Amazon.com is an American internet retailer based in Seattle, WA. It is currently the largest online retailer in the world, and has separate retail websites for Unites Stated, Canada, United Kingdom, France and more. The company was founded in 1994 by Jeff Bezos.
Since then Amazon has grown to become a popular global brand. It began as one of the original dotcoms, and over the last decade it has grown to serve a customer base of approximately 30 million consumers. As one of the first online retailers Amazon was pioneer of online technologies and e-commerce. Amazon started out as an online bookstore, and began building on its success adding product categories that include electronics, toys and games, DIY and more.
A SWOT Analysis can evaluate the Strengths, Weaknesses, Opportunities and Threats involved in Amazon.com’s business. A SWOT analysis is important in evaluating the company’s health and planning the company’s future endeavors.
Amazon is able to lead the online retail marketplace due to their ability to utilize economies of scale. The company has a warehouses around the world in which they ship products from. Although it is not difficult to start on online retail store, it is difficult to acquire a distribution network to the likes of Amazon’s.
With Prime Amazon offers high quality digital content, from movies to music, through unlimited streaming. Per month Prime is less expensive than its main competitor Netflix.
Amazon offers customers the convenience of one-stop shopping online.
Amazon is equipped with product comparisons and consumer product reviews providing the customer all the information they need to make an informed decision about their purchase.
Amazon’s prices are consistently competitive, they have free shipping offers with a minimum purchase, and offer partner discounts to their customers.
Amazon has created an effective online experience. Their site is secure, orders can be monitored and managed by the customers.
Customer Relationship Management and IT excel Amazon's business. The company records data and utilizes information on buyer behavior. This allows them to offer custom products and offers to consumers based upon their previous buying and browsing history.
Since Amazon is exclusively an online retailer, its overhead is much less than that of its brick-and-mortar competitors.
WEAKNESSES: Amazon’s cost structure could become a liability. A substantial amount of its expenses come from media costs. The content they offer on Prime is a high cost to Amazon, and has to be recouped by Prime memberships.
There is a low barrier to entry in the online retail market. It is simple to start an online store with minimal capital. However Amazon has an advantage in the market, as it is difficult for small startups to compete with Amazon's economies of scale.
The Kindle Fire’s main competitor is the iPad. The Kindle Fire is a good quality product and offers similar technology as the iPad, however it is perceived as a lower quality product by consumers.
OPPORTUNITIES:
Consumer confidence has been high and is continuing to increase. More and more consumers are turning to online “one stop” shopping for added convenience in their busy lives.
The Kindle Fire is increasingly competitive with the iPad, iPad Mini and other tablets. Currently it is the second most popular tablet after the iPad.
Amazon's Prime video is a direct competitor with Netflix. Many prefer it to Netflix as all of its content is available to stream.
Apple has recently had some technical problems with its products and the newest version of iOS.
Amazon is utilizing its expertise as an online retail giant by selling its services to other store groups. Companies such, such as Target, are creating joint ventures with Amazon to offer their products and service on Amazon.com.
In addition to their online retail business, Amazon has also stepped into the business of leasing their servers. Amazon has warehouses full of servers that are only needed during the peak retail season to support the extra online buying during that time. While these servers sit idle they have moved to leasing them out to smaller internet businesses in need of servers.
THREATS: Price competition could harm the Amazon’s business. All successful businesses attract competition, since Amazon sells similar products as brick and mortar retailers and other online businesses. It could become more difficult to distinguish the Amazon brand from its competitors.
International competition may also encroach upon Amazon’s business as it expands. Competitors who are unable to compete with Amazon in the US market, may establish business abroad to compete with them in foreign countries.
Amazon is vulnerable to its competitor’s creation of new mergers, joint ventures, and strategic alliances. Amazon could easily lose market share and its top position if its competitors team up and create effective alliances.
There is an element of seasonality to Amazon’s business. A high percentage of their gross sales comes in November and December. But, by expanding to foreign markets they may be able to balance out the domestic seasonality their business experiences.
Many brick-and-mortar stores and eBay have developed “buy-in-stores” features that could threaten Amazon’s business. These features combine the finest features of online and brick-and-mortar retail. Customers have the ability to purchase an item through internet and immediately pick it up in the brick-and-mortar store.
The launch of the Apple iPad Mini is a direct threat to the Kindle Fire. The iPad mini is a much closer competitor to the Kindle Fire than the iPad, as it has a more competitive price point and technical specs
Brick-and-mortar retailers provide consumers with instant gratification and an in-store experience. Amazon.com cannot provide physical browsing or a café for relaxing.
CONCLUSION:
Based on the SWOT Analysis it is clear that Amazon is an industry leader and will likely continue as a successful internet retailer. Continuous innovation and solid customer relations will be the key to Amazon’s future success as an industry leader. Increasing collaboration with channel partners, enhancing their reach in global markets, continuing to increase research and development to provide a competitive advantage in the marketplace, and most of all providing top of the line customer service will all be key to their business success.
