Exploring Disruptive Business Models: Amazon and Industry Trends

This report examines Amazon's disruptive business model within the context of the e-commerce industry. It begins with an introduction to the e-commerce market's growth and Amazon's significant role, highlighting its revenue and employee figures. The report then delves into Amazon's core busin...Read More

Running Head: MANAGEMENT 0
Disruptive Business Models

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Table of Contents
Introduction................................................................................................................................2
Amazon Business Model............................................................................................................3
Disruptive business models emerging in industry.....................................................................3
Important policies or practices of Amazon................................................................................5
Recommendations......................................................................................................................5
References..................................................................................................................................7

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Introduction
The e-commerce market is continuously growing as number of consumers prefer to
purchase goods online increases for the sort of convenience. In 2017, retail e-commerce sales
globally amounted to 2.3 trillion US dollars and e-retail revenues are expected to grow to
4.88 trillion US dollars in 2021 (statista.com, 2019). It also embraced the advantage of web-
based storefronts to come across the desires of huge customers.
One of the major e-commerce giants is Amazon who is continuously growing with its
particular business models. Amazon is a giant retailer for both used and new goods. As
Amazon offers services by which people can sell and buy products at the same time and the
company has so 310 million active customers. Considering the report of 2018, Amazon has
6,47, 500 number of employees and the company has earned $232 billion in revenue in the
year 2018 (statista.com, 2019). The profit is more than tripled in 2018 and this shows the
strength of its business model.
Source: (statista.com, 2019)

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Amazon Business Model
Amazon is the leading online retailer in the e-commerce industry operates a business
model with various moving parts. It is entirely different from the rest of the companies.
Firstly, the organisation sells the good straightly where a part of products are provided to
purchasers with the help of Amazon online storefront in relation with small markup.
Moreover, the stock is retained in the organisation larger network of warehouse. Most of the
customers go the Amazons site supposing its products are less costly and readily exist for
buying and shipping. Considering direct sales, Amazon offers a platform for other retailers to
sell products to customers. In relation to Amazon partner retailers, all the products sold are
often less common items or those who price are high as it allows the organisation to avoid
holding slow-moving inventory that may have negative impact on the profit. In addition,
Amazon also does keep a portion of the sales price as commission while not evaluating a fee
for its retailer partner.
Considering Amazon price services, the company also sustains a subscription-based
business model as well as a unique product line based on electronic products (Sorescu et al,
2011). With these prime services, the company have to pay yearly fee to safe same day or
two-day shipping while having access to various other services too such as digital media,
music and video. Considering these prime services, the company gains out various loyal
customers all over the world.
Disruptive business models emerging in industry
The world of business to business (B2B) e-commerce is fast-evolving. It is more
significant in certain areas of the world than in others, however, it’s becoming increasingly
obvious that even emerging economies adopting new practices and regulations to tame the
rising digital marketplace (Arli, Bauer & Palmatier, 2018). For instance, some of the
emerging trends in e-commerce include – continued importance of mobile device, direct
connections with customers, digital supply chain, reliance on drop shipping, AI-powered
personalization, demand driving forecasting and newer payment services. Various companies

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are practising and trying to mould these e-commerce trends into their business model to gain
first mover and competitive advantage in the industry.
Most of the times, people end up purchasing things they were not even looking for
simply as of utility of sites such as Amazon and eBay. However, some of the top companies
are now coming up with their disrupting e-commerce business model with outlining the
incredible advances in online shopping that develops better experience for the shoppers. One
of the company is Zoey who states that consumer side of e-commerce can be perceived as
half of the overall picture and with greater focuses on tailoring services as per the needs of
consumers, the B2B market gets cut off completely. Hence, Zoey comes up with a hybrid e-
commerce platform by creating world first B2B and B2C business model (Paine, 2017). The
company offers for B2B and B2C businesses with having a robust app store and provides
tons of great e-commerce features. Many businesses around the globe have initiated to takes
notes from B2B platforms. They also integrate that design into the inside of B2B operations.
With having an important setup on the backend, organizations are seeing an upsurge in
productivity and revenue.
One of the other company, i.e. Blucarat is also come up with a great e-commerce
channel with bringing of social interactions to e-commerce with the power of social media.
The company has developed a social bar, which can be embedded into any e-commerce
websites to syndicate the buyer's social media experience with shopping so that they can feel
more sociable. It is also known to be as powerful cloud-based social e-commerce solutions
for online retailers who wish to create a community of loyal shoppers directly on their native
sites (Watch, 2013). This seems to be making internet feel more like a mall.
Other than this, Wayblazer also come up with their distinct business model based on
AI solutions as AI seems to be powering a wide array of industries at present times and so
bringing this to e-commerce will surely disrupt the market. Powered by IBM Watson, the
company is able to provide suggestions to travellers about lodging and transportation and
thus it will be truly an innovative way to rejuvenate the travel experience. Hence, these are
some disruptive business models prevailing in the e-commerce industry, benefitting
companies to gain competitive advantage from various perspectives.

