Amazon SWOT 2024 | SWOT Analysis of Amazon

                                                                      

 Company: Amazon 
CEO: Andrew R. Jassy
Year founded: 1994
 Headquarter: Seattle, Washington and Arlington, Virginia, USA
Number  of Employees (FY2022): 1,525,000
Type: Public
Ticker Symbol:  AMZN
Market Cap (Jul 2024): $ 1.91 Trillion
Annual Revenue (FY2023): $ 574.8 Billion 
Profit | Net income (FY2023): $ 30.43 Billion

Products & Services:    Amazon.com | Zappos.com | IMDb | Junglee | Ring | Whole Foods Market | Amazon Web Services (AWS) | Blink | Alexa.com | Amazon Music | Amazon Prime | Amazon Prime Video

Competitors: Alibaba | Netflix | ebay | JD | Costco | Flipkart | Apple’s itunes | Walmart | Otto | Tesco | Google Play Store | Target | Home Depot | Walgreens | Staples | Best Buy

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Did you know?
When Amazon was started, a bell used to ring at the office after every purchase? Soon enough, this bell had to be shut down because of the high volumes of sales.  

An overview of Amazon

Amazon’s popularity is widespread around the globe. It has over 310 million active users and 200 million prime subscribers worldwide. Being the world’s leading online retailer, Amazon bags many achievements, eye-popping profits, and successful launches.

In addition to its retail prowess, Amazon Web Services is a major provider of cloud computing. Amazon is also big in the world of streaming entertainment with Prime Video and even owns a grocery chain with the acquisition of Whole Foods Market. 

Amazon has developed a reputation for business innovation. For example, Amazon Prime’s one-day shipping service is changing consumer expectations. However, while it continues to grow, Amazon is not without controversy. Data privacy concerns and labor practices are among the issues raised by regulators and the public.

Still, it has come a long way from its beginnings. Jeff Bezos laid the foundation of Amazon back in 1994. Originally, the company started as an online bookstore but soon converted to a top online retailer selling almost everything from A to Z, just like its logo says.

Let’s review this online retail giant and understand the company’s business position with the help of a SWOT analysis.

SWOT Analysis of Amazon

The SWOT analysis of Amazon is given below:

Amazon’s Strengths – Internal Strategic Factors

1. Strong Brand Image

As a global e-commerce giant, Amazon has a strong position and successful brand image in the market. The brand is known worldwide and is associated with convenience and fast delivery times.

2. Brand Valuation

According to Interbrand’s Global Brand Ranking 2023, Amazon is ranked  #3 (Apple at #1 and Microsoft at #2), with a brand value of $276.9 Billion.

3. Customer Oriented

Amazon caters to a large number of customers for everyday needs at inexpensive prices. This has made it a customer-oriented brand. 

It has also initiated loyalty programs for customers. Amazon Prime is an example of a program that offers perks like free shipping and helps foster customer loyalty and repeat purchases.

4. Differentiation and Innovation

Amazon frequently introduces creative ideas and innovative additions to its product line and service offerings such as an ambitious drone delivery service and unique new products. This creates differentiation from other companies. 

The diversity of products also helps to attract a very wide customer base and has less impact on the company if there are fluctuations in sales in any given product category.

5. Cost Leadership

Amazon doesn’t incur costs maintaining physical retail stores by selling everything online. With economies of scale, Amazon efficiently controls its costs and lowers its inventory replenishment time. 

The company has formed numerous strategic alliances with many companies like Evi Technologies, Thalmic Labs, Shoefitr, The Orange Chef etc. It has a strong value chain system which also helps in maintaining a low-cost structure.

6. Massive Merchandise Selection

Amazon owns an extensive mix of products that attract online customers and encourages them to make the majority of their purchases from Amazon rather than other online retailers. 

Amazon has the broadest retail selection, with hundreds of millions of products available. In addition, several premium brands are starting to list on Amazon (e.g., Coach, Victoria’s Secret, Pit Viper, Urban Decay, Martha Stewart, Clinique, Lancôme, etc.).

