case study amazon go

Airport Biometrics: A Primer (2021)

Chapter: appendix a - case study: amazon go cashierless retail experience.

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135   Summary Initiated by Amazon, the Amazon Go retail experience (see Figure A-1 and Figure A-2) uses a combination of cameras, sensors, computer vision techniques, machine learning, and artificial intelligence to create a cashierless retail experience; the first airport location will be at Newark Liberty Inter national Airport (EWR) (Amazon Go 2020). This technology, called “Just Walk Out,” requires customers to identify themselves when they enter the store (Amazon 2020). The customer’s identity is verified either by scanning the Amazon Go mobile app (in the case of an Amazon Go store) or their credit card (for other retailers equipped with the Just Walk Out technology). A biometric variant also exists, where instead of a QR code or credit card, customers enroll at the storefront enrollment kiosk by scanning their 3D hand palm biometric and linking that to their account. The Just Walk Out technology leverages computer vision and machine learning to distinguish between customers and the items picked out and added to their virtual cart. The system does not rely on facial recognition but relies on movement tracking. Each customer is associated with a name, an account, and a consumer profile that reflects all interactions with items on the shelves (which items are stared at, picked up, or bought). Future use of the customer’s data is still undefined. However, the initial patent application included some examples where the customer’s purchase history could be used to confirm which items were picked by the user. The main benefits are significant time savings for customers and financial savings for retailers (reduced to no cashiering cost) (Bishop 2020b). The system architecture relies on Amazon’s A P P E N D I X A Case Study: Amazon Go Cashierless Retail Experience Source: Adapted from Amazon Go 2020. Figure A-1. Amazon Go shopping experience.

136 Airport Biometrics: A Primer What? ● Cashierless retail technology ● Project implemented by Amazon Where? ● 26 Amazon Go stores across the United States (e.g., Chicago, New York, Seattle, San Francisco) ● Deployment at a few airports across the United States in stores of retail chain OTG (On-the-Go), including at EWR (OTG Management 2020) Customer process steps ● To access Amazon Go stores: – Create an Amazon account – Download Amazon Go app – The Amazon Go mobile app interface will generate a QR code, or the user may add a hand palm scan to the account at an enrollment kiosk. – Customer enters the store by scanning the QR or hand palm (or credit card for other retail stores with Just Walk Out technology) – Just Walk Out technology tracks the customer and the interaction with store items. – Virtual cart validation – Exit Who? ● Amazon patented the Just Walk Out technology. It provides the hardware (camera and sensors) along with the software. Why? ● Amazon’s goal is to create a seamless shopping experience where customers do not have to wait in line. How? ● The concept relies on the combined use of cameras, sensor fusion, computer vision, and deep-learning algorithms to track customers during their time in the store, noting each item picked up, put back, or added to their virtual carts. For the biometric hand palm variant, 3D hand palm scanners and a palm recognition software are used. Enrollment/digital identity creation and verification ● An Amazon account can be made online, and enrollment is done in the storefront at the enrollment kiosk. The online Amazon account can be linked to the hand palm biometric by scanning one's hand at the kiosk. Verification of identity how? ● Customers are identified by either a QR code generated by the Amazon Go app in Amazon Go stores or their credit card in third-party retail stores where the Just Walk Out environment is available. For? ● Amazon account holders Table A-1. Key facts for the Amazon Go case study. Just Walk Out technology and includes the camera and sensor hardware as well as the software system. Table A-1 contains a summary of the Amazon Go case study. How Does It Work? Before the Customer Journey • Amazon Go relies on sensor fusion (analyzing and aggregating data from multiple sensors, including weight and movement sensors), advanced data hosting services through Amazon Web Services, and advanced computer vision–based machine learning (Amazon 2015). • The hardware includes electronic shelves, cameras, fixtures, and a facility management system. • The inventory management involves data storing and item identification. • In the case of Amazon Go stores, customers create an Amazon account and download the Amazon Go app. • In the case of Just Walk Out–enabled stores, customers access the store with their credit card.

Case Study: Amazon Go Cashierless Retail Experience 137   The Customer Journey The customer journey can be described by the following: • Each shopper (and that shopper’s party) enters and is identified with a QR code generated by the Amazon Go app, biometric hand palm, or a credit card in the case of stores equipped with the Just Walk Out technology. • The technology tracks the customer’s movements and interactions with the different store items. As customers remove items from the shelves, those items are added to their virtual cart (Kumar et al. 2013). • The customer receives a receipt and is charged when exiting the store. Retention and Storage Account data are saved on Amazon’s own servers. • Cameras track throughout the store in real time using the video feed streaming from a ubiquitous network of cameras (Bacco and Hiatt 2010). • Amazon Go stores retain data on the interactions of individual customers with the items on the shelves. These data are used to further train the artificial intelligence running the architecture. • Account data are retained and stored at Amazon until the passenger opts for the deletion of the account. • Customers can elect to delete their biometric data. System Architecture Flow Diagram The flow diagram for this case study can be found in the Amazon Go Cashierless Retail Experience case study of Chapter 2. Source: Amazon 2020. Figure A-2. Just Walk Out enables seamless store experiences for other retailers as well.

138 Airport Biometrics: A Primer System Specifications The system relies on an artificial intelligence (see Figure A-3) to track the customer in the store. The artificial intelligence architecture relies on Amazon Web Services for streaming services as well as advanced computer vision–based machine learning. Computer Vision–Based Machine Learning To associate the right items with the right customers, the technology relies on aggregating data from different sensors linked with the location information of the sensors. The artificial intelligence driving the architecture tracks the customers in the store by aggregating data from different sensors through sensor fusion and solving different identification and linking problems to associate customers, their location, and their interactions with items in the store. Person Detection The Just Walk Out technology does not use facial-recognition technology but relies on red- green-blue cameras equipped with depth- and distance-sensing capabilities. Each customer is associated with a general profile and an anonymized 3D point cloud. During the customer’s time in the store, a deep-learning algorithm predicts the customer’s location and associates that location with actions and interactions with store items (see Figure A-4). System Architecture, Pre-Existing Systems, and Databases The following explain the buildup of the system and its processes: • Customer information and biometrics are collected at the entry gate. • The identification of distinctive features on the hand(s) of the customer relies on a propri- etary algorithm, with distinctive features of the hand specific to this proprietary technology architecture (see Figures A-5 through A-7). • Hand biometrics data that are collected are either stored, if the customer has an Amazon account, or are deleted once the customer exits the store. • The customer holds his or her palm over the device to opt in. Source: Amazon 2019. Figure A-3. Amazon artificial intelligence for the Amazon Go retail experience.

Case Study: Amazon Go Cashierless Retail Experience 139   Stakeholders and Responsibilities Stakeholders The main stakeholders of Amazon Go concept are Amazon and the third-party retailers who have purchased Just Walk Out technology services. Responsibilities Amazon owns the Just Walk Out concept, which builds on a series of patents submitted by Amazon Technologies since 2013 (Puerini et al. 2014). Case Study Review Benefits The Just Walk Out technology presents benefits both for the customer and the retailer. Benefits to customers include: • Improved customer experience over time with deep learning allowing for faster tracking and more accurate identification of interaction with store items, • Limited contact and interaction with store employees, • Reduced time spent in the store, and • No use of facial recognition. Benefits for the retailers providing the Just Walk Out–enabled experience include: • Adaptability of the Just Walk Out technology to different store layouts, • Financial savings due to reduced staff cost related to cashiering or inventory, • No use of facial recognition, • Improved customer experience, and • Detailed consumer profile data. Source: Amazon 2019. Figure A-4. Logic structure of Amazon Go and technology components.

140 Airport Biometrics: A Primer Source: Kumar et al. 2018. Note: Numbers in figure are part of the patent application and are not relevant to this discussion. Figure A-5. Hand biometrics identification process.

Case Study: Amazon Go Cashierless Retail Experience 141   Source: Kumar et al. 2018. Note: Numbers in figure are part of the patent application and are not relevant to this discussion. Figure A-6. Hand biometrics characteristics identification.

142 Airport Biometrics: A Primer Source: Kumar et al. 2018. Note: Numbers in figure are part of the patent application and are not relevant to this discussion. Figure A-7. Person detection based on hand biometrics identity.

Case Study: Amazon Go Cashierless Retail Experience 143   Responses From Customers Crowd-sourced reviews for individual stores rate on average more than 4 stars out of 5. A stated choice survey conducted by the Shorr group in 2018 found that “84% of respondents to a survey said that they see Amazon Go as a ‘type of grocery shopping experience’ they’d enjoy more than traditional grocery shopping” and “over 25% of respondents said that they would pay more for grocery products if it meant they didn’t have to wait in line at checkout” (Shorr 2018). System Performance and Specifications Review The Just Walk Out technology requires an approximately $1 million investment in hard- ware. Customers spending less time in the store allow for higher customer throughput per hour compared to a traditional store (Cheng 2019). The system is designed for 99% accuracy, including during the busiest periods. On average, Amazon Go stores process 550 customers per day and as many as 90 people at any given time. Fall-Back Options • Despite the absence of cashiers, a few store staff members are present to assist customers with any technical issues, answer questions, and process cash transactions. • If customers are incorrectly charged for an item, they can contest the charge and be reimbursed. Concerns • Privacy and use of collected data: There is a lack of transparency on how the collected data factor into the overall Amazon personalized marketing strategy. The architecture relies on deep learning, and data mining of the customer’s activity in the store would improve the experience and accuracy over time. • Lack of transparency around the use of data slowed the adoption of the technology in Europe because of confrontation with GDPR regarding consent to the processing of personal data. In the context of the regulation, every consent request must state the precise purpose for which the data will be processed (Walters 2020). Lessons Learned The Just Walk Out technology initially relied on motion tracking and an anonymized cloud of data to identify individual customers. However, in December 2019, Amazon submitted a patent for a non-contact biometric identification system to identify customers by their hands (Kumar et al. 2018). Introducing hand biometrics as one of the identifying features of each customer is expected to simplify the person-detection component of the Just Walk Out architecture. Findings and Trends Findings The Just Walk Out technology is a potential template for future models of touchless and cashierless retail at airports and other shopping locations. The use of biometrics for identifica- tion, camera tracking devices, image analysis software, and a program that automates product billing has proven to create a new user-friendly experience that is more efficient and is touch free and seamless. Amazon now has several versions of this retail technology in operation, and future revisions of the concept will only improve accessibility. Enrollment challenges may be resolved with biometric palm geometry recognition, which is also being trailed, or with a simple

144 Airport Biometrics: A Primer two-step authentication process. Another option is the use of not just one biometric, but two or more, thereby providing options for customers to choose from. The main benefits behind using this type of software are significant time savings for customers and financial savings for retailers through lower operational expenditures on employees (e.g., labor wages, benefits). Some enrollment challenges may be resolved with simple two-step palm enrollment, which is interesting because it may seem less invasive when compared to a picture of one’s face. Furthermore, this type of software presents a potential alternative to current and future models for touchless retail for airports and airlines. Future Situation and Broader Implementation Amazon submitted a patent application for a touchless hand scanning system named “Amazon One” and started implementing it in Amazon Go stores in October 2020. Customers scan their hands at the entry gate to enter the store. Trends Identified A trend identified in the Amazon case study is that the use of hand biometrics is aimed to facilitate a more efficient, user-friendly (retail) experience. In the cashierless system, time is saved, shopping requires less fumbling of personal items during payment, and simplicity for the user can bring satisfaction. In this specific case, it is not only the biometric technologies enabling this, but also the camera tracking system and software, which allow for the automatic charging of customers to their accounts. This is a trend that will likely expand to other sectors outside of retail and airports. Similarly, the retail experience removes the need for contact points and human interactions, which has the added benefit of reducing the risk of transmissible diseases, which is especially beneficial in the COVID-19 era. The camera system and the 3D hand geometry scanners allow for tracking and identification without customers needing to touch any surfaces.

Biometrics is one of the most powerful, but misunderstood technologies used at airports today. The ability to increase the speed of individual processes, as well as offer a touch-free experience throughout an entire journey is a revolution that is decades in the making.

The TRB Airport Cooperative Research Program's ACRP Research Report 233: Airport Biometrics: A Primer is designed to help aviation stakeholders, especially airport operators, to understand the range of issues and choices available when considering, and deciding on, a scalable and effective set of solutions using biometrics. These solutions may serve as a platform to accommodate growth as well as addressing the near-term focus regarding safe operations during the COVID-19 pandemic.

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5 reasons why amazon go is already the greatest retail innovation of the next 30 years.

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LONDON, ENGLAND - MARCH 04: Customers carry their purchases as they leave the UK's first branch of ... [+] Amazon Fresh, on March 04, 2021, in the Ealing area of London, England. Shoppers at the Amazon Fresh store, which stocks hundreds of Amazon-owned products and third-party items, check in with a smartphone app upon entry and are automatically billed when they exit, without needing to scan individual items. The location is Amazon's first "just walk out" shop outside the United States. (Photo by Leon Neal/Getty Images)

With news this past week that Amazon AMZN AMZN has taken its “Just Walk Out” technology to Whole Foods , it is time to call it like it is.

Amazon’s “Just Walk Out” tech will soon be looked upon as the greatest retail innovation of the next 30 years. 

The award won’t go to voice commerce. It won’t go to Zuck’s metaverse. It will go to the technology platform that first debuted inside of a small Amazon Go store in January 2018, forever offering the world a first glimpse of what checkout-free retail could and should look like.

This isn’t to say that voice or the metaverse won’t have their day in the sun at some point, too. It is just that Amazon Go is in the here and the now. What could be coming from either of them is still way too far off in the distance and likely to come, at best, in the next 30 year cycle of retail innovation.

And, make no mistake, the above mentioned “30 year cycle” matters within the context of this conversation.

