Amazon’s way of doing things is well-known: Amazon’s “start from the customer and work backward” mentality that infiltrates every aspect of the business, from pricing to product returns. Amazon founder Jeff Bezos fine-tuned the business model with something known as the “flywheel.” But what does this mean? And how can it be applied to your seller, vendor, or general eCommerce plan for success? This blog post will break it down in simple terms with examples, so you can understand the infamous flywheel and how it impacts success.
What is the flywheel?
The concept of the flywheel effect was coined by writer Jim Collins in his book Good to Great in 2001. Imagine a large metal wheel and the job of pushing it faster. Pushing with great effort inches it along, almost imperceptibly until the consistent movement speeds the wheel up. Momentum kicks in, and the flywheel begins hurtling forward seemingly on its own. The faster the flywheel moves, the easier it is to turn. It’s impossible to tell what specific moment the wheel took off, but the idea is that over time, the imperceptibility adds up. The book explains the effect of this illustrious principle in business:
“No matter how dramatic the end result, good-to-great transformations never happen in one fell swoop. In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.”
What is the Amazon flywheel?
The components of the Amazon flywheel are meant to illustrate the way Amazon generates traffic and business, and continues to grow and grow. Bezos embraced Collins’ theory with Amazon, tailoring the flywheel to his own business model. What likely started as a drawing on a whiteboard to explain a concept became well-known throughout the company internally and externally, and has now been applied in practice for more than 20 years.
The components of the Amazon flywheel are shown here. Starting with the customer experience, followed by traffic, sellers, selection and tangentially, lower cost structure and lower prices. The point is, this 'flywheel' is a cycle. If any of these areas are fed, it fuels the entire cycle and perpetuates growth. At the beginning of the business, focusing on a positive customer experience and low prices was not always profitable. But the flywheel turned slowly and consistently–happy customers came back, and more astronomical growth followed.
Examples of what pushed the flywheel
Once you have this principle in mind, it’s easy to see how Amazon has pushed customer obsession to its benefit. Many well-known Amazon programs and ideas added momentum and revenue to this flywheel, such as: Fast deliveries, expanded selection, Amazon Prime (and included services such as streaming movies, music, and Prime Pantry), a generous return policy, the mobile app, etc. Even smaller things, such as variation/twister on a detail page or removing counterfeits have provided momentum to get this wheel spinning quite fast.
Even though the flywheel has been around for ages, it still applies on both a macro and micro level for Amazon vendors and third-party sellers.
How to apply the flywheel to your Amazon business
Price, selection, and availability are the pillars of any business’ flywheel. In the Amazon ecosystem, it’s important to build your business with integrity and precision. Merely listing something available at a low price isn’t going to sell it on Amazon these days. It takes strategy to get the flywheel moving, which will give your brand a better reputation through more reviews, better exposure as you climb the sales rankings, increased conversion, and more sales and revenue.
Ways to fuel the flywheel:
- Ensure your products are retail-ready
Retail readiness means making your listings as good as possible. Optimising your pages with SEO-rich content, answering customer questions, providing detailed information that’s readable and useful, and ensuring you have good reviews is a great initial push to start the flywheel moving forward.
- Don't try black hat tricks
While some tactics sellers use to gain momentum can be really effective in the short-term, they rarely pay off in the long run. For example, buying reviews, retail arbitrage, or other sketchy methods might actually slow the flywheel down when you get listings or your entire account suspended.
- Provide a good customer service
Taking a hint from Amazon’s success, ensure your business is ready to provide stellar customer service. This might mean providing a refund to unhappy customers when something goes wrong, giving away product via Amazon Vine so customers can see valuable reviews on your product listings, or ensuring you’re registered for the Brand Registry so customers can know they’re getting the real deal and not counterfeits. While these actions may lower your margins at the beginning, the flywheel’s focus on customer service will ensure a good reputation and a return on your investment in satisfied customers.
- Take advantage of Amazon's platform
One component of Amazon’s flywheel is sellers. The third-party marketplace is literally a cog in Amazon’s flywheel. While it may be counterintuitive at times, sellers are in essence, just another Amazon customer. Amazon wants to keep sellers and vendors happy. Take advantage of the programs and opportunities Amazon provides you, its customers! This may mean attending their free Amazon Advertising seminars, providing feedback to Seller Support after a ticket is resolved, or utilising Amazon programs like Born to Run or Manage Your Experiments to conduct testing and fuel your sales.
For more ideas and discussion on the flywheel, listen to this interview with our marketing team.
The flywheel is a beneficial component to any business dealing with Amazon
The virtuous cycle of the Amazon flywheel can be valuable for success, as it works by reinforcing core principles and focusing on customer-centric behaviours. It’s important to remember that while it may take time and effort to get the flywheel moving, it continually builds momentum that adds up to great effect. Any business can implement the flywheel and incorporate it on Amazon and beyond.