SWOT Analysis of Amazon. Amazon is a US retail e-commerce, cloud computing, tech, and service company. CEO and founding father of the company, Jeff Bezos, laid its foundation in 1994. Approximately 1 million people are working for Amazon worldwide by the end of Septem 2020. The company has more than 100 million Subscribers and 310 active users globally.
Some of the prominent products and services of the company are; Blink, Alexa.com, Amazon.com, Amazon Web Services (AWS), Zappos.com, Whole Foods Market, IMDb, Ring, and Junglee.
According to an estimate, the market-capital of Amazon was approximately 1.65 trillion US dollars by the end of September. The annual revenue of Amazon was 280.52 billion dollars by the end of 2019, out of which the net income of the brand was 11.59 billion dollars.
Some of the main competitors of Amazon are; Staples, Alibaba, Walgreens, Netflix, Home Depot, eBay, Target, JD, Google Play Store, Costco, Flipkart, Tesco, Apple’s iTunes, Otto, and Walmart.
Today, we’ll study swot analysis of Amazon and discuss internal strengths and weaknesses of the company, and external opportunities and threats Amazon have to face. Here’s the swot analysis of amazon;
Strengths of Amazon
Some of the main internal strengths of the company are as follows;
Covid-19 & Lockdown
The impact of covid-19 was devastating for local offline businesses. But it turned out to be a blessing and an opportunity for the tech and e-commerce retail companies. Since people can’t go outside of their houses. The only option they’ve got is to order products online, and Amazon is at the top of the list in the e-commerce industry.
According to a study, Amazon has doubled its profit during the covid-19 pandemic and lockdown. The annual profit and net income of the company have increased from $2.6 billion to 5.2 billion US dollars.
Brand Worth & Value
According to a study conducted by Interbrand’s Global Ranking of Brand in 2019, Amazon comes as the world’s third-leading brand after Apple and Google. The estimated worth of the brand in 2019 was 125 billion US dollars.
When we talk about e-commerce retail companies worldwide, then Amazon is at the top of the list. The company is very popular among the public and it has a strong brand name.
The secret behind the success of any business lies in having a lower cost. Amazon doesn’t have to pay the rental cost of managing the physical store. The economies of scale provide the company with the advantage of the lowest manufacturing and inventory cost.
Amazon has also made business and strategic partnerships and alliances with Orange Chef, Evi Technologies, Shoefitr, and Thalmic Labs. They have a strong supply chain system and it also gives Amazon the advantage of maintaining low cost.
Innovation & Differentiation
Whether it is drone technology, smart delivery system, Withings Aura Smart Sleep System, or follow-up digital messaging system; Amazon has always pioneered and introduced the latest technology in the e-commerce market. It gives the company a differentiating edge over competitors.
Amazon follows a very simple strategy and it’s to serve customers at the lowest possible price. The company delivers products to hundreds and thousands of customers every day.
Global but Follow Local Strategy
As we know that Amazon is a global brand, but the company also follows the local strategy depending on the local cultures and traditions. Amazon also builds relationships and partnerships with local suppliers, because it helps the company to reduce supply chain costs and compete better in the local market.
3rd Party Sellers
The name and reputation of the brand have attracted the attention of many small third-party sellers. They use the platforms of Amazon and sell their products and services to a bigger market. According to the data collected by FBA (fulfillment by Amazon) that the company has sold approximately 2 billion products through third-party sellers.
Diverse & Variety of Products
Amazon owns and offers a variety of products and services to its customers, other than maintaining a product catalog of third party sellers and local retailers. According to an estimate, Amazon Marketplace sold approximately 562.3 million products in 2018.
Advanced Distribution & Logistic System
Amazon follows the latest technology of distribution and logistics system. Even though it has a fixed price, but it provides the safe, secure, and timely delivery of products/services to the customers.
Amazon has a market of more than 1 trillion dollars and an annual revenue of 280 billion dollars. Such statistical figures make Amazon a market leader in the e-commerce industry.
3 Business Ventures
Amazon has divided its business into 3 main sub-business ventures; Amazon Prime, Amazon Marketplace, and Amazon Web Services. All of these ventures work in cooperation and generate profit for the company.
Better Minimum wage
Amazon has recently increased the minimum wage to 15 dollars per hour. It makes the brand the highest paying minimum wage e-commerce company. Costco is offering 14 dollars per hour, Target is paying 12 dollars, and Walmart is paying 11 dollars per hour.
Amazon has successfully acquired companies like IMBD.com and Junglee.com over the years and also made a lot of profit from it.
