Mar 08- 10: Amazon – A deeper look into the Eccomerce colossus

I have spent over 3 days to read some analysis on Amazon in Quart and Finimize, the best newsletters on business updates and strategy right now to me.

First notice, I only include some “new” insights, while neglecting basic information of this company. If you have never read on Amazon, I recommend reading these ones first: Prime story (Vox) and Amazon overview (Quartz). It takes only 20-30m.

The ingredients of Amazon’s retail dominance

• Convenience: 1-click ordering, fast and free shipping, and Prime (Amazon’s signature)
• Price: Amazon can bring the best price as it’s an efficient cost structure. It comprises: (1) A large partner network from logistics, retailers and technology companies (2) Investment in key activities (FBA, promotions,..) (3) Access to key technology to optimize operations (ex: Robots in warehouses)

What does Amazon take from business owners?

I usually think that the price for a brand to operate successfully in Amazon is cheap, but it’s actually not, the cost may even account for ~50% of their revenue: 

1. Commission on sales – for Amazon
2. Shipping – the highest cost, which is included in FBA. Every brands chooses FBA to bring the best customer experience, then it’s like a must-have item when a brands registers in Amazon
3. Advertising – another “must-have” cost
4. Storage

Amazon’s bets on brick-and-mortar stores

There are 2 reasons why Amazon decided to get physical

• Stores are still where most shopping happen (89% sales in the US)
• Stores are places where Amazon can implement its experiments. When Amazon gets bigger, its experiments need to be put on bigger scale and a larger number of customers.

Amazon current physical-store footprint in the US

• 487 Whole Foods stores: Amazon acquired this chain last year to access organic products’ wealthy customer base, which is also the target of Amazon Prime
• 23 GO storer: small-sized ones where Amazon experiment the non-cashier services
• 21 book stores: the entry product that it uses to lure customers
• 9 4*-stores: where Amazon sell highest-rated products in its marketplace

There are rumors that the company will open its first grocery stores at the end of 2020

The failed global ambitions

Let’s look at some of other markets that Amazon focuses outside US

• India (the main one): While sales is yet to contribute much to company’s overall performance, Amazon has to deal with the harsh competition from Walmart and concerns from antitrust regulators
• China: Amazon finally gave in the business here in 2019
• Brazil: cannot compete with entrenched e-commerce leaders
• Europe: overall Amazon is thriving here. However, it cannot compete in the most lucrative category: apparel and also there is many antitrust concerns over countries
• Japan & Mexico: managed to gain a foothold, despite the competition from rivals such as Japan’s Rakuten and MercadoLibre again in Mexico

In recent years, it has also started selling in places such as Australia, Turkey, the United Arab Emirates, and Singapore

The impact of warehouse automation

Amazon’s warehouse operation is an art. Read it here (Quartz) . Yeh then this art yields a huge impact on both customers and Amazons

• To customer: Reduce delivery time. By using robots, the time between orders received and orders shipped reduced from 75m to just 15h
• To Amazon: lower cost – Robots work faster and more accurately than humans. Also, the factory aisles no longer need to be wide enough for people (attached p