The popularity of Amazon is widespread worldwide. In total, its users are 310 million active, and its subscribers are 100 million. Amazon, the world’s largest online retailer, has many accomplishments, eye-popping revenue figures, and successful launches.
Our Amazon SWOT analysis will help you understand the commercial situation of the online retailing behemoth.
The SWOT analysis examines the strengths, weaknesses, opportunities, and threats in a specific context. Being one of the Big Four in the technology industry is a great context for Amazon SWOT Analysis.
Amazon.com was founded in 1994 by Jeff Bezos. It began as an online bookstore, then quickly evolved into an online retailer that sells practically anything you can imagine, as its logo suggests.
Amazon is the world’s largest online retailer, and its success has prompted other physical, brick-and-mortar stores to establish an online presence.
Because of its global scope and aggressive pricing practices, it is frequently referred to as the online counterpart of Wal-Mart.
Amazon can capitalize on various developing market opportunities and ensure that its global supply chain of networked warehouses generates significant value for itself and its stakeholders.
Furthermore, Amazon business model is running at near-zero margins. The fact that the company has not produced a decent profit in the last five years indicates that there is still considerable space for improvement.
The SWOT analysis of Amazon shows how the world’s largest online retailer leverages its competitive advantages to become a dominant player in retail.
It identifies all of the company’s essential strengths, weaknesses, opportunities, and threats. You’ve come to the right place if you want to learn more about Amazon’s SWOT analysis.
|Year founded||July 5, 1994|
|Industries||eCommerce, Retail, Cloud, Consumer electronics, Streaming, Media House|
|CEO||Andrew R. Jassy|
|Headquarter||Seattle, Washington, U.S.|
|Areas served||Nearly Worldwide|
|Market Cap||$1.621 Trillion (August 2021)|
Strength of Amazon
In the months following the pandemic, Amazon’s market capitalization expanded by $570 billion. Amazon’s market cap is approaching $1.49 trillion, making it the third-largest company in the tech sector after Microsoft and Apple.
Even with the most severe global crisis since WWII, how is this meteoric rise possible? We’ll see how it goes.
1. Strong brand name: Amazon makes up a significant part of the global e-commerce landscape, and its brand is recognized worldwide.
2. Brand valuation: Amazon is ranked second in Interbrand’s Global Brand Ranking 2020 (Apple is ranked first, and Google is ranked third), having a brand value of $200 billion.
3. Customer-focused: Amazon serves a vast number of consumers’ everyday needs at low pricing. As a result, it has become a customer-focused brand.
4. Differentiation and Innovation: Amazon regularly introduces innovative new products and services to its offering, from the drone delivery service to the Withings Aura smart sleep system. By doing so, they differentiate themselves from the competition.
5. Cost Leadership: The company avoids the overhead of operating physical retail shops by selling everything online. The economies of scale allow Amazon to control expenses and reduce inventory replenishment time. The company has established strategic alliances with various companies, including Evi Technologies, Thalmic Labs, Shoefitr, and The Orange Chef. This company’s low-cost structure is due to its value chain system.
6. Largest Merchandise Selection: Amazon has a diverse product mix that entices online shoppers to make the majority of their purchases from it rather than from other online shops. As of 2018, Amazon’s Amazon.com Marketplace had sold 562.3 million products.
7. There are many third-party suppliers – Because of the tremendous level of traffic on Amazon’s sites, a great number of third-party retailers have joined the Amazon platform to sell their products. According to Fulfillment by Amazon (FBA) data, over 2 billion items are available from third-party vendors.
8. Think Globally and Act Local strategy – Amazon has benefited the most from this strategy. Local supply chain companies are Amazon’s partners to help it compete with domestic e-commerce rivals. The company offers services tailored to meet local demands and fits into the culture of the country.
For example, India has created a market campaign called “Aur Dikhao” to encourage people to look for more items.
9. Numerous acquisitions – Amazon has reported huge profits from several successful acquisitions, including Zappos.com, Woot.com, Junglee.com, and IMBD.com.
10. Involved in three important companies – Amazon Marketplace, Amazon Web Services (AWS), and Amazon Prime are three key businesses of Amazon that collaborate and support one another. They produce significant earnings and benefits for the organization as a whole.
11. Market Leader — Amazon is without a doubt the market leader in the online retail industry, with a market value of over $1 trillion and annual revenues over $386 billion.
