Amazon Swot Analysis

Amazon SWOT Analysis 2020 – What’s Next?

The SWOT analysis of Amazon shows that this global eCommerce player aims to fuel its growth through acquisitions and by transforming the retail experience.

Amazon was launched in 1994 by president and CEO Jeff Bezos in Seattle, Washington. It is now a global eCommerce giant with a turnover in excess of $280 billion.

Through a keen strategic vision of the future and seizing opportunities to innovate with emerging technologies, this global power brand is set to dominate where and how we buy products and services.

Despite this, there are several competitors investing heavily to compete against Amazon in its different market. The Amazon business model might be secure but many of its new initiatives might be under threat.

Amazon Quick Facts

Products And, Amazon Echo and Alexa, Amazon Kindle, Amazon Music, Audible, Amazon AWS, iMDb, Junglee, PillPack, Twitch, Whole Foods Market,
Company Competitors:Alibaba, Apple Music & Apple TV, Costco, ebay, Google Play, JD (Jingdong), Netflix, Otto, Flipkart, Wallmart

Analysis of Amazon

In this Amazon SWOT analysis, I’ll take a look into the external challenges Apple faces – the Opportunities and Threats, as well as its internal capabilities to realize the opportunities and deal with the threats – Strengths and Weaknesses.

As the New York Times reports,

“[Amazon] isn’t just secretive, the way Apple is, but in a deeper sense, Jeff Bezos’ e-commerce and cloud-storage giant is opaque. Amazon rarely explains either its near-term tactical aims or its long-term strategic vision. It values surprise.”

New York Times

What is the SWOT Analysis For Amazon?

The SWOT analysis of Amazon shows that this global eCommerce giant is set to rapidly expand into retail but its weakness is Asia could pose a major threat.

The SWOT Analysis of Amazon

amazon financial analysis

Amazon has continued to demonstrate growth but the retail segment (physical stores) is struggling to grow and make a profit. However, its AWS cloud services show strong and profitable growth.

Amazon How Does Amazon Make Money
How Amazon makes money
Amazon Business Anlaysis
The growth of Amazon’s profits

Apple’s Strengths

What are Amazon’s major strengths?

Amazon’s key strengths are based on its scale, brand and expertise in technology. These enable Amazon to offer quick deliveries, online services such as Prime Video and superior customer experience to competitors.

  1. Strong Brand Value

    Amazon is the third most valuable brand in the world according to Interbrand. This reflects not only its strong financial performance but also the popularity of Amazon with consumers.
  2. Global Scale

    Amazon Global Scale Amazon is the largest online retailer in the world. Its scale is hard to appreciate. Last year, Amazon shipped over 5 billion Prime packages, and the retail giant’s eCommerce market share in the U.S. was close to 37%. During February 2020, had over 2.01 billion combined desktop and mobile visits. For years Amazon didn’t make a profit because it continually invested in its operations: technology, distribution centres and acquisitions to improve its capabilities. Jeff Bezos called this strategy the Amazon Flywheel effect. In other words, Amazon benefits from economies of scale. Amazon Flywheel How Amazon Cash Rich By scaling its operations Amazon is able to lower its costs, improve margins which in turn drives its scale.
  3. Operational Synergies

    All four of Amazon’s main services help to reinforce each other delivering efficiencies across the organization and improving profitability. Furthermore, the subscription business model across many of these services provides Amazon with repeatable revenue. Amazon Global Scale
  4. Customer Experience

    The global tech giant has a core focus on customer experience which in turn increases the amount each returning customer spends at Amazon. Furthermore, customer benefits from positive word of mouth which helps to further grow the business.
  5. Cost Leadership

    With economies of scale comes lower costs and that means Amazon can buy cheap, offer low prices and maintain good profit margins. Amazon also benefits from its exceptionally good cash-flow. As an organization, it has acquired companies that have helped it to optimize its pricing strategy e.g. using AI.
  6. Range & Merchants has a total of 119,928,851 products as of April 2019. Amazon offers a huge range of products many of which are from key brands and suppliers across a very broad range of products. However, over 58% of all sales on Amazon come from merchants.
  7. Technology

    Amazon has cutting edge technology that it uses to optimise its operations. From drone delivery to Amazon Go, it continues to explore new ways to compete and grow.
  8. Superior logistics and distribution systems

    Amazon has an incredibly efficient logistics and distribution system. It can not handle a massive range of products, it also gets them delivered to customers quickly.

Apple’s Weaknesses

What are some of Amazon’s weaknesses?

Amazon has yet to conquer the hardware market in any meaningful way. Additionally, Amazon is struggling in Asia due to strong local competition.

