Amazon: Still the World’s E-commerce Leader

Amazon: Still the World’s E-commerce Leader

Amazon.com, which launched during the first Internet boom in 1994, quickly became the largest U.S. e-commerce company and an iconic leader of the U.S. tech sector. Twenty years later, in 2015, the company had become bigger than Walmart in terms of market capitalization, making it the largest retailer in the U.S.

What helped them to become the market leader was its focus on offering as wide an assortment of goods as possible online, backed by the lowest prices. Starting off as an Internet bookseller, Amazon.com quickly expanded into consumer electronics, software, games and video. From there, the assortment of products increased even more, to include every major shopping category.

On the flagship Amazon.com site, there are now shopping categories for books, movies, games, electronics, computers, home and garden, beauty, health, grocery, toys, books, clothing, shoes, jewelry, sports, and outdoors. In addition, there are categories for digital content, such as books and movies, which can be delivered via Wi-Fi to Amazon’s line of digital tablets.

In 2015, retail sales in North America, the UK, Germany and Japan accounted for 95 percent of all revenue. As part of a broader effort to diversify internationally, it has set up 10 different e-commerce marketplaces, including ones in key markets such as China and India, in order to attract global merchants willing to sell on Amazon’s platform. However, due to entrenched local competitors in both China and India, Amazon.com has not had the same success scaling in those markets as in its core North American market.

Besides diversifying shopping categories, Amazon JP has further set a successful example of a global mindset in business, by creating an English version of it’s website. Serving the two million foreign residents living in Japan, the company has strengthened it’s brand even further. In 2014 alone, the Japanese version of the e-commerce giant has recorded yearly sales of $7.64 billion.

The secret to Amazon’s success has been its unparalleled emphasis on getting as close to the customer as possible. Within the U.S. market, for example, Amazon.com has heavily promoted its Prime service as a way of locking in customers. After paying an annual subscription fee, customers get access to free two-day shipping as well as access to exclusive digital content. To make the digital content offer resonate with customers, Amazon.com has invested heavily in proprietary content developed in-house, such as TV shows, which can be viewed on Amazon’s tablets.

Going forward, the company needs to replicate the infrastructure build-out it has in the North American market in order to win market share in Europe, Asia and South America. The more warehouses, call centers and distribution centers the company has, the faster it can get products to customers and the more efficient it can make its supply chain.

In 2015, Amazon.com operated 60 different fulfillment and distribution centers around the U.S. (an average of more than one per state) with a total footprint of 50 million square feet. In comparison, the size of its footprint in China – arguably a larger and more important market than the U.S. – was only one-fifth as big, at 10 million square feet.

Amazon.com, too, will need to address the claims of its rivals, who claim that the company resorts to severe discounting and below-market pricing in order to drive rivals out of business. Moreover, there have been several highly publicized disputes involving the company and content publishers about pricing and distribution.

Given its massive market size, though, and its presence in key European and Asian markets such as Japan, they have become one of the most important Internet retailers in the world. With a long track record of innovation, it appears that they are well positioned for the next big wave of online commerce.