Amazon has always been on the forefront of e-commerce modernism. This has resulted in the transformation of the company from a small-scale online store for bibliophiles to the second largest e-commerce website on the planet, in just under 20 years which is a short period of time for any company to be so well known. Amazon has been around since the very beginning of the public internet. It was founded by Jeff Bezos who had the vision to see that while the internet was still small (only 16 million people) and no commerce yet transacted on it, it was growing at 2300% per year and would soon become the new economy. Here we look at some of the company’s key innovations that have contributed heavily to its success. Amazon itself is a low order disruptive innovation, while it didn’t completely create a new market it brought people greater convenience and through a series of numerous other innovations grew itself into the world’s largest online retailer.
The launch of the Kindle, back in 2007, is termed by many as the single biggest achievement by Amazon to secure its future. It truly heralded the arrival of e-readers to the mainstream. Since the launch, Amazon has shipped millions of Kindle devices across the world and has obtained billions of dollars in revenues from their eBook store. In addition, Amazon now serves as a publishing platform for independent authors, allowing them to have a healthy share of the sales figure, at 70%, if they publish their book on Kindle. It was Amazon who created the original disruption in the field of books since their online store carried just about every title imaginable and they were relentless in getting the best prices and at times even going to war against publishers. Amazon made it so authors could sell their books directly to the public and cut out the middle men and then disrupted the field again with digital books and the kindle.
Amazon’s pricing system employs many algorithms that scan for prices from thousands of competitors and adjust based on that and demand. This automated system ensures that Amazon remains competitive while also making a profit. In the past Amazon also engaged a good deal in dynamic pricing which is when an items price would change based on a calculation of supply vs demand. Another key point of Amazon is the aggressive behavior they have consistently put on their suppliers in order to get the best prices for customers.
Amazon was one of the early pioneers for reviews and ratings which has since become a mainstay of other e-commerce sites. Reviews and ratings carry a greater than 10X trustworthy factor to the average user than a statement made from a manufacturer. The depth of Amazon reviews is so large that many people will visit Amazon to read the reviews regardless of whether they ultimately end up purchasing there or not, giving it a secondary purpose as a Yelp like engine for products.
Amazon’s warehouses and fulfillment centers, dotting its service areas, are the pinnacle of modern inventory management. The top fulfillment centers in the US are replete with robots that whiz around carrying racks pertinent to a given order. The items are then manually placed inside the fulfillment basket by employees before they are weighed by robots again to check if they add up to the predicted weight. They are packed and sent to the The SLAM (Scan, Label, Apply, Manifest) module, which then matches the basket’s barcode with the Amazon order in question and prints the required labels. The SLAM module can deal with a package every second. Such robust warehousing ensures that Amazon orders are the fastest to ship out among all large-scale ecommerce websites. There are currently 89 warehouses in Amazon’s vast network scattered around the world to provide fast delivery.
Amazon’s 1-Click service is the fastest way that consumers can place an order online. With it they can purchase the item(s) of their choice with the click of a single button, provided that they have shopped on Amazon at least once before. This removes the hassle of shopping through an online cart system that requires the completion of several steps before the consumer can check-out.
Amazon prime started as a free shipping service but over the years Amazon has added many benefits that make it more of an Amazon club membership. Amazon data scientists realized that by providing free 2-day shipping, even if the average shipping cost over the course of the membership was greater than the prime fee of $99 ($79 prior to 2014) they would still make more net profit thanks to increased sales. People who have an option of free 2-day shipping are more likely to turn to Amazon to buy any item they need. Over the years Prime has become more than a shipping service it now is a direct competitor to Netflix, offering free access to thousands of movies and television shows. If you’re located in a larger city you might have access to things like one-day shipping and even free 2 hour grocery delivery. Other benefits include access to over a million songs, free ebooks and special discounts.
