In this guide, Amazon PESTLE Analysis, we’ll take an in-depth look at the political, economic, social, technological, environmental, and legal factors that are impacting Amazon’s business. Learn how these forces are shaping Amazon’s strategy and operations and how you can use this knowledge to make better decisions about your own business.
Amazon is an e-commerce industry leader founded by Jeff Bezos in 1994. It started as a bookstore and diversified its business model to include everything you can imagine. The e-commerce platform has simplified the shopping experience for consumers. If a consumer is not willing to go outside for shopping, he can still get what he wants. He tries to find a product, analyzes the reviews and ratings, and makes the final decision.
Amazon has become the top e-commerce retailer, but it is not sticking to it any more. Amazon is now investing in stores to increase its customer base and market share. Let us discuss the pestle analysis of Amazon to identify the external factors in its macroenvironment. If you are interested, please check Swot Analysis of Amazon.
How Political Factors Affect Amazon Pestle Analysis
Amazon is an e-commerce platform that serves millions of customers worldwide. The company has to face political influences and government activities that can affect Amazon’s success.
Political stability can affect Amazon’s e-commerce business. For example, the political stability of developed countries like Australia gave Amazon.com an opportunity to expand its business in the region. Even stable political governments can create threats for a company. The European Union is investigating Amazon.com regarding the use of retailers’ data who sell on Amazon Marketplace. If the regulators find Amazon guilty, it can face severe consequences. Such political issues affect Amazon’s brand image and profitability at the same time.
Another political factor that is worth mentioning is the government’s laws for e-commerce businesses. For example, a few months ago, the Indian government stopped Amazon and Flipkart from selling products of those companies in which they have equity stakes. The government supports companies like Amazon due to their huge investments, but they still have to comply with government laws and regulations, which is sometimes very difficult. However, this political factor becomes a threat when it supports other companies in the industry. For example, in China, the government supports Chinese e-commerce companies to flourish their businesses.
Other external environmental factors that can affect Amazon Inc. are cybercrime. If any government wants to improve the e-commerce business environment, it must fight against cybercrime. This can create an opportunity for businesses.
How Economic Factors Affect Amazon
Amazon will grow fast if the economic conditions are positive in the areas where it is operating. Retailing is a medium through which producers offer their products and services to consumers. Consumers buy from retailers in any economic condition, and sometimes the retail business survives even in the worst economic conditions.
Consumers’ disposable income is increasing, which is a great opportunity for Amazon.com. Higher disposable income means consumers will shop for products of their choice. This will provide companies like Amazon, Walmart, and eBay with an opportunity to expand their businesses to increase their market share and brand presence. According to the National Retail Federation, U.S. retail sales are expected to reach $3.8 trillion in 2019.
No doubt Amazon is an advanced technology company and is facing criticism for offering fewer job opportunities and preferring to use technology where it is possible. The company denied the news and replied that Amazon is looking forward to hiring highly skilled staff in the UK. But in May 2019, the company announced a program for those employees who want to quit. It will offer $10,000 plus a three-month gross salary for those who want to quit jobs and start their own delivery services for Amazon Packages.
Economic recession is another key macroenvironmental indicator that can affect Amazon. For example, the Chinese economy is slowing these days, and this Chinese recession is considered a threat to Amazon business expansion. The Chinese market is one of the key markets Amazon wants to penetrate.
The flourishing retail industry creates opportunities, but not only for Amazon. It means more competition for Amazon. Like the retail industry, retailers are also flourishing their businesses and creating more competition in the market. For example, Walmart is increasing its online presence to not only compete with Amazon but also to improve its thin profit margins.
How Social Factors Affect Amazon
Social factors, trends, and behaviors can affect the performance of Amazon both negatively and positively. Amazon made people lazy; allow them to stay at home, and the Amazon delivery system will take care of everything, like streaming movies, food items, and groceries. Staying at home and eating junk food affects the health of American adults and children. The government is under immense pressure to take necessary measures to improve the lifestyle of every citizen.
The young generation is enthusiastic and crazy for online shopping. Easy internet access and mobile devices increased this ratio. Senior citizens who don’t walk or don’t like to go outside can also use Amazon’s online shopping facility. Online shopping is becoming a hobby these days. Amazon can capitalize on this opportunity to reach more and more people around the globe.
According to the SurveyMonkey/Recode Poll, 20 percent of Americans believe that Amazon has a positive impact on society as compared to any other tech company like Google, Apple, Facebook, or Microsoft.
How Technological Factors Affect Amazon.com
Technology is the backbone of Amazon. Technology has made Amazon one of the most profitable companies in the world. Amazon is focusing on technology in terms of cloud computing (amazon web service) in every system to satisfy its customers.
Amazon is looking to use technology to the fullest for its delivery systems. Amazon Prime Air is a new future delivery system to deliver packages to consumers using unnamed aerial vehicles, also known as drones. Amazon is working with different regulatory authorities to comply with their requirements and design a sound air traffic management system.
Cybercrime is a threat to Amazon. The whole business model is in stacks. Amazon consumers and third-party sellers have concerns about their sensitive data, like credit cards and debit cards, and any personal or confidential information stored on the Amazon website. In this Amazon pestle analysis, cybercrime is a real threat to Amazon. According to CJ Rosenbaum, a lawyer who works for Amazon sellers, his several clients informed him that they were hacked and lost their monthly sales.
Technology becomes obsolete with the passage of time, and Amazon is facing the same issues that pressure it to regularly work on technological assets. All the investments in information technology create a competitive advantage for Amazon.
How Environmental Factors Affect Amazon
Amazon Inc. has resisted pressure from investors and other stockholders to disclose information relevant to environmental impact. Recently, Amazon.com committed that it would disclose all such information later this year. Another challenge for Amazon is reducing organizational emissions. It is quite complicated to estimate the emissions from e-commerce businesses. Ordering online requires less energy than driving to physical stores and buying or picking up groceries.
Amazon is also looking to make half of its shipments emission-free by 2030. Amazon has more than 100 million Prime members who are eligible for two-day delivery. As a result, “when customers want to receive a product in one or two days, the carbon emissions increase substantially,” he said. “If you are willing to wait a week, it’s like killing just 20 trees instead of 100 trees.”
How Legal Factors Affect Amazon, Inc.
Amazon business operations must comply with different laws and regulations. There are many legal factors that can affect Amazon, for example, anti-trust laws, discrimination laws, consumer protection laws for e-commerce businesses, and data protection laws.
Counterfeit product regulations are necessary and in demand among consumers. This can be considered an opportunity for Amazon to increase its efforts to minimize counterfeit sales on its e-commerce platform. Amazon already has an anti-counterfeit policy in place. Every product offered by sellers on the Amazon platform must be authentic. The sale of such products is strictly prohibited.
There are different consumer privacy acts that could create a threat to the macroenvironment of Amazon. The California Consumer Privacy Act 2018 is one of them and will take effect in 2020. Giant tech companies like Amazon, Apple, and Facebook will be required to inform users what type of data they collect and how they share or use this data.
Another legal factor is that the EU GDPR (General Data Protection Regulations) affects Amazon and all those companies that collect customer data like names, emails, and bank information. All consumer data must be protected. The European Union launched an investigation and fined Google and Facebook. This is considered a huge threat to Amazon.