Because retail innovation cycles like clockwork. Specifically, every 30 to 40 years some new invention comes around that throws retail on its head. It is a pattern that likely goes back to the dawn of time, possibly even as far back as when Jesus Christ himself first overturned the tables in the temple. 

Saving the long drawn out history lesson though, one need only look back to the late 1800s to see the cycle clearly. In and around 1890, Sears debuted its first catalog. Then, in the 1920s, following the rise of the American automobile, Sears once again built its first department store in Chicago. In the 1960s, you had the dawn of the mass merchant supercenters, aka the Walmart WMT s, the Kmarts, and the Targets of the world. And then, finally, in the 1990s you had e-commerce, aka Amazon.

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Thus, that next “something” is due to shake up retail, and it is absolutely crazy to think that it could be Amazon who leaves its mark for the second 30 year cycle in a row.

One can dismiss the idea all he or she wants, but the case for why Amazon Go and its “Just Walk Out” technology platform will be the next great innovation in retail is about as straightforward and well-defined as Brad Pitt’s abs:

Reason #1 – Math

Physical stores still dominate retail. Despite the pandemic, which forced everyone to shut their doors and to order more goods from e-commerce than ever before, physical stores didn’t go anywhere. They still make up 60% to 70% of overall retail sales.

In contrast, something like the metaverse stands more likely to take a slice out of e-commerce sales than it does out of physical stores. Therefore, when attributing something as “the greatest retail innovation of the next 30 years,” it is important to keep the base of sales that the technology will impact in mind.

Amazon’s “Just Walk Out” technology (henceforth abbreviated as JWO) stands to impact grocery store shopping, convenience store shopping, and, if Amazon’s latest foray into physical fashion retailing is any indication, apparel shopping as well. 

Whether by way of Amazon deploying JWO tech for its own initiatives, licensing the tech to others, or from copycat solutions providers licensing it within these same verticals, the pie is so large that the impacted store sales stand to trump any digitally-oriented shopping innovation hands down. 

Reason #2 – It creates a better shopping experience

Amazon’s JWO technology just makes shopping easier and more convenient, plain and simple. 

How it works is so intuitive in its design – customers take out their phones, scan a barcode to enter a store, take whatever they want off the shelves, and just walk out and pay electronically, like they are getting out of an Uber UBER or a Lyft LYFT , without ever having to stand in line again. 

Or, better yet, in some instances, Amazon even lets you just wave your palm to enter the store, which is about the coolest thing out there, especially when shopping with kids in tow (for a video demonstration of entering an Amazon Go experience with your palm, please see below).

Amazon bets on universal truths, and the idea that no one wants to spend any time waiting in line to pay is about as universal as it gets, like on par with Brad Pitt being handsome.

Don’t agree?

Try it. And, then ask yourself, if you had the same experience at your favorite grocery store, say at a Tesco, an Aldi, or even at a Circle K (the companies on the forefront of deploying Amazon-like tech themselves), and all else being equal, wouldn’t you choose the ability to walk out without standing in line every time?

You damn well know you would and are lying to yourself if you think otherwise.

Reason #3 – It leads to better omnichannel operations

One point oftentimes left out of the discussion of JWO technology is that it is, in reality, about far more than the checkout-free experience. It is also about streamlining the retailer’s store operations.

With cameras in the ceilings capturing everything that is going on in a given store, the technology platform gives unprecedented real-time visibility to inventory, at all times. In layman's terms, this statement means that retailers can be more confident in their inventory levels on shelf and also be more secure in knowing if that inventory happens to be in the right place to maximize sales. Studies show that inventory accuracy in physical retail stores averages between 60% and 70% . Whereas with JWO technology, to operate efficiently, that figure has to be in the high 90s.

However, there is another benefit from improved inventory accuracy that goes far beyond just more accurate inventory counts and more assured inventory placement – namely, enhanced omnichannel capabilities.

As retailers look to ship from store or to offer buy online, pickup in store or at curbside to their customers, the inventory inaccuracies discussed above hamstring these efforts. Far too often this situation leads to canceled orders or requests for substitutions.

All of which has the potential to go away in stores where JWO tech is deployed.

Reason #4 – It better aligns supply to demand

Going back to my ECON 101 days, economies are most efficient when supply is appropriately matched to demand, and that is exactly what can happen inside of an Amazon Go-style store relative to any other physical shopping experience.

By knowing what is on shelf at all times and through the use of electronic shelf labels, retailers can see what inventory they have on shelf and adjust prices accordingly. Have too much inventory? Then they can mark items down or place them on promotion. Too little? Then they can also raise prices in real-time.

Net/net – the whole thing should mean more goods in the hands of people when they need them most, and oftentimes at even better prices than they would get normally, too.

In many ways, it is how online works today, just brought to life inside of a physical store for the first time.

Reason #5 – It creates better advertising relevancy

Finally, the last reason why JWO technology is so powerful is that it digitizes a retailer’s understanding of the physical store much in the same way that retailers currently understand e-commerce.  

In e-commerce, retailers know every page their customers browse, every item they add to their carts, which items they actually buy, and so on and so on. In physical retail stores, retailers know none of this information. All they know is what happens at the end of the experience as items are rung up at the till.

JWO tech changes the dynamics of the game because it knows everything a customer does in a physical store, e.g. what aisles they go down, what items they pick up off the shelf and don’t buy, and even how long they might take to look at the local Sunday circular on display in the entry vestibule. 

All of which means that this data can make the advertising retailers serve up to their customers at home, out of home, or in the store itself more relevant to their customers in the moments they want it most. The customer wins in this situation and so, too, does the retailer.

And, side note, this discussion is also why Amazon’s recently released ad revenue figures of $31 billion annually is just the tip of the iceberg.

Final thoughts

So there you have it – better operations, better pricing, better relevancy, and an overall better experience bolstered by math on the side of progress. 

While the preceding sentence may sound like the tagline to a Papa John’s commercial, it should be taken as seriously as a heart attack because the retail industry will be hard pressed to find another retail innovation that checks as many boxes as Amazon’s JWO tech does.

In the end, it is funny how history repeats itself. 

Sears went from leading the way with its catalog in the late 1800s to rolling out department stores in the 1920s, and one could argue that e-commerce, roughly 100 years later, was just a better, refashioning of a catalog shopping experience, one which Amazon played a huge role in defining.

Will Amazon similarly define the technological foundations of physical retailing for the rest of the century? Will Amazon Go’s “Just Walk Platform” be the standard by which all physical retail shopping experiences are eventually judged?

Is Brad Pitt good looking?

Enough said.

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Stay connected, additional links, amazon go: a case study in cashless retail pushback.

The decision by Amazon to change course with its cashless Amazon Go stores offers a cautionary tale for retailers about the likely fallout when they try to exclude fiat currency as a payment choice for potential customers.

April 16, 2019 | by David Jones — Editor, Networld Media Group

After Amazon publicly confirmed that it had reversed course and decided to accept cash at its autonomous Amazon Go stores, public officials, consumer advocates and industry experts agreed that the omnichannel retailer has recognized that U.S. consumers are not quite ready to give up cash as a payment option and that digital payment technology can still win the day without locking out an entire class of customers.

"I think this is a wise business move on behalf of Amazon and one that acknowledges that not every one has has access to credit and even those that do don't always want to use it," New Jersey Assemblyman Paul Moriarty told ATM Marketplace sister publication Mobile Payments Today by phone.

Steve Kessel, senior vice president of physical stores at Amazon told employees in March that it will allow cash payments at its cashierless Amazon Go stores, which has become a growing issue in the industry as several retailers and retaurant chains began are experimenting with autonomous retail and cashless payment models. Currently Amazon has a total of 10 stores in Seattle, Chicago and San Francisco, but plans to increase that number to approximately 3,000 by 2021, in a direct challenge to 7-Eleven, Krauzer's and thousands of bodegas across the country.

"We are working to accept cash at Amazon Go," a spokesperson confirmed to Mobile Payments Today.

When asked what type of technological or labor changes would be required, the spokesperson did not directly answer the question and replied that it would would work the same way you would expect, “you’ll check out, pay with cash and then get your change.”

Policy debate

Officials involved in some of the earliest policy debates over cashless retail see the Amazon Go decision as a recognition that local and state governments will do what is necessary to protect the right of their constituents to access goods and services, no matter their socioeconomic status.

"We have not heard directly from Amazon about these proposed changes to their Amazon Go stores, so we are not sure of their intent," said Lauren Cox, deputy communications director at the office of Philadelphia Mayor Jim Kenney. "If this change is being made in an effort to take the concerns about potential discrimination against low-income individuals seriously, then we welcome it."

New York City council member Richie Torres , who led the fight against cashless retail in that city and sponsored a bill to force all stores to accept cash, said that Amazon is recognizing the public backlash against Amazon Go and restaurants with similar policies.

"Amazon saw the writing on the wall and made the right decision to start accepting cash at its Amazon Go stores," Torres said in an email statement provided by his deputy chief of staff. "Now it should extend that policy to other brick-and-mortar stores nationwide. A cashless business model is a discriminatory model that excludes the unbanked and people without access to credit."

The business model

It remains unclear how Amazon Go will transition the business model to begin accepting cash — for example would there be a designated cash checkout line or kiosk or would point-of-sale terminals be configured to accept cash? The change also raises the question as to whether Amazon would need to hire cashiers.

Aite Group senior analyst Thad Peterson said the transition should not be too difficult a task, depending on how Amazon structures cash payment acceptance.

"If you look at an Amazon Go store as the world's largest vending machine, which it kind of is, then accepting cash could easily be an option," he said, "but if the cash payment was taken in-store then it would force a reconfigure of the store to complete a transaction."

Amazon already offers a preloaded stored value product called Amazon Cash, which operates similarly to a prepaid retail gift card or mobile wallet. Customers can load from $5 to $500 cash value onto a card or mobile app and use that payment instrument to shop online. Customers can purchase the cards at CVS, 7-Eleven and Gamestop stores.

The decision by Amazon comes at a time of fierce debate in the U.S. and overseas about cash access, the growing prevalence of e-commerce, and a lack of access to traditional banking facilities among lower income and rural communities.

The Health of Cash, a 2018 study by Cardtronics PLC , found that 92% of consumers want choice in the types of payment methods available to them.

The study also revealed that 73% of consumers use cash regularly, even though they have other options. Additionally, while 37% of respondents preferred a debit card as their go-to payment option, 28% preferred cash.

“Cash is universal, its convenient, it’s accepted everywhere, its safe to use and there is anonymity to it," said Brad Nolan, executive vice president of Allpoint, a unit of Cardtronics.

Industry experience

Officials at Standard Cognition, a San Francisco firm that developed AI-powered checkout technology, which it sells to third-party retailers nationwide and uses to power its recently launched autonomous grocery store in the city, said that accepting cash payments should continue to be part of the retail experience.

“Standard found early on in talking with retailers that they all wanted to accept cash and credit/debit card payments, so right from the start Standard decided to offer a kiosk option for non-app payments,” Michael Suswal, co-founder and COO told Mobile Payments Today via email.

He said shoppers using the Standard or store app can just use the app and walk out of stores, however shoppers that want to pay with cash just need to stop at any kiosk and pay with credit/debit or cash options.

Financial Innovation Now, an alliance of technology firms including Amazon, Stripe, Apple, Intuit, Google, Paypal and Square, has advocated for the development of faster payments and other methods of accelerating the development of e-commerce technologies.

"FIN members are working to provide innovative payment tools that are more accessible, safer and faster than cash," said Brian Peters, a spokesman for the organization. "We are aligned and working towards the same goals of financial inclusion. To make that a reality for all consumers, we are hopeful that policymakers provide flexibility in how we approach all kinds of consumer payment environments."

David Jones

David Jones is the editor of Mobile Payments Today. He is a veteran business and technology journalist, with three decades of experience writing about business travel, real estate and technology.

Since 2015 he covered a range of technology stories for the ECT News Network, which includes the E-Commerce Times, TechNewsWorld, LinuxInsider and CRM Buyer, writing about cybersecurity, artificial intelligence, machine learning, open source computing and privacy issues among others. He recently covered FinTech issues for PYMNTS.com.

He worked as a staff writer for Bloomberg Business News and an online reporter for Crain’s New York Business. He has written for numerous media organizations, including Reuters, The New York Times, The Real Deal, Continental, City Limits and The Nation. 

He was previously awarded the George Washington Williams Fellowship for Journalists of Color by the Independent Press Association. 

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Amazon.com marketing strategy 2023: E-commerce retail giant business case study

What goes into the Amazon marketing strategy secret sauce? Our business case study explores Amazon's revenue model and culture of customer metrics, history of Amazon.com and marketing objectives

In the final quarter of 2022, Amazon reported net sales of over $149.2 billion. This seasonal spike is typical of Amazon's quarterly reporting , but the growth is undeniable as this was the company's highest quarter ever.

There is no doubt that the e-commerce retail giant continues to lead the way in e-commerce growth. The Amazon marketing strategy we are familiar with today has evolved since it was founded in 1994.

I've highlighted the Amazon marketing strategy case study in my books for nearly 20 years now since I think all types of businesses can learn from their digital business strategy. Their response to the pandemic is impressive but not entirely surprising for a brand that is ' customer obsessed '.

From startups and small businesses to large international businesses, we can all learn from their focus on the customer, particularly at this time, testing market opportunities made available by digital technology, and their focus on testing and analysis to improve results.

Their focus on customer experience put Amazon in the role of a thought leader in e-commerce experience. However, whether due to diminished customer service, or increasing customer expectations, or a mixture of the two, fulled by a global pandemic - notably, 2020 was the first time Amazon's ACSI customer satisfaction rating dropped below 80 since launch, to 65%.

With customer satisfaction now measuring at 79% in 2022 , customer satisfaction in Amazon has risen again, but is still not as high as it once was.

