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E-Tailing Case Study - AMAZON

1) Amazon started in 1995 as an online bookstore and has since expanded to offer millions of products and services through continuous innovation. 2) Key to Amazon's success has been its focus on the customer experience through features like easy shopping, reviews, personalized recommendations, and fast delivery. 3) Amazon has invested heavily in fulfillment centers and technologies to offer low prices, large selection, and excellent customer service, allowing it to become the world's largest online retailer.

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425 views3 pages

E-Tailing Case Study - AMAZON

1) Amazon started in 1995 as an online bookstore and has since expanded to offer millions of products and services through continuous innovation. 2) Key to Amazon's success has been its focus on the customer experience through features like easy shopping, reviews, personalized recommendations, and fast delivery. 3) Amazon has invested heavily in fulfillment centers and technologies to offer low prices, large selection, and excellent customer service, allowing it to become the world's largest online retailer.

Uploaded by

Issa
Copyright
© © All Rights Reserved
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E-TAILING CASE STUDY – AMAZON

The Problem
In the early 1990s, entrepreneur Jeff Bezos saw an opportunity rather than a business
problem. He decided that books were the most logical product for selling online. In July 1995,
Bezos started Amazon.com (amazon.com) and began selling books online. Over the years, the
company has continually improved, expanded, changed its business model, and expanded its
product selection, improving customer experience, and adding new products and services and
business alliances. The company also recognized the importance of order fulfillment and
warehousing early on. It has invested billions of dollars building physical warehouses and
distribution centers designed for shipping packages to millions of customers. In 2012, the
company started same-day delivery from its new distribution centers. After 2000, the
company added information technology products and services, notably Kindle e-reader family
and Web Services (cloud technologies). In 2015, Amazon continued to heavily invest in Prime
Video to actively compete with NetFlix (Trefis 2015). Amazon.com’s challenge was, and still
is, to profitably sell many consumer products and services online.

The Solution: Innovations and Reaching Out to Customers


In addition to its initial electronic bookstore, Amazon.com has expanded its offerings to
include millions of products and services. A unique example of a service they offer is
Mechanical Turk (mturk.com), a marketplace for crowdsourcing work that requires human
intelligence in dozens of categories. Key features of Amazon.com are easy browsing,
searching, and ordering; useful product information, reviews, recommendations, and other
personalization techniques; a very large selection of products, the ability to compare prices;
low prices; secure payment system; efficient order fulfillment; and an easy product return
arrangement. The Amazon.com website has a number of useful services, some provided by
its companies. For example, its & “Gift Finder and Wish Lists” section (amazon.com/gp/gift-
finder) suggests gifts for all occasions and seasons, categorized by relationship, price, and
more. Author Central (authorcentral.amazon.com) is a page where customers can read about
authors (such as their biography and speaking events) and even connect with some of them.
Authors can discuss their work and answer readers’ questions via tweeting. Amazon.com also
offers support services. Amazon Services (services.amazon.com) hosts webstores for a small
monthly fee, offering small businesses the opportunity to have customized storefronts
supported by Amazon.com’s payment and order fulfillment system (see
services.amazon.com/content/sell-on-amazon.htm). Customers can use mobile devices to
shop. Amazon Prime (amazon.com/prime) offers unlimited free shipment and streaming
video for a $99
annual fee.
Amazon.com is also recognized as an online leader in providing personalized services and
CRM. When a customer revisits Amazon.com, a cookie file identifies the user and says, for
example, “Welcome back, Sarah Shopper,” and then proceeds to recommend new books on
topics similar to past purchases. You may receive recommendations for cheaper products. For
example, a customer who buys printer toner for $30 a unit regularly might be directed to a
vendor that sells four units for a total of $65. Amazon also provides detailed product
descriptions and ratings to help consumers make informed purchase decisions. The site has
an efficient search engine and other shopping aids. Amazon.com has a state-of-the- art
warehousing system that gives the company an advantage over the competition.Customers
can personalize their accounts and manage orders online with the patented “1-Click” ordering
feature. 1-Click includes an electronic digital wallet, which enables shoppers to save time
paying for their orders, since all the shopping information, including preferred method of
payment and default address, is stored online. Amazon.com offers many Web 2.0 social
shopping features (e.g., customer reviews). It acquired Woot! (woot.com), a social
networking company known for its daily deals. Amazon is continuously adding innovative
services. In 2011, the company introduced Price Check (to be described later), which enables
customers to compare prices in physical stores with a smartphone app. Notable in 2012 were
the same-day delivery initiative, the myhabit.com clothing site (designer brands at reduced
prices), and the ability to use mobile devices while you are inside a physical store to compare
prices using the Price Check app. The Amazon strategy is to provide the best customer
satisfaction, make large investments in the short run at the expense of profit, and promote
innovations (see businessinsider.com/amazonsprofits-what-people-dont-understand-
2013-10).

