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Case Study: Amazon Omnichannel Strategy – The Ultimate Example of the Quest for Channel Dominance

Specno
February 21, 2024

Unifying data, establishing new channels and building dominance – a case study of Amazon’s Omnichannel Strategy for retailers looking to thrive in an evolving landscape 

Are you developing an omnichannel strategy?

There are few better examples than Amazon when it comes to developing new channels, building dominance in them, connecting it all for advanced intelligence feedback and then creating seamless experiences (and sales) across them.

See how technology continues to shape the future of retail and discover the benefits of inventory technology integrated for more competitive retail operations.

How exactly does Amazon do it, though? What are the mechanisms and thinking behind all the retail moves we see Amazon make? And what exactly is their omnichannel strategy?

We’ve put together this Amazon omnichannel strategy case study to help retailers understand the main drivers within a retail omnichannel strategy.

But First: What is Omnichannel, Really?

There’s a lot of confusion and misunderstanding around the concept of omnichannel in retail. And it’s partly because the definition of omnichannel is a bit misleading: 

“a way of selling products that is the same and equally good for the customer whether they are buying from a computer, a mobile phone app, etc., or in a physical shop”. – Cambridge

While good enough for a dictionary, the definition implies that it’s all about what the customer experiences on various channels. This inadvertently creates the (wrong) impression that omnichannel simply refers to making all your channels look as nice, appealing, or slick as your main channel.

To fully understand the power of omnichannel, see our retail POS integration case studies.

What omnichannel isn’t 

We often see retail teams get stuck on the idea that omnichannel simply means making your website look as nice as your store or giving people a way to buy directly from within their preferred social network app (instead of on your app, etc.).

This is only half the picture.

To understand what omnichannel really is, you have to consider a timeworn question for those who work in retail: If a customer hears your radio ad, sees your billboard, browses your product on the website, and then walks into your shop to buy it – which channel created that sale?

What omnichannel is

Omnichannel means building the customer experience across all your channels, but also building the systems that can tell you exactly when and where (and which channel) caused that actual sale – so you can replicate it.

Omnichannel is not “pay and spray” across every single channel, it’s a strategic, step-by-step channel development process with the tech ingrained into every channel to give you the feedback you need to replicate sales steps.

This will become increasingly clear in the case study of Amazon’s omnichannel strategy below…

Case Study: Amazon Omnichannel Strategy

Amazon likely needs no introduction. But, unless you’re in the US, you probably haven’t seen the full Amazon experience yet – they are so much bigger than most of us realise.

On the retail side, Amazon has built its success on two core concepts

  1. The focus on customer experience – their mission literally states to be “Earth’s most customer-centric company”. And they fulfil that by using data to create personalised interactions.
  2. They integrate all channels in the backend – a key differentiator for Amazon is that they connect customer data centrally in order to deliver on different channels.

Core Concepts for this Case Study

To fully understand the Amazon omnichannel approach it’s vital that you understand:

  • Amazon seeks to dominate channels not just be a part of them – they don’t focus on merely reaching and serving you through the various apps on your device, they seek to “own” your device experience.
  • We will show you the core of their strategy as an example – this case study can’t discuss each and every Amazon channel individually (otherwise this page will be miles long, and you’d get bored), so to really help you understand how Amazon does it, we are going to show you specific key steps in a few examples that reveal the underlying strategy.
  • It’s all about the customer’s experience – being customer-centric is so central to Amazon, it's a theme running throughout everything they do. Hence we’ll have a specific Customer Experience section for each talking point in this case study.

See specific examples of retail app features for personalised user journeys and why you need retail technology integration in-store.

1. Unifying Customer Data

In 2005, Amazon launched Amazon Prime, essentially a premium subscription or – for lack of a better description – loyalty programme.

Unlike other retail “loyalty programmes”, though, Amazon didn’t create Amazon Prime to try to boost loyalty and sales as most people will tell you. It was a way of centralising all the data they collected of various customers across multiple channels.

The opportunity

See, as a then purely online retailer, Amazon quickly realised that when you have various offerings and people have various devices, your data gets fragmented. If a customer shops via their browser on a laptop, via the app on their phone and separately via their Kindle device, you as the retailer can lose a lot of customer behaviour intelligence if those various channels can’t talk to each other in the backend. (And sharing that data is often limited by law.)

The play

By creating Amazon Prime, Amazon created a reason for people to legally allow them to connect those data streams. They offer customers attractive value (discounts, free delivery etc.) and customers allow them to track and collect their data on various devices and channels.

The customer experience angle

Why don’t they just ask you to do all that when you first sign up, you ask? Well, it has to do with UX (user experience).

