Amazon is a company known for its online services to purchase items and get them delivered to your house, being very convenient and appealing to a wide range of customers. However, they also provide other services, such as cloud computing services, streaming videos, audiobooks, software games, and produce consumer products (such as Alexa), and more (Amazon, 2018). Because of this, they have managed to become the 3rd most valuable brand in the world in 2018 with a worth of $101bn (Monaghan, A. 2018). Since 2018 there is a new possible threat to this company – net neutrality.
Net neutrality is a principle in which all data on the Internet have to be treated equally by Internet service providers. It is not allowed to charge differently depending on user, content, platform, etc. Net neutrality was officially revoked in the US on June 2018 as the FCC wanted to stop the federal government from micromanaging the Internet. Many people were concerned that their access to the Internet would be limited, as they would have to pay additional fees now for online services (O’Sullivan, 2018). For online businesses, this might be an issue as customers would lose interest due to having to pay a fee or having to wait longer for websites to load. Amazon is a well-known online business, therefore, they will also have to deal with net neutrality.
For this investigation, the question “What importance does net neutrality have on the service of Amazon?” will be answered through different supporting about net neutrality laws and Amazon as a business, and analyzed through tools such as the marketing mix, the 4P’s: price, promotion, product and place, and e-commerce. It is relevant as it is important to know Amazon’s online business in order to analyze the possible issue of revoking of net neutrality.
As an online company, Amazon is very competitive with its prices. They offer new items as well as used items, showing a wider range of prices that could appeal to more customers. They also offer a premium service that customers can pay for which provides benefits such as faster delivery and more. However, Amazon prioritizes its own products and sells them at a lower price than competitors, which is not actually allowed under net neutrality. They are able to provide such a wide range of products because they can sell directly from their providers, acting as a distributor and a retailer. Amazon gives stage to different retailers to sell products to purchasers. However, net neutrality could be disadvantageous, because producers would not necessarily have to work with Amazon but could just sell their products directly themselves, but they should still do so as Amazon has many customers.
Amazon mainly uses web-based advertising, but also commercials on TV and billboards. They don’t have a lot of physical advertisements, but it is not an issue with net neutrality as their customers will see advertisements on the Internet. However, this could be a disadvantage, because even though their advertisements will be seen by a lot of people, advertisements from other business will also be seen, leading to Amazon having a lot of competitors.
The place of Amazon is the Internet, mainly their own website. The design of their website is very important because they do not have a physical store unlike competitors such as Walmart. Because of net neutrality, Amazon was able to continually grow and succeed using the Internet as a distribution channel, but because they already have a huge brand recognition, they have no need for net neutrality and it’s now working in the favor of their smaller competitors as there is equal access and ability to get your website and content in front of the same audience.
Without net neutrality, the prices of Amazon could increase because they have fewer competitors, as the smaller businesses will struggle in the online market. As they now have fewer competitors, they don’t need to keep their prices as low as possible as they would be one of the leading online companies. It can be an advantage for Amazon because producers would be more likely to cooperate with Amazon as they would not be able to afford a presence in the online market on their own, in comparison to ‘product’ in with net neutrality. This would, in turn, mean that more producers would want to sell their products through Amazon, which would increase the demographic reach.
Without net neutrality, Amazon would be able to pay to be more visible on the Internet, as competitors would not be able to afford to compete promotionally against Amazon. Amazon wouldn’t need to spend as much on promotional material either because they can make themselves into one of the few options for the customers. With no net neutrality, being on the Internet would be an advantage for Amazon in comparison to smaller competitors as they would not be able to afford to pay for equal exposure. As mentioned before, Amazon already has huge brand recognition, so customers would already prefer them over smaller competitors.
To conclude based on the marketing mix, the importance of net neutrality on Amazon depends on the business and their stakeholders. Net neutrality has a bigger advantage for Amazon’s customers, as the prices could be lower due to the lower overhead and availability of competitors. No net neutrality would be an advantage to Amazon because they could pay to gain more exposure than smaller competitors, as they are a big company and can afford to do so, whereas the smaller companies will struggle. No net neutrality would also lead to more demographic reach as producers would more likely want to sell their products through Amazon. However, an interesting idea to consider is that despite already having net neutrality, Amazon still practices strategies that are against net neutrality, such as prioritizing their own products over others. This is contradictory towards the other supporting documents because it depicts Amazon as an exception for businesses affected by net neutrality laws.
E-commerce is the buying and selling of goods through mainly the Internet, in which Amazon plays a big role as it is an online business. It was predicted that Amazon would have almost 50% of the e-commerce market in the US by the end of 2018. That is a large percentage considering that there are many other businesses that do e-commerce, such as Walmart and Apple. However, the difference in numbers is significant, and therefore through e-commerce, it can be investigated whether net neutrality could really have had an impact on the business’ success in 2018. The US e-commerce companies state that Amazon has 49.1% of the US retail e-commerce sales and is, therefore, the leading e-commerce business by being number 1. On 2nd place, there is eBay with 6,6%. The difference in percentages between the two business is enormous, despite both being well-known. Amazon is mainly known for its business-to-consumer type of e-commerce and is an acknowledged leader of the business-to-consumer market, and as that kind of business is very popular as it’s easily accessible and convenient, it is not a surprise that Amazon is in the lead. As mentioned in the marketing mix, whether net neutrality is there or not mainly has an effect on Amazon depending on the customers and the business’ preferences. It could be said that without net neutrality, Amazon has the big advantage of getting more exposure than smaller, less-known businesses. Amazon as e-commerce is in the lead, therefore net neutrality does not have that much of an importance in comparison to other, smaller e-commerce businesses.
This investigation answered the research question “What importance does net neutrality have on the service of Amazon?” through the tools and documents used. The marketing mix shows the effect and lack of net neutrality, whereas e-commerce serves as an explanation of why Amazon would be affected. The supporting documents provide information regarding net neutrality itself, its effects and Amazon as a business. Amazon is a successful business, dominating in the e-commerce market so net neutrality does not have much of an impact on Amazon’s service. With net neutrality, Amazon is more attractive to stakeholders like customers because of lower prices, as well as producers as they can sell their products through Amazon. Without, competitors have a lesser chance against Amazon as they are a known brand and can pay their way for exposure in order to stay in the lead. It is to be considered that this investigation is limited, and more information is required to have a solid conclusion. Because Amazon is not very affected by the presence of net neutrality, it does not mean the same for customers. It is important to investigate their satisfaction too.