Amazon SWOT Analysis (5 Key Strengths in 2021)

11/18/21, 12:46 AM Amazon SWOT Analysis (5 Key Strengths in 2021)
SWOT analysis of Amazon (5 Key Strengths in

2021)
Last updated: October 22, 2021 by Ovidijus Jurevicius
This Amazon SWOT analysis reveals how the largest online retailer used its
competitive advantages to become the dominant player in the retail industry.
It identifies all the key strengths, weaknesses, opportunities and threats that
affect the company the most. If you want to find out more about the SWOT of
Amazon, you’re in the right place.
For more information on how to do a SWOT analysis please refer to our article.
Keep reading.
https://strategicmanagementinsight.com/swot-analyses/amazon-swot-analysis/ 1/17
Company Background
Key Facts
Name Amazon.com, Inc.
Founded July 5, 1994
Logo
Internet (Amazon Web Services, Amazon Video)

Industries Retail (Amazon Marketplace, Amazon Prime, Whole Foods)
served Consumer Electronics (Kindle, Fire tablet, Fire TV, Echo and
Ring)
Geographic
Worldwide (Amazon Marketplace in 17 countries)
areas served
Headquarters Seattle, Washington, U.S.
Current CEO Jeffrey P. Bezos
Revenue 280.522 billion (2019) 20.5% increase over 232.887 billion

(US$) (2018)
Profit (US$) 11.588 billion (2019) 15% increase over 10.073 billion (2018)
Employees 798,000 (2020)
Main Alibaba Group, Apple Inc., eBay, Inc., Facebook Inc., Alphabet
Competitors (Google Inc.) Inc., International Business Machines
Corporation, Microsoft Corporation, Netflix Inc., The Walt
Disney Company, Wal-Mart Stores, Inc. and many other
internet, retail, consumer electronics and video

entertainment companies.
Amazon.com business overview from the company’s financial report:
“We seek to be Earth’s most customer-centric company. We are guided by four

principles: customer obsession rather than competitor focus, passion for
invention, commitment to operational excellence, and long-term thinking. In
each of our segments, we serve our primary customer sets, consisting of
consumers, sellers, developers, enterprises, and content creators. In addition,
we provide services, such as advertising to sellers, vendors, publishers, and
authors, through programs such as sponsored ads, display, and video
advertising.
We serve consumers through our online and physical stores and focus on
selection, price, and convenience. We design our stores to enable hundreds of
millions of unique products to be sold by us and by third parties across dozens
of product categories. Customers access our offerings through our websites,
mobile apps, Alexa, devices, streaming, and physically visiting our stores.
We also manufacture and sell electronic devices, including Kindle, Fire tablet,
Fire TV, Echo, Ring, and other devices, and we develop and produce media
content. We seek to offer our customers low prices, fast and free delivery, easy-
to-use functionality, and timely customer service.
In addition, we offer Amazon Prime, a membership program that includes

