Analysis: Amazon’s five greatest innovations

Amazon Prime

Amazon has been the pioneer of the subscription service, which is fast taking off across retail.

Prime, which launched in 2005, is what Amazon describes as an “all-you-can-eat express shipping membership programme”.

Many thought Amazon was crazy to give up millions in shipping revenue when it launched Prime, and the etailer admits “there was no simple math to show it would be worth it”.

However, Amazon’s intuition paid off. The unlimited delivery service has helped customer loyalty soar.

Research from investment bank Morgan Stanley showed that 40% of Prime users spend more than £800 each year on Amazon, compared with just 8% of non-Prime users. And with a reported 65 million Prime subscribers, that’s an awful lot of additional revenue.

It’s no wonder retailers including Asos, Next and Tesco have followed Amazon’s lead and launched their own delivery subscription services.

However, Prime is now about more than delivery. Subscribers get access to video and music streaming and unlimited photo storage.

A veritable bargain for £79 a year.

One-click checkout

The checkout is the biggest bugbear for online shoppers – 46.1% of card abandonments occur at the payment stage, according to Internet Retailer.

But the Holy Grail of frictionless payment is Amazon’s 1-Click, for which it has held a patent since 1999.

The innovation enables ecommerce transactions to be processed with one click by using stored customer details.

When shoppers place their first order and enter a payment method and delivery address, 1-Click ordering is automatically enabled. If they click ‘Buy now with 1-Click’ on any product page, the order will be charged to the default payment method and delivered to the default address.

Amazon has offered this service for two decades and it’s one that retailers across the spectrum are still vying to replicate now.

Amazon Web Services (AWS)

Since 2006, Amazon has offered IT infrastructure services to businesses through cloud computing.

Amazon originally developed the business because it “wanted to move faster”.

“Before AWS, we had teams working on new ideas for the business and we found that they kept reinventing the wheel”

Amazon

“Before AWS, we had teams working on new ideas for the business and we found that they kept reinventing the wheel,” says Amazon.

“Some of these teams were spending up to 70% of their time recreating technology infrastructure – things like a web scale database, storage, queuing service, and other capabilities that we already had in use in other areas of the business.”

With AWS, Amazon teams can focus on their ideas – instantly spinning up an experiment of just about any size on-demand, without upfront capital expenditure. And so can other companies that use its platform.

Today, AWS provides a scalable, low-cost infrastructure platform for hundreds of thousands of businesses in 190 countries around the world, including retailers such as Shop Direct and Moonpig.

AWS made $12bn in revenue and $3bn in profit in 2016.

Reviews and recommendations

Amazon made one of the first forays into personalisation with its launch of product recommendations based on a user’s browsing and purchasing history.

This endorsement by association has now become a staple of retailers’ websites, irrespective of sector.

Amazon tapped into the solitary nature of online shopping and early internet shoppers’ understandable hesitation to part with their hard-earned cash for an item they couldn’t see or touch.

Written reviews and ratings on products that fellow shoppers have previously purchased became the go-to validation for customers on items ranging from a new pen to a widescreen TV.

Online now feels like the preferred shopping channel for a growing number of consumers.

However, if retailers such as Amazon had not made reviews and recommendations so easy to find, online retail might not be as mainstream as it is today.

Amazon Echo

Voice commerce may be relatively new to the retail scene but, as is so often the case, Amazon was first to market.

The etailer launched its Echo device, powered by artificial-intelligence-enabled voice assistant Alexa, last year.

The device carries out a variety of functions ranging from adding events to a customer’s calendar to getting a local weather forecast or topping up on essential items.

The meteoric rise of online retail has resulted in an expectation of ease and convenience for shoppers, and Amazon Echo taps into this.

Google launched its rival device, Google Home, in the UK market last month as the appetite for voice-enabled commerce gains pace.

However, Amazon set the agenda with its Echo device and made Alexa the AI-enabled voice assistant to beat.