Strategies That Made Amazon a Global Empire

I have a couple of e-commerce applications on my phone, but when the sale moment comes, I always hop onto one specific platform we have all known since we were kids (Yep if you are a 21st-century kid 😅).

It is not just me, millions of others do the same. And that got me thinking 🤔 How did this e-commerce platform start with a small idea, like selling books online, and now touches almost every aspect of our lives?

Although it sounds impossible with only a dream and a laptop, Amazon made it come true 😮 Fast forward a few decades, and this once-tiny startup is reshaping how we shop, stream, and store our data.

What do you think is the secret sauce behind this transformation?

Let's see!

Background and Context

Amazon, founded by Jeff Bezos in 1994, began its journey as an online bookstore. Inspired by the rapid growth of internet usage in the early '90s, Bezos saw an opportunity to create an online retail platform.

His initial vision was to create an everything store where people could find and buy anything online. By 1995, Amazon had officially opened its virtual doors to the public.

It rapidly grew, with revenue reaching $15.7 million by the end of 1996, just a year after launching. Soon after, Amazon expanded into music, electronics, and more, becoming a vast online marketplace.

Check out this video of Bezoz talking to media when Amazon just started:

Can you believe when Amazon launched, only about 0.7% of the world’s population could access the internet, yet Bezos saw the future of e-commerce?

From Bookstore to Global Giant

Amazon’s early strategy was to build a massive inventory, aggressive pricing, and offer comfort that traditional stores could not match.

This approach helped the company form a loyal customer base quickly. As the internet grew in popularity, so did Amazon, attracting new customers from across the globe.

One key factor in Amazon’s early success was its ability to scale efficiently because of technology and data-driven decisions. By leveraging customer data, Amazon personalized user experiences, recommended products, and optimized pricing.

Do you know that Amazon was among the first companies to use algorithms to suggest products to users based on their purchase history, a practice now common across e-commerce platforms?

Present-Day Amazon

Fast forward to today, Amazon is no longer just a retailer. It has transformed into a tech empire with a diversified portfolio:

• E-Commerce

  Amazon’s core business remains its e-commerce platform, which generated $469.8 billion in sales in 2021, accounting for 13% of global e-commerce retail sales. It offers over 12 million products in the US alone.

• Amazon Web Services (AWS)

  Launched in 2006 as a cloud computing division, AWS now accounts for a significant portion of Amazon's profits. AWS controls 33% of the global cloud computing market and generated $80 billion in 2022.

• Entertainment

  Amazon entered the entertainment industry with Prime Video, a streaming service that now competes with Netflix and Disney+. In 2023, Amazon spent $13 billion on content for its streaming services, including hit shows like The Boys.

• Logistics and delivery

  Amazon has built one of the most cultivated logistics networks globally, with over 400 fulfillment centers worldwide. Its in-house delivery system handles about 72% of its orders in the US, reducing its reliance on third-party carriers.

• Acquisitions

  Amazon has made several strategic acquisitions to diversify its business, including Whole Foods in 2017 for $13.7 billion, Zoox for autonomous vehicles, and MGM Studios for $8.45 billion to expand its media portfolio.

Amazon's competitors in the early years, including Barnes & Noble, underestimated its potential. Barnes & Noble sued Amazon in 1997 for calling itself the world’s largest bookstore despite its limited book selection.

Amazon's growth from a small online bookstore to a global tech leader was not an overnight success. It took years of innovation, risk-taking, and customer-centric thinking to grow into the powerhouse it is today.

Bezos' long-term vision famously spoke in his concept of Day One, which said acting like a startup regardless of size, continues to drive Amazon’s culture of innovation.

Current Position

In 2023, Amazon holds a dominant position in multiple industries:

• E-commerce: Amazon captures 49% of the US e-commerce market, far ahead of competitors like Walmart and eBay.

• Cloud computing: AWS is the most profitable Amazon arm, with over 1 million active customers, including Netflix, Facebook, and the US government.

