Introduction
Amazon.com, Inc. is one of the largest online retailers in the world that engages in the retail sale of consumer products and subscriptions. The company serves three major segments, namely International, North America, and Amazon Web Services (AWS) (“Amazon.com, Inc. (AMZN),” 2020). It sells content and merchandise bought for resale from third-party sellers through both online and physical stores. In addition, Amazon manufactures electric devices, for example, Fire tablets, Rings, Fire TVs, Kindle, and Echo among others. Amazon offers publishing services through Kindle Direct, which is an online platform where independent publishers and authors offer books in the Kindle store. Other services include free shipping membership programs, apps, databases, advertising, film and TV streaming services, and digital content subscriptions.
The emergence of the Internet and advances in digitization are the major aspects that influenced Amazon’s business model. The company started as a book store and developed into a store for most products used by human beings. On its website, Amazon remains a major bookseller alongside other products such as pet supplies, home furnishings, jewelry, health and beauty, office products, consumer electronics, lawn and patio, automotive products, groceries, software, and clothing among others (“About Amazon.com, Inc,” 2020). The growth of Amazon’s e-commerce model has been facilitated by millennials and their relationship with technology.
According to Oliveira et al. (2017), no generation has interacted with technology before in the same way the millennials have. This interaction has redefined how they want to consume goods and services, how they want to be taught, lead, and be led in organizations after graduating. Many people believe that without Amazon there would be no e-commerce (Schrager, 2019). This is because Amazon has changed the retailing dynamics, models, and how people shop (Statt, 2018). It has influenced multiple industries and sectors in the process and capitalized on millennials’ readiness to embrace technology.
Today, millennials have become one of the most important consumer groups. Companies such as Amazon have tried to learn how this population behaves, their preferences, tastes, and desires. However, the most important aspect of the millennials is their use and adaptation of technology in their daily lives (Moreno et al., 2017, p. 135). The concept of the knowledge economy best describes the nature and development of Amazon. According to Hadad (2017, p. 206), the knowledge economy comprises intangible assets such as information and knowledge management which become the new core competencies for firms.
This can be seen in Amazon’s investment in research and development which helps it create platforms that help buyers make buying decisions. The company deploys an architecture for participation where it harnesses the power of users (Tou et al., 2019, p. 1). That is to say that user-driven innovation creates a knowledge base that allows the firm to adapt its services, platforms, and infrastructure in response to the needs and experiences of the clients.
The focus of this report will be on Amazon’s disruptive technologies that have reshaped how people purchase and consume goods and services. These disruptions are often accompanied by social and demographic shifts which have a strong impact on organizational structures and business models. As explained above, the dependence of millennials on technology changes how retailers such as Amazon sell to them. The report examines the various drivers of economic change, in this case, the emergence of millennials and digital technologies. Additionally, the report will examine the legal and political frameworks and offer recommendations.
Literature Review
The knowledge economy can be seen as a paradigm shift from traditional economies. It has been defined as an economy based on knowledge-intensive activities that accelerate the pace of scientific and technical advancement (Ogundeinde and Ejohwomu, 2016, p. 791). In other words, the economies are now driven by knowledge and information management, practices that involve the production, dissemination, and use of information. These activities in this economy have become tools for job and wealth creation and are now used as the basis for the pursuit of sustainable development (Mostafa and Mohamed, 2016, p. 21).
Other descriptions of the knowledge economy include the integration of digital technologies, digital markets, ICTs, and the Internet and related technological frameworks and platforms through which the economy operates (Vasin et al., 2018). As such, technological developments can be seen as the key features of the knowledge economy.
The major drivers of the knowledge economy include technology, specifically information and communication technologies (ICTs). According to (Bogoviz, 2019, p. 85), the concept of industry 4.0 is the new vector of growth and development of this economy. This researcher argues that the knowledge economy comprises innovation-active enterprises leading the entrepreneurial development and new production technologies, as well as a share of high-tech spheres, including science and education.
