Over the past decade, ecommerce has enjoyed accelerating growth as shoppers become more comfortable with online retail. The full impact of the Covid-19 pandemic is yet to be fully understood, but according to eMarketer, early indications suggest that the global ecommerce market grew by 27.6% to a total value of $4.280 trillion against a pre-pandemic prediction of 16.5% growth. The ecommerce sector is just one area where the pandemic has triggered a new wave of innovation and technological development. The healthcare sector, logistics, and manufacturing all had to embrace technology in order to survive and grow.
For retailers, the challenges have been varied. Some businesses already had a robust online presence, and therefore it was simply a matter of capacity and ensuring they can meet increased demand. For others, with brick and mortar stores, the lockdowns and restrictions have forced many to rethink and remodel their entire business.
In both situations, technology and digitization play a critical role. The digital transformation has been particularly evident in the grocery sector, where US retail giant Walmart saw online sales grow by 97% between May and July 2020. The transition to ecommerce was already underway well before 2020; the pandemic has provided that transition with rocket fuel.
Digitization of Retail
When Amazon began its journey from a Seattle bookstore in 1995 to the online retail behemoth it is today, few would have predicted the internet’s transformative impact. The key to understanding the success of Amazon is to view it as a logistics company rather than a simple retail store.
With a global network of distribution centers, delivery vehicles, and over a million employees worldwide, the company has invested heavily in its digital infrastructure. Managing the constant flow of orders and corresponding data is a huge task, and Amazon uses the data to drive its business.
As one post from the Harvard Business School’s Digital Initiatives project outlines, Amazon’s success is based on four key concepts:
Interactive Ecommerce Platform:
Amazon has grown to become a world-leading ecommerce platform by being a go-to source for a wide variety of products. Only Chinese giant Alibaba can compete. However, Amazon goes beyond this, using customer reviews and strong governance to ensure shoppers can trust the quality of products. It was also among the first companies to widely utilize algorithms and data to direct individuals to their preferences based on past shopping behavior.
Amazon Web Services:
This service, known as AWS, is a cloud-platform that is not as widely familiar to the public as its ecommerce store. However, it has become a critical part of Amazon’s ecosystem as it uses cloud technology to gather and process data from both customers and its employees. Initially set up to support the Amazon platform, AWS is now used by high-caliber clients such as Netflix, Facebook, and Linkedin to support their own systems.
As we’ve already seen with the ecommerce platform, Amazon relentlessly focuses on customers’ needs. By continually monitoring and recording customer behavior, the company is able to optimize its platforms for individual shoppers and open new revenue streams for the business.
Frugality and Economies of Scale:
Amazon is famed for its constant reinvestment and relative frugality. Despite billion-dollar revenues at the turn of the 21st century, the company first recorded a profit in 2003, a full eight years after its founding. The constant reinvestment flow into technology and data management has helped the business find cost-savings in multiple processes. This model has driven Amazon to becoming the trillion-dollar tech giant.
There is one common denominator in these four concepts: Management of data.
The Role of API in Amazon’s Success
In keeping with Amazon’s track record in innovation and early technology, CEO Jeff Bezos may or may not have sent a now-famous “API Mandate” email to his developers in 2002. According to the legend, it goes as followed:
- All teams will henceforth expose their data and functionality through service interfaces
- Teams must communicate with each other through these interfaces.
- There will be no other form of interprocess communication allowed: no direct linking, no direct reads of another team’s data store, no shared-memory model, no back-doors whatsoever. The only communication allowed is via service interface calls over the network.
- It doesn’t matter what technology they use. HTTP, Corba, Pubsub, custom protocols — doesn’t matter.
- All service interfaces, without exception, must be designed from the ground up to be externalizable. That is to say, the team must plan and design to be able to expose the interface to developers in the outside world. No exceptions.
- Anyone who doesn’t do this will be fired.
- Thank you; have a nice day!
Whether this email was ever sent is unconfirmed; however, it does neatly reflect Amazon’s approach and the path to success. The mandate clearly sets out the need for a pathway for communication and data management through interfaces. By forcing Amazon’s employees to communicate through these interfaces exclusively, Bezos is driving the company towards APIs.
APIs’ role is to serve as a connector between the various systems and the user - whether they are workers or customers. A good example of this can be seen in Amazon’s recommended product algorithms, where the data taken from customers’ purchases are fed into data silos that support the process. APIs help to manage, sort, and direct the data to the relevant areas.
When you consider this process is repeated across every aspect of Amazon’s operations, it becomes clear that APIs are the engines behind the company’s rocket-fuelled growth.
APIs Driving Ecommerce
The retail sector’s successful response to the challenges and opportunities posed by the pandemic can, at least partly, be attributed to the presence of APIs. Having tools that can help process and manage data can give businesses the crucial competitive advantage it needs to succeed.
In the digital era, flexibility is essential as businesses increasingly pursue new sources of revenue. Amazon, for example, is a cloud-computing giant as much as it is an ecommerce company. APIs enable companies to follow the strategy of diversification and grow their revenues.
As well as a tool, it’s essential to embrace the way of thinking that drives Amazon. The constant pursuit of innovation, technological advancement, improving the customer experience. Using APIs can assist in each of these goals by providing accurate and accessible data that can be analyzed. Businesses that proactively utilize these capabilities will maximize their potential.
While it may be difficult to replicate Amazon’s wild success, there’s no reason why ecommerce businesses cannot replicate the same approach. By using a cloud-based API solution like Universal Adapter, companies can prepare for the digital retail transformation that’s already underway.