• Global reach: Amazon operates in 58 countries and ships to more than 100 nations worldwide. The company’s continued expansion in emerging markets like India and Brazil positions it for even greater future growth.

Challenges & Solutions

Despite Amazon’s growth, the company faced challenges throughout its journey, especially during its early years and crucial transitions. These challenges were operational but also strategic, financial, and competitive.

Understanding how Amazon overcame these hurdles provides valuable lessons for businesses looking to scale and dominate their markets.

1. Profitability and Thin Margins

Profitability was one of the most pressing issues Amazon faced in its early days. Amazon worked on razor-thin margins, often reinvesting profits into the business to fuel growth.

This left investors concerned about its long-term financial stability because Bezos prioritized growth over short-term gains.

• Amazon did not profit for the first nine years of its existence. It was not until 2003 that the company reported its first quarterly profit of $5 million on revenues of $1.2 billion.

While competitors focused on maintaining profitability, Amazon doubled down on expanding its infrastructure, customer base, and product categories.

This long-term approach allowed Amazon to scale quickly but created skepticism about whether the company would ever turn a profit.

Solution:

Amazon’s strategy was to scale aggressively and capture market share by underpricing competitors and offering unbeatable convenience.

Amazon built trust and loyalty among its customers and positioned itself as the go-to e-commerce platform, even if it meant sacrificing profits. Over time, this focus on market dominance allowed the company to reduce competition and improve its margins.

• Amazon’s low-margin strategy led to the term Amazon Effect. It tells how Amazon’s business model forced competitors to cut prices and improve their logistics to survive.

Check out this video to learn more about what Amazon Effect is:

2. Logistics and Delivery Challenges

As Amazon expanded its product range and geographical reach, handling logistics and timely deliveries became more difficult.

The company needed to create a full-bodied infrastructure to handle millions of orders while maintaining quick delivery times. However, global logistics had challenges, including:

• Inventory management: With millions of products, managing inventory across multiple fulfillment centers became complicated.

• Shipping costs: As Amazon expanded internationally, shipping costs skyrocketed, impacting the already-thin margins.

• Last-Mile Delivery: The final step of delivering packages to the customer's doorstep, known as last-mile delivery, was challenging. Traffic, weather, and other factors created delays, frustrating customers.

Shipping costs alone accounted for 12.6% of Amazon’s net sales in 2005.

Solution:

Amazon responded by creating one of the world’s most refined logistics and delivery networks. The company invested more in automation, robotics, and AI to optimize its warehouse operations.

Amazon also introduced its fleet of delivery trucks and planes, reducing its reliance on third-party logistics providers like FedEx and UPS.

• As of 2023, Amazon owns over 400 fulfillment centers globally and delivers 72% of its US orders through its logistics network.

Amazon’s innovation did not stop at infrastructure. It introduced Amazon Prime in 2005, a membership program offering free two-day shipping, which rewarded customers more frequently while allowing Amazon to justify the high logistic costs.

Here’s a clip of the Amazon warehouse and see why Amazon can ship products faster::

3. Competition from Established Retail Giants

Another major challenge for Amazon was competition from traditional retail giants like Walmart, Target, and eBay. These companies had decades of brand loyalty, massive physical stores, and established supplier relationships.

In the late 1990s and early 2000s, many analysts believed that Amazon’s e-commerce-only model would not be able to compete with these established brick-and-mortar businesses.

• Walmart once led an aggressive price war against Amazon in 2010 by giving deep discounts on popular books, DVDs, and electronics, challenging Amazon’s dominance in these categories.

In addition to brick-and-mortar giants, Amazon faced challenges from specialized e-commerce platforms like eBay, which had a stronghold in the auction and second-hand market. These competitors forced Amazon to adapt and innovate to maintain its competitive edge.

Solution:

Amazon differentiated itself by focusing on three pillars: selection, convenience, and pricing. It carved out a unique space in the retail market by offering various products, often at lower prices, and making the buying process incredibly convenient.

