Amazon Flywheel Business Model in 2024

Ever wondered what the secret formula is to Amazon’s jaw-dropping success?

Well, the first thing is that it’s not much of a secret.

Amazon reported a net income of $33.36 Billion in 2021 and the Amazon Flywheel strategy is a huge factor responsible for their tremendous success.

This strategy has been successful not only for Amazon but also for Amazon sellers. Unlike Amazon’s other marketing strategies that rely on driving new traffic, Flywheel excels in momentum and impacts all parts of your business, leading to a better customer experience overall.

It also brings multiple benefits that enhance a seller’s business strategy and brings even more profit. Read along to find out almost everything related to it and why it’s such a special strategy for Amazon.

What Is Flywheel on Amazon and How Did It Start?

Also known as the “Amazon Virtuous Cycle“, the Amazon Flywheel theory is a strategy in which various values work perfectly synchronize to promote traffic and overall growth.

Jeff Bezos, the founder of Amazon, came up with this philosophy in 2001 with the customer’s best interests in mind. Believe it or not, he wrote it on a paper napkin!

For a company of its size and value, you may think that they operate on very complicated processes. However, simplicity is key for this business philosophy, and I will show you just how it works.

Flywheel Business Model Explained

The Amazon Flywheel cycle has growth at its core but is fueled by focusing on the customer rather than profits. You can see the Amazon Flywheel diagram on the graph below. 

Jeff Bezos is a very wealthy man, but at the end of the day, he still grew Amazon by the principle of customer satisfaction.

By providing a great customer experience at reasonable prices it leads to happy customers who are more likely to come back – thus pushing the cycle!

Amazon Flywheel goes in two cycles that merge.

Let’s break down how the initial cycle works:

• Availability of third-party sellers leads to competition and wider product selection
• Competition and a wide selection of products allow for lower prices, which fuels positive customer experiences in return
• Positive customer experiences result in repeated purchases, bringing in more traffic
• High traffic brings in more third-party sellers and overall growth

The second cycle goes as follows:

• The company’s growth opens doors for a lower-cost structure
• The lower cost structure allows for lower prices of products
• Lower prices once again improve customer experience

and so on and so forth!

How Effective Is Amazon Fly Wheel?

Amazon is the most significant global marketplace in today’s world. You won’t believe that back in 2022, Amazon had over 2.45 billion website visits per month! And there’s no other platform for retailers to gain this massive traffic.

According to Forbes, the stock price rose over $3200 on Amazon by July 2021. The pandemic can be the reason behind this success, as many people switched to online shopping after COVID-19. 

In fact, the whole e-commerce industry around the world experienced growth during this time, and it’s not surprising at all that Amazon dramatically benefitted from it. 

After inventing the Amazon Flywheel strategy, Jeff Bezos experiences massive growth. The proof of this statement is the Amazon company now has over 1 Million employees, and it’s a huge success considering Amazon’s beginning in 1994.

Currently, Amazon has hundreds of warehouses worldwide, and some of its warehouses are as big as a football field.

Benefits of Using Flywheel Amazon for Your Business

With a fundamental understanding of the Amazon Flywheel effect, you and your brand can benefit from its growing power and dynamism. Here are the main advantages of implementing it. 

No stockouts

Flywheel’s influence is that your goods will stay in stock, you will diversify the product range to provide your clients with more options, and you will be able to reduce prices to make your products more attractive.

Faster development

Your sales will grow as your items rise in rank, and the higher the rank, the more chances you will gain better listings and visibility. In addition, client loyalty, social evidence, and advocacy help get positive reviews that boost your overall sales and ranking. Such growth is followed by a rich client experience and the ability to lower costs.

Enhanced customer experience

The platform’s success is based on an unrivaled assortment of goods and inventory at competitive costs and an excellent customer experience that makes individuals return for more. Similarly, your brand will be able to do the same and deliver an exceptional client experience across its visitors by consistently emphasizing the buyer experience on your platform, which influences everything from pricing to value.

Who Can Use Amazon Flywheel Model?

