Amazon Flywheel Explanation

27 Aug, 2020

If you are looking for a way to draw more traffic to your Amazon products, then you might want to check out the Amazon Flywheel. We’ll explain what it is here in a moment. Once you know what it is, you might be able to use it to your advantage in order to successfully sell on Amazon. 

To give you the definition of a flywheel, it is a revolving wheel that is heavy and is used in machines that are designed to increase momentum. From a standstill, a flywheel is difficult to move just by simply pushing it. By the time you are able to move it, you’ll be able to gain quite a bit of momentum from it.

To give you a good idea of how the flywheel works and how it ties into Amazon, IO Scout will explain how it can generate traffic to your eCommerce store or your Amazon product pages. Needless to say, the more traffic you generate and convert, the better your chances are for running a successful Amazon business. 

Let’s continue by defining what the Amazon Flywheel is and how it actually works.

What is Amazon Flywheel? 

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The Amazon Flywheel is also known as the Amazon Virtuous Cycle. Any way you call it, it’s a strategy that Amazon sellers can use in order to leverage their previous customer experience by driving traffic to Amazon and also third-party seller products and pages. As a result of this flywheel, the prices will tend to further the selection range of items and also lower the prices as a way to improve its “cost structure”. 

The Amazon Flywheel is nothing new. In fact, it’s been around since 2001. At the time, Jeff Wilke pitched the idea to Jeff Bezos.

Eventually, the Amazon Flywheel became the marketing strategy for the platform ever since. Many have even said that the Amazon Flywheel deserves its share of the credit for the success Amazon achieved over time. Because of this Flywheel, Amazon was able to grow well beyond its original incarnation as an online bookstore. 

Now, they tend to sell pretty much everything under the sun. The Flywheel speeds up this growth by investing heavily in customer experience. With the intent of focusing on customer experience, they can be able to sell high-quality products to their customers who can order them at just a click of a mouse. 

The customer experience improved over time thanks to the inclusion of third-party sellers. Despite the fact that third-party sellers have been accepted into the Amazon ecosystem, that wasn’t the case back in the earlier years. Amazon and third-party sellers were both their own competition. 

Amazon’s Flywheel is a marketing strategy that has stood the test of time. However, it’s ability to “spin” faster is impressive. To have a lot of growth in a short amount of time may seem unheard of. 

Without the Amazon Flywheel, the expansion and growth of the brand would have taken longer than usual. By including third-party buyers, this created such fast growth in a way where it allowed more traffic to flow to Amazon over the years. The traffic sources mostly came from sources outside of the website (i.e. -- Google ads, Facebook, etc.). 

Simply put, the lower and competitive the prices were of specific items, the more valuable it is to potential buyers. For this reason, it has led to sellers trying to purchase the product and sell it themselves. These sellers would jockey for positions using tactics like SEO, copywriting, etc.

Amazon has grown for so many years to the point where it was able to acquire certain brand names like Whole Foods in recent years. After the acquisition, it would soon give customers the opportunity to purchase their groceries online. The more Amazon grew, so did their overall value. 

Breaking Down Amazon Virtuous Cycle

Here’s how to break down the Amazon Virtuous Cycle or Flywheel. These are based on the designs that Jeff Wilkes put together when originally sketching this in 2001:

  • Low prices
  • Very large selection
  • Great delivery experience

As part of the virtuous cycle, you get plenty of customer experience out of the entire cycle. The three pillars listed above are exactly what the customer wants. It’s clear that they want low, competitive prices that they can afford.

The large selection appeals to customers because it gives them the message that if the product is available on Amazon, there’s a good chance that they’ll find it. Compare that to calling their local Wal-Mart to search for a specific item. Either they have it or they don’t (thus saving them or even wasting a trip). 

The delivery experience can be explained in the best way possible: speedy and high-quality. The product is delivered in the customer’s hand quickly without any damage done. The more this is done, the more likely customers will order from Amazon again. 

Find your Flywheel

In terms of your business success, it’s important to find your own flywheel. Growing and scaling your business might be something you’ll do in the future. You can build your own flywheel even if you have your own eCommerce business. 

There are some things you’ll want to keep in mind as you are doing this:

  • A flywheel will need plenty of force in order for it to actually move
  • The more force you apply, the more efficient it will be
  • Your flywheel will store plenty of energy over time so it can release with more power
  • When the flywheel builds momentum, it will release the energy
  • Over time, the flywheel will be very difficult to stop

Simply put, the flywheel is the perfect model to follow if you want to grow your business. It doesn’t have to be an eCommerce business at that. You can adopt this in any industry your business is in. 

Whether it’s a service-based business online or a brick and mortar business at the corner of Main and First, the flywheel can be used to your advantage. You need to adopt the mindset that your business can grow with the use of the flywheel. The sooner you use this, the better the chance you’re business may grow. 

Applying the Flywheel to your Business

Applying the flywheel to your business is important if you want to grow it. You can even modify it to fit your own business model. You can accelerate your growth or use it to achieve your key business goals. 

That’s why it’s important to keep testing new things out. Keep what’s working and improve what isn’t. Don’t take SEO or advertising for granted as it will help you more even if you need to make changes to ensure that it works better. Also, use reputation management to your advantage so you can grow your business rather than impede it due to poor customer service, poor product quality, and the like. 

Final Thoughts

The Amazon flywheel is by far one of the best models to follow when it comes to business growth. Especially when you want to grow it at a steady pace. You can do eCommerce and grow it quickly, but don’t need to set yourself out to be the next Amazon. 

But you can learn the flywheel and the examples that Amazon has set in terms of growth. They have used it to their advantage with customer satisfaction as their centerpiece. With low, competitive prices, wide product availability, and excellent shipping quality and speed it built the trust between Amazon and customers quicker than ever. 

Customer satisfaction should always be important. But use your flywheel in your own unique way. In other words, how will you stand out among the pack?