In 1997, Amazon became a public company. And by 1998, Amazon’s revenue had reached $600 million. There are said to be 2 main reasons behind Amazon’s success. First, Amazon was offering a huge convenience to the customers. And at the time, there were next to no companies that was offering the same service as a competitor. And the second is something that’s called the Flywheel Effect. A flywheel is basically a spinning wheel, it keeps spinning evenly even when faced with changes in external conditions.
Amazon’s business model had become like a flywheel by then. They sold books at lower prices, and millions of books were available in their online store, so the customers had a positive experience, since the customers were happy, it drew more customers to their website, and because more customers were joining their website, the sellers of the books, especially the third-party commission-based sellers, wanted to join Amazon to sell their books. Because they could see the large number of customers it had.
So more and more sellers listed their books on Amazon, leading to more options of books to buy on Amazon for the customers. It had become a wheel that was being pushed in the same direction twice, increasing the rotational speed. When Amazon earned more profits, Amazon used that money to improve their website and to improve the customer experience as well as in keeping the costs low. Because this was a game of low costs. When books were being sold at low prices, more customers and sellers would use their services. And thus a nice business model was created.
