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Is There a Fissure in Amazon’s Flywheel?

Since Amazon’s founding 22 years ago, the flywheel concept has guided the company’s core principles and driven its rapid ascent. However, ProPublica recently reported that a piece of Amazon’s flywheel is under increasing pressure: the customer experience.

Radial took a closer look at the potentially larger effects this could have for the rest of the ecommerce ecosystem and released its findings in a paper titled, “Is there Grit in Amazon’s Flywheel? Implications and What Retailers Need to Know to Survive.”

“Amazon was founded on the belief that by offering the largest selection of products and the best customer experience, consumers would flock to its site and sellers, looking to reach that audience, would join its marketplace. And for years, it has been right,” said Stefan Weitz, author of the paper and Chief Product and Strategy Officer at Radial, the leading omnichannel commerce technology and operations provider.

“The flywheel is a business model that has delivered tremendous value to consumers, and raised the bar for all ecommerce companies around the world. But the funny thing about a flywheel is when one piece fails, the overall system can be destroyed. And it’s possible we’re witnessing just that with Amazon.”

Radial’s paper dives deep into what’s actually happening with Amazon’s flywheel. According to ProPublica’s report, it seems that Amazon, which pioneered the ideal customer experience, is now focusing some of its efforts on increasing profitability at the expense of many consumers. Specifically, ProPublica’s report states, “Amazon often says it seeks to be “Earth’s most customer-centric company.” But in fact, the company appears to be using its market power and proprietary algorithm to advantage itself at the expense of sellers and many customers.”

The paper then offers an analysis on why these findings should be troubling for retailers and large sellers using Amazon as their ecommerce partner and relying heavily on the company for their future success. For example, Radial points to companies like Demand Media and Mahalo that nearly collapsed when Google’s “Panda” algorithm change, which was done, much like Amazon claims, to benefit users, significantly diminished traffic to their sites.

With ecommerce continuing to grow at 16 percent annually, the opportunities for retailers to take advantage of the market are endless. The paper concludes with actionable ideas and considerations for retailers to deliver an “Amazon-like” customer experience without having to choose Amazon itself.

“The visible fissure we’re seeing in the Amazon flywheel points to this simple truth: survival depends on profitably delivering an exceptional customer experience while building your own brand,” said Weitz. “The time is now for retailers and large sellers to create experiences that customers crave – understanding how to build them durably is job No. 1 for progressive companies in 2017.”

For Radial’s in-depth analysis, download “Is there Grit in Amazon’s Flywheel? Implications and What Retailers Need to Know to Survive” (link).

SourceRadial Press Release

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.