What kind of company could rival Amazon? How would they do it?
Answered by: Vic Lugo,B.A. Marketing & Advertising and Advertisements, Ventura College (2005)
Jeff Bezos plays the long game. Amazon will operate on a loss in order to gain market share. Let me repeat that, Amazon will operate at a “loss” in order to “gain” market share.
Have you ever heard of the story of diapers.com?
What a great website, oh wait, it just redirects to Amazon.
The owners of diapers.com and other high value URLs like soap.com were making a go at it. Selling baby products, they sourced good products, started building infrastructure like warehousing for their inventory, even had a major shipment deal with the brown trucks. Then one day Amazon came knocking and asked to buy the domain. The answer was no.
What did Amazon do? Drove up the AdWords PPC on KWs and sold diapers at a ridiculous price losing margin and cash on traffic.
But do you know what else happened? Amazon dominated diapers online. Diapers.com could not outspend Amazon or sell at a lower price. Within 6 months, Amazon owned Quidsi, the Corp that owned Diapers, and Soap, and YOYO dotcoms.
In the end, Amazon’s long game of operating at a loss, had gained them huge market share in diapers.
They’re still doing it to this day. If you run an e-commerce store, you will have every invitation and incentive to also list your products on Amazon. Why not? That brand recognition is powerful isn’t it? It sure is.
But while you’re counting your dollars rolling in. Amazon is counting the data. If your products are winning, Amazon will simply sell the same exact thing, especially if you source it from overseas. All Amazon has to do is make their “Amazon’s Choice” banner on it and show it at the top of the page, it’s their website right? They can do whatever they want.
And you’re left there thinking… . Where did all my traffic go?