Amazon is one of the most successful businesses in the recent past. The company has pioneered the business model of selling goods online to the customers on a scale that was never seen before. It has initially started selling books online to the customers. Using the data that was collected from selling books online; the company has diversified its operations into selling other items like electronics, consumer durables, and even groceries. Many other companies have started copying the business model of Amazon and started selling products and services online to the customers. Another successful business which made a lot of money selling products and services online is Alibaba. Alibaba is a Chinese business organization and now has more revenues than Amazon.
Buyers are the Users for Amazon
The major difference between the business models of Amazon and Alibaba is that while the former operates in a Business to Consumer (B2C) market, the latter operates in the Business to Business (B2B) market. A B2B market is characterized by manufacturers selling to the middlemen like distributors and wholesalers (B2B Marketing). It also includes selling of goods by the manufacturers of components and base materials to other businesses which use them in the manufacturing of other final products and services targeted at the consumers. Very companies made a viable business in B2B business. While Alibaba is the first company which created a viable business model in B2B business, a number of small ecommerce companies in USA too have started selling components and other industrial supplies to other small manufacturers (Pavie, 2016).
B2B businesses also cater to the needs of wholesalers and small retailers operating in the unorganized market in contacting the manufacturers and buying the required goods for a cheaper price than by buying the goods through the distributors. B2C businesses sell goods directly to the consumers cutting out all the middlemen in the process. B2C ecommerce portals like Amazon buy goods from the manufacturers and sell to the buyers on their own and ship them on their own from their warehouses. Some B2C ecommerce portals even maintain their own private labels which give them higher margins than the goods procured from manufacturers. For example, Amazon sells a number of private labels like Symbol and Myx to its customers in India. Very few companies around the world like JD.com of and Flipkart of India managed to successfully copy the business model of Amazon in a profitable manner.
Amazon sells the products directly to the end consumers. In other words, buyers are the ultimate users for Amazon. The persons who buy the products research about the available alternatives in the market, evaluate the alternatives, zero upon some of the available options, and take the final decision regarding the purchase of the product. Very few components and industrial supplies are sold on Amazon.
Demographics of Buyers on Amazon
The demographics of buyers on Amazon are different from most other young Internet companies. Contrary to the popular perception, buyers on Amazon are not young. Most of the buyers on Amazon are older and have higher incomes. According to a study, more than a quarter of the buyers are aged above 50 (Tice 2010). Nearly 57 per cent of the buyers on Amazon have an average income of more than US$ 60,000. When it comes to gender, the buyers of Amazon are evenly distributed between both men and women. The demographic profile of Amazon shows that most of the buyers purchase goods for their own consumption. Their buying decisions are not made by their friends or members of family.
In comparison, other conventional retailers have a totally different demographic base. A substantial segment of Wal-Mart’s buyers are aged below 34. Nearly 63 percent of consumers are women and have a higher average income of US$ 100,000 per year. This shows that most of the buyers in conventional retail companies do not buy goods for their own consumption. They buy them for others and take the buying decisions for others.
One of the main reasons for the Buyers of Amazon being the users is that Ecommerce facilitates men and young boys to login to the portal and put the orders on their own rather than delegating the task of purchasing the household belongings to their mothers and wives.
Buyers of other Amazon products like the Kindle and the recently launched Echo are early adopters of new technologies and spend a lot more on latest technology (Metafacts, 2016). Amazon Echo is making more of its actual users of the products to be their buyers. These technologies make it possible for men and teenagers to directly order products sitting in their drawing rooms without the need to even logging into their computers.
The industry in which it operates and the business model it follows makes more of Amazon’s buyers to be its actual users. Amazon needs to target all the consumers from different age groups and genders with it products to effectively market its products. Latest technologies sold by the company like Amazon Echo will only increase this trend in the future.
B2B Marketing. Explore B2B. https://www.b2bmarketing.net/.
Metafacts. (2016). Amazon Echo Users Spend More on Tech (MetaFAQs). https://technologyuser.com/tag/early-adopters/.
Pavie, X. (2016). Seven Reasons for Alibaba’s Success. Digital Commerce 360. https://www.digitalcommerce360.com/2016/07/27/seven-reasons-alibabas-success/.
Tice, C. (2010). Demographic Differences Are Key in Amazon-Walmart Online Battle. CBS News. http://www.cbsnews.com/news/demographic-differences-are-key-in-amazon-walmart-online-battle/.