Amazon in 2020: A SWOT Analysis (2023)

About Amazon: An Introduction

Amazonas (AMZN), the world's leading e-commerce player, is also the largest cloud player. The company has continued to strengthen its position in the US and international markets through an increased focus on technological innovation and continued investment in improving customer experience. With the pandemic, Amazon's position in international markets has solidified as people around the world have switched to online shopping in large numbers. The changes inconsumer behaviorPandemic and long-lasting, and its effects will persist in the post-pandemic world. However, while Amazon is the largest cloud player offering a wide range of cloud computing services through itsNube AWSCompared to its e-commerce platform, AWS has grown at a slightly slower pace during the pandemic.

Additionally, Amazon is among the top four tech brands in the world by market cap. As the number of smartphone and internet users continues to grow each year around the world, so has the number of people buying products and services online. These trends have proven profitable for the e-commerce leader. Amazon is now also selling a wide range of homegrown products on its e-commerce platform to boost its profitability.

2020 has proven to be a very profitable year for Amazon Inc as net sales and operating income increased significantly compared to the previous year. In the first three quarters, 2020 e-commerce sales grew by approximately $60 billion year-over-year. The company's net sales increased 35% in the first three quarters of 2020 compared to the same period last year. As of 2019, Amazon's international segment failed to generate positive operating income. However, that changed in the first three quarters of 2020. Amazon's international segment generated operating income of $355 million, compared to an operating loss of $1,076 million for the same period last year. Amazon's market cap is over $1.6 trillion, and the company could be poised for faster growth. However, the company also faces some challenges, which we will address in this analysis.

Learn more about Amazon in this SWOT analysis:

AMAZON SWOT-ANALYSE 2020

STRENGTHEN:

Strong brand value:

Amazon is the undisputed leader in thee-commerce section. Its market leading position and global dominance are supported by the strong brand equity the company has built. Amazon was known from the start as a very customer-centric company. In addition to providing quality customer service, their goal was to provide an excellent customer experience. The company has always excelled in technological innovation, which has further increased its popularity. Brand equity is directly related to the trust that customers place in a particular brand.

Over time, as Amazon's empire expanded globally and the company gained a strong competitive advantage through technology and the wide variety of products on its platform, so did its brand awareness. Amazon's algorithms, which help people choose from a wide range of products available on its platform, as well as make specific suggestions tailored to the preferences of particular customers, also have a pivotal role in boosting popularity played by the Amazon brand. In order to improve the customer experience, the company has further improved its product and service offering as well as its platform.

Amazon Prime has also played a significant role in popularizing Amazon's e-commerce platform. If Amazon memberships were growing rapidly in the US and around the world, then one of the main reasons for this was paramount. Even after so many years of its inception, Amazon Prime continues to enjoy an impressive rate of growth in the United States. From December 2013 to December 2019, Prime memberships increased more than fourfold. In December 2013, the number of core members was included25 millionbut rose to 112 million in December 2019. In addition to movies and shows, Amazon Prime offers same-day or next-day delivery in several markets, including the United States. Amazon's global distribution network ensures the fastest possible deliveries and helps Amazon provide a great customer experience. Compared to other retailers, including physical and online retailers,Amazon's competitive advantageit has intensified over time. Overall, by combining product pricing and quality with customer convenience, Amazon has achieved higher brand equity that drives sales and revenue growth.

Position in the market:

Amazon's leading market position in the United States and several other leading markets is a strong competitive advantage for the brand. Its empire is the largest in the world and way bigger compared to any ecommerce player. It also offers a full range of products and services compared to other ecommerce players. Compared to Alibaba or Flipkart, Amazon's market position is much stronger globally. In the US, its influence has continued to grow, fueled by increased consumer convenience. That's a concern for leading physical retailer Walmart, however, as Amazon's growing market share continues to put pressure on Walmart. During the pandemic, digital shopping trends continued to intensify as more and more people switched to shopping primarily online. These changes in consumer behavior will endure in the post-pandemic world. The pandemic has thus cemented Amazon's market position as the world leader in e-commerce. In the US, Amazon enjoys a market share ofabout 38%In e-commerce, Walmart, the largest brick-and-mortar retailer and number two in the e-commerce market, lags far behind with a market share of under 6%. Ebay's share of US e-commerce is now less than 5%. Previously, U.S. e-commerce sales were forecast to grow 13%. However, that rate has increased during the pandemic, and U.S. e-commerce sales could grow 18% year over year in 2020. Although the US is Amazon's primary market, Amazon has seen outperforming growth in the other markets as well in 2020. Overall, Amazon's position continues to grow strongly and has become a significant threat to other retail brands.