The ‘intangible’ economies that have emerged as a result of technology include the Internet, service, cultural, and creative economies among others (Švarc and Dabić, 2017, p. 159). Specifically, the Internet and social media have provided interactive virtual platforms within which people engage with each other. Businesses such as Amazon have only utilized these platforms to reach out to consumers who have also adapted to online shopping.
In essence, therefore, the knowledge economy would not be realized without digital tools that allow not only interactions but also information sharing. From a marketing perspective, the Internet and social media is a major tools for marketing research (Misirlis and Vlachopoulou, 2018, p. 272; Shaltoni, 2017, p. 1010; Yadav and Rahman, 2017, p. 1296). As mentioned earlier on, companies such as Amazon operate through online platforms developed from an understanding of the users. The use of the Internet to connect with customers and stimulate their purchasing decisions is seen here as the perfect example of technology as the foundation of the knowledge economy.
However, the role of knowledge or information in this economy cannot be understated. Indeed, technology is seen as a platform for knowledge sharing and management making information the most important of the knowledge economy. According to Hadad (2017), the knowledge economy is defined by information and knowledge. It is a dynamic, complex, and adaptive system which depends on e-development tools, production factors, and leverages e-commerce. Historically, the concept of knowledge has been associated with human capital by early theorists such as Adam Smith. Since then, both human capital and knowledge have been perceived as critical growth factors.
The current generation can, therefore, be regarded as the one which has achieved new heights with these factors. The development, however, has been facilitated by the ICTs, most importantly, the Internet (Hippe and Fouquet, 2018, p. 76). The Internet has provided new business opportunities and affected the way people learn and educate themselves. When these aspects are applied by businesses, it becomes a means of information and knowledge management.
The socio-economic and demographic changes that have allowed Amazon to prosper can be summarized by the emergence of millennials and their consumption habits. The millennial is a term used to describe the generation born between 1980 and 2005 (Črešnar and Jevšenak, 2019, p. 57). As of 2018, it was estimated that the millennial generation in the United States was over 75 million people making it the single largest portion of the American population (Frey, 2018). It has surpassed the postwar baby boom generation meaning that modern organizations will be forced to adapt to their values, tastes, and preferences to sell products and services to them.
A common term that has been used to describe this population is “technological savvy”, meaning that the millennials are dependent on technology. This feature has not been witnessed in previous generations and it can be anticipated that the same characteristic will be observed in future generations. Besides being technological savvy, the millennial generation values independence and displays a great level of tolerance, as well as being averse to large institutions. They offer an insight into a future characterized by ethnic and racial diversity.
The millennials are consumers of technology, and this has been described as what exposes their preferences and tastes. Being a large population, businesses have a genuine interest in serving them. To do so, they have to learn about the types of consumers they are, including buying behavior. This is a great aspect of knowledge management where the connectivity of the millennials and increasing use of social media to share information gives businesses a valuable source of data (Moreno et al., 2017, p. 135).
Having been described as ‘living their lives on the Internet’, it means that this population comprises people influencing others to make buying and other decisions (Sethi and Kaur, 2017). The values and opinions are exchanged and challenged on a global scale through interactive social media sites. As mentioned above, marketers tend to consider these sites crucial for marketing research. One of the lessons that businesses learn is that this generation likes convenience, and online retailers such as Amazon seek to capitalize on this major characteristic.
Having learned the above lesson, a new mantra for many businesses has been “adapt or die.” Modern business leaders are under pressure as they find themselves between different philosophies of change and work. The companies are faced with a situation where they have to manage two crops of employees. One of them embraces the values of their firm while the other seeks to be valued as members of society. Despite these differences, many researchers acknowledge that millennials are key assets to businesses that have fully embraced the knowledge economy (Arentze et al., 2019).
As such, it is the management that must find new ways to engage the talent of the millennials. One way to achieve this includes offering them a work-life balance, one of the essential factors candidates look for in an employment opportunity (Afif, 2019). Emerging workplace issues such as remote working have also become common among the millennials who seek to utilize modern technologies to allow them to work in virtual environments (Wilkie, 2017; Zaharee et al., 2018). These changes represent the broader shifts in the socio-economic and demographic dynamics spearheaded by the current generation.
