Amazon Growth

robertbanking

Hello you very wonderful and amazing individuals that make up this forum. I sincerely hope you are doing well and keeping positive.

I am kindly interested as Amazon started to grow online, after selling online books and expanding into lots of different category's, how would it know where to distribute resources please. I understand they would need to open more warehouses and hire more staff. However, can i please ask what other infrastructure would be needed, such as more data on their hosting for the increase of traffic to the website please and how would they know when to deploy these additional resources please? If anyone kindly had any thoughts on this i would be forever grateful and thankful it would mean the world to me.

Sending you lots of good wishes and i truly hope you continue to have a wonderful life and everything continues to go well for you. Very best wishes.   

tacpot12

Their systems would be designed to have a certain capacity, and would also be designed to have an ability to record the amount of capacity in use at any time of the day, and to allow someone (or something) to look at the records of the capacity in use. It would be someones job to monitor the capacity for each element of the system being used, and to look ahead to the point in time where that capacity would be exceeded. e.g. a Database is designed to hold 1,000 million records. Amazon expect it to start with 400 million records in it, and that they will add about 1 million records per month. Every month some will check to see if the prediction of how many records are being added is correct, and will use the data to predict when the database will be full, and to update their view on how quickly records are being added, so that the expansion of the database can be done in a way that means they are adding capacity for a certain number of years. Once the database is extended, the process repeats. 

It doesn't matter whether it is records in a database, physical space in a datacentre or the capacity on local or wide area network connections, the process is the same. This is also how they do it for staff and physical space in their warehouses. 

eskbanker

robertbanking said:

I am kindly interested as Amazon started to grow online...

How exactly is your interest 'kind'?

robertbanking said:

However, can i please ask what other infrastructure would be needed, such as more data on their hosting for the increase of traffic to the website please and how would they know when to deploy these additional resources please?

Amazon obviously has a massive global presence but will be using the same capacity planning principles as any other organisation with a web presence, from search engines and social media sites through streaming services, ticket sellers, banks, supermarkets, etc, down to very minor players.

Online traffic is readily analysed, not just in terms of volumetric patterns by day/hour, etc, but all sorts of other details, such as correlation with marketing activity, or weather, plus records of navigation journeys through sites, average dwell time on specific pages, types of devices/OS/browsers used, which search engines and terms directed the user to the site, and gazillions of other factors.

Together with business and technology plans, such rich data sources should allow well-organised businesses to stay ahead of the curve and ensure that adequate system resources are made available, with a decent margin of error....

Curious about how understanding this would influence the decisions of a private investor though?

robertbanking

Thank you very much for your responses, it really means alot, i really appreciate your thoughts on this. You are very wonderful and amazing people here.

tacpot12 that makes complete sense in that someone would be monitoring the capacity for each element of the system being used, and to look ahead to the point in time where that capacity would be exceeded. I particularly liked the example you used of a database and someone would check each month to see if the predictions of how many records being added is accurate. It really is quite simple to understand now you kindly explained, thank you so much for explaining, that is very kind of you.

eskbanker thank you very much for your very insightful post, that was really kind of you. I understand that online traffic will be analysed, not just in terms of volumetric patterns by day/hour, but other details, such as records of navigation journeys through sites, average dwell time on specific pages, types of devices/OS/browsers used along with many other factors. Thank you for your comments on this it is very kind of you. I think knowing what helped Amazon grow, could be useful when analysing other businesses as a private investor, to see if there marketing is working and how they conduct their marketing strategy, however its also interesting on a personal level on how they analyse customer behaviour to grow the business.   

Very best wishes to you all and hope you enjoy the rest of your Sunday. Take care and keep positive.   

eskbanker

robertbanking said:

I think knowing what helped Amazon grow, could be useful when analysing other businesses as a private investor, to see if there marketing is working and how they conduct their marketing strategy, however its also interesting on a personal level on how they analyse customer behaviour to grow the business.

Business strategy, customer analysis and marketing are undoubtedly all much more fundamental components of a company's growth than the underlying infrastructure (which obviously needs to be there but adds little value as such), so yes, it makes more sense to evaluate the former than the latter, but personally I'm unconvinced that studying the growth of a behemoth like Amazon is particularly useful in the context of its rise as a one-off disruptor.  There will have been many who've attempted to wrestle market share from it and failed, so analysing those may be more useful pointers, in terms of the difficulties of trying to replicate the success of a leader....

