Ecommerce Final Presentation

8/7/2019 Ecommerce Final Presentation

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Bricks and Clicksvs. E-tailingComparing Best Buy and

Amazon.com

Kevin Walke

Christopher Contino

Sever NeacsuHassan Tanvir


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Agenda

Business Model Comparison

Strategic Analysis

Porters Five Forces

Financial Analysis

Conclusion


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Introduction

Amazon.com Amazon.com, Inc. is an American-based multinational electronic commerce

company. Headquartered in Seattle, Washington, it is America's largest onlineretailer, with nearly three times the Internet sales revenue of the runner up,Staples, Inc., as of January 2010.

Best Buy Best Buy Co., Inc. is a specialty retailer of consumer electronics in the United

States accounting for 19% of the market. It also operates in Canada, Mexico,China, and Turkey.


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Business Model Comparison Value Proposition

Amazon offers quick delivery, their products and services are competitively priced, reducedsearch costs, the customers convenience is enhanced and shipping costs are reduced

Best Buy offers knowledgeable and friendly staff. The company site is comprehensive inoffering its full product line and services

Revenue Model Amazon earns revenue by the margins it charges books and various other products it sells.

It also licenses out its Cloud technology for a subscription fee

Best Buy earns money by selling electronics, extended warranties and services online andin store. They also mark up on the cost of items in order to earn their profit

Market Opportunity

Amazon has a relatively large audience. It has the leveraging power of millions ofcustomers. It is able to send emails to millions of customers on its mailing list and that givesit a huge advantage in the e-commerce world

Best buy has a large audience in the online market as well as the brick and mortar stores. Ithas multiple revenue


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Competitive Environment Amazon could be the victim of technological and product innovation that allow competitors entry in

to market segments.

(ex.Amazon is at war right now with Google books that threatens to release all of theirbooks that they sell for free on their servers)

Best buy recently purchased Future Shop, their most important competitor. They haverelatively low competition and have achieved a monopoly in the area.

Competitive Advantage Amazon follows a just-in-time ordering system; the order is picked dynamically with a new

inventory management secret. Also the relationship with variety of suppliers.

Best Buys website and retail stores allows a lot of choices and avenues of interaction with

for consumers


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Market Strategy Amazon uses a myriad of strategies. It created its own affiliate ad-site, uses

offline campaigns as well as email campaigns.

Best Buy has a myriad of techniques that they use online and offline.

Organizational Development Amazons entire business structure relies on key servers and if it goes down

could go down for a while

Best Buy has much more dynamic business organization

Management Team

Amazons management must have affiliate advertising skills and a marketingbackground since Amazon is a very marketing oriented entity.

Wider variety of disciplines needed for organizational success


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Business Model Pros and Cons

Amazon Pros Lower Prices

Higher customer satisfaction rate via Low Prices

Customer Satisfaction leads to Brand loyalty and Customer retention

Higher profits generated due to economies of scale

Less liability due to direct shipping from supplier to customer

Unmatchable core competencies due to investment in technology

Efficient use of the internet

Amazon Cons Lacking direct contact with customer could lead to misunderstandings

Unable to work efficiently with other large retailers

Law suits may lead to a bad reputation, hence impacting business negatively


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Business Model Pros and Cons Best Buy Pros

Ease of direct face to face customer service

Physical presence

Able to provide a superior shopping experience

Able to apply Sales pressure

Dell Partnership leading to larger selection of home computers

Best Buy Cons High overhead costs leading to higher product pricing

Lesser margins

Inefficient use of technology

Lack of e-business infrastructure


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Strategic Analysis Firm Value Chain

Amazon has taken the traditional value chain and added value to each step which they canpass on to customers in form of savings.

Best Buy value chain is similar to those of many other retailers.

Core Competencies Amazon core competency is its ability to use technology to eliminate costs. Best Buy gains its advantage from superior store experience, customer orientation,

inventory management, executing new store concepts, as well as, marketing,merchandising and related disciplines.

Synergies Amazon services enable third parties to integrate their products into Amazon website.

Partnerships with suppliers who can also pose as competition

Technology Amazons success is solely credited to the internet, as discussed Amazon has spent over

$1.2 billion to enhance its online capabilities. Best buy despite its online presence has notbeen able to capture the online market in an impressive manner.


