Amazon SWOT 2024 | SWOT Analysis of Amazon

                                                                      

 Company: Amazon 
CEO: Andrew R. Jassy
Year founded: 1994
 Headquarter: Seattle,USA
Number  of Employees (FY2022): 1,541,000
Type: Public
Ticker Symbol:  AMZN
Market Cap (Apr 2023): $1.05 Trillion
Annual Revenue (FY2022): $513.98 Billion 
Profit | Net income (FY2022): $-2.72 Billion

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

Let’s discuss this online retail giant in a little depth and understand the company’s business scenario with the help of Amazon SWOT analysis.

Jeff Bezos laid the foundation of Amazon 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.

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. 

2. Brand Valuation

According to Interbrand’s Global Brand Ranking 2022, Amazon is ranked at #3 position (Apple at #1 and Microsoft at #2), with a brand value of $274 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.

4. Differentiation and Innovation

Amazon frequently brings creative ideas and innovative additions to its product line and service offerings like ambitious drone delivery service and Withings Aura Smart Sleep System.  This creates a differentiation from other companies.

5. Cost Leadership

Amazon doesn’t incur costs in 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. Largest Merchandise Selection

Amazon owns extensive product mix which attracts online customers to make their majority of purchases from it rather than other online retailers. Amazon has sold 75 million products in its Amazon.com Marketplace. 

7. Large Number of Third-Party Sellers

Due to the high traffic volume on Amazon’s sites, a large number of third-party sellers have joined the platform of Amazon to sell their own merchandises. The data from Fulfillment by Amazon (FBA) reveals that there are more than 2 billion items available from third-party 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 in competing against domestic e-commerce rivals. It understands the local needs and launches its services as per the country’s culture.

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

9. Large Number of Acquisitions

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

10. Key Business Segments

Amazon Marketplace, Amazon Web Services (AWS), and Amazon Prime are 3 key businesses of Amazon which work and support each other. As a whole, they generate massive profits and advantages for the company.

11. Market Leader

With over $1 Trillion market capitalization and above $513 billion annual revenue, Amazon is truly a market leader in 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 executes reliable, secure, and fast delivery of goods and products to the customers.

13. Minimum Pay Raise to $15 Per Hour

Amazon is among the first companies in retail to raise its minimum hourly pay to $15. In comparison, Target pays $12 per hour, Walmart pays $11 per hour, and Costco pays $14 per hour. 

Amazon’s Weaknesses – Internal Strategic Factors

1. 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 so difficult. A few businesses are even giving Amazon a tough time. These include Barnes & Noble, eBay, Netflix, Hulu, and Oyster etc.

2. Losing Margins in Few Areas

In few areas such as India, Amazon has faced losses. It’s free shipping to customers can be one of the reasons that expose the risks of losing margins in some markets.

3. Product Flops and Failures

Its Fire Phone’s launch in the US was a big failure while its Kindle fire device didn’t even grow well.

4. Tax Avoidance Controversy

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

5. Limited Brick-and-Mortar Presence

Amazon owns very limited physical stores. This sometimes hinders to attract customers buy things which are not sellable on online stores.

6. 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 few of the negative remarks made by the employees. Such things affect the reputation of Amazon.

7. Declining Consumer Safety

As its offerings increase, it is becoming a challenge for Amazon to vet each product and guarantee the highest level of safety. The U.S. Environmental Protection Agency (EPA) recently had to order Amazon to remove a wide range of pesticides and unsafe products on its platform.  

8. Unfair Use of Third Party Data

Engaging in unfair trade practices undermines trust and increases legal risks. Amazon is facing antitrust charges in the European Union for collecting and using data from third-party to compete against them. If found in violation, Amazon can be fined up to 10% ($28 Billion) of its 2019 annual revenue ($280 Billion). 

10. 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.

11. Employees Strike

Strikes can grind Amazon’s operations to a halt. In Germany, Amazon employees went on strike due to unsafe working conditions and paralyzed operations in six distribution centers.

12. Amazon Drivers Allege Inhumane Work Conditions

Amazon delivery drivers allege that they’re forced to urinate in bottles because of the strict delivery time schedules and constraints. While the company has denied that they don’t force their drivers to pee in bottles, some drivers have come forth with complaints.

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

Amazon’s Opportunities – External Strategic Factors

1. Expansion in Emerging Markets

Amazon can gain the opportunity to penetrate or expand its operations in emerging markets.

2. Physical Stores

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

3. Counterfeit Products

Amazon has the opportunity to improve technological measures and organizational policies to reduce counterfeit sales. One case of counterfeit sales came into light when Amazon sold a fake My Critter Catcher. The product was sold for $1 less than the original product.   

4. Backward Integration

Can do backward Integration by expanding its production of in-house brands such as Amazon basics to differentiate its offerings and improve profit margins. 

