. And if entering into such a large market was not enough (Enright, 2010) (Treanor, 2010), Amazon released the Kindle in the year 2008, and has since become the competitor of many more manufacturers – in the tablet business. Most prominent is Apple, who entered into this niche market with their Ipad, and most recently, Ipad 2 (BBC, 2011). Among the Kindle’s other competitors are Blackberry, Barnes and Noble, and Samsung. The most important question at present is, with the release of Amazon’s new Kindle Fire earlier this year, who are Amazon’s most forefront and serious competitors. Should they be worried?
This purpose of this essay is to answer that question. Along with Amazon’s reasons for its trajectory to success, this essay also serves to reveal insight into Amazon’s past, present and future competitors, and the differences between them and Amazon; and furthermore, why this industry leader is ahead of the game, and should not feel endangered.
From its modest beginnings in 1995, Amazon.com has risen from its Seattle, Washington roots, and in the past sixteen years has earned itself a spot within the Fortune 500 e-commerce companies in the world. The company’s CEO Jeff Bezos credits the company’s success to its four part strategy: 1. Obsession over customers, 2. Innovative invention, 3. Long term thinking, and 4. Always believing that today is day one (Treanor, 2010). It is Amazon, and of course Bezos’s firm belief that companies must begin envisioning the customer’s wants and needs, and then begin to work backwards in order to develop product and service solutions that will satisfy, and exceed expectations accordingly. Furthermore, to pay tribute to the customer, the company follows a strict regimen of “developing a cohesive culture of innovation” (Treanor, 2010); they strive to invent out of the box solutions. Bezos also takes great pride in always thinking long term for Amazon. Through the company’s obsession over customers, and inventive rules and regulations, it is bound to take several years for return on investments; however, Bezos is firm in his belief that this is ok, because the customer will benefit much sooner than that. Lastly, it is Amazon’s unparalleled belief that each day brings new opportunities to obsess and fixate over and upon their customers, be even more inventive and innovative all over again (Treanor, 2010). In this way, Amazon continues to expand on all levels. Never is the achieved level of customer service, or experience enough. There is always room for improvement; to make the customer more satisfied then they already are (Treanor, 2010). Such a process doubles as an incredible competitive advantage, and Bezos has learned this through firsthand experience. In 2005, Amazon tried its hand at advertising to gain awareness for the web store; advertising campaigns were produced for both the states of Washington and Ohio. Results were tracked in both these states to note the differences. An increase in sales, and a difference from areas not advertised to was definitely present; however, not relevant enough to warrant a campaign on a global scale. Thus, the decision was made to make away with all advertising and use that money to lower product prices for the customer. Bezos maintains that should a company offer good service and good products, people are going to hear about it (Burrows, 2008).
Although the company is presently minting money and satisfying customers on a regular basis, from 2004 – 2006, Amazon.com’s stock “fell from more than 50 to as low as 26” (Burrows, 2008). It is also true that for a large part of its existence as a company, Bezos was in “Wall Street’s doghouse” (Burrows, 2008); however, this is wholly in part to Bezos’s commitment to exceptional customer service and customer experiences; he has never ceased to insist on building the capacity to support new products and services. If this required massive spending, then so be it, it was for the customer’s benefit. Fortunately, and rightfully so, Amazon was back on track by 2008; not only had the company emerged as the “undisputed e-commerce champ”, but Bezos had succeeded in embarking in the company’s most historical, and ambitious growth initiatives (Burrows, 2008). It was around this time that Bezos began to reference, and would soon announce Amazon’s release of the Kindle. Up until this point, Amazon’s main competitors included the likes of: Ebay, Barnes and Noble, Borders, and other online shops such as buy.com, and shoprunner.com etc. Amazon has always been ahead of the game in that it Bezos very quickly saw its trajectory to success. Amazon has a history of investments in affiliating with, and purchasing companies across an expansive and diverse variety of industries. Furthermore, a large amount of their acquisitions and investments are within the technology industry; this leaf was turned over in an effort to support the company’s book business (among other industries) (Treanor, 2010). In this way, Amazon was always five steps ahead of their competitors. And although online stores such as buy.com and shoprunner.com had a competitive advantage in that they offered similar methods of fast and efficient shipping, or better prices on certain products, it was never enough to overthrow this industry leader (Enright, 2010).