unlimited free shipping on over 100 million items, access to unlimited streaming
of tens of thousands of movies and TV episodes, including Amazon Original
content, and other benefits.
We believe that the principal competitive factors in our retail businesses include
selection, price, and convenience, including fast and reliable fulfillment.
Additional competitive factors for our seller and enterprise services include the
quality, speed, and reliability of our services and tools, as well as customers’
ability and willingness to change business practices.”[1]
You can find more information about the business in Amazon.com official
website or Wikipedia’s article.
Amazon SWOT analysis
Strengths
1. Low cost structure, the largest merchandise selection and a huge number
of third party sellers
Amazon is the largest online retailer in the world. In 2019, the company earned
US$141.247 billion from online sales of its own merchandise and an additional
US$53.762 billion from the commissions of the third party sellers’ sales in its
online stores. In total, the company’s online retail operations brought in a
massive US$195.009 billion in revenues – more than the next few largest online
retailers earned combined.[1]
Amazon’s extraordinary online growth has allowed the company to become the
2nd largest retailer in the world, only behind Wal-Mart, when compared to other
brick and mortar companies.
Figure 1. Amazon growth rate compared to e-commerce sales growth in U.S.
Source: Amazon financial reports[1] and Digital Commerce 360[2]
Note that Amazon has grown much faster than the entire U.S. e-commerce
market, meaning that the company has actually increased its market share by
taking it from the competitors.
What is the key to such success? According to the Amazon’s report, the online
store’s success lies in its low cost structure, the largest merchandise selection
and a huge number of third party sellers.
Figure 2. Jeff Bezos “napkin sketch” outlining Amazon’s strategy
Source: Seeking Alpha[3]
A low-cost structure leads to lower prices, which combined with a huge range
of products, results in a better customer experience. Satisfied customers
invariably return to the Amazon websites, creating ever-growing traffic, which
subsequently attracts 3rd party sellers to Amazon’s marketplace. All of these
factors lead to faster business growth for Amazon.
Amazon follows a cost leadership strategy, but so do many other online and
offline retailers. Why then does Amazon outperform them?
Low cost structure. By mainly selling online, Amazon doesn’t incur huge
costs related to running physical retail outlets. Online marketplaces also
potentially allow for selling more units without any increase in marginal
costs. Amazon constantly invests in both additional fulfillment centers
and to existing centers to enable a reduction in order fulfillment times
and shipping costs. These time and cost savings result in lower prices
that are passed on to consumers.
Selection. According to ScrapeHero[4], Amazon sells around 120 million
of various products in its Amazon.com Marketplace. In comparison,
Walmart offers only 43 million SKU’s[5] in its online shop, or just 36% of
the number of products that Amazon offers. This vast difference in range
is the reason why online customers are more likely to visit Amazon.com
rather than Walmart’s e-shop.
Third party sellers. Amazon’s business model includes accommodating
third party sellers who are able to offer their own merchandise on
Amazon’s sites and whose products therefore compete against
Amazon’s. At the beginning, third party sellers were mainly attracted to
the Amazon Marketplace because of the high traffic to its stores. Now
the main drivers are such programs as ‘Fulfilled by Amazon’ and Prime.
Third party sellers often offer products that are not available through
Amazon’s retail division. In 2018, third party sellers accounted for 58% of
all the products sold through the company’s online stores.[6] Amazon’s
third party sales grossed US$160 billion in 2018, while eBay’s merchants
sales only grossed US$95 billion in the same period.
Low prices, huge product range and the vast number of third party sellers are
all key factors in improving the Amazon customer experience and in driving
more traffic to their sites. Few companies can compete with Amazon in any of
these areas.
2. Synergies between Marketplace, Amazon Web Services, Prime and

subscription services
Amazon is involved in 4 key businesses:
Amazon Marketplace
Amazon Web Services (AWS)
Amazon Prime
Subscription Services
All four Amazon offerings support each other and create benefits that would
not be achieved if the businesses operated independently.
Figure 3. Amazon’s synergies
Source: Strategic Management Insight
AWS was introduced in 2006 when Amazon realized it could sell its servers’
excess capacity to other enterprises. For Amazon as an online retailer, the key
place to sell its goods is its website.
To run an e-commerce website with millions of visitors each day the company
had to invest heavily in its server infrastructure. These investments and the
resulting server capacity have helped AWS to grow. In return, AWS provides
two important elements for its sites:
Speed. Page load speed is crucial for Amazon. Every 100ms of delay
costs the company tens or hundreds of millions due to the lost customers.
AWS helps to speed up the website’s load time, so that Amazon is able
to serve each customer as quickly as possible. Subscription services also
benefit from this. The content and especially, the video content is served
very fast to the subscribers, increasing their satisfaction with the service.
Capacity. During the peak times of Cyber Monday (the Monday after the
Thanksgiving holiday in the U.S), Black Friday (the Friday after the
Thanksgiving holiday), and in the several weeks leading up to Christmas,
Amazon receives an overwhelming number of visitors to its sites. AWS’s
huge capacity, which is not needed during the rest of the year, is
employed during these peak times to help Amazon cope with the
increased number of visitors.
In 2005, Amazon introduced the Amazon Prime subscription service, which