See Amazon realises that when it comes to channels, people want it sleek and simple. When you buy from them for the first time, you don’t want lengthy questionnaires and loads of permissions – you want it as fast and simple as possible.

They know that to motivate people to devote the time to fill in more details and connect channels, you need to make it worth their while – huge discounts, free delivery, etc. So they kept the channels and Amazon Prime separate.

See how data boosts customer loyalty.

2. Developing New Channels

In 2015, Amazon launched the Echo, essentially a smart speaker. A seemingly super-weird move at the time, but an excellent example of how they constantly develop new channels.

The opportunity

See, while browser-based shopping was the order of the day in the early 2000s, the rise of mobile introduced a whole new range of sales elements. Just having an app was not good enough, they needed to have a more direct effect on the channel (device) itself.

Now, just before, in 2014, Amazon tried to capture the purely mobile channel by releasing its Fire Phone, but that was a little late – Android and iOS already cornered that market. So Amazon needed a way to circumvent the mobile phone entirely.

The play

With the Echo, Amazon practically invented the smart speaker market, which it completely dominated. What’s more, it gave Amazon a completely new arena to play in – IoT.

Echo basically served as the introduction to Alexa, which today customers can interact with on a range of home devices to order products, as well as purchase other Amazon-owned services such as Audible (audiobooks) and Amazon Music.

Amazon has a rich history of this channel-dominance approach:

  • Started as an online book store, launched Kindle a decade later
  • Shifting from selling DVDs to SVOD to its own streaming service (now making its own movies)
  • Invests and builds its own distribution solutions (lockers, robots, drones)

So one could say the essence of Amazon’s omnichannel strategy is not so much about trying to compete with others on the existing channels as it is about looking ahead and developing the channels of the future.

3. Building Channel Dominance 

In 2015, Amazon introduced Alexa alongside the Echo. The trick was not to stop once the smart speaker beachhead had been established.

The opportunity

Once people adopted the smart speaker, Amazon invested in making it better and easier to engage with and shop through Alexa. At the same time, the idea of smart “everything” captured the public’s imagination. Imagine all the devices in your home being able to connect to the net and monitor and take care of themselves…

The play

Realising quickly it had a headstart in the smart home space with Alexa as figurehead, Amazon invested in diversifying its Alexa-enabled products. And then made it possible for other manufacturers to use Alexa in their own, independent hardware products through Alexa Skills (basically apps that you can write for Alexa).

The idea is that, once Alexa becomes the centre of your smart home system, all your other home products will likely be Alexa-enabled and thus linked back to Amazon.

Today, Amazon uses this channel to sell a host of smart home products, from devices all the way to consumables such as light bulbs.

4. Creating Feedback Loops

In 2018, Amazon launched Amazon Go, a range of – would you believe it – actual, physical stores you can walk into to buy stuff. But it’s VERY different from your average supermarket because it was developed using all those years’ worth of consumer behaviour insights.

The opportunity

Throughout Amazon’s three-decade-long history as a global e-commerce leader, one fact seemed to always be staring them in the face: People still go to actual brick-and-mortar shops. So, instead of fighting the notion of “physical” still being a channel, they used their advantage (vast consumer data) to invest in it.

The play

Seeing that people were clearly insistent on still shopping in person, Amazon started exploring owning actual stores as early as 2015. In 2017, they purchased Whole Foods and in 2018, launched Amazon Go – a brand-new convenience store concept.

Learning from their consumer data and utilising their tech savvy, Amazon Go is a completely cashier-less store that’s all about letting you get in, grab what you want and leave in as short a time as possible.

You open an app on your phone and use it to unlock the door and gain entry to the store. Then you grab what you want and just walk out – no queues, no waiting. Sensors and cameras in the store automatically pick up what items you took and charge it to your Amazon account or card.

The customer experience angle

There’s almost no doubt that Amazon Go is the result of intense consumer behaviour analysis and testing – you could almost imagine Amazon asking “what do users dislike most about going to the shop?” And the answer being: waiting in line to pay.

See how data boosts customer loyalty.

In summary

The Amazon omnichannel strategy can thus best be described as:

  • Focusing on gathering customer behaviour data across every channel they use
  • Collecting all the data into one place to build a complete picture of each customer
  • Constantly investing in and developing new channels to reach people (and gather data)
  • Expanding your product offering in each channel to become the leader in that arena
  • Using data from every channel to inform the other channels
  • Improving existing channels with new data and insights

And it’s a great example for retailers who want to stay competitive – see how digital transformation is impacting businesses.

Need help executing your omnichannel strategy?

Let our digital consultants show you how…

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