It is a well-known fact that Amazon is a global leader in e-commerce and is also one of the most popular brands in the world. In fact, with a market capitalization of more than 1 trillion USD, Amazon is the fifth most valuable company in the world. Besides, the company along with the e-commerce dominance is foraying into the offline segment as well with the launch of Amazon Go Stores that are 100% tech-oriented. With Jeff Bezos at the helm of the company, Amazon has scaled incredible heights of success in little time.
This article puts forth a well-researched SWOT Analysis of Amazon looking into the internal capabilities of the company in terms of scalability and efficiency. Also, the analysis identifies the threats and opportunities in the external business environment in the global e-commerce industry. Besides, if you want to learn more about SWOT Analysis, you can go through our extensive SWOT Analysis guide. For now, let us get started with the SWOT Analysis of Amazon.
Table of Contents
An intelligible and extensive SWOT Analysis of Amazon
Strengths of Amazon
Distinct leadership- Amazon is led by a renowned entrepreneur named Jeff Bezos. Jeff Bezos is known for his transformational leadership wherein the employees are encouraged to innovate with the products and services. Further, Jeff Bezos has launched various other innovative ventures as well including Blue Origin that has been formed to promote space tourism (Business Insider, 2022).
Huge variety of products- Amazon has various products in its stores that include apparel, footwear, furniture, books, electronics, etc. This provides it with the advantage over the competitors as the customers would be able to get everything from one store and hence the sales of the company would rise.
Superior Technology- Amazon uses various innovative technologies such as Amazon Go wherein the stores are cashier-less and the customers need not pay at the stores, rather the payment would be deducted from the app as they leave the store.This would lead to a reduction in the shopping time of the customers and hence they would prefer to shop more at the stores (Tillman, 2022).
Market leadership- According to Statista, Amazon is the market leader in the US in the e-commerce segment with a 41% market share. The lead from the second position occupier, Walmart is huge and controls 6.6% of the e-commerce segment.
Strong distribution system- Amazon’s distribution system is huge with the company shipping 5 billion packages in the US on an average in a year. Further, the company has around 100 million square feet of space dedicated to fulfillment centers. The distribution network also involves sortation centers wherein the packages are sorted by zip code and then delivered to the USPS sites. The other component in the distribution network involves a delivery station wherein the courier companies and Amazon Flex drivers handle the delivery process.
Besides, the company is planning to open its own air hub in the future which would lower its reliance on companies like UPS and FedEx (Routlry, 2018).
Weaknesses of Amazon
Imitable business model- Though Amazon was one of the initiators in the e-commerce segment but over the years many strong players have entered the industry. Hence it can be said that the business model is highly imitable and thus this is a major negative as the company can lose its competitive edge in the market.
Limited offline presence- Amazon deals mostly through electronic means while it has started opening physical stores just recently. The company should focus more on opening physical retail outlets and enhancing its online to offline retail business as the O2O market is rising at a faster pace.
Product failures- Though Amazon is a successful company, many of its products have failed miserably. These products and services include Amazon Fire smartphone, and Amazon Dash buttons wherein the customers could link an item and preferred quantity to the button and press it whenever they needed more. The other products and services that have resulted in failure include Amazon restaurants, Whole Foods 365, and the chain of stores that contained budget-friendly private-label goods targeted toward younger shoppers (Green, 2019).
Opportunities for Amazon
More physical stores- Most of the sales at Amazon currently occur through online means. The company should penetrate more into the offline segment and this would enable it to widen its customer base, especially in Australia where 67% of people still prefer shopping from brick and mortar stores. The organizational structure of the company will have to look at the possibility of setting up an extensive network of physical stores.
Improvement in organizational policies- Amazon’s policies currently focus more on increasing the organizational revenues without focusing much on employee engagement and as a result, the employee turnover rate is extremely high, 150% a year (Brannacio, Garretson & Shin, 2021). The company should try to reduce the turnover rate by making the policies more employee-friendly which can include more compensation, flexible working arrangements, etc.
Threats for Amazon
Counterfeit products- There have been many instances wherein the company has been accused of sending fake products to customers. On a couple of occasions, the customers have received stones and other things instead of the things they ordered. These type of incidents can result in the lowering of trust among the customers
Economic recession- There has been a slowdown throughout the world because of COVID. This has resulted in a reduction in per capita and disposable income for the people. If this trend continues for a longer time, then it can lower the sales of the company.
To conclude, Amazon has the advantage of being headed by a technocrat and world’s renowned entrepreneur Jeff Bezos who can guide the company to great heights. The other advantage includes the implementation of technologies on a large scale that can be beneficial to the customers. The company can be at a disadvantage and lose customer trust because of the complaints related to fake products and negative employee reviews attached to it, it can improve itself by improving the organizational structure and focusing more on the employees and their needs. Besides, to understand the impact of external factors on the company, you can read our well elucidated PESTLE Analysis of Amazon.
Green. (2019). Jeff Bezos has said that Amazon has had failures worth billions of dollars - here are some of the biggest ones. www.businessinsider.in. Retrieved 31 March 2022, from https://www.businessinsider.in/slideshows/miscellaneous/jeff-bezos-has-said-that-amazon-has-had-failures-worth-billions-of-dollars-here-are-some-of-the-biggest-ones/slidelist/68380365.cms#slideid=68380387.
Routley, N. (2018). Amazon’s Massive Distribution Network in One Giant Visualization. www.visualcapitalist.com. Retrieved 31 March 2022, from https://www.visualcapitalist.com/footprint-all-amazons-warehouses/.
Tillman, M. (2022). Amazon Go and Amazon Fresh: How the 'Just walk out' tech works. www.pocket-lint.com. Retrieved 31 March 2022, from https://www.pocket-lint.com/gadgets/news/amazon/139650-what-is-amazon-go-where-is-it-and-how-does-it-work.