Largest cloud technology company:

Amazon is not only the world's largest e-commerce player, but also the largest cloud technology company with the highest market share and an impressive annual revenue rate. The cloud industry continues to grow at an impressive rate. In the second quarter of 2020, total spend on cloud infrastructure services exceeded $30 billion. Compared to the same period last year, this meant growth of around 6.5 billion US dollars. While Amazon made an early name for itself as a leader in the cloud, it's held its lead and market share very well. Amazon's cloud technology business is called Amazon Web Services (AWS). The closest competitors are Microsoft Azure, Google Cloud and Alibaba Cloud. However, according to the latest report byResearch group synergies, AWS' market share in the second quarter of 2020 was equal to that of the other three largest players. While AWS' market share was 33% in Q2 2020, its closest rival was Azure at 18% and Google's cloud at 9%. Alibaba's market share in the cloud industry was 6%. The eight largest players in the cloud industry had a 77% market share in Q2 2020, with Amazon leading the way. The cloud industry is unaffected by the pandemic, and Amazon enjoys a strong competitive advantage over its peers. In the third quarter of 2020, AWS recorded year-over-year growth of34%. AWS revenue increased to $9.95 billion in the third quarter of 2020 compared to $7.4 billion in the third quarter of 2019.

Increased spending on R&D:

Much of Amazon's growth in the global market, both in the e-commerce and cloud sectors, has been driven primarily by the company's focus on technological innovation. Since its inception, the company has had a strong focus on innovation that has helped the company expand its influence faster in the US market as well as internationally. Aside from a smarter and more intuitive e-commerce platform that delivers more accurate and personalized search results, the company's investment in technology has also resulted in greater customer loyalty. The use of artificial intelligence, machine learning and other latest technologies has enabled the company to provide a superior customer experience. Many people shop online using their smartphone. Although Amazon is their go-to shopping app, they also mainly use it to check and compare prices on certain products. The differentiated customer experience that Amazon offers has been made possible thanks to a strong annual investment in research and development. Amazon's R&D spending has continued to grow rapidly each year. See the following table:

In 2019, Amazon's research and development spending increased to $36 billion compared to $28.8 billion in 2018. As a result, the company grew significantly in e-commerce and cloud technology has. The company's sales and earnings improved rapidly. While Amazon has become the preferred shopping app for millions of users around the world, it is also the preferred website for product search. The total number of views of the website in February 2020 was around2.01 billionand grew to 2.44 billion in September 2020. In addition to increasing competition in the industry, the need to retain customers has also led to an increased focus on research and development at Amazon. The competitive advantage continues to grow as the company continues to invest more in research and development. In the e-commerce industry, technology is the key differentiator and, most importantly, directly impacts customer experience. An excellent customer experience leads to increased popularity and demand. For years to come, Amazon is expected to continue increasing its R&D spending to maintain its dominance in the cloud and e-commerce space.

International growth:

Amazon has seen faster international growth in 2020, driven by increased global demand for both e-commerce and cloud services. The Company's e-commerce business is divided into two segments including US segment and international segment. While the U.S. segment was profitable, Amazon's international segment posted operating losses through 2019. In the first three quarters of 2019, Amazon's international segment suffered a net operating loss of$1,076 million. However, in 2020, it has generated more than $350 million in operating income. It shows that the company has achieved internationally superior sales during the pandemic. While the company's international shipping and fulfillment costs increased during the pandemic, the higher costs were easily offset by higher unit volumes, growth in advertising sales on the platform, and higher third-party sales. The pandemic has caused profound changes in consumer behavior around the world, leading to more people shopping online using their smartphones. These changes are for an extended period of time and will continue to benefit Amazon's international segment.

Impressive growth in sales and operating income:

(Video) Modern SWOT Analysis Example with Amazon and Wal Mart (SWOT Part 1 of 2)

Over the past two years, and particularly the last fiscal year, Amazon has seen impressive growth in both its e-commerce and cloud businesses. While Amazon's popularity and influence has grown in recent years, increasing internet penetration in almost every part of the world, as well as the growing number of smartphone users and increase in the number of products sold on the platform have also resulted in sales growth. Amazon Revenue and Operating Income for 2019 and 2020. In 2020 particularly, the pandemic has accelerated the growth of e-commerce and cloud platforms as more and more people around the world rely on online sources for shopping and entertainment. The demand for cloud-based services has also grown enormously in recent years. It even grew strongly during the pandemic as more and more companies switched to the online model to overcome the pandemic's impact on demand and sales.