offers access to Prime Videos, Prime Music, free two-day delivery, same day
delivery and many other benefits for a flat annual fee.
As of December 2019, there are 112 million Amazon Prime members

worldwide.[8] Prime users buy more merchandise and spend more on each item
than regular users.[1] Marketplace helps to attract new visitors to Prime through
its Fulfillment by Amazon program (FBA).
The FBA program allows third party sellers to place their products in Amazon’s
warehouses, where Amazon takes responsibility for all logistics, customer
service, order fulfillment and returns. This enables more products to become
eligible for Amazon Prime, which is the key for the program to flourish.
In addition, packaging and shipping costs are reduced when two or more items
are shipped. As a result, Prime becomes more profitable and Amazon customer
satisfaction increases.
Prime members also get an access to the Amazon’s prime content and
subscription services. Amazon marketplace customers who are signing up for
the Prime membership for faster deliveries and bigger discounts are more likely
to consume the Amazon’s prime content and will get locked to the Amazon’s
Prime membership even more.
On the other hand, people who become Prime members due to the Amazon’s
Prime content, will spend more on Amazon Marketplace due to the Prime
membership benefits. Prime membership creates multiple benefits for every
Amazon service and the company itself.
Synergies between Amazon’s Marketplace, AWS, Prime and subscription

services are hardly quantifiable, but they provide some of the strongest
competitive advantages any company could have.
Access the full analysis… more Amazon strengths,

weaknesses, opportunities and threats
Published: March 16, 2021

Format: PDF + PowerPoint
Pages: 33
Words: 7,400
Charts/tables: 14
Price: US$19 US$9.99
BUY AMAZON SWOT 2021
What you get
PDF analysis PowerPoint presentation
Thorough insight into the business Visualization of data
Comparison against rivals
Table of contents
Company Overview
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Summary
Sources
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Sources
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11/18/21, 12:46 AM Amazon SWOT Analysis (5 Key Strengths in 2021)

SWOT analysis of Amazon (5 Key Strengths in

Name Amazon.com, Inc.

Founded July 5, 1994

Internet (Amazon Web Services, Amazon Video)

Headquarters Seattle, Washington, U.S.

Current CEO Jeffrey P. Bezos

Revenue 280.522 billion (2019) 20.5% increase over 232.887 billion

Employees 798,000 (2020)

internet, retail, consumer electronics and video

Amazon.com business overview from the company’s financial report:

“We seek to be Earth’s most customer-centric company. We are guided by four

In addition, we offer Amazon Prime, a membership program that includes

Amazon SWOT analysis

Figure 1. Amazon growth rate compared to e-commerce sales growth in U.S.

Source: Amazon financial reports[1] and Digital Commerce 360[2]

Figure 2. Jeff Bezos “napkin sketch” outlining Amazon’s strategy

Source: Seeking Alpha[3]

2. Synergies between Marketplace, Amazon Web Services, Prime and

Amazon is involved in 4 key businesses:

Figure 3. Amazon’s synergies

Source: Strategic Management Insight

In 2005, Amazon introduced the Amazon Prime subscription service, which

As of December 2019, there are 112 million Amazon Prime members

Synergies between Amazon’s Marketplace, AWS, Prime and subscription

Access the full analysis… more Amazon strengths,

Published: March 16, 2021

Price: US$19 US$9.99

BUY AMAZON SWOT 2021

What you get

PDF analysis PowerPoint presentation

Thorough insight into the business Visualization of data

Comparison against rivals

Why buy from us?

Best source Well researched

Instant Access Trusted

Have any questions?

Accessed March 16, 2020

SWOT Analysis of Walt Disney

SWOT Analysis of Walmart (5 Key Strengths in 2021)

SWOT Analysis of Volkswagen

SWOT Analysis of Toyota (6 Key Strengths in 2021)

SWOT Analysis of Subway

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