Amazon.com and the World of E-Commerce

The digital economy is constantly evolving, with certain distinct trends becoming clear in the ways businesses and customers present themselves and conduct transactions online. Technological innovation and the development of dynamic transactional platforms are pushing the industry forward and helping e-commerce businesses mature and grow (Shaw, 2006).

This report looks at the trends involved in the rise of e-commerce and its rapid expansion, analysing the impact of online marketplaces and their growth and the direct benefit experienced by small and medium sized businesses. It also explores the improvements to an online shopping experience and how they impact on customer loyalty and sales, investigates the trend of premium account memberships, and covers the growth and impact of user feedback on digital sales. Lastly, there is an analysis and discussion surrounding the evolution and integration of artificial intelligence (AI) into the online shopping experience.

Currently regarded as a leading force in the e-commerce landscape, Amazon.com has survived and thrived in the ever-changing digital economy of recent years. This report endeavours to highlight a selection of significant trends in today’s digital economy, how they relate to Amazon, the way they are influenced by Amazon and the impact that they are in-turn having on Amazon, its customers and third-party marketplace sellers.

The Growth and Development of E-Commerce

Product diversification and capacity expansion are critical contributors to growth in most retail contexts (Callaway, 2008). From its birth in mid-July of 1995 as a website for selling and distributing books – operating out of founder Jeff Bezos’ Seattle garage (Schmidt, 2014) – Amazon has since branched out into many other products and service areas as part of its business model of expansion and diversification. It only took two years for the online book retailer to be able to boast over one million individual customers, becoming the first e-commerce enterprise to achieve that milestone.

The company has been able to gradually and strategically widen the range of products sold through its online marketplace – a significant contributing factor in its rapid rise (Zhu & Liu, 2018). Enhancing the diversity of its product range is reflected in the e-commerce giant’s push into the field of safety equipment distribution by way of partnerships with existing providers and acquisitions of smaller companies (Johnson, 2017). Amazon benefits from this increasing range of available products by bolstering its growing reputation as the singular, definitive destination for merchandise of all descriptions (Stone, 2013). This unique business model is one of the primary factors behind the impressive expansion that the company has demonstrated over time.

Along with a larger catalogue of products, Amazon.com also boasts the ability to deliver products at great volume, rapidly and to distant and remote locations – competitive attributes which place the company in a unique position in the e-commerce landscape (Schmidt, 2014; Tolstoy, Jonsson & Sharma, 2016). Manufacturers and smaller retailers are increasingly turning to the Amazon.com marketplace as an avenue to expand product exposure to a broader audience online as well as to utilise Amazon’s delivery system infrastructure – with sales by third-party sellers on the marketplace now constituting more than 50% of total transactions on the platform (“Sell online with Amazon – Amazon Services”, 2019).

The Rise of Small and Medium-sized Enterprises

The internet and mobile connectivity have shifted the way small and medium businesses operate: information and communication technology including mobile internet are shaping the growth of global digital economy (Belitski, Ghobadian, Li, Liu & O’Regan, 2016). Consumers now have access to product or service information at the tip of their fingers as opposed to through traditional marketing campaigns (Bennett, 1997). Therefore, consumers are able to seek faster delivery of products or services and tech savvy entrepreneurs have capitalised on online trading platforms to meet this need of consumers. 

Two decades ago, eBay was on the rise. More recently smaller online trading platforms such as Gumtree allowed businesses to reach a wider audience. The attraction of these online trading platforms is that they break down traditional or geographical boundaries (Doh & Luthans, 2015). Yip, (2006) argues that internet together with mobile connectivity, open sourcing and workflow software distribution allow businesses and consumers to access vast amounts of information in real time. Yip, (2006) further argues that this may also result in a flattening of the world into a more level playing field. However, global, political, legal and economic pressures must be taken into consideration in order to thrive in the industry of information and communications technology (Doh & Luthans, 2015). For example there was political instability in the region of North Africa and the Middle East between 2010 and 2012 (Doh & Luthans, 2015, p.36). The movement was called ‘Arab Spring’ where citizens called out for change in leadership in the countries and this impacted international business in the region and cost circa USD 56 billion in productivity affecting supply chain routes, cost of fuel, logistics (Doh & Luthans, 2015, p.36).