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Important policies or practices of Amazon
Amazon has grown significantly since its inception and now spread its footprints and
network to various other areas including cloud computing, logistics, and most recently media
and entertainment. One of the important practice that helps Amazon in its achievement of its
disruptive model is its incline towards private label products. Amazon considers specific
product attributes and conduct in-depth market research for start selling their own private
label products such as Kindle, Echo device, fire stick and so on (Zhu, 2019). The company is
selling these products are also coming up with a new design for common products. This help
the company to cut off merchant margins and retain higher profit with serving potential needs
of the customers. Hence, this practice helps the company in promoting its disruptive business
model to a higher level.
On the contrary side, Amazon take on board warehouse robotics enterprise Kiva
Systems in 2012, its efforts in automation (Rogue, 2016). In addition, the company has also
cut hundreds of jobs as the company started shifting its focus on voice assistant Alexa and
other growing areas. The company 2017 projections for Alexa were very optimistic and the
enterprise also shifted its attention away from internet shopping and near the future of
computing by growing the presence of Alexa and AWS. This judgment of the company to
alter its business model may have negative impact on its current employees.
Recommendations
Amazon has evolved to become an ecosystem over the past 20 years and is expanded its
business model on the platform of speed and envious of scale (Stocker et al, 2017). The
company has expanded its roots and network in several domains by undertaking consumer
demand on proactive basis. However, to achieve better outcome in relation with disruptive
business model, the major recommendations for the company will be –
 The company has increased its roots in cloud computing. To move further in a game
changing way, the company can use Artificial Intelligence as a core competency
towards its private label products such as Alexa and echo device. In extent with AI,

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the company can offer unparalleled access to Amazon ace in the hole with zero clicks,
as it will revolutionize shopping benefitting the customers by offering an ability to
replenish much-needed supplies flawlessly through vocal commands.
 Amazon may increase geographic expansion by entering into healthcare as it may be
considered as a bold move into pharmacy service. As healthcare inflation unchecked,
it is known to be an industry it could disrupt quickly in relation with its extensive
supply chain system. In addition, the company can also join hand with various
distributors so that they can extend reach in medical instruments to hospitals and
others.
By going ahead with these strategies, Amazon can not only increase its revenue scale but
also gain first mover advantage through differentiation and thus capture positive value in the
marketplace and globally. It will also support more of its private label products. Being first
mover in those respected areas will aid Amazon to gain loyalty before the entrants and with
developing economy of scale.

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References
Arli, D., Bauer, C., & Palmatier, R. W. (2018). Relational selling: Past, present and
future. Industrial Marketing Management, 69(1), 169-184.
Bogue, R. (2016). Growth in e-commerce boosts innovation in the warehouse robot
market. Industrial Robot: An International Journal, 43(6), 583-587.
Paine, J. (2017). E-Commerce Disruption: 9 Companies to Know in 2017. Retrieved from
https://www.inc.com/james-paine/9-companies-disrupting-the-ecommerce-
industry.html
Sorescu, A., Frambach, R. T., Singh, J., Rangaswamy, A., & Bridges, C. (2011). Innovations
in retail business models. Journal of retailing, 87(1), S3-S16.
statista.com. (2019). Annual net revenue of Amazon from 2004 to 2018 (in billion U.S.
dollars). Retrieved from https://www.statista.com/statistics/266282/annual-net-
revenue-of-amazoncom/
statista.com. (2019). Retail e-commerce sales worldwide from 2014 to 2021 (in billion U.S.
dollars). Retrieved from https://www.statista.com/statistics/379046/worldwide-retail-
e-commerce-sales/
Stocker, V., Smaragdakis, G., Lehr, W., & Bauer, S. (2017). The growing complexity of
content delivery networks: Challenges and implications for the Internet
ecosystem. Telecommunications Policy, 41(10), 1003-1016.
Watch, A. (2013). Blucarat Brings the Best Part of Shopping to Online: The Social Part.
Retrieved from https://www.alleywatch.com/2013/11/blucarat-bringins-the-best-part-
of-shopping-to-online-the-social-part/
Zhu, X. (2019). Case XI: Amazon’s DNA: Driving Technology Innovation in the Digital
Economy. In Emerging Champions in the Digital Economy (pp. 289-311).
Springer:Singapore.