Also, develop a complete summary of all portions of the project in your group wiki, minus the Executive Summary.

Introduction

Amazon is a large online retailer and driving force between the ecommerce movements, founded in 1994 by Jeff Bezos in Seattle, WA. The name, “Amazon”, was a perfect one for a business that continued to grow exponentially. While it has grown, it has expanded on all product lines and has delivered both timely and safely to the customer. Amazon began as an online bookstore and added new innovations along the way. In its beginnings, Amazon partnered with Barnes and Noble and other local companies from 1994-1998. Beyond books, Amazon expanded to products and convenience services. From 2005-2011, Amazon became a cloud company and started crowdsourcing.

Amazon, a first mover, dominates the cloud computing area and largely controls the infrastructure of the internet. The Kindle was introduced and eBooks as well as streaming services. When streaming was offered from 2011-2015, Amazon achieved market capitalization over Walmart. Also, during this timeframe, wind farms were built to power the Amazon fulfillment centers for the shared concern for the environment. Amazon reported the best holiday season yet in 2016 (WTKR.COM). Innovation launched the same year with the drones or UAVs, Unmanned Aerial Vehicles, and specifically designed fulfillment centers equipped for the UAV. This innovation is called Amazon Prime Air. This is an innovation that is in a Beta test stage with 2 customers in the United Kingdom in Cambridge, England.

Customer Value

The Amazon model caters to immediate gratification and that has changed the face and culture of shopping for generations.

Amazon Prime is a service for a fee yearly to customers that offers 2-day delivery. To date, this has been a win with the customers and huge satisfaction and loyalty has been the case from this program and Amazon. This has been called a killer program that promotes loyalty with the customers paying for it. It has a two-way reciprocal way of giving back to both the customer and Amazon. One of the reasons that this is such a success is that it targets the place where customers have the most heartburn- in shipping times and costs.

Customers are gravitating toward low prices, fast shipping and effective turnaround of orders. The chart below emphasizes some of the perks that Amazon has like: flexible return policy, low prices, tool free live customer service, free shipping, pick up or return to story and easy to use website:

According to this chart, low prices and free shipping seemed to be the two drivers for using Amazon as a provider of goods and services, and having a value for customers. Additionally, a flexible return policy and an easy to use website added to the overall customer experience. This is how customers see value in the way their dollars can stretch and in the ways the customer can gain quality and value.

Pricing management

Amazon applies the use of a shopping algorithm, to recommend deals to its customers. While shopping algorithms are unseen and almost wholly unregulated, algorithms play an increasingly important role in broad swaths of American life. The weightings and variables that underlie these equations are often closely guarded secrets known only to people at the companies that design and use them. But while the math is hidden from public view, the effects of algorithms can be vast. With more than 300 million active customer accounts and more than $100 billion in annual revenue, Amazon is a shopping giant whose algorithm can make or break other retailers.

A research into the shopping recommendation algorithm, surveyed 250 frequently products over several weeks to see which ones were selected for the most prominent placement on Amazon’s virtual shelves — the so-called “buy box” that pops up first as a suggested purchase. About three-quarters of the time, Amazon placed its own products and those of companies that pay for its services in that position even when there were substantially cheaper offers available from others. That turns out to be an important edge. Most Amazon shoppers end up clicking “add to cart” for the offer highlighted in the buy box. “It’s the most valuable small button on the Internet today,” said Shmuli Goldberg, an Israeli technologist who has extensively studied Amazon’s algorithm.

Amazon does give customers a chance to comparison shop, with a listing that ranks all vendors of the same item by “price + shipping.” It appears to be the epitome of Amazon’s customer-centric approach. But there, too, the company gives itself an oft-decisive advantage. Its rankings omit shipping costs only for its own products and those sold by companies that pay Amazon for its services.

Network Design

Amazon has several different criteria they use when determining which suppliers they should use. The company is devoted to conducting business in a lawful and ethical manner and align with suppliers that are committed to the same principles (Amazon 2017). Amazon focuses on several different key areas; including health and safety in production areas and living quarters, the right to legal wages and benefits, appropriate working hours and overtime pay, prevention of child labor or forced labor, and fair and ethical treatment (Amazon 2017). In addition to this Amazon conducts site audits and enforces a code of conduct for their suppliers.

Amazon uses several 3PL firms to help out their business. In several cases Amazon themselves often act as a 3PL. Amazon provides a guaranteed volume which ensures fixed income for their 3PL Partners (Ganguly 2016). Amazon also has a few interesting relationships with other companies. Amazon employees work in some of their customers’ 3PL distribution centers in a way to support some of the 3PL customers that do business with Amazon (Lieb & Lieb 2014). Amazon also has this relationship with Procter and Gamble and Georgia-Pacific, which are some of Amazons key customers. These retailers will put their own employees in Amazon’s distribution centers to manage the distribution of the produce their companies sell through Amazon (Lieb & Lieb).

Amazon operates over 214 facilities across the United States. These facilities include fulfillment centers, distribution centers, regional sortation centers, Amazon Pantry & Fresh distribution centers, delivery stations and Amazon Now hubs (Dunn 2017). Amazon uses advanced analytic technology to determine where they want to strategically place these fulfillment and distribution centers. “Right now, Piper Jaffray analysts estimate that the locations of Amazon's fulfillment centers bring it within 20 miles of 31% of population, but within 20 miles of 50-65% of its core same-day addressable market (Jaffray came to this higher percentage by predicting that only households with an annual income of $50,000 would be interested in same-day delivery)” (D’Onfro 2015).

Recently Amazon has jumped into the retail stores business. This is an effort to reach as many consumers as possible through a variety of access points. Most of these stores are 300-500 square foot locations in the middle of luxury malls and sell Amazon products such as the Kindle, Fire TV, and Echo (Kim 2016). The company has plans to open up to 100 stores in shopping malls across the United States. This is just one of the many ways the company is staying innovative and trying to increase their footprint across the United States.

Sources:

Amazon. (2017) Amazon Website. Retrieved from: https://www.amazon.com/gp/help/customer/display.html?nodeId=200885140

D’Onfro, J. (2015). Here are all of Amazon’s warehouses in the US. Business Insider. Retrieved from: http://www.businessinsider.com/how-many-fulfillment-centers-does-amazon-have-in-the-us-2015-3

Dunn, J. (2017). Amazon’s logistics footprint in the US is only getting bigger. Business Insider. Retrieved from: http://www.businessinsider.com/amazon-fulfillment-centers-logistics-manufacturing-jobs-us-chart-2017-1

Ganguly, P. (2016). Amazon looks to deliver with 3rd-Party logistics market. Economic Times. Retrieved from: http://economictimes.indiatimes.com/small-biz/startups/amazon-looks-to-deliver-with-3rd-party-logistics-market/articleshow/56076490.cms

Kim, E. (2016). Amazon is doubling down on retail stores with plans to have up to 100 pop-up stores in US shopping malls. Business Insider. Retreieved from: http://www.businessinsider.com/amazon-big-expansion-retail-pop-up-stores-2016-9

Lieb, R., Lieb, K. (2014). Is Amazon a 3PL? Supply Chain Quarterly. Retrieved from: http://www.supplychainquarterly.com/topics/Logistics/20141027-is-amazon-a-3pl/