Case Study: Amazon.Com Evolution Of E Retailer
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This document analyzes the evolution of Amazon.com from its founding in 1994 as an online book retailer to a global e-commerce leader by the early 2000s. It describes Amazon's hyper-growth strategy of "getting big fast" by rapidly expanding into new product categories. However, this led to financial difficulties as Amazon struggled with high costs. The document examines Amazon's strategic responses, like focusing on personalization and listening to customers, to address its core problems and sustain long-term growth.
Case Study: Amazon.Com Evolution Of E Retailer
- 1. Amazon.com: Evolution of the E-Tailer Case Study Analysis by: Djadja Achmad Sardjana STMB-Biztel 7/20/2009 STMB Biztel-DASMR 1
- 2. Introduction • Online in July 1995 Amazon.com grew to the leading Internet retailer in the world. • Global growth came at a price Late 2000, analysts have question re: Amazon’s ability to survive (See Exhibit-1) 7/20/2009 STMB Biztel-DASMR 2
- 3. Exhibit-1 7/20/2009 STMB Biztel-DASMR 3
- 4. Introduction (Cont.) • Bezos (Amazon Founder) response on early 2001: – First is profitability by fourth quarter 2001. – Second is to take advantage of the opportunity to be the first truly global retailer. – Third is to expand product selection. – Fourth is to institutionalize at Amazon the ability to continually innovate. 7/20/2009 STMB Biztel-DASMR 4
- 5. Case Facts: In The Beginning • Amazon founded by Jeff Bezos in 1994 intention of riding the Internet wave. • Prospectus of Amazon.com’s IPO : – Founded to capitalize on the opportunity for online book retailing. –An online bookseller has virtually unlimited online shelf space – In addition, by serving a large and global market through centralized distribution and operations, online booksellers have cost advantages relative to traditional booksellers. • Amazon.com’s was hugely successful, selling over 3 million shares at $18 per share. 7/20/2009 STMB Biztel-DASMR 5
- 6. Case Facts: GET BIG FAST • Since IPO, Amazon grew as a hyper- active corporate Get Big Fast (GBF), see Exhibit-2. • In 1998, started selling not only book Expansion as a customer-led evolution. • In 1999, continued to expand its category offerings: 1. Adding products such as electronics, toys, software and music. 2. Introduced both co-branded auctions and zShops Marketplaces The revenue models for these types of businesses were fundamentally different from Amazon’s initial model. 7/20/2009 STMB Biztel-DASMR 6
- 7. Exhibit-2 7/20/2009 STMB Biztel-DASMR 7
- 8. Case Facts: GET BIG FAST (Cont.) • End of 1999, began creating the ACN Acting as a portal for other retailer. • December 28. 2000, opened an online bargain outlet store serve as a vehicle to liquidate excess inventory from Amazon’s stores and zShops. 7/20/2009 STMB Biztel-DASMR 8
- 9. Case Facts: Negative Operating Cycle • A key advantage of Amazon’s business model Negative operating cycle. • Amazon generated interest on the full sale price (cost of goods and gross margin) for over a month. 7/20/2009 STMB Biztel-DASMR 9
- 10. Core Problems: • Amazon comparative lack of physical infrastructure. • No head to head competition available. • Dot-com business smashed. • Sales growth declined. 7/20/2009 STMB Biztel-DASMR 10
- 11. Amazon Strategic Action: • Listen: the traditional definition applies; • Invent you can listen to customers, but they don’t always know what they want or what is possible; • Personalize investing heavily in personalization technology. 7/20/2009 STMB Biztel-DASMR 11
- 12. Amazon Solutions Alternatives: • announced that it planned to start charging publishers for recommending selected titles in e-mail promotions to Amazon customers. • Amazon would also require publishers to purchase advertising spots on its Web pages. • Amazon still planned to recommend books it considered worthwhile for free via e-mails. 7/20/2009 STMB Biztel-DASMR 12
- 13. Conclusions: • Amazon had matured far beyond the lnitial online business concept described in its 1995 prospectus. • Amazon innovated and created a new form of retail organization. 7/20/2009 STMB Biztel-DASMR 13
- 14. Strategic Questions: • What was less clear was what the company would become in the future, what kind of business model it should adopt, and how such a model should be valued? • The question was whether the new form was viable or whether existing firms could imitate and incorporate some the features of the new form to enhance their own survival chances in the quickly changing’ retail ecology? 7/20/2009 STMB Biztel-DASMR 14