Amazon 2018 case study
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Amazon has become one of the most innovative and successful companies by continuously evolving its business model and focusing on customer experience. It builds on past structures by entering new sectors and improving existing services. Key factors in its growth include a low-cost structure without physical retail outlets, investments in fulfillment centers to reduce costs and shipping times, a huge selection of over 500 million products, and partnerships that expanded its offerings. While competitors struggle with high retail costs, Amazon remains profitable by leveraging technology to optimize product promotion, distribution and sales across its platform.
Amazon 2018 case study
- 1. Digital Business Strategy Shreyashi - 25 Shiva Purohit-21 Jeet Banerjee-02 Ojaswi Gupta-08 Parantak Sharma-24 Siddhant Khare-
- 2. HISTORY
- 3. HOW AMAZON.COM LOOKED WHEN IT WAS INITIATED:
- 4. SWOT ANALYSIS STRENGTH ➔ Diverse product offering ➔ Unmatched brand reputation ➔ Strong business relationships with publishing houses, major electronic companies etc. ➔ Efficient in logistics & distribution WEAKNESS ➔ Operates at very low margin ➔ Criticism for its working conditions ➔ Drawing criticism from President Trump for not paying enough taxes OPPORTUNITIES ➔ Expand physical stores ➔ Expand into more product segments ➔ Tie ups with major players of untapped market ➔ Creating it’s own product line/brand THREATS ➔ Legislation against tax avoidance ➔ Identity theft & hacking ➔ Global competition ➔ Low barrier to entry ➔ Regional low-cost retailers
- 6. ● What is the key to such success? According to Jeff Bezos, the founder and CEO of Amazon.com, the company’s success lies in its low- cost structure and wide variety of merchandise.
- 7. WHY IS AMAZON THE MOST INNOVATIVE COMPANY OF 2017? ● “Our customers are loyal to us right up until the second somebody offers them a better service,” CEO Bezos says. -The company’s Motivational Factor. ● Amazon builds on the ruins of past structures - moving into one sector after another, gentrifying them, even if it required tearing down their existing structures. Eg:Amazon Music Unlimited over Amazon Mp3. ● Embracing continuous evolution - emphasizes platforms that serve their customers in the fastest and best possible way. Eg:AcquiringTwitch,Amazon PrimeVideo,Amazon’s intelligent assistant Alexa. ● Initiatives that drive Amazon - ○ Incursion into Brick n’ mortar store - Amazon Go ○ Prime program - 60% of the total value of all merchandise sold on Amazon is accounted for by Prime. ○ Fulfillment centers - humans and robots working together.
- 8. WHY DID AMAZON START PHYSICAL STORES? ● A SHOWCASE FOR GADGETS: At Amazon’s six physical bookstores — six more are on the way — books are arranged on shelves face out, even though that takes more space.Amazon isn’t trying to cram its entire inventory into these stores;Amazon figures you can just order everything else from your phone. ● MAKE CUSTOMERS DOTHE WORK: Students order textbooks and dorm furnishings online and come to these stores to pick them up.The centralized pickup location reduces shipping expenses. ● RETAILTECHNOLOGY:Amazon already makes heavy use of robots at warehouses to fulfill online orders. Now Amazon is trying to bring automation to retail.The Amazon Go convenience store in Seattle uses sensors to track items as shoppers put them into baskets or return them to the shelf.The shopper’s Amazon account gets automatically charged. ● BUILDING LOYALTY: Amazon can use its campus locations to promote its Prime loyalty program (students get 50 percent off the normal $99 annual fee).The strategy is simple: Get students hooked, and they’ll be customers for life.
- 9. WHAT DOES THE COMPETITIVE STRUCTURE OF ONLINE RETAILING INDUSTRY LOOK LIKE? WHAT ARE THE IMPLICATIONS OF THIS STRUCTURE FOR THE L ONG RUN PROFITABILITY OF AMAZON IN THE MARKET?
- 10. EVEN AFTER FOLLOWING A COST LEADERSHIP STRATEGY LIKE OTHER RETAILERS, WHY DOES AMAZON OUTPERFORM THEM? ● Low cost structure - no running cost of physical retail outlets - zero marginal costs. ● Investments in Fulfillment Centers - to enable a reduction in order fulfillment times and shipping costs - benefits passed on to customers. ● Selection - Amazon has 562.3 million SKUs. Walmart offers only 38 million SKU’s in its online shop - 7% of Amazon total offerings. ● Third party sellers - accommodates third party sellers with their own merchandise on Amazon’s sites - products competing against Amazon’s - the high volume of traffic on Amazon sites is the bone of contention.
- 11. KEY TAKEAWAYS ● How Amazon partnered with Drugstore.com (pharmacy), Living.com (furniture), Pets.com (pet supplies), Wineshopper.com (wines), HomeGrocer.com (groceries), Sothebys.com (auctions) and Kozmo.com (urban home delivery). - an equity stake in these partners - share in their prosperity - fees for placements on the Amazon site. ● “Amazoning a sector” - consolidated its strength in different sectors through its partnership arrangements - using technology to facilitate product promotion and distribution via these partnerships. - ‘Syndicated Stores’ programme. - enables other retailers to sell products online. ● Associates Program - Launched in 1996 - around 4 million pages are currently affiliates of Amazon - does not use an affiliate network which would take commissions from sale - a tiered performance- based incentives to encourage affiliates to sell more Amazon products ● Low Cost Structure - online business - asset-free business - no marginal cost - investments only in storage, inventory keeping, distribution. ● Wide variety of Merchandise - unprecedented number of SKUs across all industries - one-stop online shop - Consumer with varying needs are catered to.
- 12. THANK YOU!
Editor's Notes
- #12: How Amazon partnered with Drugstore.com (pharmacy), Living.com (furniture), Pets.com (pet supplies), Wineshopper.com (wines), HomeGrocer.com (groceries), Sothebys.com (auctions) and Kozmo.com (urban home delivery). - purchased an equity stake in these partners, so that it would share in their prosperity. It also charged them fees for placements on the Amazon site to promote and drive traffic to their sites. Many of these new online companies failed in 1999 and 2000, but Amazon had covered the potential for growth and was not pulled down by these partners, even though for some such as Pets.com it had an investment of 50%. “Amazoning a sector” - Amazon has been able to consolidate its strength in different sectors through its partnership arrangements and through using technology to facilitate product promotion and distribution via these partnerships. The Amazon retail platform enables other retailers to sell products online using the Amazon user interface and infrastructure through their ‘Syndicated Stores’ programme. Amazon Marketplace - enables Amazon customers and other retailers to sell their new and used books and other goods alongside the regular retail listings. A similar partnership approach is the Amazon ‘Merchants@’ program which enables third party merchants (typically larger than those who sell via the Amazon Marketplace) to sell their products via Amazon. - earn fees either through fixed fees or sales commissions per-unit.