Amazon is undergoing a change in leadership as Jeff Bezos stepped down from CEO on July 5 — a sentimental day for Bezos as it marked exactly 27 years since Amazon was incorporated. His replacement is Andy Jassy, who has been running Amazon Web Services (AWS), the leading cloud platform, since its conception in 2006.
Bezos first announced in February that he will be stepping down as CEO and transitioning to Executive Chair of the Amazon board. Now, the company is gearing up for a monumental transition to new leadership under Jassy.
Learn more about this pivotal move for Amazon and how this might impact its subscription business model.
From Online Bookstore to Subscription Conglomerate
Amazon was first an online bookstore that Bezos started from his home in Seattle in 1994. As the years went by, Bezos led the company’s rapid and diverse expansions. .
Eleven years later, Amazon entered the subscription space with Amazon Prime. For $79/year, customers received free two-day shipping on any order.
Under Bezos’ leadership, invention has been at the root of Amazon’s success. The company’s innovations have always been in support of customer loyalty, convenience and being able to quickly adapt to changing consumer habits. It was Amazon who pioneered the 1-Click technology that allows customers to purchase items online with the click of a button. This allows customers to rapidly purchase one-off products as well as add new merchandise to their Subscribe & Save accounts.
The brand lives by a 14-principle leadership style, many of which are very important for subscriptions, including earning trust, customer obsession, insisting on the highest standard, and delivering results. This thought leadership has supported Amazon’s dominance in replenishment and membership subscriptions.
Now, Amazon has more than 200 million Prime members worldwide, compared to 150 million in January 2020. Prime busts open the door for small- and medium-sized businesses to publicize their products, making up to 60% of Amazon’s retail sales, according to a letter Bezos sent to shareholders.
Amazon’s overall revenue for 2020 jumped 44% year-over-year, according to the Wall Street Journal. The company’s e-commerce businesses are a combination of online stores, third-party, and subscription segments — a total revenue of $84.2 billion.
Data shows that 69% of people who begin Prime’s free-trial membership convert to a paid membership. More than 90% of those consumers “continue to pay for the program after one year, while 98% stay signed up after they’ve been Prime members for two years,” according to Digital Commerce 360.
Seventy-four percent of Prime members start their product searches on Amazon.com instead of Google or any other domain versus 29% non-members, according to a Civic Science survey. Combined with the 1-click technology, Amazon has created a seamless purchasing process and brand loyalty — a hugely important aspect of a subscription business.
Amazon has a lot of subscription notches on its belt, including:
- Kindle Unlimited, which provides Kindle readers with a large selection of books for $9.99/month after a 30-day free trial.
- Audible, an audiobook subscription for $14.95/month or $22.95/month.
- Subscribe & Save, a recurring delivery option for household products.
- Vinyl of the Month Club, a curated collection of 1960s-1970s vinyl albums for $24.99/month.
- Twitch, owned by Amazon is a video live streaming platform that allows streamers to monetize their content.
- And so much more.
As the popularity of subscriptions skyrocketed during the pandemic, Amazon saw a boom in sales, with a 38% increase in revenue year-over-year, according to SUBTA’s Subscription Industry Covid-19 Report. The company’s subscription services alone were already at a 36% increase year-over-year in Q1 2021, reaching more than $7.5 billion.
At the time of Bezos stepping down, Amazon had 1.3 million employees worldwide and $386 billion in revenue last year. Although he has big shoes to fill, Jassy has a bright future ahead thanks to his 15 years as an executive at Amazon and his work with subscriptions through AWS.
Jassy’s Business Experience at Amazon
Bezos is not leaving Amazon entirely. He still owns more than 60% of the company’s shares and will oversee new products and early initiatives as Executive Chair. “Amazon couldn’t be better positioned for the future. We are firing on all cylinders, just as the world needs us to,” he said in a letter to the company.
AWS, Jassy’s area of expertise, offers pay-as-you-go and annual subscription cloud computing for businesses. Amazon’s loyalty has always been at the top of their business model and this allows its customers to adapt their expense needs.
“Instead of buying, owning, and maintaining physical data centers and servers, you can access technology services, such as computing power, storage, and databases, on an as-needed basis from a cloud provider like AWS,” according to Amazon’s AWS website.
AWS is widely used across many corporations. Even leading subscriptions like Netflix, HelloFresh, and Disney+ utilize AWS and its cloud computing softwares. AWS even provided services for the World Health Organization in its response to Covid-19.
Jassy moving to Bezos’ position means Adam Selipsky is rejoining the Amazon team. Selipsky was Jassy’s right hand man as the former VP of Marketing, Sales and Support of AWS before becoming the CEO of Tableau Software. While at Tableau, Selipsky grew the company’s subscription component tremendously.
“More and more, organizations are demanding subscription purchasing options for all of their software, and data analytics is no different,” Selipsky told analysts on a 2017 conference call, according to CNBC. “It’s no surprise why, as with subscription, our customers get the full power and simplicity of Tableau with lower risk, lower upfront investment and more flexibility,”
Tableau’s Q1 2019 results proved Selipsky’s push for subscription was the right move: nearly 85% of Tableau’s revenue came from subscriptions. With Selipsky back in leadership at AWS, the cloud computing business and Amazon overall will undoubtedly increase its subscription revenue under his direction.
Jassy’s leadership propelled AWS in particular to see a 32% year-over-year growth in Q1 2021. Amazon stock was up 0.42%, potentially signaling a positive impact of this transition.
However, Jassy must expand his focus from software as he moves into a role managing everything from physical products to technology creation and shipping logistics.
Saving the Face of the Amazon Business
While Bezos considers his business to be an example of the “American Dream,” there are others that disagree.
Since the beginning of this year, Amazon warehouse workers and drivers have given their best attempt to create the first U.S. warehouse union, and their fight is far from over. Reports from Alabama of a too-demanding work environment sparked a surge in a union. The International Brotherhood of Teamsters — a labor union in the U.S. and Canada — are at the forefront of unionizing Amazon warehouse employees.
Similarly, the United States government filed a lawsuit in May 2021 against the e-commerce giant, claiming that it is stifling competition through controlling third-party sellers. Last year, the European Commission took a similar route and investigated Amazon for using sensitive information to stay ahead of the competition.
The bigger Amazon’s reach and offerings, the greater the responsibility its CEO has to continue appealing to changing consumer needs. Jassy has a lot of expectations to exceed. But as Bezos was his mentor for the better part of 20 years, he is well prepared to lead the behemoth that is Amazon. The company has already identified and implemented key elements of a subscription business; now we’ll see how Jassy’s experience will impact Amazon’s subscription services and future innovations.
- Andy Jassy is replacing Jeff Bezos as CEO of Amazon.
- Jassy ran Amazon Web Services for nearly 20 years and will be replaced by Adam Selipsky.
- The company’s subscription services reached a 36% increase year-over-year in Q1 2021 — more than $7.5 billion.
- Under Selipsky’s direction, both Amazon and AWS will undoubtedly see an increase in subscription revenue.
- Amazon has been able to create a seamless purchasing process and brand loyalty — a hugely important aspect of a subscription business.