Amazon Flywheel Theory and User Experience: Creating the Dual Advantages of E-commerce and Technology
Amazon’s flywheel theory began in 2000 and was formulated by Bezos and management consultant Jim Collins. The core of this theory is to attract more users and sellers by continuously optimizing the user experience, thus forming a positive cycle of self-reinforcement. For e-commerce, consumers are most concerned about price and delivery speed. By addressing these two key points, Amazon significantly improves the user experience. As more third-party sellers join, Amazon can better spread its fixed costs such as logistics and servers, allowing it to further lower product prices and attract more users.
Between 2007 and 2017, Amazon took a series of strategic initiatives, including providing FBA outsourced logistics services to third-party sellers, releasing Kindle e-books, and launching the smart speaker Echo equipped with the virtual personal assistant Alex. These initiatives not only enhance Amazon’s online influence, but also collect a large amount of consumer data for it, further strengthening its market position. In addition, Amazon has eliminated potential competitors and made comprehensive progress in technology and market layout by acquiring companies such as Zappos, Quidsi and Whole Foods.
In addition to traditional retail business, Amazon’s AWS cloud service also adopts a similar flywheel model. By continuously adding developer tools, AWS attracts more third-party devices to connect, which in turn attracts more users to use AWS services. As economies of scale emerge, costs drop rapidly, allowing Amazon to provide more developer tools at a lower cost, ultimately achieving scale expansion and profit growth.
The artificial intelligence technology on the Amazon platform is mainly used in three aspects: helping sellers make more accurate product selection and marketing decisions; pushing personalized recommendations based on buyers’ historical shopping records; optimizing logistics distribution strategies and improving distribution efficiency. These are based on the core algorithmic logic of the platform – the flywheel theory.
Amazon officially explains the flywheel theory as a closed-loop cycle with no starting point and no end: improving customer satisfaction by providing a diverse selection of products and a convenient shopping experience; satisfied customers will spontaneously promote word-of-mouth for Amazon, leading to More traffic attracts more sellers, thereby enriching product categories and lowering prices; lower prices further improve customer satisfaction, forming a virtuous cycle.
For cross-border e-commerce sellers, especially those focusing on the US market, it is crucial to have a deep understanding of the flywheel theory. This helps them make more informed decisions in future product selection operations and effectively deal with various challenges that may arise. Compared with domestic e-commerce platforms, Amazon is known for its fast delivery, excellent service and reliable product quality.