Currently, Forbes gives a consensus recommendation to buy Amazon stock, giving a return on assets (TTM) of 1.73%. The stock performance is not as high as we saw in 2020 and 2021, but it did show some growth in late 2022 - early 2023.

I aim to keep this case study up-to-date for readers of the books and Smart Insights readers who may be interested. In it, we look at Amazon's background, revenue model, and sources for the latest business results.

We can also learn from their digital marketing strategy, since they use digital marketing efficiently across all customer communications touchpoints in our RACE Framework :

• Reach : Amazon's initial business growth based on a detailed approach to SEO and AdWords targeting millions of keywords.
• Act : Creating clear and simple experiences through testing and learning.
• Convert : Using personalization to make relevant recommendations and a clear checkout process that many now imitate.
• Engage : Amazon's customer-centric culture delights customers and keeps them coming back for more.

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Amazon's growth and business model evolution

Forbes credits Amazon's success to 3 rules which it breaks, but we 'probably shouldn't'!

• Strategy is about focus - although Amazon has an incredible number of strands to the business today.
• Don’t throw good money after bad - with criticism in particular of Amazon's investment in groceries.
• Your core competencies determine what you can and can’t do - developing the Kindle with no hardware manufacturing experience.

In this way, Forbes outlines a 'risky' approach to marketing strategy which, for Amazon, paid off in dividends. So, there is plenty to learn from studying this company, even if we decide not to replicate all tactics and strategies.

Amazon.com mission and vision

When it first launched, Amazon’s had a clear and ambitious mission. To offer:

Earth’s biggest selection and to be Earth’s most customer-centric company.

Today, with business users of its Amazon Web Service representing a new type of customer, Amazon says:

this goal continues today, but Amazon’s customers are worldwide now and have grown to include millions of Con-sumers, Sellers, Content Creators, Developers, and Enterprises. Each of these groups has different needs, and we always work to meet those needs, by innovating new solutions to make things easier, faster, better, and more cost-effective.

20 years later, Amazon are still customer-centric, in fact, in the latest Amazon Annual report , 2021, Jeff Bezos of Amazon explains customer obsession.

"We seek to be Earth’s most customer-centric company and believe that our guiding principle of customer obsession is one of our greatest strengths. We seek to offer our customers a comprehensive selection of products, low prices, fast and free delivery, easy-to-use functionality, and timely customer service. By focusing obsessively on customers, we are internally driven to improve our services, add benefits and features, invent new products, lower prices, increase product selection, and speed up shipping times—before we have to."

Amazon business and revenue model

I recommend anyone studying Amazon checks the latest annual reports, proxies, and shareholder letters. The annual filings give a great summary of eBay business and revenue models.

The 2020 report includes a great vision for Digital Agility (reprinted from 1997 in their latest annual report) showing testing of business models that many businesses don't yet have. Amazon explain:

"We will continue to measure our programs and the effectiveness of our investments analytically, to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures".

They go on to explain that business models are tested from a long-term perspective, showing the mindset of CEO Jeff Bezos:

We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.

The latest example of innovation in their business model is the launch of Amazon Go, a new kind of store with no checkout required. Boasting a "Just Walk Out Shopping experience",the Amazon Go app users enter the store, take the products they want, and go with no lines and no checkout.

More recently, there have been a range of business model innovations focussed on hardware and new services: Kindle e-readers, Fire Tablet, smartphone and TV, Echo (using the Alexa Artificial Intelligence voice-assistant), grocery delivery, Amazon Fashion and expansion to the business-oriented Amazon Web Services (AWS). Amazon Prime, an annual membership program that includes unlimited free shipping and then involved diversification to a media service with access to unlimited instant streaming of thousands of movies and TV episodes.

AWS is less well-known outside of tech people, but Amazon is still pursuing this cloud service aggressively. They now have 10 AWS regions around the world, including the East Coast of the U.S., two on the West Coast, Europe, Singapore, Tokyo, Sydney, Brazil, China, and a government-only region called GovCloud.

Amazon marketing strategy

In their 2008 SEC filing, Amazon describes the vision of their business as to:

“Relentlessly focus on customer experience by offering our customers low prices, convenience, and a wide selection of merchandise.”

The vision is still to consider how the core Amazon marketing strategy value proposition is communicated both on-site and through offline communications.

Of course, achieving customer loyalty and repeat purchases has been key to Amazon’s success. Many dot-coms failed because they succeeded in achieving awareness, but not loyalty. Amazon achieved both. In their SEC filing they stress how they seek to achieve this. They say:

" We work to earn repeat purchases by providing easy-to-use functionality, fast and reliable fulfillment, timely customer service, feature-rich content, and a trusted transaction environment.

Key features of Amazon include:

• editorial and customer reviews;
• manufacturer product information;
• web pages tailored to individual preferences, such as recommendations and notifications; 1-Click® technology;
• secure payment systems;
• image uploads;
• searching on our websites as well as the Internet;
• browsing; and the ability to view selected interior pages and citations, and search the entire contents of many of the books we offer with our “Look Inside the Book” and “Search Inside the Book” features.

The community of online customers also creates feature-rich content, including product reviews, online recommendation lists, wish lists, buying guides, and wedding and baby registries."

In practice, as is the practice for many online retailers, the lowest prices are for the most popular products, with less popular products commanding higher prices and a greater margin for Amazon.

Free shipping offers are used to encourage increase in basket size since customers have to spend over a certain amount to receive free shipping. The level at which free shipping is set is critical to profitability and Amazon has changed it as competition has changed and for promotional reasons.

Amazon communicates the fulfillment promise in several ways including the presentation of the latest inventory availability information, delivery date estimates, and options for expedited delivery, as well as delivery shipment notifications and update facilities.

This focus on customer has translated to excellence in service with the 2004 American Customer Satisfaction Index giving Amazon.com a score of 88 which was at the time, the highest customer satisfaction score ever recorded in any service industry, online or offline.

Round (2004) notes that Amazon focuses on customer satisfaction metrics. Each site is closely monitored with standard service availability monitoring (for example, using Keynote or Mercury Interactive) site availability and download speed. Interestingly it also monitors per minute site revenue upper/lower bounds – Round describes an alarm system rather like a power plant where if revenue on a site falls below $10,000 per minute, alarms go off! There are also internal performance service-level-agreements for web services where T% of the time, different pages must return in X seconds.

The importance of technology and an increased focus on Artificial Intelligence and Machine Learning

According to founder and CEO, Jeff Bezos, technology is very important to supporting this focus on the customer. In their 2010 Annual Report (Amazon, 2011) he said:

“Look inside a current textbook on software architecture, and you’ll find few patterns that we don’t apply at Amazon. We use high-performance transactions systems, complex rendering and object caching, workflow and queuing systems, business intelligence and data analytics, machine learning and pattern recognition, neural networks and probabilistic decision making, and a wide variety of other techniques." And while many of our systems are based on the latest in computer science research, this often hasn’t been sufficient: our architects and engineers have had to advance research in directions that no academic had yet taken. Many of the problems we face have no textbook solutions, and so we — happily — invent new approaches”… All the effort we put into technology might not matter that much if we kept technology off to the side in some sort of R&D department, but we don’t take that approach. Technology infuses all of our teams, all of our processes, our decision-making, and our approach to innovation in each of our businesses. It is deeply integrated into everything we do”.

The quote shows how applying new technologies is used to give Amazon a competitive edge. A good recent example of this is providing the infrastructure to deliver the Kindle “Whispersync” update to ebook readers. Amazon reported in 2011 that Amazon.com is now selling more Kindle books than paperback books. For every 100 paperback books Amazon has sold, the Company sold 115 Kindle books. Kindle apps are now available on Apple iOS, Android devices and on PCs as part of a “ Buy Once, Read Anywhere ” proposition which Amazon has developed.

Some of the more recent applications of AI at Amazon are highly visible, for example, the Amazon Echo assistant and technology in the Amazon Go convenience store that uses machine vision to eliminate checkout lines.

In their 2017 report, they describe the increased use of machine learning and AI ‘behind the scenes’ at Amazon:   "much of what we do with machine learning happens beneath the surface. Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more. Though less visible, much of the impact of machine learning will be of this type – quietly but meaningfully improving core operations".

Amazon Customers

Amazon defines what it refers to as three consumer sets customers, seller customers and developer customers.

There are over 76 million customer accounts, but just 1.3 million active seller customers in it’s marketplaces and Amazon is seeking to increase this. Amazon is unusual for a retailer in that it identifies “developer customers” who use its Amazon Web Services, which provides access to technology infrastructure such as hosting that developers can use to develop their own web services.

Members are also encouraged to join a loyalty program, Amazon Prime, a fee-based membership program in which members receive free or discounted express shipping, in the United States, the United Kingdom, Germany, and Japan.

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As we know, e-commerce marketing is all about the customers. Our RACE Growth System down your customer journeys into a simple 5-step structure of plan - reach - act - convert - engage. Create a winning retail e-commerce marketing strategy with Smart Insights, to acquire and retain more customers, and accelerate your ROI. Get started today.

Competition

In its 2017 SEC filing Amazon describes the environment for our products and services as ‘intensely competitive’. It views its main current and potential competitors as:

• 1) online, offline, and multichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products we offer and sell to consumers and businesses;
• (2) publishers, producers, and distributors of physical, digital, and interactive media of all types and all distribution channels;
• (3) web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers;
• (4) companies that provide e-commerce services, including website development, advertising, fulfillment, customer service, and payment processing;
• (5) companies that provide fulfillment and logistics services for themselves or for third parties, whether online or offline;
• (6) companies that provide information technology services or products, including on- premises or cloud-based infrastructure and other services; and
• (7) companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices.

It believes the main competitive factors in its market segments include "selection, price, availability, convenience, information, discovery, brand recognition, personalized services, accessibility, customer service, reliability, speed of fulfillment, ease of use, and ability to adapt to changing conditions, as well as our customers’ overall experience and trust in transactions with us and facilitated by us on behalf of third-party sellers".

For services offered to business and individual sellers, additional competitive factors include the quality of our services and tools, their ability to generate sales for third parties we serve, and the speed of performance for our services.

From Auctions to marketplaces

Amazon auctions (known as zShops) were launched in March 1999, in large part as a response to the success of eBay. They were promoted heavily from the home page, category pages and individual product pages. Despite this, a year after its launch it had only achieved a 3.2% share of the online auction compared to 58% for eBay and it only declined from this point.

Today, competitive prices of products are available through third-party sellers in the ‘Amazon Marketplace’ which are integrated within the standard product listings. A winning component of the Amazon marketing strategy for marketplaces was the innovation to offer such an auction facility, initially driven by the need to compete with eBay. But now the strategy has been adjusted such that Amazon describe it as part of the approach of low-pricing.

Although it might be thought that Amazon would lose out on enabling its merchants to sell products at lower prices, in fact Amazon makes greater margin on these sales since merchants are charged a commission on each sale and it is the merchant who bears the cost of storing inventory and fulfilling the product to customers. As with eBay, Amazon is just facilitating the exchange of bits and bytes between buyers and sellers without the need to distribute physical products.

Amazon Media sales

You may have noticed that unlike some retailers, Amazon displays relevant Google text ads and banner ads from brands. This seems in conflict with the marketing strategy of focus on experience since it leads to a more cluttered store. However in 2011 Amazon revealed that worldwide media sales accounted for approximately 17% of revenue!

Whilst it does not reveal much about the Amazon marketing strategy approach in its annual reports, but there seems to be a focus on online marketing channels. Amazon (2011) states “we direct customers to our websites primarily through a number of targeted online marketing channels, such as our Associates program, sponsored search, portal advertising, email marketing campaigns, and other initiatives”.

These other initiatives may include outdoor and TV advertising, but they are not mentioned specifically. In this statement they also highlight the importance of customer loyalty tools. They say: “while costs associated with free shipping are not included in marketing expense, we view free shipping offers and Amazon Prime as effective worldwide marketing tools, and intend to continue offering them indefinitely”.

How ‘The Culture of Metrics’ started

A common theme in Amazon’s development is the drive to use a measured approach to all aspects of the business, beyond the finance. Marcus (2004) describes an occasion at a corporate ‘boot-camp’ in January 1997 when Amazon CEO Jeff Bezos ‘saw the light’. ‘

At Amazon, we will have a Culture of Metrics’, he said while addressing his senior staff. He went on to explain how web-based business gave Amazon an ‘amazing window into human behaviour’.

Marcus says: ‘Gone were the fuzzy approximations of focus groups, the anecdotal fudging and smoke blowing from the marketing department' - the Amazon marketing strategy was reborn!

A company like Amazon could (and did) record every move a visitor made, every last click and twitch of the mouse. As the data piled up into virtual heaps, hummocks and mountain ranges, you could draw all sorts of conclusions about their chimerical nature, the consumer. In this sense, Amazon was not merely a store, but an immense repository of facts. All we needed were the right equations to plug into them’.

James Marcus then goes on to give a fascinating insight into a breakout group discussion of how Amazon could better use measures to improve its performance. Marcus was in the Bezos group, brainstorming customer-centric metrics. Marcus (2004) summarises the dialogue, led by Bezos:

"First, we figure out which things we’d like to measure on the site", he said.

"For example, let’s say we want a metric for customer enjoyment. How could we calculate that?"

"There was silence. Then somebody ventured: "How much time each customer spends on the site?"

"Not specific enough", Jeff said.

"How about the average number of minutes each customer spends on the site per session" someone else suggested. "If that goes up, they’re having a blast".

"But how do we factor in the purchase?" I [Marcus] said feeling proud of myself.

"Is that a measure of enjoyment"?

"I think we need to consider the frequency of visits, too", said a dark-haired woman I didn’t recognize.

