Amazon is the world’s largest online retailer, but the company is so much more than just an internet marketplace. With a market value of $1.46 trillion, Amazon has made its creator, Jeff Bezos the richest man in the world.
There are a dozen reasons why Amazon has become so incredibly profitable, and in this article, we’ll cover exactly what makes Amazon so successful.
Amazon is unbelievably successful for several reasons including the fact that they have greatly benefited from the economy of sales, create billions of dollars of revenue in advertising and third-party sales, offer a fantastic user experience and have almost 100% customer retention, and so many more.
If you want to find out the twelve reasons why Amazon is so successful, keep reading! We are going to go through each one in detail so you can fully understand what makes Amazon one of the most successful companies on the planet.
At Amazon, the customer always comes first! While many companies boast a client focused approach, Amazon puts their money where their mouth is and does absolutely everything they can to ensure their customers are satisfied, and therefore, coming back for more.
There are several ways in which Amazon guarantees customer satisfaction including but not limited to the following:
- Free Returns. The Amazon return policy is almost unbelievable. You can return an item for literally any reason within 90 days of purchase for a full refund, no questions asked. Most of the time, Amazon will even pay for the return shipping.
- Fast and Reliable Delivery. When Amazon says a product will arrive in two days, as it often does, you can be sure it will be on your doorstep on the established date. If the item is not delivered on time, you can keep it and still get a full refund!
- Personalized Shopping Experience. Whether you like it or not, Amazon knows a whole lot about you and the conglomerate uses that information to offer you what you want, when you want it.
- User-Friendly Interface. Both Amazon.com and the Amazon app are incredibly easy to use. Once you have signed up, put in your address, and entered your payment method, you can order your next purchase, and every purchase after that, with just the click of a button.
Although there are eleven other reasons on this list, many experts would argue that Amazon’s commitment to the customer is what has driven their success over the past twenty-eight years.
People love low prices, and there is no doubt about it, Amazon offers some of the most affordable priced products on earth.
Amazon sets their prices unbelievably low in order to keep the customer happy, however, why they can do that is still a mystery to many consumers.
The truth is, Amazon is able to place such low price tags on their items because of how much money they make simply being Amazon. By selling 4,000 products per minute, Amazon sells more than 2 billion items every year.
In addition to the fact that they make billions of dollars through advertisements, third-party sales, and Prime memberships, Amazon can keep their prices low without breaking a sweat.
In addition to offering fantastic features and service to their customers, Amazon ensures that each and every one of their customers are taken care of.
The company offers a 24/7 phone line, online messenger, and detailed descriptions of every question a customer may have on their website. Unlike some other companies, when you do get in contact with their support team, they do everything they can to answer your questions and get you what you need.
With free returns and seemingly endless refunds, Amazon’s customer service is certainly one of, if not the best there is, which has led to customer retention and wild success.
Statistics show that over 45% of consumers read reviews before making a purchase. On Amazon.com or on the app, almost every product has several, if not hundreds, of reviews.
While Amazon tends to do a fine job at describing their products, offering a review focused marketplace in which customers can look to other personal experiences to decide if a product is right for them makes them stand out from other online retailers.
As a bonus, Amazon is not only making the customer happier, they are also making their jobs just a little easier!
If a customer reads a specific problem another client had with a product, i.e. shoes whose sizing runs small, they are more likely to either get their order right the first time, or not complain when it happens to them.
As you probably already know, Amazon seems to have absolutely everything anyone might need or want. In fact, they offer over 12 million different items for sale on their site!
This wide variety of products, including hundreds of name brands, their private labels, third-party sellers, and even refurbished and renewed products at an extreme discount, has made Amazon everyone’s one stop online shop.
By ensuring that the customer can find everything they need on Amazon.com, the company has one again solidified their success as the world’s most used retailer.
In addition to simply having a lot to offer, having so many products at a variety of price points makes Amazon a great place to price compare and even get ideas for what item you may want. This brings customers directly to the site before they even know what they want.
Being a third-party sellers platform has greatly influenced Amazon’s immense success. Essentially how it works is that small to medium sized businesses can sell their products through Amazon, ship them themselves, and simply pay Amazon a cut of the profits.
In this exchange, Amazon really doesn’t have to do anything except provide the customers and interface, which they already have, and enjoy the influx of cash. In 2019, Amazon made over $12 billion on third-party sales alone!
This extreme profit margin, as well as the billions of dollars on advertising which third-party retailers pay to the company, is certainly a big part of Amazon’s fiscal success.
There are over 200 million Amazon Prime subscriptions around the world. While of course, making billions of dollars from Prime memberships certainly adds to Amazon’s success, it also keeps their clients happy, committed, and making more and more yearly purchases on their site.
Whether you are looking at Amazon’s success from a financial standpoint or customer retention and satisfaction, offering Prime memberships certainly has enhanced the company in both categories.
If you haven’t heard of the economy of sale, it is when a company becomes cost efficient, i.e. lowers their production costs, due to the fact that they have such a large production rate.
And Amazon is literally the prime example of a successful economy of sale: the more they grow, the less they spend.
By offering millions of products across every category there is, Amazon has made their business much cheaper to run. It’s one of the main reasons why Amazon can keep their prices so low, and also why they have become one of the most successful companies on earth.
Amazon actually uses its profits to benefit and grow the business. While the company itself was launched in 1994, it took over fourteen years for the company to actually become profitable as they were constantly using any and all income to improve their ever growing platform.
This business model, while it can seem risky to most growing businesses, has been one of the major contributing factors in Amazon’s success.
Another way in which Amazon not only saves money, but also increases their customer satisfaction and keeps their business running smoothly is by having in-house data and analytics teams.
These teams work tirelessly to watch customer trends, run statistics as to what is and is not working, what is making money, where the company is losing money, and essentially everything and anything they can be doing to make the company run more efficiently and become more profitable.
By not outsourcing the data collection, of course, Amazon is running more cost efficiently, however, it also means that no one else has the information that they have.
Amazon still uses FedEx, USPS, UPS, and a variety of other delivery resources; however, they have slowly segued from external deliveries to an internal team of Amazon delivery trucks and drivers.
With this delivery system, in addition to their hundreds of warehouses around the country and the world, Amazon has everything they need to be a storage and shipping conglomerate, saving them millions of dollars every year and keeping their customers happy with same day, one day, and two day deliveries to almost every home in America.
The bottom line is that Amazon will continue to grow both in size and profits because they never settle for what has worked in the past. With constant re-invention of their sites, services, and offerings, Amazon pushes the boundaries of innovation daily.
By staying up to date with the latest technology, customer needs, and the trends of online retailing, Amazon continues to make their customers and investors happy, and climbing that ladder of success to the absolute top.
Amazon is incredibly successful due to its focus on the customer, its ability to keep its prices incredibly low, its high market value, and so much more. Amazon has gone above and beyond and created an e-commerce and subscriptions brand that is growing by the second.
Welcome to CompanyScouts! I am Jake, the founder of CompanyScouts. I hold an Msc in Economics and Business Administration. With a deep interest in the consumer segment, I strive to help people get to know their favorite companies even better.