How Amazon is Trying to Be the Center of the E-Commerce Universe

May 23, 2011Sparxoo

When Jeff Bezos founded Amazon.com in 1994, could he have imagined how the company’s gravitational pull would make it the center of the e-commerce universe? The company conquered the online sales of goods from CDs to groceries, is partnering with social media giant, Facebook, essentially created the e-book market and most recently has its sights on the video rental space — the next chapter in its quest to be the center of the online retail space.

Amazon envisions the future of the e-commerce world to be in the cloud based on product launches in the past five years. In 2001, Amazon enabled its users to buy and sell used and new products and four years later began selling private label goods (under the name, Pinzon). Amazon has focused less on physical goods and more on the cloud in the second half of the decade.

In 2006, Amazon began selling data storage, called Amazon Simple Storage Service, and a year later launched its digital music service. In that same year, Amazon launched its ground-breaking e-reader the Kindle. And in July 2010, e-book sales overshadowed Amazon’s hardcover books. In fact, Amazon claims it sold 143 e-books for every 100 hardcover books. The success of the Kindle (which can only be rumored to be successful as Amazon has never released sales figures of the device) has arguably led to the current war of the tablets — with competitors like Apple, Google, Dell, HP and others.

With its e-book sales increasing (a resource with tips for eBook authors), Amazon is poised to tackle the emerging online video rental market. Online video is certainly a rising trend amongst internet users. In the month of December 2009, 178 million people watched 33.2 billion videos, with the average viewer watching 187 videos per month in the U.S, according to comScore. To capture this growing audience, Amazon recently announced it would soon begin $.99 online video rentals and launched video streaming, similar to Netflix. But Amazon isn’t the only company picking up on the trend.

Steve Jobs recently released the new iTV video rental device, Google has beta tested its YouTube rentals and the rapid growth of Netflix over the last couple of years is going to be challenging for Amazon to compete against. Netflix had 15 million subscribers as of June 30, an increase from 10.5 million a year ago, with 61 percent of them having watched a movie or television show via the internet on computers and web-connected TVs. And Netflix’s CEO admitted over the next decade he anticipates the company to focus primarily on internet streaming, reports the LA Times.

“Amazon.com has used aggressive price discounts to carve out a dominant position in print and electronic books,” writes the Wall Street Journal. But the company is faced with formidable competitors in the online video space. Beyond the industry leader, Netflix, Amazon is challenged by Apple — which aims to replicate its $.99 music downloads in the video rental market with its new iTV. Amazon’s goal is to match the $.99 rentals, but if Apple’s iTV takes off, Amazon could lose grasp of the market.

Will Amazon tackle the online video rental market as it did with e-books? If Amazon can parallel its e-book success in the online video space, the online retailer will be that much closer to achieving its goal of becoming the center of the e-commerce universe.

Image by Gabriella Fabbri from Stock.Xchng