Is Amazon your next business competitor?

Amazon, the world’s largest online retailer, made it’s maiden foray into smartphone arena with Amazon fire, pitching itself against brands like Apple and Google. The latest entry into smartphone segment by Amazon raises an important question; will amazon be your next business competitor?

Amazon.com Inc., the Seattle based, world’s largest online retailer with business operations in the United States and International markets ventured into smartphone segment on 18th June-2014. The venture into smartphone was amazon’s second foray in the hardware segment post the launch of Amazon Kindle, the e-book reader, released in 2007. The smartphone venture is in continuation to its previous launch of video and audio streaming service, preparing an eco-system for smart devices. The smartphone entry gives Amazon control at the consumer end of the media value chain, from content streaming to content consumption.

Amazon’s entry in smartphone is part of the larger expansion plan to be available and create maximum touch points leading to an e-commerce transaction and side-lining the larger share of consumer spend online. Further, as amazon looks towards its next big move in this direction it will be wise to understand how amazon has been growing in the last few years.

Amazon has been primarily growing both organically and inorganically, around a selected stakeholder’s mix of customers, sellers, enterprises and content creators. Additionally, Amazon’s expansion falls into the following three key themes i.e. countering threats, leveraging strengths, and Forward & Backward integration.

Countering Threats

Amazon sells millions of products globally and its key offerings are being disrupted by start-ups launching digital substitutes and brilliant products/solutions. Amazon has been proactively and reactively launching new products/solutions countering these threats to its money spinner categories. The launch of eBooks, Fire TV, music and video streaming falls into this very category helping amazon counter new competitors and stay relevant for users.

Leveraging strengths

Amazon has been leveraging the strengths it has garnered in the ecommerce space which includes its customer base, supplier relationships, online platform and its vast supply chain. Amazon has been banking on its Amazon prime customer base particularly estimated to be in the range of 26.9 million as per Consumer Intelligence Research Partners (CIRP) among the 244 million amazon customer for its new products/solutions. The leverage is also considering the fact that amazon prime members shop more frequently spend more money and buy more expensive items than non-prime customers, according to Morningstar, the market research firm. The new businesses amazon had recently launched including Prime Fresh-Fresh foods delivered at doorstep, Prime Pantry-Groceries delivered at doorstep, Amazon Supply-Wholesale service are key services launched leveraging the existing strengths it holds with amazon ecommerce service at the center.

Forward & backward integration

Amazon has been actively integrating forward and backward in the value chain of its core business of e-commerce. Firstly, Amazon backward integrated by venturing into content streaming, web services and whispersync with the launch of e-books-Kindle service, whispersync-delivering books on kindle devices/apps, prime music-the music streaming service, prime video-the video streaming service, and Amazon web services-cloud computing service. Secondly, Amazon forward integrated the content business with the launch of Kindle and fire devices, creating new touch points. Further, these devices give Amazon control over the customer experience.

Acquisitions fuelling growth

Amazon has been closely following these three trends and has made acquisitions in order to strengthen its planned offerings. The acquisitions of Pushbutton (TV Content and services), LoveFilm (Video streaming and rental), Amie Street (Music sharing), Touchco(Touchscreen technology), Snap Tell (Image recognition), and Reflexive Entertainment(Video game provider) have already been included into the Amazon eco-system. The other key acquisitions of Evi and Ivona in the last couple of years for voice recognition are yet to see the light of the day.

Amazon with its millions of products, services, suppliers, customers and global scale has better understanding of its stakeholder’s psyche and the changing business models. Additionally, the more Amazon gets into hardware and creates multiple touch points it will be better positioned to understand the users and their changing needs. There is no industry/sector in the Amazon eco-system who can sleep peacefully thinking amazon may not be their business competitor. At Amazon, Jeff Bezos famously quotes “it's still day one” so it’s just a matter of time, the big brother comes hunting.