In 1995, founder and CEO of Amazon, Jeff Bezos, launched the world’s most popular online bookstore. Amazon had a primary goal to become the world’s leading online bookstore and eventually morphed into a prominent company in E-Commerce delivering diverse services and products to customers. People were astonished with the ability of ordering from an online retail store. As Amazon saw a success in selling books online, they found ways to preserve consumer’s choice and elements that would set the company at an advantage from its competitors within the marketplace. Amazon’s market strategies have allowed the company to flourish a sustainable competitive advantage through the use of non-substitutability, technological infrastructure, and free shipping.
Amazon has an advantage over competitors because of non-substitutability. The company has successfully pioneered products which other companies are unable to replace. Amazon offers high quality products at lower prices and fast delivery. Amazon is portrayed as ‘The Everything Store’ which sells products such as books, media, apparel, beauty products, tools, automotive items, and much more retail goods. Amazon quickly became a success because they value adaptability and change for societal needs.
Jeff Bezos believed that the key to consumer growth was to run the company with low-profit margins. Customers grow a relationship with Amazon because they believe competitors are unable to beat prices on quality products and services. According to the article, “How Did Amazon Build Its ‘Sustainable Competitive Advantage’,” Shah Mohammed states Amazon’s initial goal of providing valuable and low price products to customers. An advantage that Amazon has over competitors is providing customers access to products that are not available in their region. The online shopping experience is efficient for customers because of Amazon’s fast purchasing process.
With the increase in sales of various retail goods, Amazon grew rapidly and needed more distribution centers. The company needed to investment in their technological infrastructure and software. In order to run efficiently, the main concern of distribution was the quality of service and what is promised to the customer. Amazon decided to come up with a distribution system that would set them apart from any competitor. They had to come up with a system that would cover storing, handling, and shipping retailed goods.
Their solution would have to correlate with the value it brings to customer’s satisfaction. Executives from Amazon went ahead and hired outside of retail such as scientists and engineers. Through the innovation, they worked on changing software codes and algorithms. It was impossible for competitors to overwrite this strong competitive advantage of new supply chain algorithms.
The algorithms were simplified for how to stock items, when, and where. This process allows employees to fix a problem during operations. In contribution to the company as a whole, its improved quality shipment, faster deliveries, and exact delivery dates. As profits increased, Amazon continues to open and operate more facilities, allowing the volume of shipment goods to increase dramatically. The company has converted shipping days into hours and offers same day deliveries, one day to two-day deliveries, and overnight deliveries for a reasonable fee. With a variety of products to offer, Amazon improved its line of service through technological advancements in order to enhance shopping experience.
When it comes to online shopping, people refuse to pay for shipping and handling. In the beginning, sales increased after Amazon offered free shipping on orders of $100 or more. After a while, Amazon began to lower shipping cost and eventually established free shipping for items that may take a few days to arrive. However, there is various shipping fees charged for customers who want products before a scheduled time. By 2004, Bezos had decided to come up with a cost that would benefit the time-sensitive customers. Amazon Prime was the next biggest hit in expediting shipping through a monthly fee. Amazon profits increased along with customer satisfaction.
According to article on Forbes magazine, “Amazon Hits Over 100 Million Prime Members,” Amit Chowdhry states Prime memberships have increased over 100 million and members spend at least $1,300 annually. Amazon began to benefit from prime customers than non-members. Some competitors have tried to implement a subscription such as Amazon Prime but have been unsuccessful and eventually eliminated it from their business. The increase in sales by Prime users led to an improvement in inventory management and eventually decreasing the prices on products. Lastly, free shipping and membership subscription for time sensitive customers has helped Amazon build a competitive advantage and increase financially.
In conclusion, E-commerce consumers have gained Amazon’s trust through their products and services. Amazon’s competitors will try to implement their strategies but have difficulties succeeding. Amazon is willing to invest in the customer’s needs in order to receive double the return. Amazon’s profits will continue to increase because of their sustainable competitive advantage through non-substitutability, technological infrastructure, and free shipping.