Amazon.com is one of the world’s largest eCommerce retailers, or etailers for short, of consumer goods. With sales several times that of its competitors, the company has achieved its status as the industry leader by adopting the concept of selling goods via the Internet’s World Wide Web. The company presently enjoys significant brand, scale and capital advantages over its rivals.

Amazon’s key strategy over the coming years is to be the first name in eCommerce and to build strong loyalty among its 10 Million and growing customer base. How does Amazon plan on keeping brand loyalty in an environment where virtually anyone can develop a net presence overnight and where virtually all products are being commoditized? According to Jeff Bezos, Amazon’s CEO, it is the personalized experience that will differentiate Amazon from other eTailers and established brick and mortar companies. Amazon wants to continue to surprise and excite people through understanding the individual buying patterns of its customers. Today, Amazon does this by offering “structured surprises” that give customers various rewards for shopping with Amazon, in an effort to both instill brand loyalty, as well as delight the customer. Some examples of structured surprises that Amazon offers include not charging for gift wrapping as a “thank you” for a purchase, offering $5.00 coupons for customers that have not visited in a while, and upgraded shipping, among other enticements.

As has been found in a study by Beth Cox of Internet News, nearly 50% of consumers that shop online would be loyal to a particular web site, if they were rewarded for continued patronage. With thousands of options to choose from on the Internet, online retailers see these incentives as something to help distinguish their sites. Amazon was one of the first and does this very well. While the structured surprises that Amazon currently offer encourage repeat business, they are not tailored to a specific individual’s preferences. However, with new personalization technologies, Amazon and others are planning to personalize these enticements, and one day be able to deliver custom tailored versions of its store, built on-the-fly for each individual customer. Combine the personalization technology with the 10 million customers that Amazon has already amassed, and you have a buying environment unlike anything that current real-world retailers can offer.

Though marketing is often mentioned as Amazon’s primary reason for success, the reality is that the back-end fulfillment process is just as important in that it has allowed these pioneers to benefit from high customer retention rates and repeat customer purchases. Amazon is one of the best today at keeping in touch with customers and consistently shipping products as promised. Amazon realizes that though their service makes them a leader today, this is not enough to sustain their lead in the future. Over time, Amazon and many others will have the capability to quote actual product availability in real-time while the consumer is online. These leaders will also be improving their back-end operations to enable them to fulfill orders at a lower cost.

According to Jeff Bezos, Amazon’s plan over the next couple of years is to continue to focus on selling broad and deep selections of merchandise in certain categories, including books, music, gifts, and videos directly to consumers. Amazon will also facilitate eCommerce between consumers and other retailers by acting as the middleman through its “Shop the Web” service. Amazon is starting to evolve from being a pure eTailer, concentrating on books, records, etc. to a future-shopping portal. Amazon’s strategy is to be at the center of as many shopping transactions as possible. The enabling technology that Amazon will use to do this is the “Shop the Web” product search service. Due to their strong name recognition in Internet shopping, many people looking for a product will shop Amazon first. If that person is looking for something that Amazon carries, Amazon will ship the product as the primary seller. If that person, however, is looking for products that are not Amazon products, the “Shop the Web” search service will allow for Amazon to direct a shopper to another site that has the product. If the shopper purchases the product, Amazon will collect a fee from the selling site. This is a very high margin revenue stream business that will allow Amazon to concentrate on its focused effort to add more stores within stores.

Examples of Amazon success:

The Amazon Web Services stack is impressive in its scale and also well thought through. Amazon is methodical about this strategy and is aiming to create an offering which can truly be called an Operating System for the new Web. Many companies have already recognized the power and ROI of the Amazon platform and are literally betting their business on it. 

Webmail.us – email hosting provider

Webmail.us is probably the most compelling success story for Amazon Web Services because of its huge ROI. It is an established business with over 27,000 customers. It had a real and simple business need – improve the cost and reliability of its backup system. After considering many alternative solutions, the company decided to utilize Amazon S3, The Simple Queue Service and the Elastic Compute cloud to address all of its needs.

The company claims to have improved its backup process and cut costs by 75%. The Webmail.us success story on Amazon contains a paragraph that nicely summarizes the technical and business gains: 

“Amazon’s Web Scale Computing model shifts the focus from do-it-yourself to let-the-experts-do-it. It allows businesses to scale up or down based on requirements and demand, and provides pay-as-you-go billing models. This combination allows businesses to turn fixed costs into variable costs, while knowing that their data or services will always be available.” 

SmugMug – online photo provider

SmugMug is another interesting success story. It is a straightforward one, because it uses Amazon S3 exactly how it was intended to be used – for storing large media. Today SmugMug hosts over half a billion photos on Amazon. And here is the real “wow factor” in this story: one week after writing the first line of code, SmugMug was storing all of its new images in Amazon S3. 

The Amazon S3 API consists of just a few simple method calls. It is equally easy to implement in Java, PHP, JavaScript, Perl, C#, Python and many other languages. As the SmugMug success story illustrates, a simple API means a very quick and painless adoption.

To pepper this with more numbers: SmugMug is now backing up all of its new images to S3, which amounts to 10 terabytes of data monthly. The SmugMug site has not gone down since adopting Amazon S3 and it estimates it will save half a million dollars on its disk storage annually. So, as the company points out, S3 makes it possible for SmugMug to compete head to head with bigger companies that have deep pockets, without having to raise massive amounts of cash for hardware. So this is game changing.

Scanbuy – mobile shopping solution provider

The success stories that we have covered so far are mostly using Amazon’s S3 storage service. Scanbuy however is utilizing the Amazon eCommerce API to bring unique comparison shopping solutions to mobile phones. Their claim to fame is allowing the users to lookup prices by simply scanning the barcodes of items in a store. This is a clever approach that is made possible by a combination of technologies. 

One of the key technologies here is the Amazon eCommerce API, which offers unlimited and complete access to most Amazon items. Scanbuy uses the API to fetch the latest pricing information, letting the user decide if they are really getting a good deal in the store.