“Lot of folks are still accessing the web with those creepy-crawly modems. Four short visits from them might be just as good as one visit from a guy with a T-1. Maybe better’.

"Good point", Jeff said. "And anyway, enjoyment is just the start. In the end, we should be measuring customer ecstasy"

It is interesting that Amazon was having this debate about the elements of RFM analysis (described in Chapter 6 of Internet Marketing), 1997, after already having achieved $16 million of revenue in the previous year. Of course, this is a minuscule amount compared with today’s billions of dollar turnover. The important point was that this was the start of a focus on metrics which can be seen through the description of Matt Pounds work later in this case study.

Amazon marketing strategy experiments!

Amazon have created their own internal experimentation platform called a “Weblab” that they use to evaluate improvements to our websites and products. In 2013, they ran 1,976 Weblabs worldwide, up from 1,092 in 2012, and 546 in 2011. Now many companies use AB testing, but this shows the scale of testing at Amazon.

One example of how these are applied is a new feature called “Ask an owner”.  From a product page, customers can ask any question related to the product, Amazon then route these questions to owners of the product who answer.

From human to software-based recommendations

Amazon marketing strategy has developed internal tools to support this ‘Culture of Metrics’. Marcus (2004) describes how the ‘Creator Metrics’ tool shows content creators how well their product listings and product copy are working. For each content editor such as Marcus, it retrieves all recently posted documents including articles, interviews, booklists and features. For each one it then gives a conversion rate to sale plus the number of page views, adds (added to basket) and repels (content requested, but the back button then used).

In time, the work of editorial reviewers such as Marcus was marginalised since Amazon found that the majority of visitors used the search tools rather than read editorial and they responded to the personalised recommendations as the matching technology improved (Marcus likens early recommendations techniques to ‘going shopping with the village idiot’).

Experimentation and testing at Amazon.com

The ‘Culture of Metrics’ also led to a test-driven approach to improving results at Amazon. Matt Round, speaking at E-metrics 2004 when he was director of personalisation at Amazon describes the philosophy as ‘Data Trumps Intuitions’. He explained how Amazon used to have a lot of arguments about which content and promotion should go on the all important home page or category pages. He described how every category VP wanted top-center and how the Friday meetings about placements for next week were getting ‘too long, too loud, and lacked performance data’.

But today ‘automation replaces intuitions’ and real-time experimentation tests are always run to answer these questions since actual consumer behaviour is the best way to decide upon tactics.

Marcus (2004) also notes that Amazon has a culture of experiments of which A/B tests are key components. Examples where A/B tests are used include new home page design, moving features around the page, different algorithms for recommendations, changing search relevance rankings. These involve testing a new treatment against a previous control for a limited time of a few days or a week. The system will randomly show one or more treatments to visitors and measure a range of parameters such as units sold and revenue by category (and total), session time, session length, etc. The new features will usually be launched if the desired metrics are statistically significantly better.

Statistical tests are a challenge though as distributions are not normal (they have a large mass at zero for example of no purchase) There are other challenges since multiple A/B tests are running every day and A/B tests may overlap and so conflict. There are also longer-term effects where some features are ‘cool’ for the first two weeks and the opposite effect where changing navigation may degrade performance temporarily. Amazon also finds that as its users evolve in their online experience the way they act online has changed. This means that Amazon has to constantly test and evolve its features.

With the latest announcement from Google to sunset their Google Optimize A/B testing , digital marketers will do well to look out for new technology to assist in their testing efforts. We'll keep our members updated with announcements

Amazon.com technology marketing strategy

It follows that the Amazon technology infrastructure must readily support this culture of experimentation and this can be difficult to achieved with standardised content management. Amazon has achieved its competitive advantage through developing its technology internally and with a significant investment in this which may not be available to other organisations without the right focus on the online channels.

As Amazon explains in SEC (2005) ‘using primarily our own proprietary technologies, as well as technology licensed from third parties, we have implemented numerous features and functionality that simplify and improve the customer shopping experience, enable third parties to sell on our platform, and facilitate our fulfillment and customer service operations. Our current strategy is to focus our development efforts on continuous innovation by creating and enhancing the specialized, proprietary software that is unique to our business, and to license or acquire commercially-developed technology for other applications where available and appropriate. We continually invest in several areas of technology, including our seller platform; A9.com, our wholly-owned subsidiary focused on search technology on www.A9.com and other Amazon sites; web services; and digital initiatives.’

Round (2004) describes the technology approach as ‘distributed development and deployment’. Pages such as the home page have a number of content ‘pods’ or ‘slots’ which call web services for features. This makes it relatively easy to change the content in these pods and even change the location of the pods on-screen. Amazon uses a flowable or fluid page design unlike many sites which enables it to make the most of real-estate on-screen.

Technology also supports more standard e-retail facilities. SEC (2005) states: ‘We use a set of applications for accepting and validating customer orders, placing and tracking orders with suppliers, managing and assigning inventory to customer orders, and ensuring proper shipment of products to customers. Our transaction-processing systems handle millions of items, a number of different status inquiries, multiple shipping addresses, gift-wrapping requests, and multiple shipment methods. These systems allow the customer to choose whether to receive single or several shipments based on availability and to track the progress of each order. These applications also manage the process of accepting, authorizing, and charging customer credit cards.’

Data-driven Automation

Round (2004) said that ‘Data is king at Amazon’. He gave many examples of data driven automation including customer channel preferences; managing the way content is displayed to different user types such as new releases and top-sellers, merchandising and recommendation (showing related products and promotions) and also advertising through paid search (automatic ad generation and bidding).

The automated search advertising and bidding system for paid search has had a big impact at Amazon. Sponsored links initially done by humans, but this was unsustainable due to range of products at Amazon. The automated programme generates keywords, writes ad creative, determines best landing page, manages bids, measure conversion rates, profit per converted visitor and updates bids. Again the problem of volume is there, Matt Round described how the book ‘How to Make Love Like a Porn Star’ by Jenna Jameson received tens of thousands of clicks from pornography-related searches, but few actually purchased the book. So the update cycle must be quick to avoid large losses.

There is also an automated email measurement and optimization system. The campaign calendar used to be manually managed with relatively weak measurement and it was costly to schedule and use. A new system:

• Automatically optimizes content to improve customer experience
• Avoids sending an e-mail campaign that has low clickthrough or high unsubscribe rate
• Includes inbox management (avoid sending multiple emails/week)
• Has growing library of automated email programs covering new releases and recommendations

But there are challenges if promotions are too successful if inventory isn’t available.

Your Recommendations

Customers Who Bought X…, also bought Y is Amazon’s signature feature. Round (2004) describes how Amazon relies on acquiring and then crunching a massive amount of data. Every purchase, every page viewed and every search is recorded. So there are now to new version, customers who shopped for X also shopped for… and Customers who searched for X also bought… They also have a system codenamed ‘Goldbox’ which is a cross-sell and awareness raising tool. Items are discounted to encourage purchases in new categories!

See the original more detailed PDF article on Amazon personalization / recommendation collaborative filtering system .

He also describes the challenge of techniques for sifting patterns from noise (sensitivity filtering) and clothing and toy catalogues change frequently so recommendations become out of date. The main challenges though are the massive data size arising from millions of customers, millions of items and recommendations made in real time.

Amazon marketing strategy for partnerships

As Amazon grew, its share price growth enabled partnership or acquisition with a range of companies in different sectors. Marcus (2004) describes how Amazon partnered with Drugstore.com (pharmacy), Living.com (furniture), Pets.com (pet supplies), Wineshopper.com (wines), HomeGrocer.com (groceries), Sothebys.com (auctions) and Kozmo.com (urban home delivery). In most cases, Amazon purchased an equity stake in these partners, so that it would share in their prosperity. It also charged them fees for placements on the Amazon site to promote and drive traffic to their sites.

Similarly, Amazon marketing strategy was to charge publishers for prime-position to promote books on its site which caused an initial hue-and-cry, but this abated when it was realised that paying for prominent placements was widespread in traditional booksellers and supermarkets. Many of these new online companies failed in 1999 and 2000, but Amazon had covered the potential for growth and was not pulled down by these partners, even though for some such as Pets.com it had an investment of 50%.

Analysts sometimes refer to ‘Amazoning a sector’ meaning that one company becomes dominant in an online sector such as book retail such that it becomes very difficult for others to achieve market share. In addition to developing, communicating and delivering a very strong proposition, Amazon has been able to consolidate its strength in different sectors through its partnership arrangements and through using technology to facilitate product promotion and distribution via these partnerships. The Amazon retail platform enables other retailers to sell products online using the Amazon user interface and infrastructure through their ‘Syndicated Stores’ programme.

For example, in the UK, Waterstones (www.waterstones.co.uk) is one of the largest traditional bookstores. It found competition with online so expensive and challenging, that eventually it entered a partnership arrangement where Amazon markets and distributes its books online in return for a commission online. Similarly, in the US, Borders a large book retailer uses the Amazon merchant platform for distributing its products.

Toy retailer Toys R’ Us have a similar arrangement. Such partnerships help Amazon extends its reach into the customer-base of other suppliers, and of course, customers who buy in one category such as books can be encouraged to purchase into other areas such as clothing or electronics.

Another form of partnership referred to above is the Amazon Marketplace which enables Amazon customers and other retailers to sell their new and used books and other goods alongside the regular retail listings. A similar partnership approach is the Amazon ‘Merchants@’ program which enables third party merchants (typically larger than those who sell via the Amazon Marketplace) to sell their products via Amazon. Amazon earn fees either through fixed fees or sales commissions per-unit. This arrangement can help customers who get a wider choice of products from a range of suppliers with the convenience of purchasing them through a single checkout process.

Finally, Amazon marketing strategy has also facilitated formation of partnerships with smaller companies through its affiliates programme. Internet legend records that Jeff Bezos, the creator of Amazon was chatting to someone at a cocktail party who wanted to sell books about divorce via her web site. Subsequently, Amazon.com launched its Associates Program in July 1996 and it is still going strong.

Here, the Amazon marketing strategy has created a tiered performance-based incentives to encourage affiliates to sell more Amazon products.

Amazon Marketing strategy communications

In their SEC filings Amazon state that the aims of their communications strategy are (unsurprisingly) to:

• Increase customer traffic to our websites
• Create awareness of our products and services
• Promote repeat purchases
• Develop incremental product and service revenue opportunities
• Strengthen and broaden the Amazon.com brand name.

Amazon also believes that its most effective marketing communications are a consequence of their focus on continuously improving the customer experience. This then creates word-of-mouth promotion which is effective in acquiring new customers and may also encourage repeat customer visits.

As well as this Marcus (2004) describes how Amazon used the personalisation enabled through technology to reach out to a difficult to reach market which Bezos originally called ‘the hard middle’. Bezos’s view was that it was easy to reach 10 people (you called them on the phone) or the ten million people who bought the most popular products (you placed a superbowl ad), but more difficult to reach those in between. The search facilities in the search engine and on the Amazon site, together with its product recommendation features meant that Amazon could connect its products with the interests of these people.

Online advertising techniques include paid search marketing, interactive ads on portals, e-mail campaigns and search engine optimisation. These are automated as far as possible as described earlier in the case study. As previously mentioned, the affiliate programme is also important in driving visitors to Amazon and Amazon offers a wide range of methods of linking to its site to help improve conversion.

For example, affiliates can use straight text links leading direct to a product page and they also offer a range of dynamic banners which feature different content such as books about Internet marketing or a search box. Amazon also use cooperative advertising arrangements, better known as ‘contra-deals’ with some vendors and other third parties. For example, a print advertisement in 2005 for a particular product such as a wireless router with a free wireless laptop card promotion will feature a specific Amazon URL in the ad. In product fulfilment packs, Amazon may include a leaflet for a non-competing online company such as Figleaves.com (lingerie) or Expedia (travel). In return, Amazon leaflets may be included in customer communications from the partner brands.

Our Associates program directs customers to our websites by enabling independent websites to make millions of products available to their audiences with fulfillment performed by us or third parties. We pay commissions to hundreds of thousands of participants in our Associates program when their customer referrals result in product sales.

In addition, we offer everyday free shipping options worldwide and recently announced Amazon.com Prime in the U.S., our first membership program in which members receive free two-day shipping and discounted overnight shipping. Although marketing expenses do not include the costs of our free shipping or promotional offers, we view such offers as effective marketing tools.

Marcus, J. (2004) Amazonia. Five years at the epicentre of the dot-com juggernaut, The New Press, New York, NY.

Round, M. (2004) Presentation to E-metrics, London, May 2005. www.emetrics.org.

By Dave Chaffey

Digital strategist Dr Dave Chaffey is co-founder and Content Director of online marketing training platform and publisher Smart Insights. 'Dr Dave' is known for his strategic, but practical, data-driven advice. He has trained and consulted with many business of all sizes in most sectors. These include large international B2B and B2C brands including 3M, BP, Barclaycard, Dell, Confused.com, HSBC, Mercedes-Benz, Microsoft, M&G Investment, Rentokil Initial, O2, Royal Canin (Mars Group) plus many smaller businesses. Dave is editor of the templates, guides and courses in our digital marketing resource library used by our Business members to plan, manage and optimize their marketing. Free members can access our free sample templates here . Dave is also keynote speaker, trainer and consultant who is author of 5 bestselling books on digital marketing including Digital Marketing Excellence and Digital Marketing: Strategy, Implementation and Practice . In 2004 he was recognised by the Chartered Institute of Marketing as one of 50 marketing ‘gurus’ worldwide who have helped shape the future of marketing. My personal site, DaveChaffey.com, lists my latest Digital marketing and E-commerce books and support materials including a digital marketing glossary . Please connect on LinkedIn to receive updates or ask me a question .

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Inside Amazon’s Growth Strategy

If the key to success is focus, why does Amazon work?

