amazon platfrom FB
20Nov

Amazon Competes with Platforms

Written by in Digitalization, Partners, Salaxy

 

Amazon has multiple platforms and APIs that were originally developed for internal use. But their strategy is to sell their own services to 3rd parties. They want constantly reinvent their business model and find new ways to create value. Even if it means that they might be facing tougher competition because also other companies are utilising the same platform components.

From Webstore to Platform

Amazon started as an online store. It was not even the first one in that business. When building their shopping site, they needed multiple components: fast and effective content management system and cloud storage, warehouse logistics and mailing systems, invoicing and payments etc. Amazon recognised the potential to treat their platform components and online store infrastructure as independent services, something that can be sold separately and form their own businesses.

This is how AWS (Amazon Web Services) was born. And that is used by all kinds of companies that have nothing to do with online shopping or webstores. The current wide 3rd party customer base keeps AWS developing new and keeping up with the competition. On the other hand, AWS is still used by Amazon online store, as well. Amazon benefits from this open platform approach.

Making Everything a Service

Fundamental idea of Amazon´s CEO Jeff Bezos is that Amazon is not working like a traditional vertical business. Each component of Amazon is being built with a service-oriented architecture (SOA), and Amazon tries to use that approach to turn every single piece of the company into a separate platform. By doing so it opens each of those components to competition. But it also guarantees that the services that survive are very good, and a lot more future-proof than solely internally used services.

So, when they are talking about “one-day drone delivery” or similar new services they are actually constantly trying to create new service platform or components to be independently profitable if used by 3rd parties, as well. Services offered to 3rd parties might be actually helping Amazon competitors (like MWS price tracking) but in overall it guarantees that Amazon is not creating anything that is not competitive.

amazon services platform

Good example of this approach is the way Amazon has productized its warehouse and shipping logistics. It is offered to 3rd party sellers inside Amazon webstores. Fulfilment by Amazon (FBA) service provides ready-made package of shipping your products to Amazon warehouses and then sending the sold items to customer directly from Amazon centres. The most open aspect of FBA is that it can be used to other sales channels, as well. So as a 3rd party seller you can use Amazon “back-end” to manage your whole shipping & warehousing process for multiple channels, not just Amazon.com sales. Amazon gets more platform customers and can scale more effectively – and offer FBA in very competitive price.

amazon go platform

Amazon has done this with multiple platforms and services, like Amazon Connect (call centres), above mentioned FBA, and Amazon’s Marketplace Web Service (MWS). They also have their own payment system, Amazon Pay. Recent expansion is on physical retail: Amazon bought Whole Foods and is also experimenting with cashierless stores.

The Power of APIs

Amazon is a success story that shows the real power of APIs and platforms! It really makes sense to design your internal architecture and software components with open APIs. That makes it possible to productize internal processes and sell them externally as services. You can benefit from 3rd party success, and even your direct competitors might become your customers.

We at Salaxy also believe that services should be designed with open APIs. Also, we do not want to develop everything ourselves, we are constantly looking for partner platforms and services which could participate in Salaxy ecosystem. The target is that each part of the offering is the best on the market!

Janne Isosävi

Janne Isosävi, co-founder / Salaxy.com and Palkkaus.fi

Read more about Salaxy:

Salaxy Developer site and resources