Amazon Flywheel is a strategy that brings Amazon to the place where it is today. It has also helped sellers to grow and develop their businesses from the beginning.  And the good part is there are no specific criteria for sellers to be eligible to use it for their brand or business.

But it has some ways that begin the spin on the Flywheel. If you are a new seller on Amazon or an experienced one, you need to list your product in such a way that pushes the wheels to spin.

Amazon has developed the e-commerce Flywheel model that can be applied to any business model. But to move the Flywheel, you, as a seller, need to put lots of time and effort into building customer experience, so it may take longer time than you think.

How to Apply the Flywheel Model to Your Amazon Business?

Price, selection, and availability are the pillars of any business’ flywheel. In the Amazon ecosystem, it’s important to build your business with integrity and precision. Merely listing something available at a low price isn’t going to sell it on Amazon these days. It takes strategy to get the flywheel moving, which will give your brand a better reputation through more reviews, better exposure as you climb the sales rankings, increased conversion, and more sales and revenue.

Ways to Fuel Amazon Flywheel

Ensure your products are retail-ready

Retail readiness means making your listings as good as possible. Optimizing your pages with SEO-rich content, answering customer questions, providing detailed information that’s readable and useful, and ensuring you have good reviews is a great initial push to start the flywheel moving forward.

Don’t try black hat tricks

While some tactics sellers use to gain momentum can be really effective in the short term, they rarely pay off in the long run. For example, buying reviews, retail arbitrage, or other sketchy methods might actually slow the flywheel down when you get listings or your entire account suspended.

Provide a good customer service

Taking a hint from Amazon’s success, ensure your business is ready to provide stellar customer service. This might mean providing a refund to unhappy customers when something goes wrong, giving away products via Amazon Vine, so customers can see valuable reviews on your product listings, or ensuring you’re registered for the Brand Registry so customers can know they’re getting the real deal and not counterfeits. While these actions may lower your margins at the beginning, the flywheel’s focus on customer service will ensure a good reputation and a return on your investment in satisfied customers.

Take advantage of Amazon’s platform

One component of Amazon’s flywheel is sellers. The third-party marketplace is literally a cog in Amazon’s flywheel. While it may be counterintuitive at times, sellers are in essence, just another Amazon customer. Amazon wants to keep sellers and vendors happy. Take advantage of the programs and opportunities Amazon provides you, its customers! This may mean attending their free Amazon Advertising seminars, providing feedback to Seller Support after a ticket is resolved, or utilizing Amazon programs like Born to Run or Manage Your Experiments to conduct testing and fuel your sales.

Enhance Your Selling Strategies with SageMailer

One more tip to crown it all. Use SageMailer to safely boost your reviews and increase sales. The tool sends automated emails requesting a product review or seller feedback to all your customers. Such proactive communication improves the percentage of clients who share reviews, improves your AMZ rating, and minimizes the possibility of earning negative feedback.

Moreover, with SageMailer’s Amazon review analytics, you can gain deeper insights into your ASINs. The tool offers informative graphs that provide a clear visualization of the distribution of customer reviews over time, including days, months, and the five-star system. SageMailer offers historical data on the percentage of positive and negative feedback received, allowing you to compare your feedback to the number of emails sent and the total number of orders. By filtering and analyzing data by date range, ASIN, and other relevant details, you can identify trends and develop effective strategies to improve your business in the future and make more informed decisions. 

Amazon Flywheel Model: Key Takeaways

If there’s one thing you take away from the Amazon flywheel, it’s that everything feeds into the customer experience. Customer experience is king, and everything you do, from your content to your processes, should aim to deliver an excellent customer experience.

Continue to feed the flywheel – from advertising budget to optimization – always with customer experience in mind.

This strategy mimics how the marketplace works, so not only will you see rewards, but you’ll also see growth.

Of course, this isn’t an overnight process. It takes time and investment to get the wheel spinning. Be aware that every tiny optimization you make influences your flywheel, adding, just a little, to its momentum. These improvements add up and make a difference. So, always be on the lookout for new avenues to keep it moving.

Want to boost your Amazon business even more? Sign up for SageMailer’s free 30-day trial! Benefit from our automated feedback management software that can make your customer experience and sales soar.