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Since Amazon started as an online retailer in 1994, it has expanded into streaming, cloud computing, content creation, and even groceries. But traditional business strategy tells us that the key to success is focus. So, why does Amazon work?

“I think in Amazon’s case, everything is very tightly connected. If you remove one part, the whole becomes less,” says Harvard Business School professor Sunil Gupta . “That’s the key question: are the pieces fitting together nicely, or they just happen to be another business because it’s profitable?”

Gupta has studied Amazon’s growth strategy and he tells Cold Call host Brian Kenny how Amazon looks beyond traditional industry boundaries to define their competitors and why connecting products and services with their customers is at the core of their strategy.

Key episode topics include: business models, growth strategy, operations and supply chain management, innovation, technology and analytics, online retail, customer-centricity, customer experience, competitive strategy.  

HBR On Strategy curates the best case studies and conversations with the world’s top business and management experts, to help you unlock new ways of doing business. New episodes every week.

• Listen to the original HBR Cold Call episode: If the Key to Business Success Is Focus, Why Does Amazon Work? (May 2019)
• Find more episodes of Cold Call .
• Discover 100 years of Harvard Business Review articles, case studies, podcasts, and more at HBR.org .

HANNAH BATES: Welcome to HBR On Strategy , case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business. Amazon started as an online retailer back in 1994. Since then, it has expanded into streaming, cloud computing, content creation, and even groceries. But if traditional business strategy tells us that the key to success is focus – why does Amazon work ? Today, we bring you a conversation with Harvard Business School professor Sunil Gupta – who has studied Amazon’s growth strategy. You’ll learn how Amazon builds its business around its customers — rather than its products and services. You’ll also learn how they look beyond traditional industry boundaries to define their competitors – and why connecting products and services with their customers is at the core of their strategy. This episode originally aired on Cold Call in May 2019. Here it is.

BRIAN KENNY: In the world of computer science, Jon Wainwright is kind of a big deal. A pioneer of computer languages, he was the principle architect of both Script 5 and Manuscript. What makes Jon a legend has nothing to do with programming. Let me explain. On April 3, 1995, Jon was in need of some work-related reading material. So, he fired up his T1 modem and navigated the fledgling internet to the beta version of a new online bookstore. With the click of a mouse, he became the very first customer to make a purchase on Amazon.com. Fluid Concepts and Creative Analogies, the book he purchased, never became a best seller. But Amazon took off like a rocket ship and hasn’t slowed down since. With a market cap larger than all other retailers combined, including Walmart, Amazon owns 49% of all online sales. In the time it takes me to read this introduction, the company will earn over 300,000 dollars. Will we ever see the likes of it again? Today, we’ll hear from professor Sunil Gupta, about his case entitled, “Amazon in 2017.” I’m your host Brian Kenny. You’re listening to Cold Call, part of the HBR Presents network. Sunil Gupta is an expert in the area of digital technology and its impact on consumer behavior and firm strategy. He is the author of the recently published, Driving Digital Strategy, a guide to re-imagining your business. This case is the perfect stepping off point to cover some of the ideas in that book, Sunil. Thank you for joining me today.

SUNIL GUPTA: Thank you for having me.

BRIAN KENNY: This is your second spin I think on Cold Call. We appreciate you coming back.

SUNIL GUPTA: I enjoy doing this.

BRIAN KENNY: Good, as long as it’s not too painful for you. I like having you here. I’ve had an opportunity to read the book. The case I think is really kind of a great foundational piece to launch into some of the ideas. I’m going to assume anybody listening to this podcast has purchased something on Amazon or watched something on Amazon Prime. I had forgotten about their modest beginnings and just how much they’ve grown and expanded and changed. The case was a great reminder of that. We’ll get into some of that. Let me start by asking you, just to set it up for us. What led you to write the case?

SUNIL GUPTA: As you said, everybody knows Amazon. At the same time, Amazon has become quite complex. I mean, they have gone into businesses that defy imagination. That raises the question, is Amazon spreading itself too thin? Are they an online retailer? Are they video producers? Are they now making movies? In strategy, we learn, everybody should focus. Obviously Jeff Bezos missed that class.

BRIAN KENNY: He didn’t come to HBS by the way.

SUNIL GUPTA: You sort of start wondering as to, what is the magic behind this? What is the secret sauce that makes Amazon such a huge success? The market gap almost touched a trillion dollars a few months ago.

BRIAN KENNY: Insane.

SUNIL GUPTA: That was the reason why I thought A, everybody knows about it, and B, it’s hugely successful and C, his business model seems to defy logic.

BRIAN KENNY: The case we know by the title takes place in 2017. Maybe you can just start us off by setting it up. How does the case open up?

SUNIL GUPTA: At that point in time, Amazon had just bought Whole Foods, which was very counterintuitive because Amazon has been an online player. So why is it getting into offline business? That was against his grain as an online player. The second thing is food is a very low margin category. You sort of say, Amazon is a technology company, its stock is going to stratosphere. Why buy a low margin business that Amazon actually had been trying Amazon Fresh for 10 years and hasn’t succeeded? Why don’t they give up? That was a starting point. But of course, the case describes all the other 20 different things that they have done in the last 20 years and asked the question, what is Amazon up to?

BRIAN KENNY: Amazon and Jeff Bezos are sort of synonymous. He’s a cult of personality there, kind of like Steve Jobs was with Apple. Jeff’s been in the news a lot lately for other reasons, you know, personal reasons. He is still obviously, probably one of the best known CEOs in the world. What’s he like as a leader?

SUNIL GUPTA: I don’t know him personally. Based on the research that I’ve done, he certainly is very customer obsessed. He’s focused on customer. He always says, “You start with the customer and work backwards.” He still takes evidently calls on the call center. The culture is very entrepreneurial, but also very heart driven. I mean, the idea for example of Amazon Prime evidently didn’t come from Jeff Bezos, it came from a low person in the organization. He’s quick to adapt the ideas if he sees some merit in it. It’s almost a 25-year-old company that still works like a startup.

BRIAN KENNY: Was the original concept for Amazon … I mean, I know he sold books originally. Was it ever really a book company?

SUNIL GUPTA: I think it started more as an online retailer. Book was an easy thing because everybody knows exactly what you’re buying. It’s no concern about the quality. His premise in the online store was a very clear value proposition of three things. One was convenience that you can shop in your pajamas, so we don’t have to fight the traffic of Boston or Los Angeles. The second was infinite variety. I don’t have the constraint of a physical store. Even if I have Walmart, which is a huge store, I can only stock so many things. As a result, you only have the top sellers. In Amazon, I can have the long tail of any product if you will. The third was price. It was cheaper, simply because I don’t have fixed costs of the brick and mortar store. I can reduce the cost structure and therefore I can be cheaper. Those were the three key value propositions. That’s how it started. The idea was, I’ll start with books and then move on to electronics and other things. But then of course, it moved far beyond being an online retailer.

BRIAN KENNY: This gets into some of the ideas in your book. I was really intrigued in the book about the notion of what kind of business are we in? Just that question alone. At face value, it looked like Amazon was a retailer. They went in directions that nobody could have imagined. The case really goes into some of a litany of all the things they tried.

SUNIL GUPTA: Right. Again, the purpose of the case was to illustrate as to how these are all connected. From a distance they look completely disconnected and completely lack of focus. Let’s start with how the concept evolved. The first thing was, as I said was online retailer. Very soon it became a marketplace. Now, what is a marketplace? They basically allow third party sellers also to sell on the Amazon platform, which is distinct from a traditional retailer. Walmart doesn’t allow me to set up shop within Walmart, but Amazon allows me to do that. Now, why would they do that? Simply because it increases the variety that they can sell on the platform. Therefore, consumers are quite happy with the variety of the product they can get on Amazon. Amazon gets commission without having the inventory and the capital cost. Perhaps the most important thing of becoming a platform is it creates what we call the network effects. If there are lots of products, everything I can buy is available on Amazon. More consumers are likely to go there. Because there are more consumers, more sellers are likely to go there. It just feeds in itself. More consumers mean more sellers, more sellers mean more consumers, and it becomes a virtual cycle. That’s why there is only one Amazon. Even if I start an online retail, which is in many ways better than Amazon, nobody’s coming to gupta.com, because buyers and sellers are not there. That became the next phase, change from online retailer to marketplace. Then it went into AWS, and you sort of say, “Well, how can it go into a technology company and compete with IBM and Microsoft?” It was competing with Walmart before.

BRIAN KENNY: That’s the web services division.

SUNIL GUPTA: That’s the web services. In fact, at that point in time, Wall Street was very down on that. They said, “What is Bezos thinking?” The idea again, if you think about it, it was very simple. Amazon was building this technology for its own purpose. And then, they started giving this technology, using this technology for the third party sellers, who were selling on its platform.

BRIAN KENNY: Let me just interrupt for a second. That’s a marked, a marked change in direction. They had always been a consumer platform. Now they’re in a business-to-business play. I bet a lot of consumers don’t even know about Amazon Web Services.

SUNIL GUPTA: Correct. Again, not in a traditional sense saying, “This is my market.” That’s simply saying, “I have this capability. There’s a demand for this capability. Can I do it?” Part of that was opportunistic also. If you remember in 2001, the dot.com bubble crashed. If you’re a B2C company, you hedge your bets and get into B2B business. Part of that may have been luck. That was, again, a change of direction. And then, Amazon started producing hardware, Kindle, and now competing with Apple. You sort of say, why is an online retailer getting into hardware production? If you think a little bit about it, the answer is very easy. Kindle was designed to sell eBooks as people move from buying the hard copy books to downloading the eBooks. The Kindle is the classic razor and blade strategy. I sell razors cheap in order to make money on the blades. I’m not making that much money Kindle, but I’m making money on eBooks, which is very different from Apple’s strategy. Apple actually makes money on devices, but Amazon is not making money on devices, or at least not making huge money on devices. Similarly, it moved into online streaming of the video content and suddenly became a competition on Netflix. You sort of say, “Why is a retailer becoming a competition on Netflix?” Again, if you think a little about it, the answer becomes clear. As you and I moved on to not buying DVDs, but actually streaming the stuff, that’s what Netflix did. They used to send the DVDs to us.

BRIAN KENNY: I remember that. I still have a couple.

SUNIL GUPTA: Amazon is very good in sort of moving with the customer. If the customer moved from buying books to eBooks, I move in that direction. If customers move from buying DVDs to streaming, I move in that direction. Now, can Amazon do it? Of course, they can. They have AWS. Netflix is one of the largest customers.

BRIAN KENNY: Are they leading or following? Are they creating a market? In the beginning it seemed like they created something entirely new. Now, are they anticipating, or are they just sort of reacting to what’s happening?

SUNIL GUPTA: No, it’s a combination of both. In some ways they are actually following the consumer behavior and say consumers are moving to a streaming and move with that. They were not the first ones. Netflix actually started the streaming thing. Then, they sort of come up with it. If you think about it, Amazon became not only distributing third party content on videos, but now they have Amazon Studio. I mean, they are making movies, and the competition now becomes Hollywood instead of Walmart. You sort of say, “What has gone wrong with Jeff Bezos? Why is he making movies?” Movies are pretty expensive business and highly risky. The key to that is to understand the purpose of the movies. The purpose of the movies is to hook the consumers from Amazon Prime. If you remember, Amazon Prime started with 79 dollars per year. The benefit at that time was two-day free shipping. Now, you and I are smart enough to sort of do the math in our heads saying, how many shipments do we expect next year, and is 79 dollars worth it or not? Bezos does not want you to do that math. He basically says, “Oh, by the way, I’ll throw in some free content, some free music, some free unique movies.” Now you can’t do the calculation. Why does he care about Prime? Right now, Amazon has about one hundred million Prime customers globally. Let’s say I get an average 100 dollars per year, that’s 10 billion dollars in my pocket before I open the store.

BRIAN KENNY: Right.

SUNIL GUPTA: The research also shows that Amazon Prime customers buy three to four times more than non-Prime customers. I mean, if you’re a Prime customer, you don’t even price shop.

BRIAN KENNY: Once you’re Prime, you’ve got to justify being a member. You buy everything on Amazon.

SUNIL GUPTA: Exactly. Your purchase increases. You become price sensitive, which is fantastic. In fact Jeff Bezos has gone public and say that every time we win a Golden Globe award for our content, we sell more shoes. The purpose of creating their own content is not to make money on the content. This is another different razor to sell you more shoes. Once you understand that, what looks like disparate business is actually extremely tied together.

BRIAN KENNY: It all comes right back to the core. They haven’t always had good ideas. Have they had some misses along the way too?

SUNIL GUPTA: I think the biggest failure was Fire phone.

BRIAN KENNY: Remind us what that was?

SUNIL GUPTA: Amazon launched their own phone. They were obviously very late in the market. iPhone was already there. Samsung had done very good. You have two major players, if not many others, who are very well established. Consumers love their iPhones. The question of course was, why is Amazon launching the phone? What are the odds of success? Clearly the odds of success were low. The reason to launch it was they didn’t want to be beholden to the iPhone or the Googles of the world. They know that the world is moving towards mobile, in terms of shopping, certainly in emerging markets, everybody’s moving to mobile shopping. If tomorrow Apple or Google sort of restrict the Amazon use, or availability of Amazon, because they’re all competing with each other now. It becomes a challenge. To Amazon’s credit, I mean, it’s true for all innovations. Not all innovations succeed. You’ve got to take a shot. If you think about it, all the technology and thought process that got into Fire phone, was not completely a waste. That went into Echo. Now Alexa is a big hit.

BRIAN KENNY: They’re a market leader in that in that. Let’s talk a little bit about the ideas that underlie his Amazon case. I think it starts with knowing what business you’re in. Your book addresses this. I think I know we’re in the education space here at Harvard Business School. Should we be thinking about other businesses?