For consumers, social media has become a way of life and the time spent on social media continually increases. For example, more than one billion people are on Facebook and over 200 million people from the emerging markets, i.e. Brazil, India, Indonesia and Mexico are Facebook users (Doh & Luthans, 2015). This social media activity produces invaluable data about consumer behaviour and it has further given rise to trends/tools such as business intelligence, analytics, big data and visualisations: with these supporting technologies organisations are able to offer products and services to target audiences across the globe (Wixom & Woerner, 2015). As per Belitski et al., (2016), it is no longer just large corporations offering access to products and services but Small and Medium Enterprises (SMEs) are also thriving by offering their products and services to consumers globally on the World Wide Web.

SMEs when successful attract investors in the form of larger corporates looking to innovate and this allows for research and development as well as further streamlining thorough access to advanced technology (Kongpichayanond, 2009). Today companies we consider as SMEs are significantly larger than 20 years ago and their growth is faster than that of a SME in the past. For example, corporations as well as some states invest on small business incubators for SMEs. The rationale for this is the investors provide the infrastructure in a test environment for the SMEs work collaboratively on innovative business solutions (Allen & Campbell, 1987).

Amazon.com has capitalised on a huge opportunity driven by the growing digital economy: It created infrastructure for small and medium size businesses to sell their products and services direct to consumers via their Amazon platform (Amazon Annual Report, 2017). As published in a 2019 Amazon SMB (Small and Medium Sized Business) impact report, this was a winning strategy as SMEs selling through Amazon’s Marketplace accounted for 58% of company sales. The report continues that to achieve this success with SMEs Amazon has invested tens of billions of dollars in to the Amazon delivery network, data centres, AI research, robotics and its people: Amazon’s virtual store spaces are available to SMEs to sell products and services to businesses [Business to Business (B2B)] as well as to consumers [Business to Consumers (B2C)]. 

SMEs then have an opportunity to utilise Fulfilment by Amazon (FBA) for logistics, customer service, advertising, start-ups credit as well as utilise Amazon Pay for collections. Amazon further supports SMEs by providing a variety of events and help to educate and upskill the entrepreneurs. SMEs are not only able to sell their own product and services but also are able to collaborate with Amazon in delivery service partner programs, customer service, Amazon Web Services (AWS), Alexa developers and Kindle Direct Publishing.In doing so, Amazon  has created an estimated 1.6 million employment opportunities world-wide along with achieving significant milestones in enhancing their infrastructure to support SMEs.

The Consistent and Coherent Shopping Experience

Amazon.com gains and retains a loyal customer base by providing an enhanced shopping experience through consistent and coherent interface design and streamlining of the transaction process. The high degree of involvement that Amazon.com has in the presentation of products and the transaction process between sellers and customers through its online marketplace plays a significant role in building customer trust and perception of fairness (Liu & Tang, 2018) and positively affects consumer loyalty (Chiu, Lin, Sun & Hsu, 2009). The consistency and familiarity of the shopping experience provided to customers is one aspect of Amazon’s approach to online retail that has set it apart from other e-marketplaces. A contrasting approach is taken by eBay, which places far greater responsibility on individual sellers for engagement and interaction with customers, and as a result retains less influence and control over the shopping experience of visitors to the e-marketplace.

Perceived ease-of-use of e-commerce websites has a major part in determining the willingness of consumers to participate in web-based transactions (Shih, 2004). Poor website design can have a significant negative effect on the shopping experience of customers, whereas enticing and appropriate visual layout expressed in clear presentation of information and supporting media reinforces expressions of product quality and positively influences buyer satisfaction in the transaction, increasing the likelihood of repurchasing intentions (Hasan, 2016; Wells, Valacich and Hess, 2011).

The Premium Account Experience and Benefits

The Amazon Standard Sign up process is a free account that users can use to sign in to Amazon.com. It enables new and existing users to match their specifications with products and services that fit their requirements as designed through the company’s website. Therefore, it is a basic account that is free, and deals with the basic membership agreement, rules and regulations as specified during terms and conditions agreement. On the other hand, Amazon Prime sign up is a paid subscription which accords users access to services that would otherwise be unavailable, or that are more costly to a typical Amazon customer. Krasnoff (2019) enumerated that users are charged $12.99 per month or $119 per year divided into Prime Video, Prime Music and Prime Reading. However, it has a free trial period of thirty days, which can be canceled at any time.  Furthermore, it has a six month free trial period for its Prime Students member where they can access free two-day shipping with monthly membership of $6.99 or $59 per year. Other benefits include two hour conveyance for free through prime now, music and video streaming.

