How Amazon conquers the US market


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        How Amazon conquers the US market      


I'm not going to replicate exactly the steps that brought Amazon to the top. Although I plan to gradually figure it out. But from personal experience, I can single out those factors that are now deciding the fate of consumer money in favor of the ecommerce giant.



About 60% of Amazon sales in 2018 were formed by third party sellers, independent sellers. Basically it is small and medium business. In 1999, their share was 3% - almost the entire turnover of Amazon did itself. In money terms, the company's own sales grew from $1.6 billion to $117 billion over 19 years.

During the same time, sales of independent sellers on Amazon grew from $0.1 billion to $160 billion. That is, business makes a decisive contribution to the company's growth dynamics, about 300 thousand companies and entrepreneurs who actively compete with Amazon itself and among themselves, creating the best offer. price and range



Amazon Prime

Half of America's households have an Amazon Prime subscription. In real terms, that's $15 billion in revenue.

From left to right - the number of paid Amazon Prime subscribers, the dynamics of the cost of an annual subscription, the dynamics of the company's revenue from Prime subscriptions. Forbes

Think about it - this is a payment for the service that customers give to the company even before they even start buying something. Prime gives you fast free shipping on orders over any amount. Plus a subscription to content - movies, books, music. For $13 per month or $119 per year.


Subscribing to Prime pays off by the fact that it resets the cost of delivery of any order. Psychologically, a subscription causes something like an addiction - without it, buying is so uncomfortable that it is easier and more convenient to issue it. And when it does, the customer automatically searches Amazon first, in part to justify having a subscription The dilemma of the chicken and the egg.



A strong trump card in the hands of Mr. Bezos. A significant share of the money earned by the company was reinvested in logistics. Globally, sellers of goods on Amazon are divided into three categories:

  1. Independent stores using Amazon as a "showcase" of goods. They receive orders from the platform and somehow deliver them themselves.
  2. Retailers that guarantee Prime in a given territory. The companies still store and deliver the goods themselves, but they are committed to delivering them in one to two days to customers subscribed to Prime.
  3. FBA (Fulfillment by Amazon) - the store stores goods in Amazon warehouses, and the infrastructure of the platform itself is responsible for its delivery.

Of course, Amazon's search results and catalog are dominated by products from sellers from the latter group.


In addition to the construction and development of fulfillment centers, the company actively invested in the development of its own delivery service. Let's look at the numbers:

Graph of the share of logistics operators in the delivery of goods Amazon Rakuten Intelligence

As you can see, in just two and a half years, Amazon has increased the share of delivery by its couriers from 20 to almost 50%. Halving the share of America's Post, USPS. At the same time, the average delivery time for an order across the country from Amazon is three days.

For the seller, the Amazon offer is very beneficial. Merchandise storage and handling services cost less than solutions from specialized companies, and delivery from Amazon's own warehouses to the client and transfer of goods between warehouses is carried out at rates 80-90% below the standard rates of American carriers.

As a result, even companies with their own warehouses additionally use the Amazon infrastructure for inventory management and delivery to customers.

What does this mean for the client? This means that Amazon has a 99% chance of delivering any product faster than the "native" branded online store. For example, here are the delivery options for the Pixel 3a smartphone from the Google online store (the order was made on July 2).

Pixel 3a Smartphone Delivery Dates on the Google Google Store

Amazon will deliver the same smartphone in one to two days and for free to Prime subscribers.

This picture will be for the vast majority of goods. They simply do not make sense to order not on Amazon. The price offer is usually the best on the market, and combined with the delivery, there is no reason to buy elsewhere.


Co-branded card

Personally, I have always considered co-branding a business with banks as a very niche story for especially loyal customers. Since, upon closer examination, co-branding often turns out to be less profitable than a good cashback card. But Amazon has turned its partner Chase credit card into a real competitive advantage.

My Chase Amazon credit card (in the US, card details are printed on the back) Maxim Roslyakov

The card offers a gentlemen's set of good options: free annual service, free insurance for car rentals worldwide, travel insurance with luggage loss and delay coverage, concierge service.

But the main plus of this card in the context of the article is a five percent cashback for Prime subscribers on any purchases on Amazon. No limits on the amount of cashback.

Given that many products (including Apple products, electronics, and more) are sold strictly at RRP (recommended retail price), the benefit of a five percent cashback becomes significant. Moreover, the integration of the co-branded card into the interface is done very competently. You can use the accumulated cashback right during the purchase process.

The ability to use the bonuses accumulated on the card directly during the Amazon purchase process

In any other online store, I will have to pay $ 399 for this smartphone. Thanks to good co-brand integration and previously accumulated points, Amazon's offer looks to be $45 better. And from the balance paid by the card, I will receive 5% cashback.

Thus, thanks to the combination of the assortment, the Prime subscription and the logistics and cashback tied to it, the marketplace becomes the starting point in online shopping for most Americans.

I hope someday to write about the success of a Russian company that will be able to conquer the market and outperform its nearest competitor in terms of revenue by ten times. Good luck to the participants of this exciting competition. Competition is always for the benefit of the customer.

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