SUNIL GUPTA: You’re right. The bigger question that Amazon case raises is: how do you define what business you are in? Most of us tend to define business by the traditional industry boundaries. If I’m a bank, I’m in banking and other banks are my competition. I think industry boundaries are getting blurred today. Amazon can get into banking. I have lots of customers, I can start giving loans to small and medium enterprises.

BRIAN KENNY: They know a lot about those customers.

SUNIL GUPTA: They know a lot about customers. The key asset is now customers and data, and not the product and services that you offer. Once you know about customers, you can do lots of different things. One thing is, I would say is the industry boundaries are getting blurred. You need to think about not competition, but what do customers want. Do I have capabilities to serve that? The second thing is the traditional definition of where competitive advantage comes from is changing. What I learned, in doing my MBA class many years ago, we used to read Michael Porter’s competitive strategy stuff. If I were to simplify and summarize what I learned in competitive strategy was competitive advantage comes from making your product better or cheaper. Differentiation or cost leadership, which makes sense. If you think about it, it’s very much product-focused. I think in today’s world, competitive advantage comes from connecting products and connecting customers. The Kindle and eBooks is an example of connecting products, multiple products right? Making movies of Amazon and selling more shoes is connecting products. Razor and blade have been around forever. I think what is different today is razor and blade could be in completely different industries. Movies and shoes. The other side is connecting customers. We are in a network economy. That’s why there is only one Facebook, or one WhatsApp. If you are the only person on Facebook, what’s the value of Facebook? Not much, unless you love yourself. As more and more people get onto Facebook, the value of Facebook increases. It’s not about improving product. Without changing product, Facebook value increases. I think in this connected world that we live in, it’s about connecting products and connecting consumers.

BRIAN KENNY: We’ve got a lot of listeners out there. Many of whom are probably leading firms of one kind or another. How do they even go about exploring redefining their business?

SUNIL GUPTA: I think again, you need to think about what is your key asset? Everything starts with the consumer. In the Amazon case, you move with the consumer to some extent. I asked the same of a company for a medical device manufacturer. I said, “Who’s your competition?” The typical answer is: the other medical devices. Medical business is now becoming a lot about data. Google is getting into that. Apple. iPhone is becoming a medical device. Suddenly you have a very different kind of player getting into this thing. When I say, “What business are you in?” You need to think about who might actually get into that business and that changes the whole picture.

BRIAN KENNY: Why is Amazon so good at engaging customers?

SUNIL GUPTA: I think it comes from the culture of being customer obsessed, that no matter what the customer is right. They deliver on that promise. I mean, the level of convenience that customers expect from companies has changed. It used to be, if a company delivers a product within a week, that was considered good. Now, if you don’t deliver on the same day it just seems awful. They’ve raised the bar in everything. Of course, they’re using technology very effectively, whether it’s in their warehousing, whether now they’re investing in drones. I think they’re still a 25-year-old startup.

BRIAN KENNY: That’s another point that I wanted to touch upon. They’re able to adapt their supply chain it seems almost effortlessly to whatever business direction they move in. Is it possible for another entry to come into this space and scale in the same way that Amazon has? Is this a once-in-a-lifetime type thing?

SUNIL GUPTA: That’s a tough question. I think Amazon, it’s not that they’re adapting supply chain for everything, right? For example, I don’t think Amazon supply chain is ready for delivering frozen food yet. If I have a supply chain to ship you electronics, I can use the same supply chain to ship you prescription medication. That opens up another billion dollar, several billion dollar market. If I call myself an online retailer, I will never think of prescription drug delivery. If I think of my capabilities, I have the warehouse to deliver electronics and books. Why can’t I deliver your prescription medication? That opens up completely different businesses.

BRIAN KENNY: What are the kind of pitfalls that you need to be careful of, as you start to move into adjacent markets?

SUNIL GUPTA: I think definitely the big challenge is: how far do you go? On one hand it’s good to expand the business scope because the industry boundaries are getting blurred. The danger is do you lose focus? The classic challenge of losing focus. There’s a balance. I think in Amazon’s case, if you notice, everything is very tightly connected. If you remove one part, the whole becomes less. That’s the key question: are the pieces fitting together nicely, or they just happen to be another business because it’s profitable?

BRIAN KENNY: We’ve done a couple of cases on Cold Call that touch on the organizational impact of firms that move into new businesses. Some of them are examples of where it’s benefitted the employees. In other cases, it seems to have disrupted the culture in negative ways. How do you see this playing out at Amazon? Does it impact them in any way?

SUNIL GUPTA: If you look at Amazon, it has grown the top line 20, 25% every quarter without fail, except for one quarter in 2001. Right now, it’s in 2019, their sales are 232 billion. I don’t know that many companies, which grow at that rate, even when they’re over 200 billion. I think, if you’re on a winning team, that as an employee, it has to energize you. If you are in a culture which encourages experimentation and innovation, it has to excite you. At the same time, I’m sure it’s a very demanding culture, and there have been reports about how demanding the culture of Amazon is. It probably is not for everybody. For the people who are innovative, who are entrepreneurial, who want to be on a winning team, I’m sure it’s an exciting place.

BRIAN KENNY: There are sort of shades of Apple there. I mean, I think Apple had the same reputation. You’ve discussed this case in class with students.

SUNIL GUPTA: Oh, many students.

BRIAN KENNY: What are sort of the top line things that surprise you as you discuss it?

SUNIL GUPTA: The nice thing about this case is, everybody knows Amazon as a consumer. Everybody has shopped at Amazon. It’s very easy case. In fact, it’s a very short case that I give, at the opening of most sessions. People see it as very surface level. They sort of don’t realize the deep insights that comes out. As a three page case, you sort of say, I will be done in ten minutes, but then you peel the layers of the onion. That was a shocking thing to them, as to how you peel the layers of the onion and how you see the connection across different things. Why did Amazon buy Whole Foods? It makes no sense. Why did they get into AWS? It makes no sense. When you start un-peeling that layer, you see the connection as to why Amazon is doing all these different things. I think that’s the “A-ha” moment that comes across.

BRIAN KENNY: Much more on that in your book. How’s the book doing?

SUNIL GUPTA: Book is doing great.

BRIAN KENNY: Great.

SUNIL GUPTA: Fabulous. It was released in August. I’ve been going around on tour for many, different parts of the world.

BRIAN KENNY: I bet you can buy it on Amazon.

SUNIL GUPTA: You can certainly buy it on Amazon.

BRIAN KENNY: That’s great. Sunil, thanks for joining us today.

SUNIL GUPTA: Thank you very much Brian.

HANNAH BATES: That was Harvard Business School professor Sunil Gupta – in conversation with Brian Kenny on Cold Call . If you liked this episode and want to hear more of Harvard Business School’s legendary case studies in podcast form – search for Cold Call wherever you get your podcasts. We’ll be back next Wednesday with another hand-picked conversation about business strategy from the Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review. We’re a production of the Harvard Business Review – if you want more articles, case studies, books, and videos like this, be sure to subscribe to HBR at HBR.org. This episode was produced by Anne Saini, Ian Fox, and me, Hannah Bates. Special thanks to Maureen Hoch, Adi Ignatius, Karen Player, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener. See you next week.

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Ecommerce tips, strategies, and news – all without ever having, [case study 2023] amazon omnichannel strategy.

How would you rate your current omnichannel strategy ? In this case study, we explore Amazon's multifaceted omnichannel strategy, and highlight lessons any eCommerce store can apply.

If you'd like to skip the primer on what omnichannel strategy is and go straight to the Amazon examples, click here .

What is Omnichannel Strategy? 

Unfortunately, the vocabulary around omnichannel is murky.  For clarity, this article uses the following definitions.

• Channel: Any medium where a brand can interact with a customer. Simply put, a channel facilitates a customer touchpoint. It can include physical touchpoints, such as a pop-up store, or digital touchpoints such as a mobile application, website, chat, or social platform. 
• Multichannel Retailing/Strategy: Using multiple channels to sell merchandise through. The goal of multichannel strategy is to identify which channels to invest in. Channels are approached independently.
• Omnichannel: Customer phenomenon where all sales and marketing channels are looked at as one entity.
• Omnichannel Strategy : Optimizing key metrics (such as sales) by creating seamless shopping experiences across all channels. Omnichannel strategies take into account all retailing activities involved in successfully selling through channels simultaneously.

Omnichannel strategies assume customers move between channels. They may research online and buy offline . They might begin a shopping session on your site, and complete it in-app while waiting in line. The reality is, you customers will switch channels. An omnichannel strategy focuses on creating the best experience when they do.

Amazon's Omnichannel Strategy: Examples & More

Amazon’s stated mission is to be “Earth’s most customer-centric company”.  Part of that is reaching customers where they are. For Amazon, that means expanding their channels, and creating a unified omnichannel experience. They are an ideal  case study in how to create an omnichannel strategy . There are two key principals to Amazon's omnichannel success. First , Amazon focuses on the customer experience. They use data to create a personalized, responsive interactions, no matter which channels their customers are engaging them in. Second , they focus on integrating their channels in the backend. This goes beyond inventory and central fulfillment. It includes connecting customer data , and fulfilling customer's wants in whichever channel they prefer.

1. Amazon Prime and Data Unification

The first challenge for any omnichannel strategy is how to connect customer data across channels and devices. Typically, customer data such as behavior, previous purchases, demographics, product/category affinities, and more are siloed in each channel.

Amazon Prime is Amazon's solution to the customer data challenge. Amazon Prime, simply put, is the single best incentive to create an account, and log in no matter which channel or device you are on.

Unite Customer Data Across Channels:  Barilliance is built to track, store, and leverage customer data across channels.   Request a demo here .  

How Amazon Prime Creates a Single Customer View, the cornerstone of their omnichannel strategy

Amazon is a master at bundling.   At the center of the Amazon ecosystem (at least on the B2C side) lies Amazon Prime. On the surface, Amazon Prime is an analogue to membership discount stores like Costco or Sam's Club. Invest in the membership and you get benefits. The primary reason to invest in Amazon Prime is the promise of free (and increasingly fast) shipping. Prime is pure convenience.  It eliminates the biggest reason for cart abandonment (shipping costs), and creates a lock-in effect. To Prime members, Amazon is the first, and often only, destination when shopping. Today, there are 95 million Amazon Prime members. This is despite the continued price increases , first to $99/year in in 2014 and now up to $119/year in 2018. 

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To drive Amazon Prime membership, Amazon has layered additional benefits. In 2019, the list of benefits extends well beyond shipping. You can see the full list of Prime Membership benefits here , but below is a quick sampling. 

• Free Prime Video Subscription: Unlimited streaming and access to movies and T.V. series. 
• Various Discounts: Spanning premium streaming services such as HBO or Starz to Whole Foods Supermarket discounts.
• Free Prime Music Subscription: Free access and streaming to a library of the 2 million most popular songs. 
• Prime Wardrobe: Allows you to try on items you buy online before committing to purchase. 

And on and on and on. Amazon piles benefits onto Prime Membership because data unification is fundamental to a successful omnichannel strategy. It underpins Amazon's ability to understand customer preferences, fuels their vaunted recommendations, and creates a seamless experience across devices. Simply look at the first screen you are presented on Amazon's mobile app. The first action is to sign in, authenticate who you are, and continue to enrich your customer profile on Amazon.

How to Apply Data Unification

Your store probably already supports some form of account creation. The challenge is that for most stores, accounts are viewed as an annoyance. 

In fact, account creation is cited as the second most reason for cart abandonment . 

Consider how you can create incentives for your customer base to create and actively use their accounts. You can copy Amazon's playbook directly by focusing on convenience, shipping, or direct benefits such as Prime Video. 

Additionally, you should use technology such as Barilliance to automatically track and unify customer data across devices. Features like our Triggered Email Booster ensures you are capturing data even if they don't sign in. 

Lastly, you need to use this data in a meaningful way.

The reason our clients convert 73.25% more on returning customers is because they are able to create personalized recommendations and messages, tailored to their past behaviors and purchases. 

2. Amazon Echo and Channel Expansion

Omnichannel assumes customers cross channels fluidly in the same transaction. 

The challenge is establishing (and building upon) a direct relationship with customers in each channel.  Amazon aggressively tackles various channels in a variety of ways, and the Echo is an excellent case study on how to establish a dominant presence in a sales channel. 

How Amazon's Echo Extends Omnichannel Strategy into Voice

Voice is solidifying itself as an important channel for commerce. ComScore predicts that 50% of all Google searches will be conducted by voice by 2022. And Statista shows that the number of digital voice assistants are expected to grow to 8.4 billion by 2024. 

And, voice is increasingly being used to complete purchases. 

In February of 2018, OC&C Strategy reported that roughly $2 billion in sales were made over voice. However, that number is predicted to balloon to $40 billion in sales by 2020.

Before the Echo, Amazon tried to create a more direct relationship with customers with their Fire Phone. Unfortunately, Android and iOS had already locked them out of this market, and to this day that effort remains one of the worst performances in Amazon's history. It represented a major threat - even to Amazon, to not have direct access to customers. Their solution? Create another device customers would use regularly that bypasses mobile. Amazon invented the "smart speaker" market in 2015 with the Echo, coupled with their new personal assistant technology, Alexa. Today, they still possess an overwhelming lead in market share , capturing more than 2.5x that of Google Nest and nearly 10x that of Apple's HomePod.

Amazon's smart speakers changed the competitive landscape, giving Amazon direct access to customers in a way similar to mobile devices. Today, consumers can easily ask Alexa to purchase any number of products, from toilet paper to headphones. Additionally, it acts as another channel for a number of Amazon owned services, including Audible and Amazon Music. 