The Results
In 1999, Time magazine named Bezos “Person of the Year.” In January 2002, Amazon.com
declared its first profit—for the 2001 fourth quarter. Since then, the company has remained
profitable despite its huge investments in distribution centers and other initiatives.
Amazon.com reported that despite adverse U.S. and global economic conditions, its annual
profits for 2015 had increased 721% from 2007. In 2012, Fortune magazine selected Bezos as
the “businessperson of the year” (see fortune.com/2012/11/16/2012-businessperson-of-
the-year). Annual sales increased consistently by 30–40% each year due to the addition of
more products and services, going global, and the increased
volume purchased by existing customers. Amazon offers about 20 million books, music, and
DVD/video titles to millions of customers. In 2015, Amazon had over 1.6 million e-books for
sale. Finally, its investors are rewarded with rapidly increasing stock prices. Data from 2016
show Amazon.com as #6 on Alexa (global rank) and #4 (U.S. rank). It has over 23 million “Likes”
and over 84,000 “Talking about this” on Facebook (see facebook.com/Amazon). As of
February 2014, Amazon has 2.3 million followers on Twitter (twitter. com/amazon). For the
“Amazing Amazon Story—Jeff Bezos Full Speech,” watch the video (17:59 min) at
youtube.com/watch?v=YlgkfOr_GLY.
Despite increased competition from thousands of e-tailers in the online market, Amazon.com
has been holding its place as the number one B2C e-tailer and money-making EC site in the
world (some Chinese sites are getting closer to Amazon, but they are not competitors). Due
to its order fulfillment system, Amazon.com can offer very low prices. Add this to high
customer satisfaction and the selection of quality products, one can understand why
Amazon.com sells more than three times the products compared to its nearest U.S.
competitor. Amazon.com also offers several features for international customers, including
over one million Japanese-language books. Amazon.com operates in 16 countries but it can
ship its products to other countries. Each country has a website in its own language (for
example, Amazon China amazon.cn). Amazon.com generated revenues of about $482 million
in 2015, with an operating income of over $107 billion (see
variety.com/2016/biz/news/amazon-clocks-107-billionin-revenue-in-2015-1201691106).
As of Q4 2015, the company employs over 222,000 full-time and part-time employees.
Amazon.com is considered as the “king of e-tailers.” The company has been ranked by the
U.S. National Retail Federation, as the #1 fastest growing large retail organization in the USA.
For a comprehensive slide show about Amazon.com, see Stone (2013).
Sources: Based on Stone (2013), Trefis (2015), and amazon.com (accessed April 2016).

LESSONS LEARNED FROM THE CASE


The case of Amazon.com, the most recognized name of all e-tailers in the world,
demonstrates the evolution
of e-tailing, some of the problems encountered by e-tailers, and the solutions that a company
can employ
to expand its business. It also is indicative of some key trends in Internet retailing. For
example, there is fierce competition online. Amazon.com is successful because of its size,
innovations, personalization, order fulfillment, and customer service. The biggest online
retailer is still growing and becoming more dominant.
E-tailing, as demonstrated by the Amazon.com case, continues its double-digit, year-over-
year growth rate despite the global economic downturn. This is, in part, because sales are
shifting away from physical stores.
In this chapter, we look at the delivery of both products and services online to individual
customers. We also discuss e-tailing successes and failures.

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