What is Amazon Flywheel or Amazon Virtuous Cycle?|Bizistech

Amazon has become the world’s largest customer-centric organization on Earth.

Ever thought, how?

Well, it’s not a secret anymore. The founder and CEO of Amazon, Jeff Bezos, has explained the strategy or model he uses for Amazon, known as “Amazon Flywheel.”

The term “Amazon Flywheel” was first used by Jeff Bezos in 2001, and later, Amazon used this model in other businesses like Amazon web services. Not only Amazon now, many other e-commerce sites like eBay, Walmart even Shopify is using the jeff Bezos flywheel model.

Now, what is the Amazon flywheel, and how does it work? We will discuss all its aspects in this article.

Before we talk about Amazon Flywheel let’s see,

What is Flywheel?

A Flywheel is a rotating wheel made up of a metal desk used in machines to gain momentum. Due to its heavyweight, it isn’t easy to start, but it built its momentum and started to rotate on its own once it began to.

What is Amazon Flywheel?

Amazon Flywheel strategy works the same as Flywheel; you have to put an initial force on it to start the wheel.

Amazon started this wheel from the Customer experience and is still focusing on it as Jeff Bezos once in his interview said  “We are laser focusing on customer experience, and we will try to provide them the best experience even before they realize they needed it.”

Three Main Focuses of Amazon Flywheel

Amazon Flywheel is also known as Virtuous cycle, which focuses on other three elements:

  1. Selection
  2. Lower prices
  3. Traffic 

Amazon Flywheel Diagram

Amazon Flywheel Diagram
Source: Amazon

How does the Amazon Flywheel model work?

Initially, Amazon started with a customer experience. To gain the best customer experience, they focused on factors like selection, lower prices, and traffic, which are interconnected.

By selection here means providing as many choices to customers they want. Today Amazon offers more than 30 products categories with the motive that “Customers will get what they want .” That’s why the majority of the people pick Amazon because they offer more product selection as compared to other marketplaces.

Now, you might be thinking about how Amazon can offer so many choices; they did this by starting an open marketplace or the third-party market, allowing third-party sellers to sell their products at their desired price even if they are competing with their partners. 

Now, what was the purpose of this action?

Amazon allows third-party sellers to lower their cost structure, so they charge third-party sellers for using their platform for selling, offering lower prices which means a greater customer experience.

Amazon Flywheel Working Process Imaginary Design

The concept of this whole model is if people can access as many products they want, they will be happier and will come back, which drives more traffic. Now, after noticing this a lot of traffic, many third sellers will be interested and want to use Amazon as a selling platform that ultimately doubled the selection and lower the cost structure, allowing Amazon to offer low prices that automatically improve the customer experience.

The beauty of this model is that everybody is benefited from each other as every factor is interconnected to each other. That’s why Amazon called this Flywheel “Growth Flywheel.”

Amazon is still using this core concept in its other businesses; that’s why Amazon is the world’s largest marketplace. 

This means you can also utilize this strategy in any business, whether you are a seller on eBay, Walmart, or Shopify. You need to put an initial force on it because your business will automatically start running once the wheel is started. You can also use this model in your other businesses; you need to understand your main focus.

Pros and Cons of Amazon Flywheel

Pros

  • Allows third-party sellers to market their products.
  • Sellers can reach a wider audience through this platform.
  • Brand owners can better take advantage of Amazon services like prime delivery, storage, and fulfillment through FBA, which helps them promote their brand.

Cons

  • There will be so many sellers from different countries, so brand owners have to lower their prices to remain competitive.

FAQs

Conclusion

The Amazon Flywheel model is a successful strategy which we can see by the brand reputation of Amazon that today it’s the world’s largest customer-centric marketplace.

Every strategy or model you use needs a lot of effort to start, so you need to build enough momentum to create the wheel once.

After seeing an Amazon flywheel model, if you want to become an Amazon seller or get advice on which Amazon model will be best for you, contact us at info@bizistech.com or call us at +1(323) 746-2485. Our experts will give you the best advice on implementing this model in your business.

So, share with us how you are using this Amazon Flywheel model in your business?

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