Amazon com: Marching Towards Profitability Class 7: Electronic Commerce
Download 16.29 Kb.
|
- Navigate this page:
- Main Takeaways
- More in-depth Summary
- Case Discussion / Digest Questions Based on a comparison of Amazon.com to a physical book retailer like Borders
- Disadvantages
A  mazon.com: Marching Towards Profitability Class 7:Electronic Commerce
H Main Takeaways Fulfillment is central to customer experience in online shopping. Personalization was the key to customer loyalty. The transparent pricing on the net provided customers with power to compare prices costlessly thus lower price variations. Amazon tried to be a convenience brand with books music and videos. There's no tradeoff in internet business between increasing service and lowering cost.. The reason for that has a lot to do with the Internet's ability to scale infinitely. There is little incremental cost to spread an innovation over more customers, once you have developed it. Not important to be the cheapest but to provide the best value proposition. More in-depth Summary Amazon started in July 1995 just as bookstore carried no inventories and acted just like a middleman which offered a storefront to customers focused on personalization to drive repeat sales . The company’s stated focus was customer and revenue growth, brand loyalty and it was least bothered by “short term profitability” .It tended to differentiate through massive selections ,service quality ,simplicity and pricing. In the second phase , around 1998 it started venturing into new product categories starting with music and videos then going into video games ,toys , tools and electronic products .Also 1998 onwards it launched websites in different countries UK , Germany. It realised that order fulfillment and was key to customer satisfaction .It expanded it’s infrastructure by building distribution centers as it realized that to control its customer experience it had to manage it’s fulfillment process and make fulfillment and logistics among it’s core competencies . In third phase starting around mid 2000 the focus shifted to profitability even at the cost sacrificing growth. There more product categories were added in order to induce the network effect ,but this was mostly through co branding . New sites were launched in Japan and Canada .More By 2002 ,30% of amazon’s revenue came from non us websites. Focus was on profits and fulfillment was now done through a combination of in-house and outsourced efforts. It launched “Amazon outlet” to manage its own inventory to dispose overstock ,discontinued and factory-reconditioned merchandise . Personalization To achieve profits companies needed to provide unique value through customer intimacy (key to customer loyalty) using past purchase history ,products viewed , wish list and other data thus effectively providing unique stores for each individual.this helped in targeted marketing .
Amazon has placed more importance on selection and convenience than price and strove to be provide customer satisfaction . It did extensive marketing expenditure to gain brand recognization . It through personalization tended to be different things to different people ,rather than being a book brand it tended to be a convenience brand with books music and videos auctions thus locking into higher state need. Using these ideas it captured 80% book market despite the fact that it is not the cheapest player in market . Growth through acquisitions To grow during boom days Amazon not only expanded its own service offerings but also invested in and partnered a host of other companies.It’s investments included e- retailer like (Pets .com and Drugstore.com), service and infrastructure companies using cash transactions , stock swap and cross-promotions. Though the retailers like pets.com went bust but technology &solution companies helped it in backend operations ,selection and personalization which helped it a lot in creation of experience.
Amazon was the first internet retailer to have an affiliate program that allowed owners of other websites to refer customers to Amazon in return for a referral fee. This was patented to Amazon in Feb 2000. It was free to join with hidden quotas or performance tiers. By end of 2002 it had nine hundred thousand affiliates. Virtual Middlemen In 1999 , Amazon introduced co-branded auctions and zShops Marketplaces, where Amazon acted like an agent facilitating interactions and taking fee. It also leveraged its “ Amazon Commerce Network” platform, a portal for other retailers through which Amazon could take fee and equity in addition to direct investments. It has also started to manage vitual storefronts for Toys “R” Us , AOL’s shopping network ,Target and its associated stores, in most of these deals amazon managed the store and provided customer service and order fulfillment while remaining stuff like merchandising ,procurement and inventory were managed by the companies who stores it managed in return for a combination of fixed payments ,per unit payments , percentage of revenue. In Nov 2001 It started offering in-store pick up option for electronics in partnership with circuit city ,with customers having option of having stuff delivered to their door or picking it from store. For orders picked up at the store , Amazon received a percentage of revenues . In Sept 2002 , Amazon launched an online office store with Office Depot on similar lines. It also launched apparel store with leading brands where it managed front end while partners dealt with merchandising and fulfillment. Finally it launched a partnership with Borders Books, under which borders relauched it’s Website co-branded with Amazon. Amazon managed order fulfillment ,inventory ,site content and customer service while Borders used it for online customer relationships and to drive traffic to stores. These service partnerships are much more profitable than average profits across the company.
Mass Personalisation Access to customer data Lower labour and capital costs Short cash to cash cycle Global access Scalability Lower prices Personalized recommendations Instant bundling Co-branding and Cross sales Ability of sellers to try Pricing experiments Access to product info ( Editorials amd customer reviews) Less pilferage Disadvantages Lack of Social Contacts ( No Border’s Experience ) Pricing discounts Complex Logistics  – –
Directory: merage merage -> For immediate release merage School “edge” Students Grab Hold of the Long Tail merage -> Global Business: International Residential gsm 295 – March 2001 in Leuven femba 9A merage -> Biographical Sketch merage -> Designing Brand “Nano” – a car for the Indian Consumer: An Ethnoconsumerist Perspective Download 16.29 Kb. Share with your friends:
|