Just like any other company, Amazon was also once a start up.
In late March, Jeff Bezos, founder and CEO of Amazon Inc., surpassed tycoon investor Warren Buffett to become the world’s second wealthiest person. According to Forbes, Bezos’ net worth is now at a staggering $76.2 billion, up $3 billion in only the past week due to Amazon’s stock rising almost 5%. His wealth, along with Amazon’s company size, has exponentially grown since the company was founded in 1994. As an online retailer for books to what is now the largest online retailer in the world, Amazon offers a limitless variety of products ranging from things like home goods to holy water (yes, holy water is available on Amazon). Along with its original business model of supplying third party products, Amazon has since created goods and services such as the Amazon Prime membership, the Amazon Kindle and Echo that have been a result of the company’ adaptation to the digital age.
Along with Amazon, the practice of online retail has been adapted by many other companies, such as Walmart, eBay, and Kohls, to name a few. With delivery service of goods shopped online becoming more and more popular since the the late 90s, companies have found it to be a unique selling point to target customers that don’t always have the time to physically shop or that live far away from a certain shopping location. In fact, 71% of shoppers today believe that they will get a better deal online than in-store. But what makes Amazon so special in that they control 36% of the e-commerce industry?
Innovation and Diversification
There are two main concepts that have led Jeff Bezos and the Amazon team to their current success: innovation and diversification. When most entrepreneurs think of innovation, they think of impacting an industry with a new device or product that makes the use of that certain product easier and more versatile. Apple for example, has changed the concept of handheld devices forever, first introducing the iPod, then the iPhone. Amazon, however, innovates in the very way they practice business. When Amazon sells a product to you, they technically do not own the item at the time of purchase. Let’s say you buy a poster to decorate your new dorm. Once you click purchase, the order has been received and Amazon is working on getting you that poster from wherever it is; whether that be a warehouse nearby your town or 7,000 miles away in China. Amazon will incur the cost of buying the product, cost of shipping, and possibly a minor cost in storing the product for a certain period of time. However, they do not incur any expense in producing the good. And when wholesaled to Amazon, the cost of buying the good makes everything cheaper for them.
Amazon’s ability to adapt to today’s market needs has been largely due to not specializing their business practice into one product item or line. Instead, Amazon’s business model has allowed them to distribute whatever they want (as mentioned before, they sell holy water). In basic business terms, the more products you have to sell, the bigger target market you have, the more sales you will make, and hence the more markets you will to grow in. If you google the latest news for Amazon now, you will see articles about Amazon testing and launching its latest venture, Amazon Go. It is their newest creation in which they are able to open cashless grocery stores that do not require a checkout counter. The only reason for them to be able to open this store and most likely be successful is due to the many other ventures they have taken with their online retail business.
“So why does this matter to me, a young entrepreneur?”
Just like any other company, Amazon was also once a start up. Now, it is one of the world’s largest names, creating cashless grocery stores, disrupting the traditional retail business, and even creating television shows and movies. Today, a majority of colleges focus on innovating and building better and more efficient inventions for the future. Students are rewarded and scouted by the big companies in their achievements in the sciences and engineering. Students in these majors are able to use their knowledge in the real world and in the classroom to create these inventions, hopefully being hired by company like Apple or Tesla or even being funded on Kick Starter to run their own start up. However, a lot of students in social sciences and in business school may not always have the knowledge and application to take on such a venture. Although this may seem like a lacking trait for an entrepreneur, refer again to Jeff Bezos. Despite graduating Princeton University with a computer science and electrical engineering degree, Bezos used his passion in e-commerce to figure out a way to put the customer first and profits second. So for you young, aspiring entrepreneurs that want to run a business, Jeff Bezos and Amazon is a prime example of thinking completely outside of the box, from once selling a book from the founder’s garage to selling holy water on the internet.