2019 has come and gone. Throughout the year, we saw a number of interesting things like the college admissions scandal, the fire at Notre-Dame and the impeachment trial of a US President, to name a few. However, one of the most interesting and less-talked-about occurrences was likely something that obtained a smaller headline in the news: Amazon became the world’s largest company.
Over the past two decades, Amazon has turned traditional retail on its head, and in more ways than one. Amazon was a pioneer in e-commerce. Although Amazon was not the first to sell online or even specialize in online sales of tangible goods, they truly revolutionized what it meant to shop online. By slashing the prices of products that you’d typically see in brick and mortar stores and introducing rapid home delivery, Amazon became a one stop shop for consumers due to sheer convenience.
But how is Amazon able to sustain its e-commerce business model if it’s cutting costs that other online retailers or brick and mortar stores are forced to deal with? The answer lies within the cloud. Retailers are forced to sell online, but they’re not experts in building website infrastructure for online sales. Guess who is? Amazon.
How does Amazon make money? Hint: It’s not via e-commerce
Even with all of the company’s success with e-commerce, Amazon was hardly profitable until about three years ago. Before that, Amazon didn’t even have its first profitable quarter until Q4 2001, about a year and a half after their initial IPO in May 1997. Even then, the company as a whole was generally skirting by on razor thin margins until 2016 - 2017.
What happened during 2016 and 2017? AWS exploded. AWS grew tremendously and eventually became the majority of Amazon’s operating income. Furthermore, as the growth of AWS continued into the following years, Amazon’s cloud offerings represented as much as 58% of the company’s profits in 2018.
Now here is 2020 with the COVID-19 pandemic. Amazon’s ability to fulfill so many products so quickly is critical to the day to day lives of many people who are otherwise quarantined in their homes. It is great, and we are thankful, that Amazon has risen to the challenge. However, with many brick & mortar stores now shutdown more and more customers are getting used to sourcing their needs online particularly from Amazon. This begs the question how will other retailers recover and compete with what will definitely be the largest company in the world coming out of this crisis.
Traditional Retailers are in a Constant Battle with Amazon
Amazon has been expanding beyond selling books and CDs for years, and traditional retailers of all kinds have been battling with Amazon for market share. Over the years, Amazon’s online store expanded to sell household goods, toys, electronics, food and nearly anything else a consumer could need, and traditional retailers began to see real declines in business.
In more recent years, brick and mortar retailers have begun battling Amazon in a non-traditional way. While fighting for their share of consumers by offering lower prices or better customer experience, Amazon understood that it possessed far more knowledge about every faction of consumer around the world than any other for-profit business ever could.
Amazon quietly launched AWS in 2006 with little fanfare, all the while they were slowly realizing the potential impact of their newest invention. Over time, Amazon developed a common infrastructure of services that anyone and everyone could use when building their own proprietary internet-based technologies and e-commerce stores.
Because of Amazon’s continued growth and aggressiveness when selling goods online, all retailers had to compete with Amazon’s prices and convenience. We saw an explosion of e-commerce stores in all retail segments during the 2000s and 2010s. Traditional retailers just couldn’t get by without some sort of online offering. Consumers needed to be able to shop at all times, especially when it was convenient to them. Going to a real store became an inconvenience, and people would rather shop online in their pajamas than go to the store during their lunch breaks, after work, or during their only free time over the short two day weekend. Now shopping online from home can be seen as a health advantage also further promoting online retail.
AWS Makes Ecommerce Easy, and Your Ecommerce Makes it Easier for Amazon
While consumers began looking online for their shopping needs, retailers took notice and started bringing their stores online. Retailers needed a partner to get their online stores up and running, so naturally they’d choose the easiest or cheapest option for a partner. In most cases, AWS has always been the easiest and cheapest option when creating online stores.
See the problem here?
Traditional brick and mortar retailers are effectively funding their own demise as they continue to give billions to their biggest competitor, Amazon. Not to mention, hosting their e-commerce platforms on AWS gives Amazon unprecedented access to data about the consumers in their industry. With its immense size and endless resources, Amazon has the ability to harness its ever-growing knowledge and outperform even the savviest and most well-renowned retailers.
More and more businesses like Walmart, Netflix and Lemonade are shying away from AWS cloud offerings as Amazon’s poaching tactics become a regularity in today’s capitalist environment. Moreover, you have to wonder if Walmart’s better-than-average sales in 2018 and 2019 was in part related to their conscious effort to move to Azure.
A Simplified Cloud Platform with No Ulterior Motives
As the world’s largest company, the only part of Amazon that’s making any real profit is AWS. Amazon is able to support their aggressive online retail sales tactics by its domination in the cloud space. Because of this, retailers may be best served by a cloud provider that is only a cloud provider, otherwise they could be enabling the competition to beat them.
Xterity Cloud by Egenera is a partner in your business’s goals and achievements. We don’t have any skin in the retail game, and therefore we’re not using your money and customer data to compete with you.
Xterity Cloud provides the exact resources you need to run a successful business without only providing cookie-cutter solutions, unlike AWS. Xterity is a simplified cloud platform that doesn’t require complicated certifications and is easy to get up and running. Finally, with Xterity, we’ve been providing 24x7x365 customer support for years, without the egregious price points of AWS or Google.
As a retailer, you should think twice about using AWS as your cloud provider.
About Egenera
Egenera was founded in 2000 and was quickly named as one of the top 10 startups to watch in 2002. Egenera’s Xterity Cloud platform is a global public cloud offering that is built in top tier data centers with leading connectivity providers, with the mission to simplify the consumption and management of IT resources. Xterity’s simplified cloud console allows organizations to get into the cloud without certifications, developers, or system architects.
From their operations in Massachusetts & California, to Japan, the UK, and Ireland, Egenera has established a reputation within the cloud computing industry as a leader in simplified IaaS. Egenera can help organizations large or small achieve their goals by providing 24 x 7 x 365 support and learning the individual needs of your business.
Explore a simplified cloud platform and avoid hours of headaches at Egenera.com.
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