How Amazon Employs Big Data to Reign the E-Commerce Industry
Wed, April 21, 2021

How Amazon Employs Big Data to Reign the E-Commerce Industry

Amazon uses big data to recommend items to customers, detect fraud, and more / Photo Credit: Hadrian (via Shutterstock)

 

Amazon is a successful e-commerce giant, but its success was no accident, said Caleb Danziger of Inside Big Data, a news outlet catered to big data. Amazon frequently uses big data to make decisions, stimulate purchases, and make customers happy. Before retailers leveraged big data to change prices, people generally saw the same prices for products each day no matter how many times they checked the store’s website. 

One example of which is prices for plane tickets and hotel rooms. If potential guests check fares and rates for the same destinations several times, they might see the prices change. This is called dynamic pricing, a tactic used by Amazon. The firm changes the prices of its products about 2.5 million times each day, meaning the item’s costs shifts every 10 minutes. Thanks to Amazon’s massive data, it can analyze certain factors such as competitor pricing and available inventory to make informed decisions on how much an item should cost. 

Amazon’s status makes it a target for retail fraud. The firm gathers over 2,000 historical and real-time data points on every order, utilizing machine learning algorithms to monitor transactions with an increased likelihood of being fraudulent. This alone halts millions of dollars worth of fraudulent transactions annually. Amazon can also scrutinize suspicious return requests using big data algorithms. For instance, Amazon could launch an investigation if big data shows a buyer “has returned an unusually high percentage of things over the past few months.” 

Amazon’s big data also encouraged more customers to purchase more with each order, recommending related items to users based on the products they added in their cart or things they have purchased before. When the company appeals to customers with personalized picks and prompts them to spend more money, Amazon’s profit rises and people believe that the e-commerce giant is a place where they can by whatever they want. 

Amazon’s warehouses are called “fulfillment centers.” Its warehouses utilize data to identify which products are running low or track which items customers purchase the most often. Overall, Amazon could not have made this far without leveraging big data. Customers should expect the firm to use big data to progress further in the e-commerce industry.