12. Logistics and distribution systems — The logistics and distribution systems employed by Amazon are extensive. It even has set charges for various delivery periods. As a result, it provides consumers with dependable, secure, and timely commodities and supplies.
13. Raising the minimum hourly wage to $15 – Amazon is one of the first retailers to raise the minimum hourly wage to $15. Target pays $12 an hour, Walmart pays $11 an hour, and Costco pays $14 an hour. 12. Market Share: According to eMarketer, Amazon controls 38.7% of the e-commerce market. Amazon is used by about two out of every five people. To put Amazon’s domination into perspective, Walmart, which is in second place, has only 5.3 percent of the e-commerce industry.
13. Supply Chain: According to RBC Capital Markets, Amazon has worked with 1300 companies across 400 delivery stations in the United States, employing 85,000 people. Amazon’s extensive supply network, combined with innovations like drone delivery, maintains the company’s forefront of e-commerce.
14. Diversification: In addition to e-commerce and digital streaming, Amazon is also a major player in cloud computing, artificial intelligence, and artificial intelligence. According to Canalys, Amazon’s cloud platform AWS has a 32.4 percent market share. According to Forbes, Amazon’s streaming network Amazon Prime Video has a 52.9 percent penetration rate.
15. Board of Directors: The board of directors of Amazon includes a former Starbucks COO, a former dean of the MIT Schwarzman College of Computing, a former chair and CEO of MTV Networks, and a former CEO of PepsiCo. General Keith Alexander, a former National Security Adviser, joined Amazon’s board of directors this year. Amazon’s tagline is “Work hard. Have some fun. Create history.” With the clout that Amazon’s board of directors possesses, it’s only natural that the company is expanding the boundaries of 21st-century commerce.
Weaknesses of Amazon
Amazon has made some important sacrifices on its way to the top, which may interfere with its growth. Amazon’s weaknesses are limiting elements over which it has entire or partial control. Here’s a rundown of some of these internal issues:
1. Employee Morale: According to a Verge piece, Amazon warehouse workers are turning to walkouts, strikeouts, and strikes to seek greater health care and hazard compensation. If the drive for efficiency takes precedence above the need for well-being, Amazon may face severe personnel concerns.
2. Seller Relationships: Amazon sellers are concerned about increasing inventory storage constraints, faster delivery demands, risks from “black hat” methods, and competition from Amazon’s private label products. If these concerns are not addressed, Amazon will lose favor, especially as anti-Amazon firms such as Shopify, Etsy, and Walmart nibble at Amazon’s heels.
3. Quality Focus: Amazon is focused on improving product search, the convenience of purchase, and shipping speed. As a result, Amazon cannot check the veracity of claims or the quality of products sold on its marketplace. This could lead to people migrating to more reliable platforms.
4. Work Culture: The employee experience at Amazon is characterized by intense competition, critical feedback, and insensitive practices. The employees feel that there is no praise, that work-life balance is disfavored, and that there are no benefits.
5. Physical Presence: Walmart, America’s largest retailer, is poised to dethrone Amazon with its Walmart+ membership scheme. At the moment, Amazon’s retail network cannot compete with big-box retailers such as Walmart and Target.
6. Easily replicable business concept – Online retail firms are extremely widespread in today’s digital age. As a result, competitor corporations can easily replicate Amazon’s business model. A few businesses are even giving Amazon a run for its money. These include, among others, Barnes & Noble, eBay, Netflix, Hulu, and Oyster.
7. Loss of Margin in a Few Areas – Amazon has suffered losses in a few markets, including India. Its free shipping to clients may be one of the factors exposing the concerns of margin erosion in various countries.
8. Product Missteps and Failures — Its Fire Phone launch in the United States was a flop, and its Kindle Fire gadget did not farewell.
9. Tax Avoidance Controversy — Amazon has received unfavorable attention due to tax evasion in Japan, the United Kingdom, and the United States. President Trump chastised Amazon over social media taxes.
10. Limited physical shop presence — Amazon owns only a few physical stores. This can make it difficult to entice buyers to buy items that are not available in online stores.
11. In July 2018, Vox reported scathing reports about Amazon’s treatment of employees and working conditions. Poor air conditioning, scheduled toilet breaks, and continual video surveillance are just a few of the complaints cited by employees. Such things have an impact on Amazon’s market reputation.
