If such a thing as corporate DNA exists, it has animated the rise of the last decade's most successful technology companies. Google had a relentless focus on data, Apple a Zen-like obsession with simplicity, and Facebook a world of social connections to mine. Amazon has relied on an altogether more prosaic trait: thriftiness.
The Seattle-based online book store transformed itself into an e-commerce giant by developing a gospel of saving that informs everything from its operations to its brand identity and new products like the Kindle Fire tablet. "Cost-cutting is the corner-stone of Amazon (AMZN)," says RJ Hottovy, director of equity research at Morningstar (MORN). Because the firm doesn't suffer the costs of maintaining real-world stores, it has been able to charge consumers less.
According to the Chicago-based investment banking firm William Blair & Company, the prices of goods sold by Amazon are up to 13% lower than its online and brick and mortar competitors. With more than 160 million active users, the company currently accounts for 20% of all U.S. online retail sales. Analysts expect it to grow further, picking up new customers at a clip of 20% year-over-year. Meanwhile, overall online retail, which accounts for 10% of all U.S. sales is expected to also grow, albeit more slowly at approximately 1% a year by some estimates. Online retail is expected to be worth some $226 billion this year, according to Forrester Research (FORR).
That has shaped the firm's brand in the minds of consumers. To competitors, Amazon has increasingly become a challenger, and in some cases like the defunct Circuit City and Borders, played a hand however small in their doom.
In the last year, the company has become even more aggressive. One Saturday last December, it made shoppers a compelling offer. Those who used its free Price Check mobile app to compare the price of an item at a physical store with Amazon.com's price received 5% off the same product. (The maximum discount was $5 for each item.) This reportedly tripled usage of the Price Check app that particular weekend but also generated heavy criticism, with one New York Times op-ed describing the tactic as "scorched-earth capitalism." The company countered that, "the goal of the Price Check app is to make it as easy as possible for customers to access product information, pricing information and customer reviews, just as they would on the Web."