7. Large Number of Third-Party Sellers

In addition to selling products, Amazon offers additional variety through its marketplace, allowing third-party retailers to sell through the Amazon platform. This helps encourage customers to make most of their purchases through Amazon rather than other online retailers.

Due to the high volume of traffic on Amazon’s sites, a large number of third-party sellers continue to join the platform to take advantage of Amazon’s massive reach. Data from Amazon indicates that about 60% of Amazon store sales come from independent sellers.

8. Go Global and Act Local strategy

This strategy has benefitted Amazon the most. Amazon develops partnerships with local supply chain companies that help it compete against domestic e-commerce rivals. It understands the local needs and launches its services according to the country’s culture.

In India, for example, it launched a market campaign, “Aur Dikhao,” to encourage users to search for more of its products.

9. Large Number of Acquisitions

The successful acquisitions of Whole Foods, Zappos.com, woot.com, Junglee.com, IMDb.com, and many others have produced significant incremental revenues and profits.

10. Key Business Segments

Amazon Marketplace, Amazon Web Services (AWS), and Amazon Prime are three key Amazon businesses that work and support each other. As a whole, they generate massive profits and advantages for the company.

11. Market Dominance

Amazon enjoys a dominant market position globally, allowing it to set trends in markets and influence prevailing industry standards. With about $2 Trillion market capitalization and above $574 billion annual revenue, Amazon is truly a market leader in the online retail industry.

12. Superior Logistics and Distribution Systems

Amazon uses highly efficient logistics and distribution systems. It even has fixed rates for different delivery time periods. Thus, it provides reliable, secure, and fast delivery of goods and products to customers. In fact, this strength has become a cornerstone of Amazon’s business model.

13. Financial Resources

Amazon has cash to invest. This helps it maintain its competitive edge by investing in new technology, services, products, and markets.   

14. Launch of Electric Delivery Vehicles

Amazon is revolutionizing the delivery industry with its commitment to sustainability. As of 2024, it has rolled out more than 15,000 custom electric delivery vans packed with cutting-edge safety, design, and navigation features. This is part of Amazon’s Climate Pledge goal of putting 100,000 electric vehicles on the road by 2030 in partnership with Rivian. 

These eco-friendly vans are already making deliveries in thousands of cities and regions across the country, including major metropolitan areas like Boston, Houston, Austin, and Chicago. They have delivered more than 800 million packages to customers in the US. 

Amazon’s pledge to make a positive impact on the environment also includes plans to deploy 10,000 electric rickshaws for delivery in India by 2025. 

15. Personalized Shopper Service Hits Big

Amazon recently launched its personal shopper service exclusively for Prime members. If you have an Amazon Prime subscription, you can opt for the personal shopper experience, which gives you access to the company’s team of professional stylists and fashionistas.

They will help you select clothing items, accessories, shoes, bags, wallets, etc., that suit your taste. Remember, there are millions of product options available, so having a personal team of shoppers is going to be a big-time help. 

16. Amazon Luna – Game Anywhere On Devices You Own

Amazon Luna is a cloud-based gaming service that allows you to play games on your devices without needing gaming consoles or PCs. Games can be streamed directly to your screen as long as you can access high-speed internet. 

Launched first in the US in 2022, the service is now available in Germany, the United Kingdom, France, Italy, Spain, and Canada. A broad range of casual games, AAA titles, and retro classics are available. 

The Luna controller is an optional accessory for a better gaming experience. Luna offers the Luna+  subscription package for expanded game availability.

17. Minimum Pay Raise to $15 Per Hour

Amazon was among the first retail companies to raise its minimum hourly pay to $15 in the US. In some states, governments mandate minimum wages. Where there are no state mandates or the mandated rate is lower than $15, Amazon’s minimum wage applies.

This presents an opportunity to attract superior employees who are looking for higher wages, which could lead to productivity gains.

