Amazon’s Amazing Strategies

Business cycles throughout the world are decreasing at a rapid pace. In 1958, the average length of time a company remained on the S&P 500 was 57 years; by 1983, it had dropped to 30 years; in 2008, it was just 18. In all these years one thing is very evident and constant and that thing is change. These days companies with robust business models and ability to transform are on the peak and will continue to do so till they posses these qualities.

Amazon emerged from the dot-com bubble one of the few winners and continued to blaze a trail of impressive growth (from about $4 billion in 2002 to nearly $20 billion in 2008). Amazon survived the dot-com bust because it had a viable and innovative business model built around a market-changing customer value proposition and a radical profit formula, which upended the staid book industry. Then it quickly expanded beyond books to include all sorts of easily shippable consumer goods, growing from its core into near adjacencies. But Amazon didn't stop there. A few years later, the company seized its white space when it devised a new value proposition, offering a commission-based brokerage service to buyers and sellers of used books. Then it moved into its white space again by developing a model to serve an entirely different customer: third-party sellers. By opening up its storefront to other retailers that were essentially competitors, Amazon transformed its business from direct sales to a sales-and-service model, aggregating many sellers under one virtual roof and receiving commissions from the other companies' sales. Then Amazon did it yet again, identifying a new area of potential growth by finding another new customer—the IT community. Serving this new customer's needs required different processes, different resources, and a different profit formula—in short, another new business model.

Finally, many analysts are starting to call Amazon the Wal-mart of e-commerce. To that end, Scott Devitt @ Morgan Stanley had a cool chart.  This chart shows Amazon and Wal-mart's net sales (adjusted for inflation) as if they companies started at the same point in time.