Amazon continued to innovate with services like Amazon Prime to strengthen its competitive position, which gave customers more reasons to choose Amazon over traditional retailers.

In response to Walmart's aggressive pricing, Amazon used dynamic pricing algorithms to ensure it could match or beat competitors' prices in the market.

• As of 2023, Amazon controls 49% of the US e-commerce market, leaving competitors like Walmart, eBay, and Target with smaller shares.

Wow! Look at this cute little video from Amazon:

4. Scaling Operations Globally

Expanding into international markets came with its own set of challenges. As Amazon grew, entering new markets like India, Brazil, and China posed difficulties, including local regulations, handling cross-border logistics, and customizing the products to native preferences.

• In 2004, Amazon launched its first international marketplace in the UK, followed by expansions into Germany, Japan, and beyond. However, each market welcomed Amazon with unique challenges.

For instance, in India, Amazon faced heavy competition from local e-commerce players like Flipkart and struggled with the country’s fragmented logistics infrastructure.

Amazon struggled to gain a foothold in China due to intense competition from local e-commerce giants like Alibaba and JD.com.

Solution:

Amazon adapted its strategies for each market. In India, it invested billions in building a localized logistics network and partnered with local delivery firms. Amazon also introduced region-specific features like Cash on Delivery, a popular payment option in many emerging markets.

• As of 2023, Amazon has invested over $6.5 billion in its Indian operations. And Amazon India has become one of the top e-commerce platforms in the country, with a market share of over 30%.

In China, where Amazon struggled to compete, it eventually scaled back its operations and shifted its focus to cross-border e-commerce, allowing Chinese consumers to purchase products directly from its global platform.

Check this video to see how COD works in India:

5. Regulatory and Political Scrutiny

As Amazon grew into a global tech giant, it attracted increased scrutiny from governments and regulatory bodies. The company faced accusations of anti-competitive behavior, tax avoidance, and poor warehouse working conditions.

These challenges threatened Amazon's public image and exposed it to regulatory changes.

• In 2021, the European Union fined Amazon $886 million for violating data protection laws, one of the largest penalties ever imposed on a tech company.

Solution:

Amazon addressed some of these concerns by improving working conditions in its fulfillment centers, increasing transparency in its business practices, and engaging with regulators.

However, it remains under scrutiny in several markets, and its ability to navigate regulatory challenges will be critical to its future success.

Here’s a clip of the news:

Results

• Amazon has over 310 million active customers globally, with 200 million Prime members benefiting from the company's fast and free shipping, exclusive deals, and content streaming.

• The platform allows third-party sellers to list products, with 56% of Amazon’s sales coming from these external vendors.

• AWS has over 1 million active customers globally, including startups, enterprises, and government organizations. Its infrastructure supports 190 countries.

• In 2022, Amazon spent $13 billion on content creation. As a result, Prime Video has grown to over 175 million active viewers worldwide, making it one of the largest streaming platforms globally.

• Amazon acquired MGM Studios in 2021 for $8.45 billion, gaining access to a vast library of films and TV shows, including franchises like James Bond.

• In 2023, Amazon handled 72% of its US deliveries. The company has over 400 fulfillment centers globally, covering 175 million square feet of warehouse space.

• In 2021, Amazon delivered 4.2 billion packages globally, cementing its position as one of the largest logistics companies in the world.

• In India, Amazon has invested more than $6.5 billion since 2014 and now holds over 30% of the country’s e-commerce market, second only to Flipkart.

• As of 2023, Amazon’s market capitalization exceeded $1.3 trillion, making it one of the most valuable companies in the world. The company employs over 1.5 million people globally.

Conclusion

The journey of this e-commerce giant shows the importance of customer-centric strategies, continuous innovation, and global market adaptation. You can boost your marketing efforts and drive growth by leveraging these insights. Adopt technology, diversify your revenue streams, and focus on outstanding services for your customers.

It's your turn now (We will feature the best answers in the next post):

1. How can you prioritize customer experience in your business?

2. What innovative strategies will you implement to stand out?