18. History of Profitable Acquisitions

Amazon has a history and the balance sheet to support further acquisitions into markets it already trades in, as well as to enter into new markets. More acquisitions can further increase Amazon’s market share and reduce competition. 

Some of Amazon’s biggest acquisitions are Whole Foods, MGM, Zappos, Twitch, and Ring.  Using its considerable buying power to acquire more companies would facilitate additional growth.

Image Source: Statista

Amazon’s Weaknesses – Internal Strategic Factors

1. Thin Profit Margins 

Amazon’s profit margins are thin in many of its retail segments. Aggressive pricing strategies and ongoing investment in expansion contribute to finer margins. In a few areas, such as India, Amazon has faced losses. Free shipping to customers and competition from other online retailers contribute to the problem. 

2. Product Flops and Failure

Amazon has had a few big failures. For example, Its Fire Phone, launched in the US in 2014, was intended to compete with big names like Apple’s iPhone. It failed to impress buyers and was withdrawn just a year later.

Amazon’s ‘Destinations,’ a service for planning trips and booking accommodation, also lasted less than a year. Other failed launches included Amazon Wallet, Local Register, and Spark. 

3. Limited Brick-and-Mortar Presence

Amazon owns very limited physical stores.This sometimes hinders its ability to attract customers who want to buy things which are not necessarily available in online stores.

4. Poor Workplace Conditions

Vox published negative reports related to employees’ treatment and workplace conditions against Amazon. 

Poor air conditioning, timed bathroom breaks, and constant video surveillance are a few of the negative remarks made by the employees. Such things affect the reputation of Amazon.

Amazon delivery drivers alleged they were forced to urinate in bottles because of the strict delivery time schedules and constraints. 

While the online retail giant denies the allegations, it’s also true that it does impose very strict company policies, which can have negative consequences for Amazon workers.

5. Declining Consumer Safety

As Amazon’s offerings increase, it is becoming challenging to vet each product and guarantee the highest level of safety. The US Environmental Protection Agency (EPA) recently had to order Amazon to remove a wide range of pesticides and unsafe products from its platform.  

6. Over-dependence on Distributors

Relying on distributors exposes Amazon to a wide range of issues. One of its main distributors (German Logistic Group – Deutsche Post DHL) can leverage its position to renegotiate terms.

7. Employees Strike

Strikes can grind Amazon’s operations to a halt. Amazon workers have walked out in several countries, most of the protests related to wages or working conditions. 

In Germany, for example, Amazon employees went on strike due to unsafe working conditions, paralyzing operations in six distribution centers.

Amazon’s Opportunities – External Strategic Factors

1. Expansion in Emerging Markets

Emerging markets provide ongoing expansion opportunities if Amazon can capitalize on the opportunity. Not only were emerging markets home to a whopping 85% of the global population in 2022, but they are now expected to lead the way in retail ecommerce growth. It’s projected that emerging economies will represent 64% of the anticipated $1.4 trillion dollar retail ecommerce by 2024. 

While Amazon has a huge presence in North America and Europe, there are still plenty of places where it can grow. Demand for e-commerce could rise in emerging markets in India, Southeast Asia, and parts of Africa as internet services expand and economies grow in these emerging markets.

2. More Physical Stores

Amazon is primarily known as an online retailer, but not all consumers shop online and prefer to shop at physical stores. In fact, 54% of US consumers surveyed preferred brick-and-mortar locations when shopping. The global e-commerce market is projected to grow to $6.3 trillion in 2024, which is still only 21% of the total global retail sales anticipated to reach $30.57 trillion in 2024. 

Lastly, by expanding its physical stores, Amazon can improve its competitiveness against big box retailers and engage customers with the brand.

3. Inflation Supporting Demand for Cheaper In-House Brands

Private label sales in the US alone reached $236 billion in 2024 – a 4.4% year-over-year increase.

Amazon can do backward Integration by expanding its production of in-house brands such as Amazon Basics to address consumers demand for less expensive products. 

