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Why Amazon’s History of Diversification should be Acknowledged by all Startups

Starting life early in the internet’s history, Amazon recognised the potential for online sales back in 1995, when it launched as a humble online bookstore. Over the 21 years since then, the company has grown and diversified and now boasts a vast array of products, services and even electronic devices. As the biggest online retailer, grossing $1bn over Christmas alone, the giants compete with Netflix to provide online entertainment, contemporary device makers such as Apple with its Kindle and Fire, search engines like Google, with Amazon Assistant and even brick and mortar stores. Most recently, Amazon has teamed with Morrison’s supermarket to offer groceries delivered within an hour to Prime customers.

Noticing gaps in the market, taking risks and continually adapting to consumer needs has relentlessly kept Amazon at the forefront of e-commerce, innovation and customer service with no sign of stopping. As opposed to threatening entrepreneurs and startups, Amazon is set up in a way which encourages them, facilitating the launch of new businesses with Launchpad and offering a foray into online shop ownership with Marketplace. A recent press release from the company announced its UK Marketplace vendors’ sales are up 29% at a time of global economic uncertainty. This comes as it launches the Amazon Academy: a business school for SMBs.

Amazon Timeline of diversification

From its humble beginnings, as purely an online bookstore in 1995, Amazon had expanded to offer CDs and DVDs within just 3 years, quickly adding toys, games and electronics, including computer games by 1999.

Recognising the value in getting smaller companies on board, Amazon launched Marketplace in 2000, offering a safe space for third-party sellers to offer their wares, whilst increasing their own diversity. Specialist vendors who had access to rarer copies of things expanded a mainstream store to now offer niche products. So far, so logical: Amazon has secured its space as a leading and trusted e-commerce site.

In 2002, it really started seeking new opportunities and Amazon Web Services was launched. A cloud computing unit, this has continued to shape SMBs, by offering unique pay-as-you-go services. This coincided with Amazon beginning to sell clothing. It now offers department like shopping in various sectors.

2005 sees the launch of Prime shipping, which has evolved and beaten an entirely new path in online deliveries since. Initially offering guaranteed delivery within two days, there are options for grocery deliveries within the hour now, and all products can be selected for next day delivery using Prime. This adaptation to customer needs is what exemplifies Amazon and SMBs should pay attention to customer requirements.

Recognising the trend for convenience, space saving and the undeniable decline of print books, 2007 launches the Kindle eReader. This revolutionises reading and sets the company up for future electronic device development. Now offering the Fire TV station for supreme streaming and Fire tablets, this was an innovative and ground-breaking move by Amazon, which continues to provide for consumers now in 2016.

AmazonBasics range is launched in 2009, which sells blank DVDs, cables and other related equipment with its own label. This demonstrates a response to consumer trends and capitalises on information gathered, whilst offering a convenient place to get everything one needs.

The following year in 2010, Amazon Studios is created, and the company begin to make special edition series, in the way Netflix does. This later goes on to make Golden Globe winning show ‘Transparent’ and offer Prime streaming services as watching content online becomes the new norm in consuming media.

Flex, a delivery service using citizen drivers to deliver is launched in 2015 and this year has seen the Morrison’s partnership and a wealth of business support services launch. But what are the key factors to Amazon’s success?

Amazon’s diversification take away

Amazon’s success is largely due to their incredible customer information, gathered from their ever-improving database. Responsive to consumer needs, it holds many people’s address history, search results, purchase history and integrates with other platforms to provide comprehensive consumer profiling. Added to this, Amazon offers one-click purchasing, which is convenient: the key to an online success. What SMBs can take away from this is the importance of data capture and information gathering. The better you know your client, the easier it is to provide for them.

Diversification is essential not only on a personal level but also as an entire organisation:

Steps for successful diversification

Know your market

Gather as much information on the new niche as you can. This can include employing an expert in that specific division, to ensure your diversified sector gains a competitive advantage over other companies.

Secure finances

You must speculate to accumulate, as the saying goes. However, ensuring that you have the finances to take a risk is key to good business sense. Using information and experience gained from online resources such as Reuters, trading platforms or reading up on financial and currency based news could be very valuable from a purely financial perspective.

Be prepared to take risks

Driving innovation is the willingness to take risks. This is often a part of an entrepreneurial mindset. Nothing ventured, nothing gained.

Supportive culture

Vital to any SMB growth, developing a supportive culture towards development and innovation will open your business up to the many benefits of diversification.

KPIs

Setting achievable performance indicators requires strategy. An essential part of monitoring the success of your diversification, you should understand what works and when to admit that it hasn’t.

Effective incentives to drive divisions forward

Whether these are financial or emotional, find something for your team to be working toward to make the diversified product or service a success.

Learn from mistakes

As is the case in business, making sure that you learn from mistakes will help lead future diversification. Amazon’s Fire Smartphone didn’t work out, but its tablets remain popular. Rather than being set back by failure, embrace it and see what you can do to improve in future.

What are the drawbacks?

Amazon has built a reputation and has the reputation and finance to take risks and gamble. The Fire Smartphone flop was not big enough to set them back. SMBs wishing to embrace the notion of diversification should do so in a focused way. Whilst traditionally putting all eggs in one basket is not the safest option, neither is spreading them so thinly it becomes a chore to collate them!

Diversification is a normal way for businesses to adapt to trends in behaviour, gaps in the market and consumer needs, and it should be approached strategically in order to help your company grow, as opposed to simply saturating the market with a monopoly of products. Hone in on what you know you can provide, based on your customer knowledge, expertise in field and budget.

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