According to Synergy Research, cloud infrastructure services revenue for the 12 months ended July 2020 reached a whopping $111 billion.

Amazon E-CommerceSales made a solid jump in 2020. At the end of the third quarter, the brand's nine-month e-commerce net sales had reached about $228 billion, up about 35.7% year over year. In the same period a year earlier, the company's net sales from e-commerce were just $168 billion. The company's cloud revenue also took a big leap during the same period.

For the three quarters ended Sept. 30, Amazon's cloud revenue grew to $32.6 billion, compared to $25 billion for the same period last year.

The company's operating income, which Amazon says is a measure of profitability, rose to $16 billion in the first three quarters of 2020, compared to $10.7 billion in the same period last year. Overall, Amazon's sales and profitability increased in 2020. It also marks the beginning of a new chapter in Amazon's history.

Worldwide sales network:

Amazon's other leading strength is its international distribution network that supports its global business empire. According to its website, Amazon operates more than 175 fulfillment operations centers, with more than 110 located in North America. The leading e-commerce player uses a variety of sophisticated tools and technologies, including robots in its warehouses, to make packing and delivery easier and faster. The company has maintained a strong logistics network that allows deliveries to all corners of the world. In addition to Amazon's trucks, the company also gets help from its delivery service partners, who have their own team of drivers operating between 20 and 40 vans. The company has also increased its own fleet of cargo planes to facilitate deliveries around the world during the Covid-19 pandemic. Afterfuentes, the number of aircraft in Amazon's fleet reached 80 in June 2020 after the company added 12 new cargo aircraft during the month. The company also uses the services of UPS, Fedex and the United States Postal Service to deliver faster deliveries to its customers in the United States and abroad. The company is constantly working on developing new technologies to strengthen its distribution network, including unmanned aerial vehicles or drones.

Personnel management:

For technology companies,human resources managementIt is an important source of competitive advantage as most of its competitive strengths come from the skills and knowledge of its employees. Technology leaders have a strong focus on strategically managing their human resources, and the technology sector also pays the highest salaries and benefits in the industry. From recruiting to training to retention, organizations have a strong focus on getting things right to hire and retain the best people. Amazon also has an elaborate recruitment strategy that focuses on hiring talented people who have the right personality traits to fit into the company's culture. As of 2019, Amazon had798.000Employees. The tech giants are known to pay the highest salaries, and the Big Four, including Apple, Amazon, Google and Microsoft, pay the highest salaries in the industry, even for entry-level techs. Apart from that, there are great bonuses and other perks aimed at keeping those developers and software engineers longer. There is a big difference between what companies like Amazon pay their software engineers and developers and the market average. However, Amazon is also committed to attracting the best talent in the industry. There's also pretty stiff competition in this space between the big four tech players.

Growing share of search engine advertising:

While Google is the undisputed leader in search engine advertising and will continue to do so for years to come, Amazon's share of search engine advertising is growing steadily. It turns out that most product searches come from the Amazon website. Amazon has already overtaken Microsoft in this area. Its share of US search ad revenue is now larger than Microsoft's, and it's the only company whose share of US search ad revenue will continue to grow in the coming years, at the expense of losing market share from others like Google. In 2019, Amazon had around 12.9% market share in US search ads, Google had the largest share at around 73.1%, and Microsoft was the third-largest player with a 6.5% market share. However, it is estimated that duringshare googlecould drop to 71% by 2021, Amazon's share could improve to 16%. Amazon's US search ad revenue is projected to reach $11.7 billion by 2021. While the growing share of online search ads will help the company increase its profitability, it will also create a new and solid revenue stream for the company.

Weaknesses:

Weak development of the international segment:

Amazon's business has grown very quickly and the company has also achieved impressive penetration of international markets. However, the international segment hasn't performed as well as Amazon's other two segments, including North America and the AWS segment. By 2019, Amazon's international segment had posted operating losses. In 2018, the international segment suffered a net operating loss of $2.14 billion, which narrowed to $1.7 billion in 2019.