12. Declining customer safety – As Amazon’s product offering expands, it is getting more difficult to vet each product and ensure the highest degree of safety. The United States Environmental Protection Agency (EPA) recently ordered Amazon to remove various pesticides and dangerous products.
13. Unfair use of third-party data — Unfair business practices weaken confidence and increase legal risks. Amazon faces antitrust charges in the European Union for collecting and utilizing third-party data to compete with them. If Amazon is found to be in violation, it faces a fine of up to 10% ($28 Billion) of its 2019 annual revenue ($280 Billion).
14. Overdependence on distributors — Amazon’s reliance on distributors exposes the company to various risks. One of its primary distributors (German Logistic Group – Deutsche Post DHL) may be able to renegotiate arrangements.
15. Employees Strike – Strikes can interrupt Amazon’s operations. Amazon employees in Germany went on strike due to unsafe working conditions, effectively shutting down operations in six distribution hubs.
Weaknesses and strengths are factors that determine Amazon’s success on the internal front. External factors that influence performance include opportunities and threats. Since we’ve completed the review of the internal factors, we can turn our attention to the external considerations.
Opportunities for Amazon
Amazon’s success is due to its ability to innovate. The number of patents awarded to Amazon has more than doubled from 118 in 2010 to 2054. Here are some of the new changes created by Amazon’s inventive culture:
1. Podcasting: Amazon recently integrated a podcast service into its Amazon Music platform. The new effort is intended to eat into Spotify’s and Apple’s market share as the top podcasting providers. This service would complement Amazon’s Alexa.
2. Package Delivery: The US Postal Service, UPS, and FedEx expect that Amazon’s delivery network will dominate their market in a decade. Amazon plans to create 1500 delivery hubs in towns and suburbs across the United States this year.
3. Amazon Fresh: Amazon Fresh, the company’s most recent venture, provides seamless in-store and online shopping as well as consistently cheap rates. Amazon Fresh outlets, the first of which is already available to select customers in Woodland Hills, California, might be a game-changer for Amazon.
4. Amazon’s Small Business Accelerator: Amazon has launched an $18 billion initiative to assist small firms in selling to customers. Logistics, tools, education programs, services, and people are among the areas in which investments are made. The goal here is to speed up the growth of existing merchants while also onboarding 100,000 new dealers on the site.
5. Food Industry: Amazon’s foray into food delivery is another way to exploit its supply chain expertise. Zomato, India’s top meal delivery service, has reservations about Amazon’s entry into this lucrative market.
6. Amazon may be able to penetrate or grow its business in underdeveloped markets.
7. By increasing physical stores, Amazon can increase its competitiveness against big-box retailers while engaging people with the brand.
8. Amazon has the opportunity to develop technical measures and organizational regulations to prevent counterfeit sales. One instance of counterfeit sales was revealed when Amazon marketed a counterfeit My Critter Catcher. The item was sold for $1 less than the original item.
9. The company can perform backward integration by focusing on its brands, such as Amazon essentials, to differentiate its services and increase profit margins.
10. Additional acquisitions of e-commerce enterprises can enhance the company’s market share and lower the degree of competition.
11. Self-Driving Technology — Amazon just paid $1 billion for Zoox Inc, a California-based self-driving firm. It may now deploy autonomous technology to capitalize on the demand for ride-hailing services or strengthen its delivery network.
12. Introduction of electric rickshaws in India– Amazon commits to have a beneficial environmental impact. Amazon intends to deploy 10,000 electric rickshaws for delivery in India by 2025, with this objective in mind.
Amazon is known for its pioneering spirit. Regardless of what Amazon does, it aims to become the best. Whenever Amazon launches a new product, the world expects grandeur. What about Amazon’s “delivery” capabilities? We will examine some of the threats Amazon is facing.
Threats of Amazon
With Amazon’s main rival, Walmart, preparing for a market-share war, there’s trouble in paradise. Amazon has recently faced the following threats: Amazon’s threats are negative factors that are outside Amazon’s control and influence.
1. Counterfeits Goods: The government is putting pressure on Amazon to be held accountable for the harm caused by counterfeit products sold by third-party sellers on Amazon. A court has found that Amazon is accountable for the physical injury and property damage caused by an explosion triggered by a counterfeit battery sold on Amazon.
