Lessons from Amazon 3 Rules for Business Expansion

3 Lessons in Business Expansion Taken from Amazon's Playbook

Recently, Amazon announced that it will be expanding into private label consumable products, which has us wondering: Is there anything Amazon cannot do? Ever since starting out as nothing more than an online bookseller, Amazon has followed a very calculated growth path. Let’s take a closer look at this new move to show how you too can follow the same strategy to grow your business.

3 LESSONS IN BUSINESS EXPANSION FROM AMAZON

1. Focus on Building a Solid Company First

Amazon proves that businesses should not go haphazardly into expansion mode without building a solid company first. They’ve worked hard to create a highly efficient logistics program, operation and customer service experience, all key to creating a solid base that ensures high profits along with customer satisfaction and loyalty.

Apply It to Your Business

To ensure your business is stable and ready for expansion, take a look at your operation, listen to the feedback of customers and discover the weakest areas or parts of your business that could use some fine tuning. Before even thinking about growth and expansion, make sure you have everything running smoothly, so you do not experience a breakdown with additional sales.

2. Slow and Calculated Expansion

Another aspect of Amazon’s expansion into private label consumables is the fact that it is part of a series of calculated and planned moves. Consider these facts from Amazon’s timeline:

  • In 1995, Amazon started selling books online.
  • In 1998, they expanded to music and DVD sales.
  • In 1999, they added home improvement products, software, video games & gifts.
  • In 2003, they added personal care items, gourmet foods, sporting goods & outdoor items.
  • In 2004, they added jewelry and beauty products.
  • In 2006, they added toys, baby products, and a grocery store.

We should note that Amazon has been experimenting with private label products for years: “Pinzon” household goods in 2005, Amazon Basics consumer electronics accessories in 2009, and Amazon Elements baby wipes in 2014.

Apply It to Your Business

Amazon’s success proves that you should not try to introduce all your ideas at once, no matter how brilliant they may be. Notice how Amazon went from books then added other forms of media like music and videos? You too can start with the products and services that are most related to your current business model, adding one at a time, carefully and strategically.

3. Research and Timing

It is quite clear that Amazon did research to plan not only the “what” but also the “when” with this expansion into private labeling.

Research clearly shows that Americans are embracing private labels more than ever before. A 2014 Nielsen report found that “The social stigma of private label has virtually disappeared in the region,” with 75 percent of Americans calling private labels a good alternative to name brands and 67 percent saying that private labels are on par with name brands in terms of quality.

Research also demonstrate that NOW is the perfect time for an expansion into consumables. Consumers are becoming more comfortable buying consumable products online – a fact that Amazon had to take into consideration when expanding to private label with products like nuts, tea, coffee, spices, vitamins, baby food, diapers, and laundry detergent.

Apply It to Your Business

When considering expansion, it is vital that you conduct the proper research to determine if it will be a profitable venture or a flop. Check formal research studies and the markets you are considering to see what direction things are heading. And by all means, ask your customers! They can be your greatest source of insight to whether there is a need for a new product and if they’ll purchase it from you.

Expansion can be difficult, but Amazon proves that if you make calculated and strategic decisions about the direction you take your business, you can become wildly successful.