Yuhang He's Blog

Some birds are not meant to be caged, their feathers are just too bright.

What is the true Amazon

When talking about Amazon, what is the first term jumping into your mind? While most of you would say the worldwide e-commerce platform, today’s Amazon has far already reshaped itself into cauldron of various high-techs.

amazon

It is amazingly interesting that in its early days, Amazon just sold books, far has not yet been today’s omni-product e-commerce platform. When reexamining Amazon today, it is the giant acrossing e-commerce, logistics, intelligent hardware, data storage/processing and even robotics. Obviously, it is internally inadequate to define it as merely an e-commerce medium, although hardly can we accurately and comprehensively give it a name.

Flywheel: philosophy behind the whole Amazon business

Amazon CEO Jeff Bezos often cites “flywheel” as the operation philosophy beneath the Amazon system, the term was originally formulated by Amazon business consultant Jim Collins back in the early days of Amazon. It operates as, to make the flywheel circling, the company cuts the prices to attract more customers and consequently increase the overall sales. With the attracted huge customer base reciprocation, the company benefits from the sales economy such that it can cut prices again, spinning the flywheel anew.

Traditional bricks-and-mortar storefronts suffer most from the price-war launched by Amazon (of course, Amazon should not be responsible for it at all) as they are more fragile in resilience of the negative impacts of low-price. Amazon itself paid for price-war bog too. Tracing back Amazon history, while launched in May 1997, Amazon bled money for the next six years, followed by another decade with barely profit eked out. It is hard to imagine how Jeff Bezos managed to convince Wall Street and Amazon share holders to disregard Amazon’s bad financial performance over years and ignore the lackluster profit enarnings. Fortunately, all the expenses earlier eventually begins to pay back. At last count, Amazon membership program Prime has an estimated 85 million subscribers, nearly equivalent to two-thirds of American households. An astonishing number that marks Amazon’s great success and its unprecedented market occupancy.

Amazon Diversifies: Don’t look down Amazon

Customer first and exceptional customer service are two criterions Jeff Bezos use to make a decision or persuade the dismayed investors or shareholders. But achieving this goal is not easy. As the soul pillar at Amazon, you have to constantly flatter your investors and shareholders spiritually, internally you need to encapsulate yourself as the desirable and energetic leader with your workers’ religious reverence and willingness to work for you. Externally, you need to create various services or facilities, either practical or formal, to stop your customer’s querulous mouth and to satisfy their nearly perverted needs. What Amazon chooses to cope with these sophisticated situations is simple: Diversify.

Amazon chooses to branch out its inherent business. Any tiny and novel business that relates to Amazon’s original business could be settled and launched by Amazon, regardless of its potential financial feedback and even the risks of being an outsider. For example, the keen need to high efficiency of item delivery as well as production, Amazon steps into robotics industry, bringing a fleet of trucks to mechanically sort items within or between warehouses, drastically escalating the overall productivity and at the same time minimizing the human-prone errors. Also, to reduce the gap between the customer’s ordering the item and the item delivery, Amazon invest on drone to deliver the item through the “air traffic”. Although relevant regulations have banned Amazon’s experiments on drone item delivery in US. As an alternative, Amazon moved the bulk of experiments to UK and the first drone’s delivery to an actual customer in Cambridgeshire countryside was achieved in December this year, which is really a milestone to Amazon’s automation process.

Amazon’s massive success rely more on its complex logistics empire. A recent survey shows that Amazon’s delivery infrastructure network contains more than 180 warehouses, 28 sorting centers and 59 local package delivery stations, covering about 44% of US population who are guaranteed to live within 20 miles of at least an Amazon warehouse or delivery station. Just imagine how the logistics empire enpowers the whole Amazon when comparing with any of its existing or potential competitor.

Diversification process is not always direct to Amazon’s core business. It allows to reinvent new business. The Amazon cloud service, known as Amazon Web Service (AWS), was incubated within Amazon in the early days by a small group of engineers, who keenly sensed the huge market need for standardized and basic-infrastructure ready could service. Today, AWS conquered more than 34% of the worldwide computing service, compared with a combined of 24% share by Google, IBM and Microsoft. The biggest advantage of AWS is that it releases startups from heavy, repetitive basic infrastructure refactoring work so that they can more focused on the products and core technology that truly stand them out above the bruising competition pool.

Amazon also seems to be interested in creating the unknown. Who has ever imagined the e-book reader kindle which tries best to simulate the real paper reading experience is brought into reality by Amazon, after all Amazon per se is assumed to be just an e-commerce platform. The recent released Amazon Echo reaffirms Amazon’s ambition to become an indispensible role in building the world with the forthcoming AI era.

What is Amazon?

It seems to be unlikely for someone to turn back Amazon’s ambitious march to be diversified and to be more sophisticated. The opportunities as well as the risks await Amazon is unpredictable. Rather than directly answering what is Amazon, we prefer to discuss Amazon with topics on the ground. Amazon is …, of course, it tries to cover and conquer every aspect of our life, it attacks and retaliates its competitors without any hesitation, it hides its monopoly suspect currently by letting the customer happy ingeniously and wisely. Don’t forget Jeff Bezos said: If we take care of customers, the stock will take care of itself in the long term.

Disclaimer: the above picture is taken by Ted S. Warren. This blog is referenced the online blog, it just reflects my own thoughts and some numbers might be incorrect.