  1. Low Retail/eTail Margins

    Margins are low and this is often a criticism of Amazon but many analysts support Amazon’s strategy to continually invest in its growth. However, those margins are a weakness as global competition heats up and other etailers compete on price.
  2. Asia/China

    In July 2019, Amazon announced it was shutting down its Chinese domestic e-commerce business if the face of stiff competition from larger competitors such as and Alibaba. Almost 70% of Amazon’s revenue comes from the US. Rest of World, which includes huge markets like China and India only represents 11% of Amazon’s revenue. Amazon has yet to secure a strong presence in Asia.
  3. Failures and Experiments

    Amazon has had its fair share of experiments some of which have dramatically failed. As an example, the Fire Phone was a complete flop and alongside this was its attempt to replicate Apple Pay with Amazon Wallet. Jeff Bezos in his defence though has said: [quote]”If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle…Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures.[/quote]
  4. PR Over Employee Treatment

    Numerous reportsNumerous Amazon have hit the press about how Amazon treats its people and they don’t seem to be going away anytime soon. These allegations of unfair treatment are not just in its distribution centres but also across other parts of its business. Inevitably, these public relation issues can spread and damage the Amazon brand.
  5. Physical Stores

    Amazon is determined to not only be online but also increase its presence across traditional retail. However, the number of physical stores are limited and cannot compete with large behemoths such as Walmart. In fact, Walmart now is aiming to go head to head with Amazon online. Amazon purchased Whole Food to increase its physical presence and expanding to grocery stores but it still lags behind Walmart. Last year, Amazon earned around $20 billion in grocery from Whole Foods and delivery through Amazon Fresh and Amazon Prime Now. At the same time, Walmart earned $270 billion making it the world’s largest grocer.
  6. Sustainability

    There has been a lack of environmental transparency from Amazon regarding its policy and practice of sustainability. While it has set a goal of being carbon neutral by 2030, many argue that this is not enough. Moreover, Amazon has been slow to report on progress or discuss its policy regarding its other services such as AWS.

Apple’s Opportunities

What are some opportunities for Amazon?

Amazon is expanding into the $3 trillion healthcare market. Strategic acquisitions could see growth in retail stores as well as help fuel growth in Asia.

Apple’s Threats

What are the threats to Amazon?

Amazon faces stiff competition from Apple, Google, Alibaba as well as lots of new startups. With relatively low margins and a growing number of e-commerce platforms, Amazon’s online business faces threats e.g. Walmart.

  1. Competition

    Amazon faces competition from big and small players in each of its markets. As an example, Walmart is heavily pursuing new drone technologies to deliver goods and has actually filed more patents than Amazon. A further example, Prime video now has more competition with Apple TV+ and Disney+.
  2. Asia/China

    China has several homegrown eCommerce sites that could expand in key markets like the US and Europe. Alibaba and hold potential to improve their brand awareness and expand operations through strategic acquisitions and partnerships.
  3. Cybercrime

    Amazon an online retailer is considered a juicy target for any hackers. Its stores the important data of customer like credit cards and other sensitive purchased data. Data breach is a key threat to Amazon. Any mishap (data breach & DDos attack) is inevitable and can affect the amazon stock, credibility and profitability.
  4. Merchants and Platforms

    It has become easy now to create an online shop with platforms like Shopify. More and more eCommerce shops might not seem as though they impact Amazon but progressively they could nibble away at its market share. Amazon makes less money with merchants selling than branded products. However, merchants have now grown to account for 58% of its sales.
  5. Government Regulations/Interventions

    Many governments are looking into the dominant positions of many platform businesses and asking the question if they are operating fairly. As a result, Amazon could face court cases or changes to laws that affect its future.

Summary of Amazon SWOT Analysis

Amazon’s ecosystem has also given it more cash to deploy, which is why it can afford to pursue low-profit initiatives. As Amazon enters new markets and exapnds, it follows a strategic playbook:

Amazon Flywheel How Amazon Cash Rich
Amazon’s flywheel
  1. Attract and retain customers to the platform by providing a better customer experience.
  2. Invest in operations e.g. warehouses, distribution and data centres.
  3. Optimize operations using intelligent systems that reduce duplication, waste and improve efficiencies.
  4. Monetize operations by allowing others to use the platform(s).

Amazon SWOT Analysis Infographic

Amazon Swot Analysis Infographic
Amazon SWOT analysis infographic

Free SWOT Analysis Templates

If you’re interested in creating your own SWOT analysis then download these free SWOT analysis templates now.

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