Porter’s Five Forces of Amazon 

Amazon is the world’s leading tech company focusing on AI, digital streaming, online advertising, cloud computing, and e-commerce. Jeff Bezos founded the tech company in 1994. Today, we’ll discuss Porter’s five forces of Amazon; bargaining power of buyers and suppliers; threat of new entrants and substitutes, and competitive rivalry.

Porter’s five forces of Amazon would focus on the bargaining power of suppliers and buyers; the threat of new entrants and substitute products and brands; and competitive rivalry. Here’s Amazon Porter’s five forces analysis as follows;

Porter’s Five Forces of Amazon 

Let’s discuss Porter’s five forces of Amazon and they’re as follows;

Bargaining Power of Suppliers of Amazon

The bargaining power of suppliers in Amazon Porter’s five forces analysis is as follows;

I-SC Challenges

The disruption in supply chain operations impacted the revenue of about 93% of Amazon sellers during the 2020 crisis. This is because a lot of product materials and raw supplies come from foreign overseas markets. According to an estimate by Jungle Scout, mega brands experienced inventory delays ranging from 1 to 4 months.

II-Market of B2B & B2C

The gross merchandise value of Amazon is roundabout 15 billion USD and the tech giant company is running its business in countries like; India, Japan, Italy, Spain, the UK, France, Germany, and Canada. Amazon has recently introduced the B2B category comprising repair, maintenance, and operation supplies and it has got approximately 18 million products in them.

III-Supplier’s Influence

The bargaining power of suppliers analyzes the size of suppliers, forward integration, and number of suppliers. Amazon is the world’s leading online store and the supplier’s influence is very low and the company could easily switch to low-cost suppliers. However the growth of a competitive e-commerce platform would make things difficult for Amazon in the future.

Bargaining Power of Buyers of Amazon

The bargaining power of buyers in Amazon Porter’s five forces analysis is as follows;

I-Edge over Walmart

Amazon has won the US household spending market share over Walmart in 2021. The market share of Amazon is 15% in the US consumer spending category of apparel and clothing; whereas the market share of Walmart is 6.5%.

II-Customer Satisfaction

According to an estimate by Statista, Amazon has earned 78 points in the ACSI (American Customer Satisfaction Index).

III-Buyer’s Influence

The focus of Amazon is on its customers by putting emphasis on product quality and increasing the customer satisfaction level. In order to amplify brand loyalty, a strong brand image, and a higher customer satisfaction level, the company implements strict rules and regulations.

Threat of New Entrants to Amazon

The threat of new entrants in Amazon Porter’s five forces analysis is as follows;

I-Fulfillment Centers

Amazon has achieved the market leadership position in the e-commerce industry due to various reasons like; strong brand image, economies of scale, massive warehouses, and high capital investment. According to an estimate by MWPVL, the global logistics space of Amazon is 21 million square meters.

• 446 Amazon warehouses in the US
• 141 warehouses in India
• 96 warehouses in the UK

II-New E-commerce Entrant

Heavy structural costs and strong barriers like supply chain and logistics network, branding, maintaining quality, and others would make it difficult for new e-commerce stores to enter the market and sustain their position.

III-Global Retail E-commerce

The global retail sale from the e-commerce industry in 2021 was 5.1 trillion USD, and it would reach 8.1 trillion USD by 2026. The E-commerce industry holds great growth potential both for new capital entrepreneurs and established brands.

Threat of Substitute to Amazon

The threat of substitute products and brands in Amazon Porter’s five forces analysis is as follows;

I-Digital Streaming

Various factors impact the life patterns and customer trends like social media and e-sports are replacing digital streaming. The consumer market is finding new trends in leisure activities. However, Amazon Prime is facing tough competition from Google, Microsoft, Nike, YouTube, and Netflix.

II-Retail E-commerce

A customer could easily buy products online from Walmart, eBay, or Amazon. The brand switching cost is very low because there are many e-commerce stores available and offering similar types of services. In fact, they offer better pricing, an efficient SC network, availability of inventory, and a supplier base.

Competitive Rivalry of Amazon

The competitive rivalry in Amazon Porter’s five forces analysis is as follows;

I-E-commerce competition

Alibaba, Walmart, and eBay are the top competitors of Amazon, and the annual revenue of the tech giant company Amazon in 2023 was 539 billion USD. Alibaba is also facing stiff growth due to anti-monopolistic laws and regulations of China and tough competition. Amazon has established a diverse structure and operates its business in various categories, and that’s why the company faces competition from various companies.

II-Online Streaming Competition

Disney, Hulu, and Netflix are the top competitors of Amazon Prime in the online video streaming category. According to an estimate, Amazon earned roundabout 31.76 billion USD from online subscriptions.

III-Cloud computing Competition

Google Cloud, Microsoft Azure, and Alibaba are the top competitors of Amazon in the cloud computing category. The market share of Amazon in the Cloud computing category is 34% by 2021; the market share of Google and Azure is 11% and 21%.

Conclusion: Amazon Porter’s Five Forces Analysis 

After an in-depth study of Porter’s five forces of Amazon; we have realized that Amazon is the world’s leading tech giant company. If you are learning about Amazon’s five forces analysis; then you should keep in mind the abovementioned bargaining power of suppliers and buyers; the threat of new entrants and substitutes, and competitive rivalry.