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Porters Five Forces


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Financial AnalysisRevenue

AmazonYear Total Revenue (Billions) Growth Rate

2002 3.93

2003 5.26 34%

2004 6.92 32%

2005 8.49 23%

2006 10.7 26%

2007 14.8 38%

2008 19.2 30%

2009 24.5 28%

2010 34.2 40%

Best BuyYear Total Revenue (Billions) Growth Rate

2002 19.6

2003 20.95 7%

2004 24.55 17%

2005 27.43 12%2006 30.8 12%

2007 35.9 17%

2008 40 11%

2009 45 13%

2010 49.7 10%

$3.93 $5.26$6.92 $8.49

$10.70$14.80

$19.20$24.50

$34.20

$19.60 $20.95$24.55

$27.43$30.80

$35.90$40.00

$45.00$49.70

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

2002 2003 2004 2005 2006 2007 2008 2009 2010

Revenue(Billions

)

Year

Amazon vs. Best Buy Revenue (Billions)

Amazon

Best Buy


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Financial AnalysisRevenue

$940.3 billion (2017)

$855.5 billion (2017

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900$1,000

2002200320042005200620072008200920102011201220132014201520162017

Billions

Forecasted Total Accumulated Revenue Amazon vs. BestBuy

Amazon @ 31% growth rate, Best Buy @ 12% growth rate

Amazon Total Accumulated AnnualRevenue

Best Buy Total Accumulated Annual

Revenue


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Financial Analysis

Cost of Revenue

$3.93$5.26 $6.92

$8.49$10.70

$14.80

$19.20

$24.50

$34.20

0

5

10

15

20

25

30

35

40

2002 2003 2004 2005 2006 2007 2008 2009 2010

Billions

Year

AmazonRevenue Vs. Cost of Revenue

(Billions)

Total Revenue

Cost of Revenue

$19.60$20.95$24.55

$27.43$30.80

$35.90

$40.00

$45.00

$49.70

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

2002 2003 2004 2005 2006 2007 2008 2009 2010

Billions

Year

Best BuyRevenue vs. Cost of Revenue

(Billions)

Total Revenue

Cost of Revenue


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Financial Analysis

Gross Profit

4.745.55

6.586.95

8.18

9.2810.13

11.79

13.09

$0

$2

$4

$6

$8

$10

$12

$14

2002 2003 2004 2005 2006 2007 2008 2009 2010

Billions

Axis Title

Best Buy vs. Amazon Gross Profit 2002-2010

Best Buy Gross Profit (billions)

Amazon Gross Profit (billions)


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Financial Analysis

Operating Expenses

17%

4%

17%

11%12%

26%

8%

0%

5%

10%

15%

20%

25%

30%

2003 2004 2005 2006 2007 2008 2009 2010

%IncreaseFromPreviousYear

Year

Best Buy% increase of operating expense per

year

% increase of operatingexpense per year

17%

38%

21%

30%

38%

28%

44%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%50%

2003 2004 2005 2006 2007 2008 2009 2010

%IncreaseFromPreviousYear

Year

Amazon% increase of operating expenses per

year

% increase of operatingexpense per year


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Financial Analysis

2.58% 2.91% 2.97%3.26% 3.40% 3.70%

3.83% 3.52%2.23% 2.65%

-17.83%-3.81%

0.67% 8.50% 3.92% 1.77% 3.21% 3.37% 3.68% 3.37%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

NetMargin%

Year

Best Buy vs. Amazon Net Margin

Best Buy

Amazon


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Which Company is StrongerFinancially?

Category Best Buy Amazon

Revenues+ -

Cost of revenue+ -

Gross profit+ -

Operating expenses + -Net Margin

= =


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Conclusion

Both Amazon and Best Buy are leaders in their respective industries. Whatthey both share is experience and first-mover advantage when consideringtheir markets which is illustrated by their colossal size of operations andrevenues.

It is difficult to compare the two giants since each has a totally distinctivebusiness strategy from the other.

With the exponential growth of Amazon.com cause by the growth of theinternet and the business relatively low overhead, it is not hard to predict

Amazons net worth surpassing that of its more mature rival Best Buy.

Best Buys conservative growth and stronghold on market share will

continue to elevate this company on the retail level.


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Thank you for your attention

Any Questions?

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Ecommerce Final Presentation