Amazon has become one of the most influential brands on the planet. During the holiday season in 2015, Amazon captured approximately 40% market share of the US online consumers who shopped in top retail websites and generated a whopping $107.01 billion revenue in 2015 (Ellwood 2016). (Figure 1)
Figure 1: Revenue Comparison between Amazon and competitors in 2015
Source: Wikinvest 2016
What does Amazon do?
Amazon operates on a mixed business model with various core offerings. It keeps inventory and sells tangible goods directly to customers. It also provides services in the form of an online selling and shopping experience to both seller and buyer respectively. Since Amazon’s business model looks rather simple, what is their competitive advantage?
In 1997, the founder and CEO of Amazon, Jeff Bezos, acknowledged the importance of building a strong brand to combat the threat of substitutes in the e-commerce marketplace.
“There’s nothing about our model that can’t be copied over time. But you know, McDonald’s got copied. And it still built a huge, multibillion-dollar company. A lot of it comes down to the brand name. Brand names are more important online than they are in the physical world.”
Brand embodies names, symbols, logos, fonts and colours as the means to communicate to customers of who they are. Market perceptions on the brand are developed over time through customer experiences (Iacobucci 2013, p.77).
In 1995, Amazon created a brand name as an online bookstore and over the years, it projects a strong brand image as “the Everything Store” offering a myriad of products and shopping experiences with convenience at low prices.
How do e-retailers build brand loyalty when there is no brick-and-mortar shop to establish tangible contact with customers?
In an online environment, Amazon understands the importance of building brand community for their consumers to share interests and interact with each other about the products (Zhang, Benyoucef & Zhao 2016, p.15). With enhanced trust and satisfaction toward the brand, customers will repurchase the product and recommend it to other people, which eventually leads to brand loyalty.
We know that loyal customers are valuable because it is more expensive to secure new customers than to retain existing ones (Heding, Knudtzen & Bjerre 2009, p.13).
Amazon enhances brand loyalty by establishing associations with customers through brand community and personality (Iacobucci 2013, pp.81-82). Amazon launched a subscription based membership, Amazon Prime, with an annual fee of $99 which offers free two-day shipping on most purchases, free streaming of movies, TV shows and music. In 2014, Amazon focused on building emotional branding to connect with their Prime members through Prime Now which offers free two-hour delivery on a range of selected goods and groceries (Ruffolo 2014).
Amazon has also adopted aggressive brand extension strategy by providing an array of product offerings to fulfil the diverse needs of customers who are looking for fast and convenient online shopping experience. Its core offerings have expanded from selling books and CDs to household items, computers and furniture.
Recently Amazon has undertaken various investments in several high growth ventures. It has embarked on a co-branding exercise to develop the Dash Buttons with more than 100 reputable partners. It’s another strategic move to extend the umbrella brand by leveraging on its brand equity and to lock their customers down within Amazon’s shopping empire.
Honestly, not everything is a bed of roses for Amazon. The Fire Phone project turned into a flop without understanding the needs of consumers.
“In essence, we were not building the phone for the customer—we were building it for Jeff,”
Amazon Local is another failure that was launched too late when the fad on daily deals was losing steam.
Nevertheless, failures don’t dampen the spirit. Bezos continues to seek for innovative ways in pursuit of his ambitious plan to transform Prime Air into reality to serve the community or maybe… to satisfy his growing hunger for a ‘little adventure’.
Ellwood, M 2016, ‘Unboxing Amazon’, Men’s Fitness, vol.32, no.3, pp.64-66, retrieved 23 April 2016, General Reference Center Gold
Heding, T, Knudtzen, CF & Bjerre, M 2009, ‘Brand Management Research, Theory and Practice’, Routledge Taylor & Francis Group, New York
Iacobucci, D 2013, ‘Marketing Management (MM4)’, South-Western, Cengage Learning, Mason, Ohio
Ruffolo, R 2014, ‘Emotional Branding – Can You Feel It?’, Global Cosmetic Industry, vol.182, no.5, p.19, retrieved 23 April 2016, Business Source Complete
Zhang, KZK, Benyoucef, M and Zhao, SJ 2016, ‘Building Brand Loyalty in Social Commerce: The Case of Brand Microblogs’, vol.15, January 2016, pp.14-25, doi:10.1016/j.elerap.2015.12.001