Jigantus.com

I recently saw statistics on sales from Amazon.com which were impressive.

Barclays analyst Doug Anmuth provides the stats:

Peak items ordered on a single day

2008: 6.3M
2007: 5.4M
2006: 4.0M
2005: 3.6M
2004: 3.6M

Items ordered per second

2008: 72.9
2007: 62.5
2006: 46.3
2005: 41
2004: 32

Peak items shipped on a single day

2008: 5.6M
2007: 3.9M
2006: 3.4M
2005: 2.7M
2004: 2M+

Amazon is a machine, with every one else slowing down, they continue the charge with sales growing year over year even in tough times. Having watched them somewhat closely, I believe there are a few reasons:

Agressive pricing - Amazon is a fierce price competitor on almost all their products. They rotate pricing up and down as they approach certain seasons to gain customers. They offer free shipping on many products which takes the guessing game out of the price when buyers compare prices and builds trust.

Service - I’ve talked about service before, but they go out of their way if there is a problem to fix it. They ship on time and provide tracking or order status details.

Selection - Buyers know that they can go to Amazon for most of the products they may happen to buy, and because they know Amazon has great prices and service, stick to the brand.

Reviews - Amazon has great product reviews, detailed descriptions so buyers don’t have to stray far to identify the product and get prices.

Resellers System - When Amazon is out of a product, they have resellers to step in. These resellers are screened and vetted, ensuring a good customer service experience.

Strategic Partners - Amazon has teamed with specialty players in specific verticals to build brand and offer specialized service and pricing. Leveraging the Amazon brand with the partner shows how influential Amazon really is.

Buyer Savvy - As buyers become more savvy to using the Internet for search and saving money, they are able to better weed out where they can find a place to buy that they trust.

There are many other things Amazon is doing, but offering what buyers want is really the key. With the recession killing sales everywhere else, Amazon grows, which means they have to be stealing business. With over $18 billion in annual sales, they certainly are on to something.

I recently saw a slide of Amazon.com’s performance as presented by Mary Meeker from Morgan Stanley at a recent Web 2.0 conference.  It shows how strong they have become at the expense of competitors like EBay. You can see by the chart below that they have grown at a much faster pace then the e-commerce retail industry sales by far. In fact, even as growth declines, Amazon.com continues to show increases.

Amazon Metrics

Amazon originally started out as a discount book seller, selling a HUGE selection of books at great prices and service. I recall ordering a book from them when they first started. This first order turned out to be a  miss shipment. When I called customer service, they were prompt, courteous and replaced the book and allowed me to keep the first book for the “trouble”.

With sharp prices and this type of service, customers will continue to come back. In my other e-commerce business, they are fierce competitors. We could beat their prices, but because of high ad costs, we don’t normally list prices lower.

Amazon doesn’t make much margin, but they get repeat business because people trust the brand. Amazon makes this up with large volumes.

If they have a weakness, it is their large product line. Their customer service representatives lack expertise in many of the products they sell. This is where I can see niche companies with competitive prices and product specific knowledge gain traction. Companies that try to spread themselves too thin experience mistakes when recommending product selections resulting in a higher percentage of returns and unhappy customers.

My other e-commerce business has had success in this regard.  Offering competitive prices with knowledgeable service, we have managed to become top sellers in our space in a short period of time. Even though Amazon might list better prices, we enjoy reasonable sales because we are specialized.

E-commerce is a tough game with fierce competition. To stay alive you have to offer competitive prices, great service and have the knowledge to back it up. Beating Amazon head on would be a tough game, but carving out a niche specialty might be the foot in the door.

According to Wikipedia:

“An economy is the realized social system of production, exchange, distribution, and consumption of goods and services of a country or other area. A given economy is the end result of a process that involves its technological evolution, civilization’s history and social organization, as well as its geography, resource endowment, and ecology, among other factors. ”

Economies are often referred to when you talk about Countries, but in fact the web has become an economy of its own, with certain sites providing further sub economies.

Let’s put it to the test and look at EBay. EBay has a system of production (third party applications), exchange, distribution, and consumption of goods. It has technological evolution, social organization (feedback system, discussion boards, EBay etiqutte, cult following) and geography (wordlwide) . Third party developers building applications for EBay users like Esnipe, Paypal, and other marketing tools can be argued as using “code resources” to fuel the economy.

EBay is not selling goods, it makes money from fees and services, (much like a government tax) and puts it back into making improvements for it’s new economy. The environment it has created, the eco system, allows the economy to thrive. EBay must nurture, care and continue to improve the economy, or it goes down.

Other sites like Facebook and MySpace, are growing to become economies as well. Originally started as a social network, the environment being created motivates third party developers to build applications to service users thus promoting commerce.

Craigslist has tapped into the exchange of goods, services and social exchanges between local people.

Amazon.com , Buy.com have also created a system that allows third party sellers to sell on their web sites. They no longer sell just direct.

Second Life, a virtual reality game takes it a step further where it has created a fictitious world where real people play their self developed characters and pay real money for fake land, goods or services created by other virtual people. In fact real life companies create a presence in this system to market their goods outside the real world.

The Internet has allowed businesses to create new economies that are fostered and promoted inside each URL. Jignatus.com hopes to be one of those new economies.

Of course, we still have to live in the “real” economy, the one where we have a physical place to live, but what a powerful place the web has become.