While the new shifts have seen the growth of companies such as Amazon, there emerging issues that can be described as controversial and detrimental to sustainability. One of these issues is the political power that has been gained by large technology companies and how they use this power. In a research article by Culpepper and Thelen (2019), the question of whether the masses have become “Amazon Primed” is examined. They express those large companies tend to set the terms of access through which consumers access products and services, as well as information. Such levels of control can be deemed dangerous for the society and economy as consumption is determined by a few large enterprises pursuing self-interests.
Another critique of these changes concerns the issue of consumerism. According to (Lister, 2016), consumerism is used to refer to excessive consumption of consumer goods regardless of the negative effects on people and the planet. This phenomenon cannot be attributed only to the Millenials as consumerism can be considered the key driver of industrialization, which has been the greatest threat to the environment. This was an era that extends to the current one where people tend to choose easy over ethical as explained by Lang (2019) who uses Amazon as an example. The knowledge economy rises in aggregate demand for consumer products, and new technologies can be considered detrimental to sustainability. As such, the current generation should be wary of the future implications of their consumption patterns.
Impact of Legal Framework and Political Factors
Political Factors
Companies such as Amazon often receive political pressure because of their monopolistic nature and are faced with anti-trust laws. However, it is argued here that the major political factors revolve around cybersecurity and user privacy. The issue of privacy, especially in countries such as the United States, has brought about dozens of political debates followed by legislation intended to protect all users of e-commerce and other digital platforms (Fazlioglu, 2019). As mentioned above, the emergence of a few large tech companies has given them political power over the markets and the consumers. These companies can influence the political proceedings in some countries considering that many governments support e-commerce and digital transformation. However, it is in the issue of privacy where governments and even individual users have more power over the companies.
Amazon has created several digital applications for its users, some of which have been blamed for violating user privacy. One example is Alexa where some customers expressed worried about privacy. These worries have resulted in sales decline prompting the company to make efforts to calm users down and to make assurances by implementing some privacy controls (Rubin, 2019). Some authors refer to the invasion of privacy as the ‘dark side’ of Alexa where, despite the device being fun for most, it can be a nightmare in some situations (Lynskey, 2019). Privacy is a political right in many democratic countries where governments are keen to implement measures necessary to achieve it. However, the political power of many tech companies has meant that the politics of privacy has become a losing game (Kerry, 2018). Many executives have had to answer to the senate and other legislative bodies regarding their commitment to privacy.
It should be noted that cybersecurity and privacy present political pressure for many businesses. As explained above, concerns about privacy invasion have led to Amazon losing significant numbers of customers (Rubin, 2019). Issues such as licensing digital businesses have depended on the extent to which the political climate is favorable and the degree to which the companies can assure both the government and users that there will be ultimate protection of user data. Cyber breaches are becoming more common and governments are forced to enforce even stricter regulations. Large companies may have the means to implement security frameworks. On the other hand, the smaller entities tend to be the most affected as argued by (Raghavan, Desai, and Rajkumar, 2017, p. 9) who state that over 50% of them have suffered at least one cyber-attack. Therefore, Ecommerce business models require careful consideration of privacy and security due to the political implications involved.
Implications of the Sharing Economy
The rise of the sharing economy has taken a path almost similar to that of the knowledge economy. This is because IT is considered to be an enabler of this economy where electronic, social, and mobile businesses form the basis of the sharing economy (Puschmann and Alt, 2016). The mobile and digital devices that have built the knowledge economy are the same ones building the sharing economy in addition to socio-economic and demographic changes, including consumer behavior. Peer-to-peer access to goods is a critical characteristic of this form of economy where the greatest outcome is a declining need for people to own assets.