How to Apply Channel Expansion

The key lesson is establishing a direct touchpoint with customers. The good news is you don't have to create a whole new product category to do so. What new channels and touchpoints can you create with customers? Is it a direct, ongoing relationship? Can you continually educate, and motivate new and past customers. One fantastic example is   Lego . Their Youtube channel has gained 6M+ subscribers, with videos regularly receiving 500,000 - 1M views. Each video promotes the lego universe, or celebrates a new product coming out. It's one of the best examples of retention marketing I've seen. 

3. Leveraging channel dominance to build an ecosystem of products

Once you establish a channel, what should you do next? Your omnichannel strategy needs to extend beyond first contact. In Amazon's case, the Echo was a beachhead. It opened the door for Amazon to not only sell through voice, but create a whole new category of products to lead in.

The Echo speaker line was really an introduction to Alexa, a new way to engage with Amazon. Amazon began expanding Alexa's capabilities in two ways. First, they allowed other hardware manufactures to use Alexa in their own products via skills. Second, Amazon invested itself in other form factors.  Today, Amazon sells everything from light bulbs to smart displays to smart plugs that all use Alexa as it's core differentiating factor. Once Alexa becomes the default smart system in the house, it becomes much more likely that customer will add on more products to that system. Further, each added product adds functionality and benefit, making the whole Alexa system more valuable to the consumer.  And, best of all for Amazon, having Alexa a centerpiece of the home makes purchasing from Amazon even easier, multiplying the customer LTV from a customer purchasing an Alexa based system .

4. Focus on the customer experience 

Our final example of Amazon's omnichannel strategy centers on Amazon Go and their continued focus on the customer experience.

Amazon has had their eyes set on the grocery category for a long time. In fact, as early as 2006 Amazon began selling groceries online.  From an opportunity perspective, grocery is a massive $653 billion industry and growing rapidly . However, this doesn't fully get at why Amazon wants to be at the center of grocery. The truth is, without providing grocery services to their members, they open the door for competitors to enter and compete with Amazon on every other category. Now, after almost a decade, it looks like Amazon is ready to begin rolling out new store concepts and begin taking a piece of the grocery industry they have been aiming for.   Amazon Go stores focus on convenience. There is no checkout. As a consequence, there are no checkout lines. You simply us the Amazon Go app to enter the store, login with your Amazon login credentials, select the items you want, and walk out.  The theme of Amazon is the customer. Everything they do in their omnichannel strategy circles back to improving the customer experience. Amazon Go stores follow a long line of technological feats used to make Amazon the most convenient choice, from 1 click checkout to same day delivery, to now using computer vision to remove checkouts from the store.

5. Improving Brick and Mortar Experience with Online Data

ECommerce makes collecting data easy. Amazon leverages collected data in a number of ways, including how they think about traditional brick and mortar stores.

Expanding Into Physical Locations

Amazon is much more than amazon.com. Currently, they operate 512 physical stores with  plans to open many, many more. The truth is, the future of retail is multi-channel. Consumers do not shop exclusively online. Nor do they only shop in-store. They do both. And a successful omnichannel strategy focused on the customer experience and convenience needs to have a firm footing in both worlds. 

“Amazon is fully aware that they have to be much bigger in consumables and that omnichannel is what’s going to work in consumables.”  - Wolfe Research

A successful omnichannel strategy connects offline and online channels. Below is one example of how Amazon does it.

Leveraging Online Data In-Store: Introducing Amazon 4-Star

My favorite example of how Amazon leverages online data for physical use is their 4-Star concept. The store is a physical extension of Amazon.com, using unique displays based entirely on customer data. According to Amazon, “We’ve designed our stores around our customers - what they’re buying and what they’re loving. We’ve used customer ratings, reviews, and sales data from the hundreds of millions of products online to curate our store with features like 'Most-Wished-For' and 'Frequently Bought Together'."

While the concept continues to evolve, they currently use three types of customer data.

• Reviews  - The whole store is premised on items sold on Amazon.com with 4 stars and above rating.
• Sales Data  -Sales data is used to identify top selling items, and helps keep inventory turnover high.
• Customer Data  - Lastly, customer data such as Most Wished For items are identified and displayed.

6. Maximizing impact via partnerships

In August, 2022, Amazon announced Prime Members can now shop independent retail brands directly from the Amazon app. 

The partnership gives brands access to Amazon's same day delivery network, and also facilitates customers ordering online and picking up in-store.  From the article: "We see high potential in our expanded seller partnership with Amazon, which includes delivery directly from select PacSun retail locations,” said Mimi Ruiz, vice president of ecommerce at PacSun. “This is one more way for us to offer our customers the styles they want and love, when they want them."

Next Steps...

The next step is to commit to creating the best customer experience for today's omnichannel shopper. 

Next, you need to select the right technology partner. Ideally, they can both create personalized touch points and connect data across both offline and online channels.

We've put together an in-depth guide on how to select a personalization partner here. If you're interested to see how Barilliance can help your brand, you can request a demo here.

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Successes and Failures of Amazon’s Growth Strategies: Causes and Consequences

Author(s):  KIM, W. Chan, MAUBORGNE, Renée, KOO, Oh Young

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Started as an online bookstore 22 years earlier, Amazon had achieved unceasing growth, becoming the largest internet bookstore, the largest online marketplace, a global media company, and the most successful IT service provider. In 2015, the online retailer expanded to the brick-and-mortar retail business, launching Amazon Books across the US and beta-testing Amazon Go in Seattle. As of May 2017, Amazon was ranked ‘the most innovative company’ and the world’s fourth-largest company by market capitalization.

To achieve this multi-faceted growth, Amazon has made countless strategic moves. The case explores Amazon’s 20-year path for growth and introduces both successful and failed strategic moves. Successful strategic moves are Marketplace, Prime, Amazon Web Services, and Kindle; failed strategic moves are Auctions, A9 Search Engine, Endless, and Fire Phone. It analyzes commonalities and differences among them; to thereby understand the roots of the company’s high and poor performance. Blue ocean strategy concepts are applied to analyze Amazon’s market-creating strategic logic for future growth.

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GoPro Protective Housing (HERO11 Black/HERO10 Black/HERO9 Black) - Official GoPro Accessory

Brand	GoPro
Water Resistance Level	Waterproof
Color	Black
Product Dimensions	1.6"D x 3.25"W x 3"H
Item Weight	181 Grams

About this item

• Protects your GoPro from mud, dirt and debris during extreme activities
• Front LCD screen remains accessible for viewing
• Waterproof down to 196ft (60m) perfect for deep-water diving
• Includes a skeleton backdoor for improved audio capture [1] and easy access to the camera's back touch screen
• A flat glass lens makes for sharp, high-quality images above and below water

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Protective Housing (HERO10 Black/HERO9 Black)

HERO10 Black/HERO9 Black is rugged and waterproof right out of the box, but this housing handles anything you can throw at it. It protects from dirt and flying debris, and it’s waterproof down to 196ft (60m) for deep-water diving.

What's Included:

• Protective Housing for HERO10 Black/HERO9 Black
• Skeleton Backdoor
• Mounting Buckle

Customer Reviews
Price	—	$230.66$230.66
Processor	GP2	GP1
Photo	23MP + SuperPhoto with HDR and RAW Photo Capture	20MP + SuperPhoto with HDR and RAW Photo Capture
Video	5.3K60 / 4K120	5K30 / 4K60
Video Stabilization	HyperSmooth 4.0 (All Modes) + Horizon Leveling On Camera and GoPro App	HyperSmooth 3.0 (All Modes) + Horizon Leveling On Camera and GoPro App
Slo-Mo	8x at 2.7K	8x at 1080p
TimeWarp + Time Lapse Video	TimeWarp 3.0, Time Lapse, and Night Lapse Modes	TimeWarp 3.0, Time Lapse, and Night Lapse Modes
Live Streaming + Webcam	Live Streaming at 1080p and Webcam Mode	Live Streaming at 1080p and Webcam Mode
Screens	Status + Live Preview Front Screen and Rear Touch Screen	Status + Live Preview Front Screen and Rear Touch Screen
Additional Features	Hindsight, Scheduled Capture, Duration Capture, LiveBurst	Hindsight, Scheduled Capture, Duration Capture, LiveBurst
Auto Upload to the Cloud	With A Subscription to GoPro	With A Subscription to GoPro

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Product Dimensions	1.77 x 3.07 x 3.23 inches
Item Weight	6.4 ounces
ASIN	B08FRTLX2M
Item model number	ADDIV-001
Customer Reviews	4.7 out of 5 stars
Best Sellers Rank	#2 in
Date First Available	September 4, 2020
Manufacturer	GoPro Camera

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• · Protective Housing for HERO12 Black/HERO11 Black/HERO10 Black/HERO9 Black · Skeleton Backdoor · Mounting Buckle · Thumb Screw

Product Description

Your GoPro is rugged and waterproof right out of the box, but this tough housing handles anything you can throw at it. It protects from dirt and flying debris during intense action; plus, it's waterproof down to 196ft (60m) and perfect for deep-water diving.

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Customer Reviews, including Product Star Ratings help customers to learn more about the product and decide whether it is the right product for them.

To calculate the overall star rating and percentage breakdown by star, we don’t use a simple average. Instead, our system considers things like how recent a review is and if the reviewer bought the item on Amazon. It also analyzed reviews to verify trustworthiness.

Customers say

Customers like the quality, waterproofness, and protection of the camera enclosure. For example, they mention it's well-made, keeps their GoPro perfectly dry, and provides an extra layer of protection for the lens, screens, and body. That said, some complain about the ease of opening. Opinions are mixed on the fit.

AI-generated from the text of customer reviews

Customers like the quality of the camera enclosure. They say it's well-made, and much higher quality than previous aftermarket housings they've used. It holds up well, and is a good product. Some customers mention that it'll be a fantastic companion, capturing many incredible memories.

" Good product , tested at 60ft (20 m) deep, worked perfectly, the product arrived as expected" Read more

"...I'm not risking it. This isn't that expensive and gives peace of mind if I ever decide to plunge the camera underwater." Read more

"...It is cheaply manufactured and designed compared to the older dive housings and I NO LONGER trust that this will protect my housing under water...." Read more

"... Well built and designed. Is a must if you want to use your go pro in the water." Read more

Customers like the performance of the camera enclosure. They say it works well, has no issues, and protects their camera well. Some mention that it works great at depth scuba diving and that it's a great product.

"Good product, tested at 60ft (20 m) deep, worked perfectly , the product arrived as expected" Read more

"Excellent protector I did scuba diving and it works perfectly ." Read more

"The case works great if you’re not going to use any of the GoPro lenses...." Read more

"Wanted to protect my investment and this works great . I don't have to worry about dropping it or being a little rough." Read more

Customers are satisfied with the waterproofness of the camera enclosure. They mention that it is very resistant to water, it keeps their GoPro perfectly dry, and it is an excellent watertight housing. Some say that the case is good if used under water and that it was completely dry on the inside when they brought it up.

"...This case is great protection from water and even though you can’t access the screen with the original door on it, you should still be able to..." Read more

"...It was completely dry on the inside when we brought it up...." Read more

"...because I took the gopro through a beating  It fully protected my gopro from water and mud!  when i was soaked head to toe in water and..." Read more

"...Sure enough it powered on immediately. This case kept my GoPro perfectly dry . — My first impressions of the case before using it were positive too...." Read more

Customers like the protection provided by the camera enclosure. They mention that it works well as a protector for their GoPro and provides an extra layer of protection for the lens, screens, and body of the device. Some say that it's worth protecting an expensive item.

" Excellent protector I did scuba diving and it works perfectly." Read more

"It protects the GoPro great . I used it a lot and great investment." Read more

"...would 100% recommend this case to anyone that has a gopro!  Totally worth it - dependable, reliable, and provides a peace of mind!" Read more

"...touch screen capability if you use the full housing, but worth protecting an expensive item ." Read more

Customers are satisfied with the leakage of the camera enclosure. They mention that it works well and has no leaks.

" No leakage great quality " Read more

"Used this case for 2 weeks in the keys and it never showed a sign of leakage !" Read more

"...took this housing on a Hawaii hiving trip, it worked well, with no leak or anything , and the video quality is still great. Highly recommanded!" Read more

"... No leaks even after depths of 145ft." Read more

Customers have mixed opinions about the fit of the camera enclosure. Some say that it fits their GoPro 10 perfectly, while others say that the case does not fit a wide angle lens.

" Great housing fits my GoPro 10 perfectly . Came with extra door seal. Used it on a 100' dive recently and worked perfect...." Read more

"...angle lens and hoped I could use it underwater in this case but it does not fit . That’s the only reason I didn’t give it 5 star." Read more

"...This fits on my hero 10 perfectly ! It's pretty tough and easy to use...." Read more

"...10/10 …. Also case will only fit the normal lens no filters." Read more

Customers find the camera enclosure hard to open. They say the clasp is tricky.

"...I think it’s good that it’s difficult to open , but the design makes me feel like gonna break the latch one of these days just off of the amount of..." Read more

"...The clasp to open it is a bit tricky , but other than that this case delivers as promised...." Read more

"...Also… opening the case is a a little cumbersome in my opinion." Read more

"It lives up to it's name. The clasp that closes it is very hard to open . I was afraid I was going to break it." Read more

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Amazon is about to take on Temu and Shein by copying them

If you can’t beat them, join them. 

Facing surging competition from Chinese cheap-stuff marketplaces Temu and Shein, Amazon is preparing to launch a new section of its site for Chinese sellers that want to ship their fast-fashion and lifestyle wares directly to U.S. customers. It could go live later this year.

According to multiple reports—The Information got there first —Amazon held a meeting yesterday with the biggest Chinese sellers, detailing the plan. The presentation described a section that’s accessible from the Amazon homepage and targeted at people who will put up with a nine- to 10-day delivery time if it means paying bottom dollar. (We’re talking lightweight items that retail for under $20.)

