I have criticized the brand extension of Amazon.com for selling things unrelated to books sometime back. Since then, I have spent quite a good amount of money buying books from Amazon and the stock price of AMZN has increased 200%. So what exactly is working for the dotcom giant? In a couple of words: extensive personalization. When I as an individual go to Amazon.com, it still comes up primarily as a bookstore. Yes they do have a link to 42 product categories they sell, but the first thing I see there is a list of books related to my taste as a reader followed by a list of bestsellers, and then some seasonal stuff like in October, Halloween story books and costumes followed by anything else like promotional products.
To compare visually, this is the first thing I see when I am at Amazon.com (note that I have not securely logged in, it is based on the information stored in Amazon cookie on my machine. If I purchase something, before checkout I will have to log in to my account). And this is what any new user sees on going to Amazon.com at the same time. The two pages have remarkably different content because my landing page is personalized for me based on my shopping history and activity on Amazon stores, while the other one is for generic user. Similarly, if you look at the landing page for any other user, it will have a completely different content based on their interest.
Amazon is a standout example of how you can do brand extension in unrelated fields if you concentrate on each customer as an individual and provide them with what they are looking for. Amazon uses technology to its benefit by empowering the site with a search box right at the top to help you find what you are looking for instantaneously, and hence taking you in a whole new world where you will find Amazon.com as a completely different store. If you search for kitchen appliances, Amazon will turn itself for you as a kitchen appliances store, and same for anything else. The crown jewel of Amazon is recommendation engine. No one has got this one thing as well as Amazon did. This engine helps Amazon take individual customization to the next stage.
As for the stock price, I have a slightly different theory. With the Internet boom and bust settling down and the web becoming more ingrained in the life of the masses, the analysts have started comparing Amazon and the likes to the brick-and-mortar stores. This instantaneously gave a kick to Amazon because they can sell a lot more than any brick-and-mortar store, or many of these stores taken together, because for one, they have a global presence, and next, they don’t have to maintain shelves and window displays like the physical stores. Amazon does maintain a real state on its website, but that is customized for each individual customer.
Just compare going to Sears stores with shopping at Amazon. At Amazon, it might take you less than a minute to find what you are looking for, while at Sears, it might take you 10 minutes to reach the end of store where you will find what you are looking for. But then there are some natural advantages at Sears and other physical stores like customers can touch and feel stuff, customers go to buy one thing and finds something totally different at the store and buys it as well and so on. With the help of software, the likelihood of Amazon filling these gaps is much more than Sears filling the voids like personalization and a near infinite inventory at a physical location.