These services offered through Amazon have different consequence to the fashion by which digital economy is currently viewed since they contain copious shipping benefits, especially those derived from Amazon Prime. Expansion in Amazon Prime has enabled discounts on groceries, rapid delivery options, and streaming of movies and music. According to Forbes (2018), Amazon.com is shaping the digital economy as it is on top of the list of the digital 100 records public companies. Since customer recommend Amazon products, subscription to Amazon prime has continually improved. Additionally, customer may consider owning two different subscriptions (both Amazon Prime and standard sign up) offered by the company as this is the best way to leverage its products and clients (Bughin & Manyika, 2013). High end customers, especially small and medium sized organisations have discovered benefits in taking advantage of discounts for their bulk purchases, as they can further make unimaginable profits once their products reach the end consumers. The feature of quick delivery benefits those customers dealing in perishable products as the cost of storage and any effects of the products going bad are tremendously reduced.

Amazon Prime has continually improved the digital economy in terms of shipping, video streaming, music streaming, whole foods discounts, and reading, exclusively on Prime Day. Additionally, Amazon provides free services for marked goods as it has reduced the hassle that customers encounter when shopping online, particularly when adding unnecessary items during orders (Seth, 2019). Amazon has developed favourable shipping terms to its customers. For example, if the goods are marked as Prime, then they would be delivered in two shipping days for free. These conditions are flexible whereby a no-rush shipping option that is discountable is available. Furthermore, there currently exists a free two-hour delivery on household essentials with Prime. Other distributions preferences are also available for Standard Sign Up customers, such as Amazon Key Home Kits, in-home delivery, and Amazon Fresh grocery that are well embedded with Prime Pantry (Consumer Reports, 2019). Customers can choose these options at their discretion as long as they consider values derived from each alternative. Busy clients always consider an option of goods delivered to their premises for obvious reasons among them to cut on costs. Factoring these explanations and the two key qualities under discussion, Amazon has not failed in delivering customer’s satisfaction.

Further, there is the Prime Wardrobe, which allows free returns of unwanted items since customers can try their clothing and accessories within a seven-day return window (Consumer Reports, 2019). This property satisfies customer’s preferences as they will only pay for the items they desire. Within the product also exists the Prime-exclusive fashion brand that offers stylish looks from its in-house fashion brands — Amazon Household where families can share services, as well as the Amazon Family that allows family oriented-offers. Such an interaction creates cohesiveness more like a real world experience, and increases the chances of return visits boosting the company’s revenues. Additional, there is membership sharing that allows two adults to share benefits from the same account hence creation more accessibility to products and services within the digital economy growth.

There is also access to Prime Videos which has thousands of free films in Prime Instant Video. This tailor made product is suitable for digital economy, which is constantly growing towards online streaming of movies and music. With this quality, movies and music can easily be downloaded for offline playback (Consumer Reports, 2019). Furthermore, reading of digital content is enhanced through Amazon Prime Reading library that allows members to borrow books and magazines.  The Kindle Lending Library and Kindle Firsts enrich the digital economy through their free readings and downloads facilities. There is also a digital access to Washington Post that has a free six-month trial hence enhanced digital content (Seth, 2019). Amazon offers unlimited ad-free access to music streaming services as well as Prime photos that offers Amazon Cloud Drive for unlimited photo storage.

Existence of Amazon Prime rewards visa signature card that offers the card holders five percent cash chargebacks on purchases made on the website is of great significance to customers as they shop more for less. For those customers without Prime membership, they still get three percent chargeback which is considered nondiscriminatory (Watanabe et al. 2018). Other benefits of using the card include getting two percent back at restaurants, gas stations and drugstores and one percent back on other purchases. Additionally, there are no annual fees imposed on the card and if used while travelling, there are no foreign fees charged.