Amazon is a deeply analytics based corporation and is driven by team of data scientists who find ways to increase overall conversion. Machine learning is used to find the products you are most likely to buy based on your previous browsing or purchase history with the company. Pricing algorithms help Amazon find the right price based on other competitors and supply. They recently deployed artificial intelligence software to help combat fake (bought) positive reviews that dilute the trust users have of their review system. The company uses a software tool for instant feedback for any members of the organization that helps employees constantly improve. One of their greatest internal systems is their inventory software, that coordinates the picking and packing of items in the absolute quickest amount of time.
A couple years ago Amazon first mentioned wanting to develop drones and many people didn’t take them quite seriously. Fast forward to 2015 and it became clear that Amazon has a real intention to develop a drone delivery program in select markets. They are already conducting tests in Washington with an ultimate goal to provide package delivery within 30 minutes. Amazon has been leading the way in proposing regulations to make a safety corridor for drones to operate and all their drones are self-designed with sensing abilities to avoid obstacles. They are currently experimenting with several different models and said to be able to fly up to 15 miles. If Amazon is successful in bringing drone delivery it will certainly spill over into other industries and greatly expand the developing drone service market. Knowing Amazon they will probably eventually adopt a modular approach and sell the drones or a service using their drones to other companies.
Amazon Fulfillment System
The Amazon fulfillment system takes advantage of 89 warehouses and a highly just in time shipping system. When an order is put in Amazon immediately beams that information to an individual with a handheld scanner who is directed to a location, grabs the items and brings it to a conveyor where it works its way to a pre-package station. This whole system is highly automated with each movement and order carefully machine calculated to arrive in an order that maximizes efficiency. The huge network of fulfillment centers allow 3rd parties to sell their products through Amazon but not have to physically ship the products to the consumer. Amazon has continued to innovate with their shipping system even going so far as to begin to develop an anticipatory shipping system that allows them to use machine learning to decide which customers will likely order what products and to pre-pack those and even ship them nearby the customer so they can be quickly delivered when the order comes in.
Amazon Web Services
Amazon Web Services is a cloud-computing platforms that provides more than three dozen services to third party websites. These include cloud storage, caching services, data warehousing, front-end database services, among others. To provide robust access to internet users, AWS has 12 strategically-located data centers across the world. Launched in 2006 as one of the pioneering firms in cloud-computing, it has seen strong growth that even surprised forecasters. As of 2015, AWS is deemed as a highly profitable entity with yearly revenues almost always double of the operating income. At the time it was quite a leap from an e-commerce company to go in an help pioneer the new field of cloud computing. Thanks to ventures like these Amazon now represents more than e-commerce but also media, hardware and cloud services and could just as easily jump into just about any field it wants and have the necessary brand permission.
Amazon Mechanical Turk
The Mechanical Turk is a service from Amazon that uses crowdsourcing for a high number of easy tasks that on their own would be time consuming. The system has been used for abuse reports, spam, to find duplicate pages, missing persons and other data classification tasks. These tasks are usually beyond the skills of automation and instead require a humans cognitive ability like deciding what category a picture should be in.
Other Jeff Bezzos projects
The Clock Of The Long Now also known as the 10,000 year clock is a project being built with support by Jeff Bezzos and expected to eventually be installed in Nevada. The clock is expected to last 10,000 years (or longer) and will create a unique chime for each bell ringing sequence for many millenniums to come. It’s designed towards longevity with bronze age technology and built to survive the heat, earthquakes and provide a place for humans to reflect on the passing of time and civilization.
Blue Origin is a aerospace design company launched by Jeff Bezzos to create a re-usable spacecraft and ultimately deliver people into space. It’s expected in 2018 that Blue Origin will start taking passengers into space, sending them upwards of 300,000 feet for 4 minutes of weightlessness and bringing them safely back down. With its New Shepard spacecraft Blue Origin recently made history on November 23rd, 2015 by launching and then landing the rocket and made history a second time by re-launching the re-usable craft and successfully landing it again.
Amazon continues to lead the pack in terms of business model innovation. If Amazon keeps up with this innovative pace, it will continue to be at the top of not just e-commerce but other yet to be created markets.