In 2020, as the company began to generate operating income from its international segment, costs and expenses also increased due to Covid-19. In general, the company has spent more on its international business than on making a profit in recent years. In 2020, the company had net operating income of $355 million for the first three quarters from its international operations. However, it's not even 10 percent of what AWS or Amazon North America generated in the same period.

Lower profit margins:

Amazon Inc.'s profit margins have been consistently lower over the past few years. Compared to other tech brands like Apple, Microsoft or Facebook, their operating margins have remained consistently lower. Operating margin was around 6.1% in 2019. Despite being one of the largest tech brands with a market cap of over $1.6 trillion, Amazon still has the lowest operating margin of any top tech brand.

Decreased cloud growth rate:

Amazon Web Services is the undisputed leader in the cloud industry. The cloud is also a major growth driver for Amazon. However, Amazon's cloud growth rate has started to slow while Microsoft and Google, its main cloud competitors, have had some big deals of late. While AWS accounted for 12% of the company's net sales in Q3 2020, the growth rate of Amazon's cloud business has slowed since Q4 2019. AWS' growth rate was 34% in the fourth quarter of 2019, but declined to 33%. in Q1 2020 and then to 29% each in Q2 and Q3 2020. AWS is the dominant player in the cloud industry. However, the slower growth rate could force Jeff Bezos to spin off AWS. Compared to AWS, Amazon's other two segments, including Amazon North America and Amazon International, have seen higher growth rates.

Presence of counterfeit and counterfeit products on the platform:

Another major problem that Amazon faces is counterfeit products. The company has made various efforts to solve the problem but has not been able to completely remove the fakes from its platform. This is also a reason why several influential brands have abandoned their plans to sell on Amazon. In addition to brand dilution, other risks arise from the threat of counterfeiting. Nike had started onepilot programIn 2019 Amazon fell. When unauthorized sellers sell counterfeits and undercut prices, it reduces the brand value of premium labels. Several other brands are also uncomfortable doing business through Amazon's platform. For example,birkenstockis a German brand for handmade shoes. However, numerous unauthorized sellers also sold their products on behalf of Birkenstocks, leading to numerous consumer complaints. Birkenstock found that counterfeiting was thriving on the platform, but there was no mechanism in place to stop these sellers from doing so. To make matters worse, Amazon itself copied many other brands' products that were the best sellers in their categories and began selling them under Amazon Basics.

occasions:

Expand the sales network and collection points internationally:

Amazon has a strong international distribution network. However, sales increased very quickly internationally during the pandemic. The company needs to further strengthen its international distribution network to increase its market penetration in emerging markets. It will help the company increase its sales and profitability in the international segment. As the company adds more collection points in markets like India and other emerging markets, it will find more popularity and growth there. At the same time, the company could reduce the competitive pressure posed by local e-commerce companies in emerging markets.

In-house production:-

Amazon's profit margins were consistently lower. However, you can expand your profit margins. While the company has expanded its range of products of its own or the products it sells under Amazon Core in recent years, the company can use its size and scale to increase its operating margins. While it will help the company make more profit from product sales, the company will also be able to maintain the prices of the products sold. Your e-commerce platform under control.

Originals for Amazon Prime:

One of Amazon Prime's main competitors is Netflix, whose main strength is its huge pool of original movies and TV shows. Netflix is ​​also a leader in the online streaming industry. However, if Amazon wants to increase its influence and market share in online entertainment, the company should add more original movies and shows. This will help increase Prime memberships and help Amazon boost an attractive revenue stream. It's true that Amazon may need to raise the price of Prime membership, which is currently a fraction of what Netflix charges, but the company will still be able to significantly increase its profits on Prime. YouTube is the number one video source for American audiences. However, it differs from Netflix and Prime, which only stream movies and TV shows. However, accstatesmanWhile Netflix's average monthly user average as of September 2019 was 46.5 million, Amazon Prime's was just 16.5 million. Amazon can grow viewership quickly, but like Netflix, it would also need to focus on increasing its selection of original content to attract viewers around the world.

Expand the AWS network in emerging markets:

Amazonasis a leader in the cloud industry. However, to increase its global market penetration, the company needs to focus on emerging markets. You need to grow your cloud infrastructure in emerging markets. Markets like India offer a significant opportunity ahead of AWS. Amazon is already planning a huge multi-billion dollar investment in the Indian market. Apart from India,AWSThere are also plans to expand AWS Regions in other countries, including Japan, Indonesia, Spain, and Switzerland. AWS has 77 Availability Zones and 24 Infrastructure Zones worldwide. In India, AWS plans to open a new AWS Zone in Hyderabad by 2022. Amazon has been increasing its investments in India for quite some time, announcing in 2020 that it would invest $1.6 billion in two planned data centers to be established in Telangana.

