economic help
Running Head- AMAZON
IMBFX 503
Philadelphia University
Rengi Thomas
Amazon
Amazon.com is a Fortune 500 e-commerce company based in Seattle, WA. Amazon was one of the first big companies to sell goods over the Internet. The company was founded by Jeff Bezos in 1994, and launched in 1995. They started out as an online bookstore and then quickly diversified by adding other items, such as VHS tapes and DVDs, music CDs, software, video games, electronics, MP3s, clothing, furniture, toys and even food items. Today, the company even produces its own products such as the Kindle series. Also, Amazon.com is one of the major providers of cloud computing services. Currently, the company is the largest global online retailer responsible for 20% of online retail market share. (Amazon, 2016).
The key strategies and distinctive competencies that have led the company to success and its present position of a world leader in the Internet sales can be identified as follows.
Firstly, Amazon.com employed the cost leadership strategy by offering products and services at lower costs than competitors. The key to making this strategy successful were the economies of scale that allowed the company to offer the largest range of products to its customers.
Secondly, Amazon.com expanded internationally, pursued strategic acquisition and bought new firms to bring new services, assets, capabilities, services, and skills.
Thirdly, the company is committed to delivering superior quality of products and services. It earned a reputation of a convenient and reliable brand that offers the lowest prices, one of the fastest and lowest shipping, widest selection of goods, and many additional features with its services.
The fourth key factor was efficient logistics and distribution that allowed spreading warehouses geographically, so that goods could be dispatched faster and with lower costs to each country.
Therefore, the key factors that have made Amazon.com successful in the past were cost leadership strategy, economies of scale, international expansion and strategic acquisitions, as well as superior quality of products and services, and efficient logistics and distribution (Mirov, 2005; Chaffey, 2012).
Company’s robust CRM has created customer centric processes in order to carefully record data on customer’s buying behavior. This enables them to offer individual items, related items or bundle them as an offer, based upon preferences demonstrated through purchases or items visited. Also, the company claims that 55% of their customers are repeat buyers resulting in low cost of acquisition of new buyers.
With its strategic partners & due to its Amazon fulfilment centers, Amazon has created a deep & structured network in order to make the product available even at remote locations. It also has free of cost delivery charges in certain geographies.
By using the strategy of “Go global & act local”, Amazon is able to fight with domestic E-commerce companies through absorbing & by forming / partnering with supply chain companies. The branding too is done as per local taste. For example- In India, Amazon is currently using the “Aur Dikhao” campaign to encourage users to browse more of their products. (Bhasin, 2016).
Acquiring companies like Zappos.com, Junglee.com, IMBD.com, woot.com etc. has proven to be a successful and revenue generating step for the E commerce giant.
Amazon launched the fire phone in the US which was a big flop. At the same time, Kindle fire did not pick up as strongly as Kindle did. Thus, there were several product flops which caused a dent in Amazon’s deep pockets.
My primary reason for choosing Amazon is the convenience the online retailer brings to millions in this world. Amazon has focused on being one of the most reputable customer service retailer that provides free shipping and lower prices. Amazon should focus their attention on opening walk in stores for individuals to shop, primarily for the last minute shoppers.
Amazon Business Model
Amazon has three distinct businesses and developing opportunities. The three are Amazon Retail, Amazon Marketplace, and Amazon Web Services.
Amazon Retail started with selling books to expanding their market with goods and services. They primarily built their empire by using the best prices, unrivaled selection, and convenience.
Best prices- Amazon sells and rents text books at a cheaper rate then most competitors like Barnes and Nobel and Chegg.
Unrivaled selection- Amazon offers a variety of selection to attract their customers into buying more products without leaving their homes.
Convenience- Individuals these days really want convenience, not wanting to leave their homes. They would like service delivered to their door step. This is exactly what amazon has done by building an easy to use interface for customers to place orders. Fast and reliable delivery from a various warehouses across the U.S. Most importantly they have reviews in which people could rate their services and is shared on the website for consumers to view and decide if this is what they want.
Amazon also offers a third party selling platform, Amazon marketplace, which allows merchants to sell their goods and services. Amazon charges a commission based on a formula involving the sale price of the item based on the following criteria: (Chaffey, 2014)
Shipping credit.
Referrel fee that ranges from 6% to 25% of the sale price.
Variable closing fee.
Fixed closing fee of $.99
The criteria were changed by the following comparable services:
Sell on Amazon: Merchants paying a monthly fee of $39.99 plus varying commission generally between 15% and $1.35 per item.
Amazon Webstore: Merchants pay $24.00 a month plus 2% of sales.
Checkout by Amazon: very similar to PayPal that is integrated into shopping cart.
Fulfillment by Amazon: Allows merchants to use Amazons advanced fulfillment technology.
Amazon does not release information on these businesses above nor do they release revenue or usage information that could be beneficial to individuals.
Finally Amazon provides web-based services such as Amazon Cloud, Amazon Fulfillment Web services, Amazon simple email service, etc.
Questions to Consider
What are the benefits and limitations of Amazon's online retail model?
How does Amazon.com change the market for shopping other products such as clothes, shoes, etc?
Amazon has a huge catalog of products for sale. How does the design of Amazon's web site facilitate the user's effort to locate a particular product?
Have you noticed Amazon offering certain items cheaper than the competition?
Conclusion
Amazon is one of the most reputable retail online stores of the 21st century. With its integrated technology it is aiming to bring satisfaction to millions across the U.S and other nations. But the question remains, is it really better than retails stores such as Target, and Walmart. While having the perception of being a low price leader is something Amazon strives for, it's up to us, as smart consumers, to see through the charade and always do our due diligence when making significant purchases. This means always price comparing, looking for coupons that'll beat Amazon pricing, and understanding the types of products Amazon purposefully prices higher than the competition. Do that and you're guaranteed to always find the lowest price.
References
Chaffey, D. (2012). Amazon.com case study. Smart Insights. Retrieved from
http://www.smartinsights.com/digital-marketing-strategy/online-business-revenue-models/amazon-case-study/
Amazon.com. (n.d.). About Amazon. Retrieved from
http://www.amazon.com/Careers-Homepage/b?ie=UTF8&node=239364011
Bhasin, 2017. SWOT analysis of Amazon – Amazon SWOT analysis. Retrieved from http://www.marketing91.com/swot-analysis-of-amazon/
Chaffey, 2014. Amazon.com Case Study- Retrieved from http://www.smartinsights.com/digital-marketing-strategy/online-business-revenue-models/amazon-case-study/