5. Self Driving Technology

Amazon recently acquired California-based self-driving startup Zoox Inc for whooping $1 Billion. It can now leverage autonomous technology to exploit the increase in demand for ride-hailing services or use it to improve its delivery network.

6. Launch of Electric Rickshaws in India

Amazon pledges to make a positive impact on the environment. With this vision in mind, Amazon plans to deploy 10,000 electric rickshaws for delivery in India by 2025. 

7. Personalized Shopper Service Hits Big

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

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

8. Plans to Enter the Crypto Stratosphere

There are a lot of speculations and rumors floating around the crypto ecosystem. However, there have been reports by mainstream media outlets that Amazon does indeed plan to make a move into cryptocurrency, stating that the company has developed a big appetite for digital currencies and blockchain.

If the retail giant does step into crypto-space and accepts virtual currencies as a payment option, there will be massive opportunities for small businesses in the future. 

9. Launch Of Electric Delivery Vans Across The US

Amazon is revolutionizing the delivery industry with its commitment to sustainability. With the roll-out of over 3,000 custom electric delivery vans packed with cutting-edge safety, design, and navigation features, Amazon is well on its way to achieving its Climate Pledge goal of bringing 100,000 electric vehicles on the road by 2030 with Rivian. 

These eco-friendly vans are already making deliveries in over 500 cities and regions across the country, including major metropolises like Boston, Austin, and Chicago, having delivered more than 75M packages to customers in the US. 

Amazon is not only dedicated to customer satisfaction but also to protect the planet we all call home.

10. 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, and Canada. A broad range of casual games, AAA titles, and retro classics are available here. 

However, you’ll need a “Luna Controller” for a better gaming experience and a monthly fee to access the Ubisoft +, Luna+, and Jackbox Games subscription packages with a many new games.

11. Launch Of Amazon Clinic – A Virtual Healthcare Service 

Amazon has launched the Amazon Clinic – a message-based virtual care service that offers affordable and accessible virtual care options for more than 20 common health conditions, including allergies, acne, and hair loss. 

Currently, the service is available in 32 states, allowing customers to select their preferred telehealth provider and receive treatment within hours with upfront pricing. 

The service helps customers achieve better health at their convenience, whether at home, during dinner, at the grocery store, or on the go.

12. Amazon’s Biggest Acquisitions

More acquisitions of companies can increase the company’s market share and reduce the competition level. Some of the biggest acquisitions by Amazon are Whole Foods, MGM, Zappos, Twitch, Ring, etc.   

13. Amazon Dominates Cloud Market
With a market share of 34%, Amazon Web Services dominates the $200B+ cloud market and has a huge potential to grow because most users prefer the elasticity and security that AWS provides.

Amazon’s Threats – External Strategic Factors

1. Few controversies

have caused a dent in Amazon’s brand image. People critically reacted and boycotted Amazon sites in 2010 when they found that it’s selling the book “The Pedophile’s Guide to Love & Pleasure: a Child-lover’s Code of Conduct.”

2. Government regulations

Regulations can also threaten the business proceedings of Amazon in some critical countries. Amazon does not ship to Cuba, Iran, North Korea, Sudan, and Syria.

3. Links to exploitative labor

Amazon is 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 ecommerce giant to reputational, economic, and legal risks.

4. Cybercrime

Increasing cybercrime can affect the network security system of the company.

5. Aggressive competition

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

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

6. New Entrants

Imitation is simple as many new entrants are coming up in the market usually with the same business model of Amazon. 

7. Fake Products

The increase in counterfeiting and fake products threatens Amazon’s profits. The company recently filed a lawsuit against 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. Lawmakers Seek Answers after Tornado Kills Amazon Workers

Democratic lawmakers are on a quest to seek answers from Amazon after a recent tornado hit an Amazon warehouse in Illinois, killing 6 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) complaint

The Federal Trade Commission (FTC) is set to take legal against Amazon for allegedly violating children’s privacy with its Alexa voice assistant. This is part of the agency’s ongoing investigation into potential Children’s Online Privacy Protection Act violations, which could result in significant financial penalties.

The e-Commerce giant is also being investigated for data security and privacy concerns in its Ring camera and home security business. 

Although COPPA imposes financial penalties of slightly over $50,000 for each violation, the sum can add up quickly as each affected person is considered a separate violation. 

Recommendations

SWOT analysis clarifies the current standing of Amazon. Few necessary improvements are needed to be done to administer the lacking and reinforce its market position.

In short, Amazon needs to strengthen its key areas, minimize its weaknesses, avail opportunities, and counteract threats for future progress.

Few recommendations are given below:

1. Consolidate the market dominance by boosting its marketing efforts, promotional activities, and competitive advantages.

2. Strategically deal with global controversies. Amazon needs to resolve tax issues and manage its app’s features efficiently to diminish negative publicity in the market.

3. Increase its limited presence through opening physical stores outside the U.S. This will augment brand popularity 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.