With Amazon Prime account, one is able to download a mobile application that permits consumers all over the country to carry out their shopping beginning in the morning to late night, all through the week, for gifts, cereals and foods from neighboring restaurants and mini stores. For all the goods purchased, customers get the benefit of free delivery within two hours of purchase. Otherwise for restaurant orders, the company offers free delivery within one hour of placing an order. This service is often available from Amazon associated restaurants within a given region.Amazon is increasingly transforming digital economy globally and the movement of goods and services through digital technology. It is considered a retail giant in this era of globalization and technological advancement. It has created several jobs and killed inflationary pressures by discouraging several barriers to free trade. It has also changed the ecommerce as it invests in AI ecommerce tools, such as algorithms.

Online User Feedback and Product Reviews

Online reviews have become a part of most aspects of the public web. From informal casual comments to star ratings or thumbs up and down, much of the public internet includes a means of providing your views or experiences of using a product or service. The impact that user feedback has on the success of products or services varies depending on the context. A news site that relies heavily on advertising may not result in significant loss in revenue, whereas holiday and tourism packages sold online that receive poor reviews or that fail to provide them may miss out on a significant amount of revenue and fail to compete in an online space filled with feedback (Zhang, Ye, Law & Li, 2010).

Online stores see consistent impact from public online feedback on their for-sale items or services. Due to the wider reach of online reviews, they hold the power to make or break sales figures or utilisation of a product or service, particularly when these products are less well known and in need of validity and publicity (Zhu & Zhang, 2010).  As companies and services have realised the increasing value of reviews, they have tailored their systems to promote reviewing and substantiate the claims of reviewers by verifying, filtering and sorting reviews.

Online user reviews come in different sorts and by a range of different authors. Because of this they are perceived differently to more traditional paid or professional reviews. They operate more like ‘on-demand’ word-of-mouth – a reflection of public perception that is accessible at any time (Hu, Liu & Zhang, 2008). However, unlike in-person word-of-mouth reviews, online reviews are more difficult to verify the credibility of. Various strategies have been employed to combat this. One approach is to only request or allow reviews by verified purchasers of a product. Another is to rank reviewers by the amount of upvotes they receive. By complimenting the overall scores with more specific reviews – marked specifically as helpful by others – the customer is more likely to treat the reviews and the system delivering them as legitimate (Chen, Dhanasobhon & Smith, 2008). These techniques also serve to dissuade manipulation by making it ineffective to pay for reviews that may not be upvoted and therefore have little impact.

Companies like Amazon have worked hard to make their product review system helpful for both sellers and consumers. As Amazon has grown so has the impact and scope of reviewed items. The sheer number of product reviews across the millions of items sold through Amazon.com has played a significant role in the uptake of reviews systems by other online shopping sites. Even though the marketplace is known for its excellent customer service, it also faces issues regarding the credibility and usefulness of reviews, just like other review services. The company has employed several strategies to address review quality issues. A part of this is allowing only verified purchasers to post reviews with a ‘Verified Purchase’ tag, and enabling customers to disclose aspects of their personal information to reinforce their credibility as authentic reviewers, reflected in tags like ‘Real Name’. A further feature that has been included allows for reviews to be marked as ‘helpful’ by other users, thus raising the profile and ranking of the reviewer – who is then endowed with the title of ‘Top Reviewer’ to indicate their track record of regularly publishing helpful reviews.

The approach that Amazon.com has taken in encouraging and soliciting reviews from legitimate customers, combined with the integration of reviews from Amazon’s international markets, and their presentation in an effectively filtered and sorted manner that highlights legitimate and high-quality feedback, has earned the company’s customer review system place as a leader in the e-commerce space. Studies show that a large percentage of potential customers consider online reviews before purchasing  online, and pay particular attention to reviews which bear indicators of credibility.

Artificial Intelligence and Online Shopping

Artificial Intelligence has been around since the 1950’s and was a concept that was later developed by scientist. It’s primary goal has always been to replicate the intelligence of a human brain and have the ability to learn and adapt. It started off in games where a real player would play against a computer or in this case Artificial Intelligence. As time went on, progress was made, but there were also fallbacks, things such as incorrect translation between languages and translating back gave wrong translations (Tecuci, 2011).

Over the years, Artificial Intelligence has made its way from computer programs to mobile applications, smart home speakers and into the e-commerce platform. Fast forward to today, artificial intelligence is helping e-commerce companies improve commercial negotiation on their platforms with figures showing that 85% of retail and 79% of consumer product companies will implement and plan to use Artificial intelligence for supply chain planning by 2021. It has also found that there will be a 10% annual increase in revenue growth (IBM.com, 2019; Fei & Yan, 2015).

