There is a great metric by which companies’ success can be measured. Effectively, if the name of a corporation’s good or service becomes interchangeable with the product category as a whole, the company’s product – or at least its marketing – is probably pretty successful. Older examples would be the use of the word “Xerox” as a verb, or “Kleenex” as a catchall for tissues. In our generation, the use of “Google” as a verb is likely the best example.
I received an Amazon giftcard the other day. As I perused the site and compared prices with other e-tailers such as Target, Best Buy and Wal-Mart, I found that, as always, Amazon undercuts its competition, especially with tax and shipping factored in. Since I spend much of my pocket change at Amazon, this discovery came as no surprise.
But what was surprising was an interesting metric; Amazon, nearly earth’s largest
bookseller, books a net profit of only 1.34%. Granted, they rely on volume, not margin, for profits, but this incredibly low number was compelling, and seems indicative of Amazon’s corporate philosophy of using loss leaders – like the Kindle Fire – and microscopic margins to catch and keep customers within its simple and increasingly expanding product and entertainment ecosystem. The thinking is, as long as one buys a book at Amazon – giving them, say 28 cents on every $25 hardcover sold – one may as well purchase digital content from Amazon’s burgeoning music, video, and e-book selections. And while you’re at it, why not everything else?