Weaknesses of Amazon
Some of the main weaknesses of the company are as follows;
The controversy of Avoiding Taxes
The US, UK, and the Japanese government have accused Amazon of avoiding taxes. Even President Trump has also criticized the company in his tweets. It has sent a negative image of the company.
Products like Fire Phone have turned out to be a failure in the market and couldn’t achieve the required market share.
Loss in some Areas
Amazon has to face huge losses in some of the developing Asian markets like India. Free shipment is one of the many reasons for the loss.
Easy Business Model
Amazon is following a very simple e-commerce retail business model. It’s so simple and easy that any new competitor can come and copy it. Some of the e-commerce businesses like Hulu, Netflix, eBay, and Barnes and Noble have followed the same business model. Now, they’re in a very strong position in the market.
Less Physical Stores
Physical stores give customers a touch of the real-life experience of checking out various products and then choosing one of them. Amazon has few store offline stores as compared to the competitors.
Wrong Use of the Data
European Union has recently accused Amazon of collecting data from the third party and then using it to gain a competitive edge in the market. It has created an atmosphere of antitrust among the public. The company has to pay off 28 billion US dollars if found guilty.
Falling Customer Safety Standards
Environmental Protection Agency of the US has asked Amazon to remove some of its non-environmental products (like pesticides) from the page. The focus of the company has always been on offering a wide variety of products to the customers. In the race of offering products, it has become difficult for the company to check the safety standards of its products.
Poor working Conditions
There are many negative reports about the poor working conditions of Amazon in its workplace. Like constant surveillance, bathroom leakage, and poor air quality are the top few. Such reports have created a bad reputation for the company.
Protest/Strikes of Employees
Some of the employees of Amazon have protested in Germany because of the unsafe working condition. Consequently, 6 distribution centers of the company became shut down because of the workers’ strikeout. Such strikes and protests aren’t good for the company’s reputation.
Over-Reliance on Distributors
Amazon has a history of relying on suppliers and distributors. It puts the company in a vulnerable position and it’s very risky for the company. Some of the suppliers and distributors have taken advantage of the company’s vulnerability.
Check out this article: Swot analysis of Amazon (E-commerce Company)
Opportunities available to Amazon
Some of the main external opportunities available to the company are as follows;
Acquiring more Companies
Amazon has the opportunity to acquire some of the small competitors and reduce competition in the market. It would help the company to increase its market share.
Improve Tech Policies
Amazon should improve its tech policies and measurement protocol. For instance, some third party sellers sold fake products online while the original product came later in the market.
Launching Physical Stores
Although the company has physical offline stores, they are very few and limited. If the company opens up new stores, then it would help the brand to attract more customers.
Electric Rickshaws in India
Some of the environmentalists have criticized Amazon for selling non-environmental friendly products. The company has taken a new of cleaning the environment by launching 10000 electric rickshaws by the end of 2025 in India.
Self Driving Vehicles Technology
Amazon has recently bought a self-driving startup Tech Company in California at 1 billion dollars. The purpose is to get its hands on the autonomous technology, develop it further, and then become a market leader later on.
Threats Amazon has to face
Some of the main external threats that the company has to face are as follows;
High Level of Competition
The e-commerce market has become very competitive in recent years. It’s because of the competitors like eBay and Walmart. Now, the company has to face another type of competition. Like self-driving technology, video streaming services, and logistics.
Exploiting Labors and Workers
There reports that Amazon has been exploiting its workers. Even the US state department is checking the human rights abuse in the company. A flare of such news could turn away many new customers.
Cybercrimes pose a serious threat to the company. Therefore, the company should have a strong cybersecurity system to measure such attacks.
Government Rules & Regulations
The government is restricting Amazon from not sending products to countries like Syria, Yemen, Iran, North Korea, Sudan, and Cuba. Government policies are a major block in the way of the company’s growth.
Objectionable and Immoral Products
A third party seller launched its book by the name of ‘The Pedophile’s Guide to Love & Pleasure; a Child lover’s code of Conduct’ in 2010. It enraged people and many people boycotted Amazon because of it.
Critics have claimed that Amazon has many fake reviews of some products. Reviews and stars are very important to check the performance of any product. Many users make a purchase decision based on the reviews. According to an investigation report by Financial Times, the company removed more than 20,000 fake reviews and stars from its platform.
Economic Recession & its Impact
Although the covid-19 pandemic has increased the company’s sales, it doesn’t mean that the company is invincible. If the post-pandemic recession happens, then it would a bad impact on the company’s sales.
After a careful study of the swot analysis of Amazon, one thing we have noticed that the company has a strong market position. But some global controversies are jeopardizing the reputation of the company. The brand should also take advantage of the available opportunities to reduce threats of cybercrimes and counterfeit sales.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.