Blue Ocean Strategy - Amazon Prime Delivery, Air & Content

Amazon Prime, or One Hour Delivery are all examples of Amazon creating uncontested space (ie. Blue Oceans) in which to compete far away from anything their competitors can do. Amazon was able to reduce the delivery time and now you can purchase a product and get it delivered to your house in 2 days with no additional cost. This was achieved by Amazon Prime, which is a premium subscription service, it started in 2005 and charges U$119 of yearly subscription from its members. According to Jeff Bezos, on the yearly investor letter of 2018, they had more than 100 million members. This is almost 12 billion dollars of inflows that Amazon can invest in the supply chain. Amazon rose customer satisfaction to a new standard, pioneered with one-click shopping, customer reviews, and fast receipt verification on email.

Prime Day is about leveraging a flywheel of subscribers and recurring revenue. Prime Day is a designed as a massive sale exercise to  attract consumers who aren't Prime subscribers to experience what prime is all about and become members.  Amazon primarily looks ate Prime days as a weapon to penetrate the amazon customer households to convert them as prime subscribers. Amazon intends to have more  Prime subscribers because they buy more stuff, consume more content, provide more data, and have more lifetime value. Cowen & Co. estimates that Amazon had 63 million Prime subscribers and 44% of them planned to buy something on Prime Day with another 42% undecided. Cowen & Co. estimates that about 10% of non-Prime households will sign up on Prime Day.

Prime Day also advertises the Amazon logistics capabilities of fast and free delivery. Free one-day Prime delivery is now available on more than 10 million products, and many of them will be on sale on Prime Day. Many of the amazon customers jump on to this bandwagon and make that delivery speed an expectation for Black Friday and the holiday season. Amazon's competitive advantage in terms of logistics vs. other retailers is classically evident on prime day delivery. According to estimates from Consumer Intelligence Research, the number of Prime subscribers recently topped 100 million, and on average those customers spend about $1,400 per year, compared with about $600 per year for shoppers who aren’t members.

Through Prime Video Amazon is playing in red ocean media where competitors like Netflix, Apple and other content providers dominate. For example, Prime users can add Showtime or Starz for $8.99 a month. Amazon takes a cut of the revenue, typically about 25 percent for the largest companies, when a customer signs up. Amazon’s strategy is  Create the world’s largest online shopping mall and then invite smaller businesses to pay a toll in exchange for using the site to reach many millions of new customers and also provide media content.

Amazon has one other weapon that gives it a distinct advantage over Netflix and its other media peers: the Echo. As more of the Alexa-powered devices populate consumers’ homes, it’s not hard to imagine tighter integrations with smart TVs. That opens Amazon up to all sorts of untapped opportunities with advertising and cross-selling products.