Sharing Economy
The concept of a sharing economy is simple: it lets people have access to stuff or to share stuff that they would traditionally not be able to afford. Rather than purchase, they are allowed to rent or pay for short-term usage while vendors let many people outside the firm to contribute to the consumer experience (Kane, 2016). With the advent of Web 2.0, content is driven by the user actively sharing and spreading information, whether via social media, or comments and reviews on particular items and services. In this way, the user becomes an unpaid advertiser for online business, as they share and remediate content across the Internet. Amazon as an online business embraces the concept of sharing ownership and control over products and services, by allowing users to create and run their own “stores” from within the Amazon site.
In this respect, Amazon is not only a business itself, but it allows others to run their businesses via the Amazon platform, which not only increases consumer visits and visibility of the site, but utilises this shared business model to exploit the sharing and promotion of Amazon and its services, via user-generated advertising outside of the Amazon network. The amount of unpaid advertising that Amazon would receive from users and “store” owners is invaluable in the current climate of user-generated and remediated content.
Early on, the site offered a simple approach to encourage sharing of Amazon content, thereby increasing sales, and creating revenue options for other businesses and sites outside of Amazon. After going public in 1997, the company offered what was to become one of its most successful external ventures: the Associate program. The Associate program allowed other website hosts to place ads within their personal sites, advertising relevant books to their visitors, which linked to Amazon, who would then take and complete their order.
For example, a web-master who ran a website about motorbikes might place ads throughout their site for their favourite books about bikes, so they could essentially recommend or suggest the books to their visitors, who could then click forward to purchase the book on Amazon. Not before signing up and making a user account of course - so not only was Amazon able to rapidly expand the reach of their business through affiliate advertising, they were also able to gain new (and hopefully ongoing) customers, and in turn, new affiliates.
Affiliates were rewarded with commissions of between 3 to 8 percent on any books sold via their site (“Amazon.com Inc. History”, 2016), and Amazon was able to advertise and sell their products through other sites at very little cost.
If the situation is analyzed according to Porter’s five forces of competitive advantage, then Amazon will be seen as having sufficient power over its buyers (Ehmke, 2005). They are not organized, and they are reliant on its services to fulfill their needs. It collects their information and uses the consumer intelligence to make better products and product offers. At the same time, sellers have low power against Amazon. They are restricted in their bargaining power because they cannot find another large-scale online retailer like Amazon (Baer, 2014). If they want to access the Amazon marketplace, they have to abide by the company’s rules and yield to its pricing demands (Baer, 2014). The company was able to do this by persistently asking publishers and content creators or license owners to lower their sale price. The intention of the company has been to reduce the entry point for consumers. A low price for consumers is a price that they cannot ignore. On the other hand, access to millions of consumers is an offer that most sellers are not willing to let go.
Amazon is succeeding in the attention economy and the sharing economy because it focuses on creating an ecosystem and improving the product offerings within the ecosystem in the online world (Kelleher, 2012). Users can get into one Amazon offering such as subscribing to Amazon Prime, and they can use the same account to find other Amazon services. The offers for sharing appear as the attractive points which cause consumers to direct their attention to Amazon.