A great example of this is Amazon’s use of Artificial Intelligence. Amazon’s Alexa smart voice assistant uses Artificial Intelligence. Amazon has implemented this smart voice into a smart speaker known as the Amazon Echo. Amazon Echo smart speaker allows consumers to talk to  Alexa the voice assistant and control smart devices in their home. Some of these include dimming the lights or playing music. The phrase “Alexa…” followed by your command, is all that is needed to activate the voice assistant. As time goes on, Alexa becomes smarter and recognises your patterns on your behaviour and activity.  But as with every piece of technology and software there can also be limitations in what it can do. Alexa has its limitations too. An example of these limitations is the ability to add items to your shopping list by telling Alexa to do so. Giving the command to add items to your shopping list will do just that but you can’t give it multiple items at one time and must be done in a different command. It can be a tedious process but AI is continuously improving everyday which is one of the great things about AI. As with every product that goes along with software, there will always be a better generation than the previous one which is why the Echo speaker Gen 2 doesn’t require you to press a button to activate Alexa and can be fully controlled by voice. (Clauser, 2019)

Amazon Alexa is connected to the same account the user uses to shop on Amazon Shopping which gives consumers an easier and smoother shopping experiences between all devices. Users can simply ask Alexa where there stuff is, Alexa will then speak out an overview of when the next package will arrive to their home. Alexa will even go a step further and send a notification to the users phone to remind them of when their package will arrive. Amazon has made sure that only authorised users can proceed to make purchases through Alexa and has given users the ability to set a 4 digit pin code that must be said before making any purchases. From this point users can simply give a command to order a product and if the user wants to simply re order an item they have bought in the past they can simply say “Alexa, reorder batteries” for example (Amazon.com, 2019).

While this type of technology is impressive in itself, what makes it even more impressive is the ability of Artificial Intelligence to determine previous purchases that were made and to reorder items that are requested.

Amazon hasn’t stopped here, as it plans its future with Amazon Alexa. According to Newman (2019), Amazon has received a patent in which it allows users to easily ask a command without having to use the word “Alexa” first, making conversations more natural and easier. A user who wanted to play music would say “Play some music, Alexa” instead of “Hey Alexa, play some music.” This approach gives a more natural human conversation.

AI isn’t just limited to smart speakers but also mobile applications, smart wearables, and other gadgets. Amazon is developing a smart wearable in which it can detect a user’s emotional state and continuously tracks a user’s daily behaviour. The whole goal of this product is for Amazon to determine what a user feels towards certain products and can help recommend products to users, giving them a more personalised experience when shopping on Amazon. It uses Artificial intelligence to track users activity.

It is estimated that by 2024, there will be over 500 million smart speakers in the US alone, and half being powered by Amazon Alexa (Newman, 2019).

It’s clear that Artificial Intelligence has really taken off over the last few decades, only starting from a small computer game algorithm to a virtual assistant embedded into a smart speaker and not only smart speakers but mobile applications and now in users online shopping experiences. Amazon has lead the way in online e-commerce and adding Artificial Intelligence in its path, paves the way for many new opportunities for Amazon to innovate and experiment in the ecommerce online business world.

Conclusion

It has become clear that the digital economy, e-commerce specifically, has multiple trends that follow and has now become such an important factor in today’s society. Different technologies and functions of what Amazon provides has a fundamental role in the overall users online shopping experience. Artificial Intelligence has grown quickly and is saving not only businesses but consumers time. 

Online reviews and feedback are creating a community in which companies can use to improve on and offer even more to consumers. Businesses are turning to Amazon now more than ever to sell their products to the growing community on Amazon allowing for faster and more streamlined services and delivery. Enterprises are also growing rapidly, allowing for consumers to access these tools right from their fingertips. 

The differences between the standard Amazon Sign Up process and Amazon Prime paid process sets the boundaries in what extra services consumers must pay for to get as an extra service. Most importantly, it’s all about the user experience, from the moment they interact with a product, up to the very end they complete a purchase. These trends are what makes up an innovative company and a successful e-commerce business.

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