On November 19th, 2007, Amazon released The Kindle, the ever-awaited e-book reader. Although similar technologies had been previously released, nothing could compare to this new age technology. The Kindle utilized a high-resolution screen (with no backlighting) in an effort to mimic the effect of reading a real book. The font size was easily adjustable, and pictures would appear in “four-level gray” (Flatley, 2008). Furthermore, the battery charge would last for several days in the case that wireless feature was turned off. This wireless feature would allow the user to connect on Amazon.com and have its selection of e-books at their fingertips. The standard rate for a Kindle e-book was, and remains to be approximately $9.99 (Flatley, 2008). The Kindle was initially only available in the Unites States, and sold out in approximately five and half hours upon the day of its release, and remained out of stock until late April of 2008 (Flatley, 2008). With the release of Amazon’s Kindle, the company was entering into an entirely new competitive market. In the present day, the Kindle’s main competitors include the Samsung Galaxy, Blackberry’s Playbook, and most prominently, Apple’s Ipad. In the inception and release of the Ipad, the presence of the Kindle did not necessarily pose a threat. At this point, they were devices that catered to two different markets. The Ipad – a portable, and touch screen laptop, and the Kindle – originally designed for portable and convenient e-reading; although equip with internet capabilities. The main differences between these devices was and continues to be Apple, Samsung, and Blackberry’s (among all other manufacturers of tablets) utilization of the backlight. As Bezos states in his interview with Daniel Lyons in Newsweek, most individuals are content reading short articles or blog posts on a desktop, laptop, or cell-phone screen, but no one (himself included) wants to read a three hundred page book on their computer. Bezos continues to state that this is the purpose of the Kindle – it brings the convenience of wireless connectivity to long form. His belief in the significance, and learning capabilities that come from long form text as opposed to short form text are completely justified. Spending ten or twelve hours living an alternate life through a novel is incomparable to reading a blog post in five minutes (Lyons, 2009). Amazon’s long time and remaining competitor Barnes and Noble have also produced an e-book reader called The Nook Simple Touch (and most recently, The Nook Color) (Wasserman, 2011). In August, 2011, Barnes and Noble’s fiscal first quarter earnings were up 37% for the quarter – compared to the same period in 2010; this was all in part to The Nook, their very comparable (complete with a high resolution screen, and not a backlight) e-book reader (Wasserman, 2011). However, the release of Amazon’s latest version of The Kindle: The Kindle Fire on September 28th, 2011 was responsible for the decrease of Barnes and Noble’s stock of more than 9%. The reason for this being that Amazon introduced The Kindle at $199, a price that undercut the most recent version of the Nook by fifty dollars. If that was not enough, Amazon reduced the price of its previous version of the Kindle, making it sixty dollars cheaper than the previous version of the Nook (Wasserman, 2011).
The Kindle Fire is not just an e-book reader; Amazon to say the least, is very attuned to the global audience, economy, its customers, and are (as previously stated) exceptionally loyal to them. In this way, the most recent version of The Kindle is entering an even larger competitive market; the color tablet complete with full media, internet, and of course reading capabilities is significantly cheaper than most recent tablets released by Samsung, Motorola, and of course Apple. At this point in the game, it appears that The Kindle’s biggest competition is the Ipad 2, and vice versa (Ulanoff, 2011). Both Amazon and Apple have spent years constructing a foundation for their own “hardware/software ecosystem” (Ulanoff, 2011). This is illustrated in the Kindle’s free, integrated, and user-friendly 3G technology: Whispernet; this innovative technology allows the Kindle user to buy and consume books wherever they are (Ulanoff, 2011). Similarily, the advent of the Apple Apps store is a milestone in its history; in the span of less than two years, there are over 100,000 apps available for the Ipad. This is incomparable to the amount of and the amount of Android apps available for The Kindle pales in comparison (Ulanoff, 2011). However, unlike the majority of tablet manufacturers, Amazon understands user interfaces; Ulanoff states that “no other competitor” aside from maybe Apple, “runs such an active and varied website for consumers”. Furthermore, he states that Amazon also understands the retail space better than most manufacturers delivering Android devices; and moreso, it is true that even Apple’s Itunes store cannot offer the diverse and expansive variety of products that users will be able to find through Amazon.com on the Kindle Fire. It is a fact that the Seattle based company has been perfecting its interface for over sixteen years; today, Amazon is a wealthy and user-friendly web-space that often also serves as a source for many “brick and mortar”(Ulanoff, 2011) outlets.
It is clear that Jeff Bezos, and the humble origins of Amazon.com are sixteen years later, a force to be reckoned with. Now a multimillion dollar company due to its focus on niche markets and an invaluable customer experience, it appears as though Amazon.com is a true industry leader. From its origins as a bookstore set on a goal of offering 300, 000 books to now being capable of shipping out more than twenty million products – inclusive of all versions of The Kindle- is more than impressive. In fact, recent statistics indicate that although The Kindle Fire will not be going on sale until at least mid-November, pre-orders for the device hit past the 250, 000 mark only five days after appearing on Amazon.com. Approximately two thousand people are signing up for The Kindle Fire every hour.
Evidently, Amazon is doing exceptionally well in the present ever-precarious economy, and although its competitors are many, it is clear that Jeff Bezos operates his empire with care, courtesy, and above all integrity. This is exemplified in this loyal customer base. At the root of it all, this is what is important – and why Amazon will continue to thrive and prosper.
Anderson, C. (2005, January). The zen of jeff bezos. Retrieved from http://www.wired.com/wired/archive/13.01/bezos.html
BBC. (2011, September 28). Tablet computers: Amazon’s competition. Retrieved from http://www.bbc.co.uk/news/technology-15093288
Burrows, P. (2008, April 17). Bezos on innovation. Retrieved from http://www.businessweek.com/magazine/content/08_17/b4081064880218.htm
Enright, A. (2010, October 22). What amazon’s strong growth means for competitors. Retrieved from http://www.internetretailer.com/2010/10/22/what-amazons-strong-growth-means-competitors
Flatley, M. (2008). Is there a kindle in your future?. Business Communication Quarterly. 71:3, 403-410
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Treanor, T. (2010). Amazon: love them? hate them? let’s follow the money. Business Media, 26, 119-128.
Ulanoff, L. (2011, September 26). Amazon’s tablet: the ipad’s biggest threat. Retrieved from http://mashable.com/2011/09/26/amazon’s-tablet-the-ipad’s-biggest-threat/?WT.mc_id=obnetwork
Wasserman, T. (2011, September 28). Barnes and noble stock falls 9% after amazon tablet launch. Retrieved from http://mashable.com/2011/09/28/barnes-noble-stock-falls/