4. Digital Healthcare Services

The rise of digital healthcare, due in part to macroeconomic and societal events such as the COVID-19 pandemic, presents an excellent opportunity for Amazon to expand. The current digital health market is anticipated to reach $171.9 billion in 2024 and grow at an impressive 8.49% CAGR by 2029.

Amazon can greatly expand its offering in this area. It launched the Amazon Clinic in 2022 – a message-based virtual care service that offers affordable and accessible virtual care options for more than 20 common health conditions. Currently, the messaging service is available in 34 US states and can be expanded both in the US and in other countries.

5. Cloud Market 

The global cloud market is valued at $300 billion in 2024, with an incredible 21% CAGR.   With a market share of 31%, Amazon Web Services dominates the $200B+ cloud market, but the competition is edging closer. 

Amazon has the opportunity for continued growth because of the elasticity and security that AWS provides. It must maximize this growth to protect against competition from other giants in the tech industry such as Microsoft and Google.

Image Source: Statista

Amazon’s Threats – External Strategic Factors

1. Lawsuits

While some previous big suits were settled, an even bigger one is active.

In September 2023, the US Federal Trade Commission and 17 state attorneys general sued Amazon. They allege Amazon illegally blocks competition and uses its monopoly to hike prices and degrade quality. 

2. Controversies 

Controversies have damaged Amazon’s brand image. Amazon has been criticized for anti-competitive practices (the reason for the lawsuit mentioned above) and accused of selling illegal products in some markets, including stun guns and concealed cutting weapons prohibited under UK law.

People critically reacted and boycotted Amazon sites in 2010 when they found it was selling the book “The Pedophile’s Guide to Love & Pleasure: a Child-lover’s Code of Conduct.” It has also been accused of selling anti-semitic products, including ‘I Love Hitler’ t-shirts. It was also criticized for selling foie gras, which is banned in several countries, and for selling cockfighting magazines and dog-fighting videos.

3. Government Regulations

Regulations can also threaten Amazon’s business in some critical countries. Amazon does not ship to Cuba, Iran, Iraq, North Korea, Sudan, and Syria.

4. Links to Exploitative Labor

Amazon was one of three retail giants facing scrutiny from the US State Department for maintaining supply chains and labor sources associated with human rights abuses. This exposes the e-commerce giant to reputational, economic, and legal risks.

5. Cybercrime

Increasing cybercrime can affect the company’s network security system. Improved security measures would reduce this threat.

6. Aggressive Competition

Competition with big retail firms like Walmart, Target, Home Depot, and eBay can give Amazon a tough time in the future. In addition, Amazon competes with the following companies in key business sectors:

• In Video Streaming Service: Apple TV+, Netflix, Disney+
• In Logistics: FedEx, UPS
• In Self-Driving Technology: Tesla, Uber, Ford

7. Fake Products

The increase in counterfeiting and fake products threatens Amazon’s profits. A few years ago, the company filed a lawsuit against a New York-based online retailer for allegedly counterfeiting Valentino shoes, a luxury Italian shoe brand offered by Amazon. 

8. Economic Recession

Amazon is not immune to an economic recession. If economic uncertainty worsens, it can impact Amazon’s sales. 

9. Fake Reviews

Amazon has an overwhelming amount of fake reviews, and the problem has worsened in recent times due to the pandemic. Product reviews are a critical indicator of quality and authenticity, and customers rely heavily on reviews to make purchases.

According to the Financial Times investigation, Amazon has deleted over 20,000 fake 5-star reviews from its top UK reviewers.

10. Tornado Kills Amazon Workers

Lawmakers went on a quest to seek answers from Amazon after a tornado hit an Amazon warehouse in Illinois, killing six workers. In a letter posted, the company has been heavily criticized regarding poor worker safety policies and complete disregard for putting emergency countermeasures in place. 