Amazon’s new tactic would closely follow the Temu and Shein playbook by having sellers send their products to a warehouse in China, from which they would be sent directly to U.S. buyers. Currently, Chinese sellers send their products to Amazon warehouses in the U.S.

The distinction is important because the U.S. has a relatively high “de minimis” threshold of $800 on the value of imported goods: If the value is below the threshold, the item is not subject to import duties. Temu and Shein have both denied that this provision is central to their ability to sell things at ultralow cost in the U.S., but U.S. lawmakers disagree . A House select committee found that Temu’s and Shein’s shipments alone from their Chinese warehouses accounted for almost a third of the billion packages that entered the U.S. in 2023 using the de minimis loophole. 

In April, the Biden administration ordered closer scrutiny of de minimis shipments from China, partly to check whether they’re violating the U.S.’s ban on goods produced with forced labor (a common accusation against Shein and Temu, and one that they have strenuously denied). There are also two bills lingering in Congress that would exclude China from the de minimis channel.

This may be one reason why Beijing just issued draft rules to make it easier for Shein, Temu, and AliExpress—at this point the shining beacons of Chinese e-commerce prowess—to finance the construction of new warehouses outside the country. But if America’s Amazon is also about to get into the game of helping Chinese sellers access U.S. buyers through the de minimis channel, those legislative efforts in Congress could find it a little harder to drum up the support they need. (It’s currently unclear whether Amazon’s shipments will use the de minimis channel; I did ask, but an Amazon spokesperson did not answer my question.)

On the other hand, the competition presented by Amazon’s move could further tarnish Shein’s planned IPO, which CNBC said on Monday was set to take place in London, owing to lawmakers’ opposition in the U.S. The date for the flotation is not yet clear, but British human rights group Stop Uyghur Genocide yesterday launched a legal campaign to stop it going ahead at all, owing to those aforementioned concerns about forced labor.

More news below.

David Meyer

Want to send thoughts or suggestions to Data Sheet? Drop a line  here .

SpaceX tender offer. Elon Musk’s SpaceX will reportedly sell insider shares at a valuation of around $210 billion, Bloomberg reports . Its last valuation in December was $180 billion, and the new valuation would be a record for a U.S. private company. Meanwhile, SpaceX has won an $843 million NASA contract to build the space agency a vehicle that can bring down the International Space Station by the end of the decade, when it’s due to go out of service. Both the ISS and this U.S. Deorbit Vehicle (which NASA would own and operate) would break upon reentry.

YouTube AI music talks. YouTube is reportedly talking to major record labels about paying them so their artists have an incentive to allow their music to be training fodder for YouTube’s AI models. According to the Financial Times , this would help Google’s video site release its own AI song generators, which it plans to do this year. The big labels just sued AI song generators Udio and Suno for allegedly using copyrighted music to train their models without permission.

SoftBank Perplexity investment. Speaking of AI companies allegedly taking data without permission, it seems Perplexity—an AI search outfit that online news outlets have accused of pilfering their journalism—is set to get a cash infusion from SoftBank’s Vision Fund 2. Bloomberg reports that SoftBank will put in $10 million to $20 million as part of a $250 million round valuing Perplexity at $3 billion, or triple its last valuation.

SIGNIFICANT FIGURES

—The less-than-impressive number of iOS downloads of TikTok’s Whee , a new Instagram-like social network, in the first week after it was quietly launched on June 18.

IN CASE YOU MISSED IT

Slack CEO welcomes EU’s Microsoft Teams probe that could see the tech giant slapped with a $21 billion fine , by Ryan Hogg

The Supreme Court rules in Biden’s favor, tossing out GOP claims that Democrats coerced social media companies to stamp out conservative points of view , by the Associated Press

Amazon joins Google parent Alphabet in the $2 trillion market cap club , by Justin Doom

Why Land O’Lakes now has a CTO after 97 years without one , by John Kell

Ask Andy: How much should startup founders pay themselves? , by Andy Dunn

BEFORE YOU GO

Telco malware. KT Corp., the South Korean communications giant formerly known as Korea Telecom, has been caught infecting the computers of over 600,000 users with malware. As Tom’s Hardware reports , this was part of an effort to combat illicit peer-to-peer file sharing.

KT and the Korean cloud storage firm Webhard—whose systems use the BitTorrent P2P protocol to store data on users’ computers rather than Webhard’s servers—had previously gone to court over the strain Webhard’s traffic was putting on KT’s network, and the court had ruled that KT could block Webhard’s traffic. But instead, KT installed malware on the users’ PCs, disabling not only Webhard’s program but also in some cases the PCs themselves. Korean police have now charged 13 KT employees and contractors over the attack, which likely violated multiple laws.

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This decades-long trend in home prices has been ‘flipped on its head’ amid a big shift in the housing market

Nvidia will produce such a massive ‘cash gusher’ that it will have to buy back more stock because all that money has nowhere else to go, analyst says

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HHS Announces Cost Savings for 64 Prescription Drugs Thanks to the Medicare Rebate Program Established by the Biden-Harris Administration’s Lower Cost Prescription Drug Law

Under President Biden’s Inflation Reduction Act, some people with Medicare will pay less for some Part B drugs if the drug’s price increased faster than the rate of inflation.

The U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), today announced that some Medicare enrollees will pay less for 64 drugs available through Medicare Part B. The drugs will have a lowered Part B coinsurance rate from July 1, 2024 – September 30, 2024, since each drug company raised prices faster than the rate of inflation.  Over 750,000 people with Medicare use these drugs annually, which treat conditions such as osteoporosis, cancer, and infections. White House Domestic Policy Advisor Neera Tanden will announce the cost savings on these life-saving drugs in a keynote address on the Biden-Harris Administration’s focus on lowering costs today at the Center for American Progress.

“Without the Inflation Reduction Act, seniors were completely exposed to Big Pharma’s price hikes. Not anymore. Thanks to President Biden and the new Medicare inflation rebate program, seniors are protected and benefitting from lower Part B drug costs,” said White House Domestic Policy Advisor Neera Tanden. “The Biden-Harris Administration will continue fighting to bring down the cost of health care and prescription drugs for all Americans.”

“President Biden’s Medicare prescription drug rebate program is putting money back in the pockets of seniors and people with disabilities, said HHS Secretary Xavier Becerra. “President Biden made lowering prescription drug costs for Americans a top priority, and he is delivering on that promise. Our work is not complete, and we will continue to fight for lower health care costs for all Americans.”

Please find soundbites from HHS’ Chief Competition Officer, Stacy Sanders, here .

Because of President Biden’s lower cost prescription drug law, the Inflation Reduction Act, which established the Medicare Prescription Drug Inflation Rebate Program, some people with Medicare who use these drugs during this time period may save between $1 and $4,593 per day.

“Everyone should be able to afford their medication, and the Inflation Reduction Act continues to deliver on this goal to improve affordability,” said CMS Administrator Chiquita Brooks-LaSure. “Discouraging drug companies from price increases above the rate of inflation is a key part of this effort, and CMS continues to implement the law to bring savings to people with Medicare.”

Padcev, a medication used to treat advanced bladder cancer, is an example of a prescription drug with a price that has increased faster than the rate of inflation every quarter since the Medicare Part B inflation rebate program went into effect, resulting in lowered Part B coinsurances for seniors and others with Medicare. A beneficiary taking Padcev as part of their cancer treatment may have saved as much as $1,181 from April 1, 2023 through March 31, 2024, depending on their coverage and course of treatment. Another example, Crysvita, treats a rare genetic disorder that causes impaired growth, muscle weakness, and bone pain. A beneficiary taking Crysvita may have saved as much as $765 from July 1, 2023 through March 31, 2024 depending on their coverage and course of treatment.

The Medicare Prescription Drug Inflation Rebate Program is just one of the Inflation Reduction Act’s prescription drug provisions aimed at lowering drug costs. In addition to this program, the law expanded eligibility for full benefits under the Low-Income Subsidy program (LIS or “Extra Help”) under Medicare Part D at the beginning of this year. Nearly 300,000 people with low and modest incomes are now benefiting from the program’s expansion. A comprehensive public education campaign is underway to reach the more than three million people who are likely eligible for the program but not yet enrolled.

In addition, as of January 1, 2024, some people enrolled in Medicare Part D who have high drug costs have their annual out-of-pocket costs capped at about $3,500. In 2025, all people with Medicare Part D will benefit from a $2,000 cap on annual out-of-pocket prescription drug costs.

The Inflation Reduction Act requires drug companies to pay rebates to Medicare when prices increase faster than the rate of inflation for certain drugs. CMS intends to begin invoicing prescription drug companies for rebates owed to Medicare no later than fall 2025. The rebate amounts paid by drug companies will be deposited in the Federal Supplementary Medical Insurance Trust Fund, which will help ensure the long-term sustainability of the Medicare program for future generations.

For more information on the Medicare Prescription Drug Inflation Rebate Program visit, https://www.cms.gov/inflation-reduction-act-and-medicare/inflation-rebates-medicare

To view the fact sheet on the 64 Part B drugs with a coinsurance reduction for the quarter July 1, 2024 – September 30, 2024, visit, https://www.cms.gov/files/document/reduced-coinsurance-certain-part-b-rebatable-drugs-july-1-september-30-2024.pdf

More information and helpful resources about the Inflation Reduction Act and how it is helping to lower costs for people with Medicare can be found at LowerDrugCosts.gov .

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Alaska court weighing arguments in case challenging the use of public money for private schools

The Alaska Supreme Court is weighing a case that challenges as unconstitutional laws that have allowed families with children in home-study programs to use public money for education-related expenses at private schools

JUNEAU, Alaska -- The Alaska Supreme Court is weighing a case that challenges as unconstitutional laws that have allowed families with children in home-study programs to use public money for education-related expenses at private schools.

The court heard arguments Thursday in Anchorage, more than two months after Superior Court Judge Adolf Zeman sided with a group of parents and teachers who brought the challenge.

The case centers on provisions of state law passed a decade ago that have allowed families with kids in correspondence school programs to receive thousands of dollars a year in reimbursements for instruction-related costs.

The allotments drew scrutiny after Jodi Taylor, the wife of Attorney General Treg Taylor, wrote an opinion piece in 2022 about “an opportunity — which has been hiding from public view – for families to use their children’s education allotment” for classes at private schools and other educational options.

Zeman ruled in April that the provisions “were drafted with the express purpose of allowing purchases of private educational services with the public correspondence student allotments." He said that conflicts with the Alaska Constitution, which says public funds cannot be paid “for the direct benefit of any religious or other private educational institution."

Attorneys for the state asked the state Supreme Court to reverse Zeman's ruling , arguing in part that the ruling was overly broad. Attorneys for parents who have used their allotments to pay their children’s private school tuition and intervened in the case said the allotments are a direct benefit to families, not private schools. They say parents have a federal right to choose private schooling.

The Legislature wasn't obligated to create a correspondence study option, Kirby Thomas West, an attorney with the Institute for Justice representing the intervening parents, told the court Thursday. “But once it did, once it has said, We are going to allow you to use this allotment benefit ... to do a wide array of things, including home schooling, tutoring, books, curriculum, all kinds of things, the state can’t — as the Superior Court’s interpretation would do — then say, except for one, except for send your kids to private school.”

The Supreme Court did not indicate Thursday when it would rule.

More than 22,000 students are enrolled in correspondence schools, a type of homeschooling supported by local school districts. It can be an option for families living in remote reaches of Alaska, but some families in more urban areas also choose correspondence programs as an alternative to traditional neighborhood schools. Allotments can be used for such things as physical or speech therapy for students with special needs or for help paying for some college courses, according to court filings.

At issue in the case are provisions of a 2014 law that says districts with correspondence programs are to provide individual learning plans for correspondence students. Parents can use allotments to buy “nonsectarian services and materials from a public, private, or religious organization” if those services or materials are required for the child's learning plan and meet other standards, such as approval by the school district and support "a public purpose.”

Those provisions, which Zeman ruled unconstitutional, originated in a bill proposed by then-Sen. Mike Dunleavy, who is now governor. The Republican — a former teacher and school administrator who has advocated for greater school choice and parental involvement in education — also had proposed a companion constitutional amendment that would have allowed public money to go to private or religious schools. That amendment proposal stalled for lack of support.

Jodi Taylor, in her 2022 opinion piece, said two of her children at the time attended full-time a private school in Anchorage and also were enrolled in an Anchorage School District correspondence program. She said she planned to request that allotment funds for the children be used to help pay tuition costs at the private school, which she said was an approved vendor for the correspondence program. It was not clear, though, if that happened.

Two months after the piece was published, the Department of Law, headed by Treg Taylor, released a legal opinion on allotments penned by Deputy Attorney General Cori Mills. It said use of allotments to pay most or all of the tuition at a private school was “almost certainly unconstitutional,” but said they could be used in some circumstances to pay for certain classes at a private school that supported a child's home-based education. Treg Taylor had recused himself from the matter.

But the attorney general said after the lawsuit was filed in 2023 that he sought ethics advice that ultimately determined he could participate in the case. He said by email this week that the ethics advice was confidential, and he did not respond to questions about his children's schooling.

The state has gotten outside help in the case. It signed a contract worth up to $100,000 with attorney Elbert Lin, a former solicitor general for the state of West Virginia who argued the state's case Thursday. The Texas-based First Liberty Institute, a self-described religious liberty legal organization, is providing pro bono legal advice on the case “and any subsequent appeals,” according to contracts released by the Alaska Department of Law.

State lawmakers in response to Zeman’s decision earlier this year passed a bill with provisions aimed at providing stability for correspondence students while the litigation plays out. The move came near the end of a contentious legislative session in which they clashed with Dunleavy on public school funding .

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