More people now prefer sharing as the primary means of accessing goods and services, a situation labeled a paradox because it displays features of both a capitalist and its alternatives (Richardson, 2015, p. 121). The fact that the current generation is embracing these shifts means that technology companies such as Amazon would need to make the necessary adjustments.
The main way in which the sharing economy impacts Amazon is the degree to which sales are affected. A sharing economy means fewer purchases among the consumers and retailers will likely record declining sales. However, Amazon is an adaptable company that can be expected to join the sharing economy and gain revenues in the process. A news article by Allen (2015) reported that Amazon had entered a sharing economy with Flex delivery, a platform for a crowdsourced network of drivers. The resulting infrastructure has been likened to that of Lyft and Uber in that it allows drivers to sign up for delivery shifts. The sharing economy, therefore, may present Amazon with another market opportunity in which to pursue further growth.
Formal and Informal Legal Systems and Anti-Trust Laws
The vulnerability of e-commerce business models adopted by Amazon and other online companies has resulted in multiple formal and informal legal systems governing them. In essence, legislations such as money transmission laws and counter-terrorism laws present companies with formal laws and regulations with which to comply (Trautman, 2016). Such businesses should not allow themselves to be used for money laundering and other illegal deeds. Technology has also offered terrorists a medium for conducting their activities, either through communication channels or other media. Money exchanges between terrorists and their funders are a critical factor carefully monitored by the government.
The social economy presents businesses with an informal legal system governing the deeds of corporations, especially those that have a direct implication on the community. Earlier notions of the social economy and capital have included the concept of civic engagement and community development, as well as social enterprises. In the developing world, social capital is deemed to be the missing link in community development planning as explained by Adamtey and Frimpong (2018). In the developed world, concepts such as open co-operative reflect the social elements of the economy and the protracted efforts to care for the community (Fonte and Cucco, 2017). Companies whose agendas are aligned with those of the community are preferable to consumers and policymakers.
Lastly, Amazon’s growth to the level of market dominance exposes it to further legal implications in the form of anti-trust laws. Recently, Amazon has been subject to both US and European investigations for alleged cases of anti-competitive conduct. These two legislative regions probe Amazon’s use of third-party seller data and the company’s control of the buy box (Palmer, 2020). It is important to mention that Amazon has been a pioneer in the online retail industry which has made its niche. It took time before other companies can enter the industry meaning Amazon has the competency and knowledge that exceed its competitors.
Additionally, Amazon has managed to gain a massive market share across the world and its growth and expansion, as well as control over key resources, may result in a situation where the company behaves like a monopoly. The US and the European Union have very strict anti-trust laws meaning that the retail giant will likely face multiple accusations and suits related to anti-competitive behaviors.
Conclusion
Amazon has been one of the most disruptive brands on the planet as it pioneered e-commerce and the knowledge economy. E-commerce is a business model where a business engages its customers through the Internet and digital devices. These two elements are the basis on which the knowledge economy is built. As explained above, a knowledge economy comprises knowledge and information as the main components. It has also been stated that the Internet and social media provide tools for knowledge and information management.
The combination of these aspects has resulted in a paradigm shift that has been propagated through to consumers whose behaviors have also changed. Most importantly, the success of Amazon and the knowledge economy have been attributed to the rise of the millennials, a generation described as technology savvy. The millennials have embraced technology and companies that offer technology solutions, including those that make shopping easier.
Recommendations
The concepts of sharing economy and social economy have been discussed showing further market changes that could disrupt the companies. It is recommended that Amazon should take advantage of the sharing economy to facilitate further growth through cost savings. These will be necessary at a time when consumers will be doing the same. These savings will also offset any changes in sales revenues resulting in consumers choosing to share rather than to purchase. Secondly, Amazon can become more reputable by aligning its objectives with those of the community.
The social economy is growing in significance and people will likely align themselves and remain loyal to businesses whose focus of the greater good of the public. Lastly, the company should address all security and privacy issues associated with its platforms and applications. As mentioned above, these issues can lead to a decline in user subscriptions for fears of invasion of privacy.
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