11. Federal Trade Commission (FTC) Complaints

The e-commerce giant is being investigated for data security and privacy concerns in its Ring camera and home security business. The Federal Trade Commission says Ring employees illegally surveilled company customers and failed to put security measures in place to stop hackers from taking control of cameras. An FTC order, which is subject to court approval, would stop Ring from making any profit off the unlawfully accessed videos and would also mean millions in refunds to customers.

12. Easily Imitable Business Model

Online retail businesses have become quite common in this digital world. So, imitating Amazon’s business model for rival firms is not difficult. A few businesses are even giving Amazon a tough time. These include eBay, Walmart, Netflix, Hulu, Oyster, etc.

13. Tax Avoidance Controversy

Tax avoidance in Japan, the UK, and the US has sparked negative publicity for Amazon. A few years ago, President Trump criticized Amazon over taxes on social media.

If Amazon continues to face negative publicity due to the true or untrue perception that it isn’t paying its fair share of taxes, it could hurt its brand value and revenues. 

14. Unfair Use of Third-Party Data

Engaging in unfair trade practices undermines trust and increases legal risks. Amazon has faced antitrust charges in the European Union for collecting and using data from its third-party sellers to compete against them.

If found in violation, Amazon could have been fined billions of dollars. However, Amazon and the EU Commission reached a settlement, with Amazon agreeing to make significant changes to its business practices.

If consumers believe Amazon is using unfair means to gain a competitive advantage over its competitors, which could mean fewer options and higher-cost goods for consumers, its brand value could take a hit.

15. Violation of Privacy Laws

Amazon also settled a suit in the US over violations of children’s privacy laws related to Alexa. Amazon will pay a $25 million penalty and has agreed to a permanent injunction.

Consumers want the companies they do business with to adhere to privacy laws and to keep their information private. If they don’t, they may consider shopping elsewhere, which will hurt Amazon’s brand value and revenues.

Amazon SWOT analysis

Recommendations

This SWOT analysis analyzes the current internal and external Amazon business environment. A few necessary improvements will help reinforce Amazon’s market position.

In short, Amazon needs to strengthen its key areas, minimize its weaknesses, avail itself of opportunities, and counteract threats for future progress. Among the recommendations:

1. Consolidate market dominance by boosting its marketing efforts, promotional activities, and competitive advantages.
2. Strategically deal with global controversies. Amazon needs to resolve tax issues, data privacy issues, and workplace complaints and manage its app’s features efficiently to diminish negative publicity in the market.
3. Increase its limited physical presence by opening physical stores outside the US. This will augment brand value and market reach. 
4. Enhance its strategic entry in developing countries where many growth opportunities are available.
5. Increase competitive edges and enlarge the gap between Amazon and its biggest competitors.
6. Address the issues of counterfeit sales and cybercrimes by upgrading technology measures.
7. Enhance network security systems for the protection of consumers’ rights.

 References & more information

1. Interbrand (May 9, 2024) Best Global Brands
2. Department of Justice (May 9, 20232023) Amazon Agrees to Injunctive Relief and $25 Million Penalty
3. European Commission (2022) Commission Accepts Commitments by Amazon
4. Federal Trade Commission (2023) FTC Sues Amazon for Illegally Maintaining Monopoly Power
5. Federal Trade Commission (2023) FTC Says Ring Employees Illegally Surveilled Customers
6. Financial Times (2020) Amazon Deletes 20,000 Reviews After Evidence of Profits for Posts
7. Ashmore Grou (2018) MC_10 May18_2.pdf (ashmoregroup.com)
8. Euro Monitor International (2023). Significance of E-Commerce Investment in Emerging Markets – Euromonitor.com
9. Forbes Advison (2024) 35 E-Commerce Statistics of 2024 – Forbes Advisor
10. Statista (2024) United States: private label dollar sales 2023 | Statista
11. Statista (2024) Digital Health – Worldwide | Statista Market Forecast
12. Statista (2024) Chart: Amazon Maintains Cloud Lead as Microsoft Edges Closer | Statista

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