Beyond Aggregation: Amazon as a Service

Beyond Aggregation: Amazon as a Service

In late 2015, Amazon made a rare strategic mistake by closing its Webstore business and directing its customers to Shopify. This move was seen as a blunder, as Amazon proclaimed publicly that Shopify was its preferred partner for the Webstore diaspora. However, what has changed since then is the transformation of Shopify's business model. While they started as a Software-as-a-Service (SaaS) company, they have now shifted to a commission-based model. This shift is important to note because it shows how Amazon is extending its offerings beyond its platform.

Amazon.com Inc. recently introduced a new service that allows merchants to embed the online retail giant's payment and fulfillment options onto third-party sites. This move extends some of the benefits of Amazon's popular Prime membership program to merchants off its platform. It's worth mentioning that 40% of Amazon's sales are sold by third-party merchants, most of whom leverage Fulfilled-by-Amazon. This means that their goods are stored in Amazon's fulfillment centers and covered by Prime. This not only increases the return to scale for Amazon's fulfillment centers but also deepens Amazon's moat.

The success of Amazon Web Services (AWS) is another example of how Amazon has leveraged its scale and infrastructure to become a services provider. AWS started as a solution for developers to have access to enterprise-level computing resources with zero up-front investment. This model was a win-win situation for both developers and Amazon. Developers had access to resources, and Amazon gained scale for its products. The success of AWS has led to the application of the same model in e-commerce, as Amazon shifts from being a retailer to being a services provider.

It is clear that Amazon intends to apply the same model to logistics as it did with AWS and e-commerce distribution. Amazon is building its own logistics network to compete with established players like UPS and FedEx. Just as they have done with AWS and e-commerce distribution, it is expected that Amazon will offer its logistics network to third parties. This will increase the returns to scale and deepen Amazon's moat even further.

One of the reasons for Amazon's success across various industries is its control of demand. Amazon not only has power over its suppliers but also collects relevant data from consumers. This data can be used to fuel a self-contained ad platform that is untouched by regulation. However, limiting a business to customer touchpoints that you control also limits your overall addressable market. In the case of e-commerce, Amazon will never be the only option. There are other players, such as The Anti-Amazon Alliance, working hard to reach consumers. Nevertheless, every customer visiting these websites has an Amazon-driven expectation in terms of shipping. If these expectations are not met, consumers will choose to buy from somewhere else. Merchants are constantly trying to catch up with Amazon's shipping capabilities.

Amazon's logistics network has a nearly impregnable moat due to the massive expenditure required to build it out. This moat is attractive to all businesses competing to be consumer touchpoints, increasing Amazon's addressable market. Furthermore, the more volume Amazon processes, the more difficult it will be for competitors like Shopify to scale their own shipping solutions. This endangers the current major initiative of Shopify to build its own logistics network.

Now let's shift our focus to the world of TikTok and how founders and startups can win on the platform. TikTok has become a popular platform for brand marketing, and there are certain strategies that can help founders and startups succeed.

The first tip is to find your niche. TikTok has a large audience, especially among Gen Z users. By targeting a specific niche, you can educate and engage with a more focused audience. For example, if you have an app for young women experiencing their first period, you can create content that caters to their needs and provides valuable information.

Getting your first viral video on TikTok is often a matter of trial and error. Many founders have found that their first viral videos were random or happened by chance. It takes experimentation with different content styles, series, and sounds to find your rhythm and build an audience. The key is to create content often and consistently.

Organic content performs best on TikTok, especially in the early days. Gen Z users prefer authentic and organic content over blatant advertising. By showcasing your app organically and consistently, you can build trust and engagement with your audience. High-quality videos that align with your brand's values and expectations can have a significant impact on TikTok.

Don't ignore the comments section on TikTok. It is a valuable tool to engage with your community and build relationships with your audience. Responding to comments and engaging with your followers can be a successful strategy for growth.

Track attribution and understand the metrics of your videos on TikTok. By understanding the value flow of a TikTok user, you can iterate faster and make data-driven decisions. It's important to use tools like Bitly UTM parameters and Segment to track the impact of your TikTok videos on your business.

Study other accounts in your niche to learn faster. By observing what works well for others in your industry, you can gain insights and ideas for your own content. Lurking, commenting, and engaging with other creators can help you understand what performs well and what resonates with your target audience.

Consider leveraging other influencers or user-generated content (UGC) to expand your reach on TikTok. Working with smaller influencers can often be more effective and cost-efficient than partnering with a single huge influencer. When working with creators, it's best to allow them creative freedom rather than providing them with a script. This helps maintain authenticity and allows the content to resonate with their followers.

TikTok is also exploring opportunities for partnerships with startups through its Jump program. This program allows third-party integration tools that enable startups to create an app within the TikTok ecosystem. This opens up new possibilities for startups to engage with users directly within the TikTok platform.

Lastly, make trends your own and stay true to your brand. Participating in trends can help maintain relevance and attract attention, but it's important to stay authentic and add value to users through education or humor. Avoid using TikTok solely for selling and focus on building relationships with your audience.

In conclusion, Amazon's expansion beyond aggregation and its focus on becoming a service provider in various industries demonstrate its ability to leverage its scale and infrastructure. The success of AWS and its shift towards a services business model in e-commerce and logistics highlight Amazon's strategy of deepening its moat and increasing its addressable market. On the other hand, TikTok provides a unique platform for founders and startups to engage with Gen Z users and build their brand. By following the tips mentioned above, founders and startups can increase their chances of success on TikTok and tap into its vast user base.