
Everything is a remix
Amazon crossed $1 trillion market cap recently and became the second company after Apple Inc. to do so. I had written about Amazon in one of my assignments and thought about sharing it. Some information, especially financial may be outdated.
Amazon.com which is one of the torchbearers of the new economy and shows all the characters ascribed to ‘new economies’, namely being highly innovative, technology-driven and customer oriented. It is a behemoth today, with revenues touching USD 107 billion in 2015 and over 250000 employees across the globe. It is the 9th most valuable company in the worlds and eclipsed Walmart last year as the most valuable retailer by market capitalization.
Amazon has pioneered the e-commerce market and was amongst the earliest brands to recognize the transformative power of internet and changing customer taste. Amazon today has become synonymous with retail and is often the first choice for the new generation of customers. The origins were however much humbler. Amazon was started by Jeff Bezos in 1994 as a seller for books. Bezos wanted to capitalize on the rising internet penetration and shortlisted books from an initial list of 20 items he thought could be easily be sold online. Over a period of time, it moved into other items and categories and the rest is history
More than a century earlier, Richard Warren Sears started a business selling watches through mail order catalogs. He moved to Chicago and joined hands with Alvah C. Roebuck and formed what later became the Sears Roebuck & Company. In addition to watches, they started to sell supplies to farmers in smaller cities, who till then were dependent on the whims and relationships with the local grocery stores and the limited options they had. Recognizing the opportunity, Sears published its first catalog in 1888 with clear and transparent pricing and a wide array of choices. It started to expand its offerings over the years and by 1895 had a 532-page catalog. In its heyday, it dominated home delivery with 75 million catalogs distributed each year, bringing goods to far-flung farms, towns and other locations.
At a macro level, Amazon basically replicated what Sears had done nearly a century ago. Just like Sears offered its customers a paper catalog to shop from, Amazon’s website is essentially a digital catalog. Today it sells as many as 480 million items to its customers in North America alone. Sears was able to recognize the societal trend of people migrating from cities to suburbs. It had the insight to realize that such people wouldn’t have the shopping options they used to have in bigger cities and would miss it. Sears innovated and leveraged the ever-improving railroad and postal networks to reach out and serve the customers. Similarly, Amazon leveraged the increasing internet penetration in households to provide customers a new way of shopping. Both companies operated on the premise that your choices were no longer limited by your physical location and a family in a remote town could have access to the same products as an urban household, that too at transparent prices.
Sears established its brand by selling watches and farm supplies initially, Amazon started with book titles and later CD’s before rapidly expanding to other categories. Both created a subscription model, Sears with its paid catalogs offering discounts and Amazon through Amazon Prime, providing expedited shipping and special offers. Sears was also a pioneer in payment systems. It introduced the successful Discover credit card in 80’s when credit cards were still finding their feet in the market. Amazon patented the one-click purchase and has been focusing on innovation. It is investing heavily in newer technologies like Echo AI and drones. Sears started to set up retail stores in bigger cities when it felt that the rural markets wouldn’t grow beyond a certain rate. Amazon too has been talking about an omnichannel approach and has already started to open physical bookstores. Sears actually got its catalog online a year before Amazon was launched but unfortunately didn’t invest in building the internet infrastructure to actually sell online and missed the bus. Today many analysts have suggested that Amazon should buy Sears and utilize their existing store infrastructure to enter brick and mortar retail.
To summarize both Sears and Amazon were disruptors of the traditional retail model. Both leveraged the breakthroughs in communication and logistics of their respective eras and basically freed the customers from the tyranny of their location. Both companies invested heavily in building a brand and customer loyalty and imparted credibility to their respective business models for others to replicate. In reality, by not identifying the changing market dynamics as it did earlier, Sears basically passed the torch to Amazon.
https://www.entrepreneur.com/article/270451
http://fortune.com/2012/01/09/how-amazon-ate-sears-lunch/
https://en.wikipedia.org/wiki/Sears
https://en.wikipedia.org/wiki/Amazon.com
https://export-x.com/2015/12/11/how-many-products-does-amazon-sell-2015/
