While Amazon’s annual revenue has recently soared to more than $135 billion for the fiscal year 2016, making it the world’s eighth largest retailer, there are still many core lessons that small business owners can learn from how this giant rose to greatness.
Here are 10 top business lessons small businesses can learn from Amazon.
1. Build what your customers are telling you they want
When Amazon launched Prime in 2005, it was an unproven concept that many thought would end in failure. However, by listening to their customers and seeing how they reacted to previous experiments with free “Super Saver Shipping,” they determined that fast, reliable shipping would become a necessary core component of the business in order to successfully compete with in-store retailers.
Now, the service has become one of the company’s most popular membership programs with countless happy customers.
2. Never stop experimenting
Now pulling in more than $2 billion annually from customers like Netflix, Comcast, Dropbox, Shell and more, Amazon Web Services (AWS) started as nothing more than an internal experiment.
Before the cloud technology infrastructure platform launched publicly in 2006, it was first a way for internal teams to stop reinventing the wheel when they set out to build a new product.
They found that many teams were spending up to 70 percent of their time re-creating technology infrastructures like web scale databases, storage and other capabilities that were already in use elsewhere within the company. After recognizing the hugely positive internal benefits of a platform like AWS, they quickly began experimenting with offering the same tools to other companies, and the rest is history.
3. Deliver more value than your customers expect
After one Amazon customer had his PlayStation gaming console stolen from his front porch before getting home to bring it inside, he felt defeated. So, he got on the phone with Amazon to see what could be done.
To his surprise, the customer service representative had a new one shipped later that day—completely free of charge—and it arrived just in time for Christmas. That’s the kind of experience that’ll turn a regular customer into a loyal brand advocate.
4. There’s no substitute for a great customer experience
Amazon has long invested heavily in creating the best possible customer experience for their community. In 2013, they took their customer experience innovation a step further by introducing the Mayday Button, which provides live, on-device tech support, 24/7, 365 days a year, for free on their Kindle Fire devices.
If you’re having an issue with your tablet, you’re just one click away from immediate support. It doesn’t get any better than that. To test out your support skills, check out LiveChat’s Customer Service Quiz.
5. Focus only on the metrics that matter most
For most businesses, profit margins matter. However, for Amazon CEO Jeff Bezos, that’s not exactly the case. He explains: “Percentage margins are not one of the things we are seeking to optimize. It’s the absolute dollar free cash flow per share that you want to maximize. If you can do that by lowering margins, we would do that.”
In short, Bezos is prepared to continue lowering his prices with the larger goals of creating stronger customer loyalty and increasing sales volume while competitors are driven out of the market due to tight margins. Amazon is willing to sacrifice short-term profitability for long-term success.
6. You have to take risks in order to excel
Bezos claims that he’s “Made billions of dollars of failures at Amazon.com.” However, those mistakes like the Fire phone, which dropped in price from $200 to just 99 cents one month after launch, have been integral to the company’s overall success.
“Companies that don’t embrace failure and continue to experiment eventually get in the desperate position where the only thing they can do is make a Hail Mary bet at the end of their corporate existence,” Bezos says.
7. Invest in your relationships
Fulfillment by Amazon (FBA), the company’s incredibly affordable program for sellers to use Amazon warehouses for storing, packing and shipping their products directly to customers, is now used by millions of businesses around the world.
FBA eliminates almost all of the headaches of running an e-commerce business by being able to warehouse products at more than 100 fulfillment centers around the world, staffed by thousands of Amazon employees. On top of that, sellers get to take advantage of offering Amazon Prime benefits, free shipping, simple exporting to international customers, easy returns and access to Amazon customer service.
By allowing sellers easy and affordable access to Amazon’s existing logistics resources while also helping the sellers become more competitive on the platform, Amazon is building strong relationships with millions of businesses around the world and making themselves a better marketplace in the process.
8. Be patient
With Amazon’s frequent 10-year bets on services like Prime, products like the Kindle Fire and platforms like Amazon Web Services that don’t promise profitability until reaching mass scale in several years, the company has become the embodiment of patience.
As Bezos shares, “We've had three big ideas at Amazon that we've stuck with for 18 years, and they're the reason we're successful: Put the customer first. Invent. And be patient.” That philosophy has rewarded them well, largely because of the long-term relationships this strategy has helped them build with their customers.
9. Frequently identify new market opportunities
When new competitors arrive and circumstances change in the retail marketplace, Amazon is quick to adapt. Take AmazonFresh, which allows customers to order everything from fresh groceries and prepared meals to toys, electronics, household goods and more with same-day shipping in a handful of major U.S. cities.
This service, launched to provide more value to existing Amazon customers, is an answer to the slough of delivery startups and stores that have recently attacked the market of grocery deliveries. With a built-in base of customers who have already come to expect quick deliveries, Amazon’s move into the grocery delivery business is a no-brainer.
10. Anticipate customer needs in advance
Amazon has always done a great job of innovating with new products, services, and tweaks to their business model, like the introduction of Amazon Prime that has deep roots in anticipating what customers value most from the company.
As Bezos himself puts it, “If you're competitor-focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering.” With Prime, the company is doubling down on their efforts to deliver more products quickly to members and become a more viable replacement for physical retailers.
Business lessons from Amazon
Your small business may not be able to implement everything at the scale Amazon does, but these business lessons can be applied to companies of any size. By keeping them in mind and incorporating them into your business’ philosophy, you’ll serve your customers better and stand out from the competition. And who knows, you might just be the next big thing.