El_Torro

This reminds me of a famous anecdote: Jeff Bezos presented his business plan to make Amazon grow to a bunch of students at Harvard Business School in 1997. After listening to his presentation most of the feedback was that it would never work and he should sell his business to an established retailer, failing that Amazon would go bust.

Amazon grew to the size it is now because it was the right idea at the right time. If we're looking for the next Amazon (or the next Microsoft, or the next Google, etc...) then it won't be a company that behaves in exactly the same way as its successful predecessors. 

coyrls

eskbanker said:

robertbanking said:

I think knowing what helped Amazon grow, could be useful when analysing other businesses as a private investor, to see if there marketing is working and how they conduct their marketing strategy, however its also interesting on a personal level on how they analyse customer behaviour to grow the business.

Business strategy, customer analysis and marketing are undoubtedly all much more fundamental components of a company's growth than the underlying infrastructure (which obviously needs to be there but adds little value as such), so yes, it makes more sense to evaluate the former than the latter, but personally I'm unconvinced that studying the growth of a behemoth like Amazon is particularly useful in the context of its rise as a one-off disruptor.  There will have been many who've attempted to wrestle market share from it and failed, so analysing those may be more useful pointers, in terms of the difficulties of trying to replicate the success of a leader....

In Amazon's case, I think you might be under playing the importance of the underlying infrastructure.  Amazon is as much, if not more, a technology company than a retailer.  Their growth was enabled by an innovative technology infrastructure that was so successful that it forms the basis of Amazon Web Services (AWS) that now contributes much more to Amazon's profits than its retail business.

I share your bewilderment as to the point of the original question.

eskbanker

coyrls said:

eskbanker said:

robertbanking said:

I think knowing what helped Amazon grow, could be useful when analysing other businesses as a private investor, to see if there marketing is working and how they conduct their marketing strategy, however its also interesting on a personal level on how they analyse customer behaviour to grow the business.

Business strategy, customer analysis and marketing are undoubtedly all much more fundamental components of a company's growth than the underlying infrastructure (which obviously needs to be there but adds little value as such), so yes, it makes more sense to evaluate the former than the latter, but personally I'm unconvinced that studying the growth of a behemoth like Amazon is particularly useful in the context of its rise as a one-off disruptor.  There will have been many who've attempted to wrestle market share from it and failed, so analysing those may be more useful pointers, in terms of the difficulties of trying to replicate the success of a leader....

In Amazon's case, I think you might be under playing the importance of the underlying infrastructure.  Amazon is as much, if not more, a technology company than a retailer.  Their growth was enabled by an innovative technology infrastructure that was so successful that it forms the basis of Amazon Web Services (AWS) that now contributes much more to Amazon's profits than its retail business.

I share your bewilderment as to the point of the original question.

Yes, fair point - I suppose I tend to mentally pigeonhole them simplistically as two separate entities, i.e. B2C retailer (which is the bit I suspect OP was primarily thinking of) and B2B infrastructure provider, but yes, the tech for the former contributed significantly to the success of the latter.

aroominyork

And it was only AWS that made Fundsmith, albeit for only two years, invest in Amazon. Terry Smith had wished they were two separate businesses but eventually swallowed the retail side so that he could buy into AWS.

A good lesson in how the market cannot evaluate the tech behind retailing is Ocado: it trundled along around £3 per share for many years, then in 2018 became a darling of the markets and started its climb to £29, and today is back down to £5.50.

Prism

My feeling is that Amazon have so far missed the opportunity to become the clear leader in the cloud and have now fallen significantly behind Microsoft. A little like the earlier attempt by Google to attack Microsofts enterprise software market share, which didn't come to much. Who will be next to have a go I wonder?

aroominyork

Prism said:

My feeling is that Amazon have so far missed the opportunity to become the clear leader in the cloud and have now fallen significantly behind Microsoft. A little like the earlier attempt by Google to attack Microsofts enterprise software market share, which didn't come to much. Who will be next to have a go I wonder?

Maybe robertbanking's analysis will uncover the company with the ideas and systems to make a success of it. I am sure he will keep us updated.