2. Government Regulations: During the first few months of the pandemic, the Indian government prohibited non-essential products on Amazon. The ban cost the company $398 million. Local retailers were also favored by government policies more than the e-commerce business. Such policy adjustments are and will continue to be a danger to Amazon’s domestic and international expansion.
3. Antitrust Investigations: During a hearing before a House Judiciary antitrust subcommittee, Congress expressed worry about Amazon’s monopoly and data-privacy rules. Members specifically questioned whether Amazon helps or hinders the success of other firms. Amazon is also being scrutinized by the European Union.
4. Quality Control: Statistica reported that third-party merchants accounted for approximately 53% of Amazon products sales in 2020. A congressional hearing featured comments by Amazon CEO Jeff Bezos implying that the company is selling stolen goods. Lack of accountability and oversight can result in the loss of trust.
5. Rivalry: Walmart launched the Walmart Fulfillment Service. With the advent of this product, third-party sellers now have an option to Amazon. Although the market share gap between Amazon and its nearest competitor is enormous, it is projected to narrow in the next years.
6. Few issues have harmed Amazon’s brand image. The Pedophile’s Guide to Love and Pleasure: a Child-Code lover’s manual was discovered by the public in 2010. People boycotted Amazon sites in response.
7. Government rules may potentially jeopardize Amazon’s corporate operations in some crucial countries. The following countries are prohibited from receiving Amazon shipments: Cuba, Iran, North Korea, Sudan, and Syria.
8. Labor exploitation – A US government investigation into Amazon’s supply chains and labor sources for violating human rights is one of three investigations the State Department is conducting. The eCommerce behemoth is put at risk as a result of reputational, economic, and legal liabilities.
9. Growing cybercrime can have an impact on the company’s network security system.
10. Amazon may face difficulties in the future due to aggressive rivalry from large retail corporations such as Walmart and eBay. Furthermore, Amazon now competes with the following companies:
Apple TV+, Netflix, and Disney+ are among the video streaming services available.
In terms of logistics: Tesla, Uber, and Ford are all leaders in self-driving technology.
11. Imitation is easy because numerous new competitors are entering the market with the same business plan as Amazon.
12. Counterfeit and Phony Products – The rise in counterfeiting and fake products jeopardize Amazon’s earnings. The company recently sued a New York-based online store for allegedly faking Valentino shoes, a luxury Italian shoe brand sold by Amazon.
13. Economic Recession – Amazon is not immune to a downturn in the economy. If economic uncertainty deepens, Amazon’s sales may suffer.
14. Phony reviews — Amazon has many fake reviews, and the problem has gotten worse in recent years due to the epidemic. Product reviews are an important sign of quality and authenticity, and shoppers strongly rely on them when making purchases.
According to the Financial Times, Amazon has removed over 20,000 bogus 5-star reviews from its top UK reviewers.
Final Words on Amazon SWOT Analysis
Amazon has its work cut out for it in terms of future strategies, and this SWOT Analysis might serve as a guide and a path for the corporation to follow in the future.
The primary takeaway from this SWOT Analysis is that Amazon must focus on profitability rather than volume alone to remain competitive in a future where volume and market leadership are insufficient to add value to its stock.
- Strength: Internal reasons that enable Amazon’s expansion
- Weaknesses: Amazon’s success is hampered by internal problems.
- Opportunities: External forces accelerating Amazon’s growth
- Threats: External forces are impeding Amazon’s success.
Amazon’s current position is clarified via a SWOT analysis. Few adjustments are required to administer the deficiency and strengthen its market position.
In short, Amazon must enhance its key areas, minimize its weaknesses, seize opportunities, and prevent dangers to advance in the future.
A few suggestions are provided below:
1. Consolidate market domination by increasing marketing and promotional efforts, as well as competitive advantages.
2. Handle global controversies strategically. To reduce bad market publicity, Amazon must overcome tax difficulties and efficiently manage the features of its app.
3. Expand its limited reach by opening actual stores outside of the United States. This will increase brand recognition and market reach.
4. Strengthen its strategic presence in developing countries, where there are numerous chances for growth.
5. Strengthen Amazon’s competitive advantages and widen the distance between it and its main competitors.
6. Improve technology measures to combat counterfeit sales and cybercrime.
7. Improve network security technologies to defend consumers’ rights.