Amazon.com, or simply Amazon, is an electronic commerce and cloud computing company based in the United States, and available in Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, the Netherlands, Spain, and the United Kingdom in addition to the United States. Amazon also ships many of its products to other countries, and owns a fair number of products and subsidiaries, including, but not limited to, Audible, Kindle, Twitch, and Zappos. It was originally founded in 1994 by Jeff Bezos as an online bookstore, and has since expanded to provide the services of online shopping, web hosting, and content distribution (amazon.com, 2016).
Amazon is currently the world’s largest retailer, having overtaken Wal-Mart earlier recently(Li, S., 2015), and is currently the fourth most valuable public company, behind only Apple Inc, Alphabet, and Microsoft. It’s current revenue is estimated to be $107 billion USD (amazon.com, 2016), and a total active user base of 244 million, whereas an active user is defined as an account that has purchased something through Amazon in the past 12 months (Kline, D. B., 2014).
However, in addition to being an online retailer, Amazon is a huge collector of the data of its millions of users, resulting in various programs and algorithms that figure out what a user is most likely to be interested in buying, and can then utilize this information to advertise select product to the user, or sell that plethora of information to other companies so that they can more effectively market to consumers.
The scale of Amazon’s collected data, as well as its usage of this information, made this topic an appealing one, especially when one must think about the issue of privacy. This large scale data collection will be the focus of this blog post.
What kind of data does Amazon collect?
Amazon collects a variety of data about its large consumer base, both about their actions on their site, and using cookies, what other sites these consumers visit (Amazon Privacy Notice, 2016). These website tracking cookies are used to determine what products to advertise to a particular customer based on their internet habits, both on the Amazon site in the “1-Click” or “Recommended for You” features, as well as through off-site advertising (Amazon Privacy Notice, 2016).
However, much of Amazon’s data is collected from consumer activities on their own website, and information that an Amazon user provides to Amazon. They have collected information about a user’s searches, purchases, posts, participation in contests/questionnaires, and contact with Amazon’s customer service, as well as addresses, telephone numbers, names, credit card information, personal description and profile photo, and financial information (social security number, driver’s license number) (Amazon Privacy Notice, 2016).
Additionally, there is automatic information that Amazon collects from any visitor to their site, including a user’s IP address, computer type, connection information such as browser information and version, purchase history, date and time, and lengths of visits to certain pages (Amazon Privacy Notice, 2016). Finally, Amazon mobile collects information about a user’s location, and credit history information from credit bureaus (Amazon Privacy Notice, 2016).
What does Amazon do with this data?
A great deal of Amazon’s appeal and competitive advantage comes from the fact that it offers a more personalized service than other online retailers. It compiles the huge amount of information listed above into useful information by comparing similar consumers’ shopping habits and suggesting products based on that. These suggestions are presented to the consumer through Amazon’s “1-Click Purchasing” and “Recommended for You” features, and thus offers each customer individualized advertisements
Additionally, Amazon sells this data to retailers (Leber, J., 2013), which use the information to more effectively advertise their products, as well as more efficiently identify the market segment they would like to address. Specific data is not sold, as that would violate privacy policies of users, but rather information about demographics and purchases.
Other data collecting giants, such as Facebook and Google, also sell this type of information to retailers and advertising companies, but Amazon’s information may prove more useful as it provides information about the actual purchases of a consumer rather than that consumer’s interests (Leber, J., 2013).
Challenges and Opportunities (SWOT)
With this immense amount of consumer information, Amazon has an immense opportunity in terms of its marketing and sales. However, with this opportunity comes the challenge of maintaining privacy, as consumers will stop providing this information to Amazon if they do not trust the site. Thus far, it has been one of Amazon’s strengths to be able to uphold this standard of privacy, and hopefully will continue to use collected data for the benefit of the consumers and producers alike by showing helpful products to the right segment of a market.
Conclusion: Amazon’s gains from Big Data.
All the data that Amazon collects about its users, places Amazon as a retail competitor of Walmart, as well as an information-collecting competitor of Google. Amazon’s personalized service through its usage of big data has proved effective, as it is the largest retailer in the world. Though its data collection may not be the sole reason for its success, it cannot be ignored when assessing Amazon’s competitive edge and what makes Amazon so special in the eyes of its consumers.
Amazon Privacy Notice. (2016, September 30). Retrieved November 28, 2016, from https://www.amazon.com/gp/help/customer/display.html?nodeId=468496
AMAZON.COM ANNOUNCES FOURTH QUARTER SALES UP 22% TO $35.7 BILLION. (2016, January 28). Retrieved November 28, 2016, from https://www.sec.gov/Archives/edgar/data/1018724/000101872416000170/amzn-20151231xex991.html
Kline, D. B. (2014, May 24). How Many Customers Does Amazon Have? Retrieved November 28, 2016, from http://www.fool.com/investing/general/2014/05/24/how-many-customers-does-amazon-have.aspx
Leber, J. (2013, January 21). Amazon Woos Advertisers with What It Knows about Consumers. Retrieved November 28, 2016, from https://www.technologyreview.com/s/509471/amazon-woos-advertisers-with-what-it-knows-about-consumers/
Li, S. (2015, July 24). Amazon overtakes Wal-Mart as biggest retailer. Retrieved November 28, 2016, from http://www.latimes.com/business/la-fi-amazon-walmart-20150724-story.html