Diversification:

Amazon can also create more growth through diversification. The company has a strong presence in the e-commerce and cloud industries. In the entertainment sector, while Amazon has a significant presence through Amazon Prime, it needs to make additional investments in this space to increase its penetration of the global market, which is currently dominated by Netflix. Amazon is also said to be diversifying into other businesses, including internet connectivity and self-driving cars. Amazon announced in June 2020 that it was planning to acquire Zoox, a California-based company working to develop autonomous vehicles from the ground up. Though Amazon hasn't clarified the terms of the agreement, it saidfuentes, will pay more than $1.2 billion to acquire Zoox. Amazon is also reportedly planning to enter broadband services. named himKuiper-Projectand received FCC approval for the project in July 2020.

Threats:

Competitive Threats:

WhileAmazonasis one of the largest companies in the world, it also faces significant competitive pressures in various areas. In addition to e-commerce, the company also faces increasing competitive pressure in the areas of cloud and online streaming. In the e-commerce sector, several local players around the world pose a threat to Amazon's business. For example, Flipkart in India and Alibaba in China are among Amazon's main competitors in e-commerce.Walmarthas also invested strategically in e-commerce in recent years, growing its share of the US e-commerce market. Walmart is now the second-largest player in US e-commerce. Its market share is still far below Amazon's, but the company has been able to increase its market share over time. Microsoft Azure and Google Cloud are among AWS's biggest competitors in the cloud industry. They've also landed some influential deals lately. As the cloud industry grows rapidly, Google and Microsoft are also working aggressively to increase their market share.

Regulatory Threats:

Regulatory pressures on the technology industry have continued to mount as governments in the US and other nations closely monitor their actions and policies. The scale and cloud of companies like Amazon, Apple, Google, and Facebook have become a concern for governments in the US and other regions, including Europe and Asia Pacific. In 2020, the US government stepped up its antitrust crackdown on big tech companies. While these organizations have access to vast amounts of data, their ability to set the rules and control the game, and prevent their competitors from taking advantage of opportunities, can lead to unbridled power that undermines free competition. The Antitrust Committee raised several such concerns in its report this year. In October 2020, the Antitrust Subcommittee of the US House Judiciary Committee submitted its requestReport of 451 pagesand 83 pages were dedicated exclusively to Amazon. In short, the report raised concerns about Amazon's tendency to exploit sellers thanks to its market dominance, which raises serious competition concerns.

Personnel-related topics:

While Amazon has generally managed to maintain a good reputation when it comes to human resources management and employee well-being, issues with human resources still crop up from time to time. The tech industry already faces a high turnover rate, and companies need to invest heavily in their employees to keep them longer. In November 2019, a group of Amazon employeesrequestedmanagement to improve working conditions in their camps. Employees worked 12-hour shifts during the peak season and the injury rate was also high. Workers have also complained about being forced to work like robots in warehouses, doing jobs that can be very complex for a human. Aside from that, safety concerns are also widespread in these camps. These concerns have once again come to the fore during the yearCoronavirus crisis. While several warehouse workers in areas hard-hit by the virus have simply quit their jobs, Amazon's warehouse workers have stepped up efforts to secure better wages and safer working conditions from management during the crisis.

A few last words:

Amazon has seen amazing growth over the past few years. Sales have grown exponentially, especially during the coronavirus crisis. The company saw a rapid increase in its e-commerce sales across its North American and International businesses. While the growth rate of Amazon's e-commerce platform accelerated, its cloud platform began to slow down. However, Amazon remains the undisputed market leader in both areas. The company's profit margins are historically low. However, the massive sales more than make up for the lower margins. Amazon's immense influence on e-commerce has also brought the brand under government scrutiny. The US government has stepped up antitrust action against major tech brands, including Amazon. However, there are other challenges for Amazon, including counterfeiting on its platform as brands like Nike have exited Amazon's e-commerce platform. Still, 2020 is proving to be a very profitable year for Amazon as it has seen tremendous sales growth. The changes brought about by the coronavirus will continue. It has changed consumer behavior around the world in such a way that brands like Amazon will be preferred in the future.