Amazon looks to me as one of the most innovative companies in the world, far more innovative actually that any of the electronics giants out there which have done poorly at inventing any real breakthrough innovation for the last 10 years. Amazon not only innovates to make its logistics better, but it makes also some very smart business moves to consolidate its position on various markets. Its latest move, in the book edition industry, ressembles one that leverages a “locking strategy”, i.e. a strategy that locks customers into the Amazon ecosystem.
Examples of marketing strategies locking customers
You have all experienced the effects of a locking strategy. Think about your Nespresso machine. Not so long ago, the only capsules you could buy were produced by Nespresso. Compatible capsules came well afterwards, Nespresso modified its machine to make the lives of capsules manufacturers though and even invented a machine to further lock customers into its distribution network.
Gillette famously launched its Mach 3 razors at an attractive price and made profits on selling the blades.
The Canon, HP and Epson of this world mimicked the Gillette strategy (or what is the opposite?) in selling ink printers at fair prices and charging outrageous prices for replacement cartridges and making sure that third-party cartridges were either not or less advantageous.
Interestingly the locking effect also resulted from Swatch’s vertical integration started in the 90’s. The Swatch company acquired many of the component makers in the horology industry, locking Swatch competitors into an insane relationship where they had to buy from Swatch their third-party components. This gave Swatch a monopoly on crucial certain components and an enormous bargaining power.
The Amazon locking strategy
When it launched its Kindle, Amazon not only enabled people to read digital books but it also locked them into buying digital books in a proprietary format.
After selling books in a proprietary format, Amazon has ventured in the edition sector. Authors can use Amazon has a publishing platform. Readers can order a digital copy for their Kindle or a regular, printed-to-order copy of the same. And this printed copy of the book will obviously be delivered through the amazing first-class supply-chain of Amazon. A printed-to-order book is made available in less than 2 hours and can be at your place the next day.
Conclusion
The example above shows the capacity of Amazon to innovate along the value chain, mastering it all and levering huge economies of scope and scale (after all, Amazon Web Services was only the first opportunity they seized of leveraging those economies of scope).
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Posted in Marketing.
