Question 1 Walmart Powers Online
Reread the Walmart case in Chapter 3 and then compare walmart.com with amazon.com.
What features do the sites have in common? Which are unique to walmart.com? To amazon.com?
How did they (Amazon) get to their current position from their humble beginnings. Wal-Mart, in the vernacular of sports, is the greatest retailer of all time, from a bricks-and-mortar perspective. Amazon, is the king of online retailing. Wal-Mart is trying to encroach on Amazon’s market share. Do you think it possible?
Question 2 E-Tailing
Do a little research on the history of Amazon. How did it get to be such a juggernaut from its humble beginnings? Discuss how they scuttled the competition
What are Amazon.com’s critical success factors? Is its decision not to limit its sales to books, music, and movies, but to offer a much broader selection of items, a good marketing strategy? With the broader selection, do you think the company will dilute its brand or extend the value proposition to its customers?
Opening Case AMAZON.COM: E-TAILING GROWS DESPITE THE SLUMPING ECONOMY
Amazon.com (amazon.com) reported that its annual profit for 2008 had doubled, with a 41 percent revenue increase, despite adverse U.S. and global economic conditions.
Entrepreneur Jeff Bezos faced an opportunity rather than a business problem. In the early 1990s, Bezos saw the huge potential for retail sales over the Internet and identified books as the most logical product for e-tailing. In July 1995, Bezos started Amazon.com, an e-tailing pioneer, offering books via an electronic catalog from its Web site. Over the years, the company has recognized that it must continually enhance its business models and online storefront by expanding its product selection, improving the customer experience, and adding services and alliances. In addition, the company recognized early on the importance of order fulfillment and warehousing. It has invested hundreds of millions of dollars in building physical warehouses designed for shipping small packages to hundreds of thousands of customers. Amazon.com’s challenge was, and remains, how to succeed where many have failednamely, how to sell consumer products online, at a profit, and show a reasonable rate of return on investment.
The Solution: Reaching Out to Customers
In addition to its initial electronic bookstore, Amazon has expanded its offerings to a vast array of products and services segmented into three broad categories: media (books, music, DVDs, etc.); electronics and other merchandise (including its new wireless reading device, Kindle; office supplies; cameras; toys; etc.); and other (nonretail activities, such as Web services, Amazon Enterprise Solutions, etc.). Key features of the Amazon.com superstore are easy browsing, searching, and ordering; useful product information, reviews, recommendations, and personalization; broad selection; low prices; secure payment systems; and efficient order fulfillment.
The Amazon.com Web site has a number of features that make the online shopping experience more enjoyable. Its Gift Ideas section features seasonally appropriate gift ideas and services. AmazonConnect allows customers to select their favorite authors, read about them, and then receive e-mails from those authors.
Amazon.com also offers various marketplace services. Amazon Auctions hosts and operates auctions on behalf of individuals and small businesses throughout the world. The Shops service hosts electronic storefronts for a monthly fee, offering small businesses the opportunity to have customized storefronts supported by the richness of Amazon.com’s orderfulfillment processing. Customers can use Web-enabled cell phones, PDAs, or pocket PCs to access Amazon.com and shop anywhere, anytime. Amazon.com also can be accessed via AT&T’s #121 voice service.
Amazon.com is recognized as an online leader in creating sales through customer intimacy and customer relationship management (CRM), which are cultivated by informative marketing front ends and one-to-one advertisements. In addition, sales are supported by highly automated, efficient back-end systems. When a customer makes a return visit to Amazon.com, a cookie file (see Chapter 4) identifies the user and says, for example, Welcome back, Sarah Shopper, and then proceeds to recommend new books from the same genre of the customer’s previous purchases and a range of other items. It 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 superb 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 order feature. 1-Click includes an electronic wallet (see Chapter 10), which enables shoppers to place an order in a secure manner without the need to enter their address, credit card number, and other information each time they shop and allows customers to view their order status, cancel or combine orders that have not yet entered the shipping process, edit the shipping options and addresses on unshipped orders, modify the payment method for unshipped orders, and more.
In 1997, Amazon.com started an extensive associates program. By 2009, the company had more than 2 million partners worldwide that refer customers to Amazon.com. Amazon.com pays a 4 to 10 percent commission on any resulting sale. Starting in 2000, Amazon.com has undertaken alliances with major trusted partners that provide knowledgeable entry into new markets. For example, clicking Office Supplies allows customers either to select from Amazon.com’s office supplies or to browse those of Office Depot; clicking Health and Personal Care allows customers to benefit from great deals offered by Weight Watchers. In yet another extension of its services, in September 2001 Amazon.com signed an agreement with Borders Group Inc., providing Amazon.com’s users with the option of picking up their merchandise at Borders’ physical bookstores (in-store pickup). Amazon.com also is becoming a Web fulfillment contractor for national chains such as Target. AmazonFresh is a grocery delivery service. Amazon MP3 allows downloads, some free, others for 69¢ per song. AmazonConnect allows authors to post remarks on their book pages to customers who have bought their books. Amazon.com also has its own search engine, called A9 (a9.com), and offers a range of Web services to developers (Amazon WebStore).
In 1999, Time magazine named Bezos Person of the Year, recognizing the company’s success in popularizing online shopping. In January 2002, Amazon declared its first profitfor the 2001 fourth quarter. Since then, the company has remained profitable. Annual sales for Amazon.com have trended upward, driven largely by product diversification and its international presence. This pioneer e-tailer now offers over 17 million book, music, and DVD/video titles to some 20 million customers.
Amazon.com also offers several features for international customers, including over 1 million Japanese-language titles. Amazon.com maintained its position as the number one e-tailer in 2008, generating revenues of $19.2 billion, with a net income of $645 million. In 2009, the Amazon.com Web site attracted at least 615 million visitors. Amazon.com, the king of e-tailers, which has shown all others the potential of B2C EC, is increasing its profitability, even in economic crises.