Case Study on E-Commerce at Amazon.com

Presented By

Akarsh (1420302)Asha (14203Aparna (14203Sowmya (14203Vinita (14203Keerthi (14203Harish (1420312)

Business

Began as one of the major companies to sell goods

over the internet

Started as solely as an Online bookstore

Due to success diversified into many other product

lines and services

Multinational e-commerce company

World’s largest online retailer

Introduction

• Amazon was incorporated in July 1994 in the state of Washington by Jeff Bezos.

• It went online in July 1995 as a online bookstore and issued first Initial Public Offering on May 15,1997.

• It diversified its product range into DVDs, VHSs, CDs, video and MP3 downloads/streaming, software, video games, electronics, apparel, furniture, toys and jewellery.

• They also produce consumer electronics- Fire phone, Amazon Kindle e-book reader and the Kindle Fire tablet computer.

Growth and Diversification

• During the first 30 days of business, Amazon.com fulfilled orders for customers in 50 states and 45 countries.

• In 2000, Amazon.com began to offer its best-of-breed e-commerce platform to other retailers and to individual sellers. More than 2 million small businesses have benefited from this by increasing sales and reaching new customers.

• In 2006 they launched, Amazon Web Services(AWS) began exposing key infrastructure services to businesses in the form of web services - now widely known as cloud computing.

Downfall of Amazon

Problems

• Amazon faced a big downfall from 1995 to 2000 in its initial period in terms of revenue.

• Since, 2000 the growth of sales at Amazon slowed down considerably. • From 1995 to 2002, Amazon.com incurred losses in each year, totalling $3.0

billion.• Gross margins were only 10 to 12 % (giving no room for error to be followed

by Amazon).• Losses also arose from Amazon’s goal of growing rapidly and establishing a

global brand name quickly before its competitors.•  Amazon aimed for market share and did not make a profit till 2001.• Amazon has faced lawsuits over exclusivity of contracts (Toys‘ R'Us: 2004-)

and size claims (Barnes and Noble: 1997).• Amazon's auction site, founded in 1997, proved unsuccessful, though its

technology was later incorporated into Amazon Marketplace.

Success

• Amazon perfectly understood the old-economy retail cocktail: low prices, large selection, customer experience.

• Jeff Bezos’ 3 big ideas:Digital enables limitless inventoryDigital boosts customer careDigital allows high margin, lowest prices.

Continued...

• Became the leading online book seller.• Became the leading music collections seller in

120 days from the launch.

Analysis

Continued...

• They always tried to be at number one position when searching for any books through Google.

• Increased customer satisfaction.• Ease of search just by typing the name or

subject or author of the book.• Low cost and added advantage of free shipping

for some products.• Effective resource utilization as they had

customer money which they can use for 45 to 90 days before handing it over to the publisher.

Comparison with Barnes & Noble as per 1998 statistics

Amazon Barnes & Noble

Number of stores 1 Website 1,011

Number of employees 1,600 27,000

Titles per superstore 3.1 million 175,000

Total sales $ 542 million $ 3.1 billion

Sales per employee per year $ 375,000 $ 100,00

Sales growth (last quarter of 1998) 306 % 10 %

Book returns 2 % 30 %

Inventory turnover per year 24 % 30 %

Operating income in 1998 - $ 29.2 million $ 147.3 million

Customers, Customers and Customers

Developing Alternatives

Diversification

• Amazon started venturing in diverse business fields like DVDs, VHSs, CDs etc. The one which they started as online bookstore got spread into 16 main categories.

• In 2000, Amazon.com began to offer its best-of-breed e-commerce platform to other retailers and to individual sellers. More than 2 million small businesses have benefited from this by increasing sales and reaching new customers.

• In 2006 they launched, Amazon Web Services(AWS) began exposing key infrastructure services to businesses in the form of web services - now widely known as cloud computing.

Strengths

• Extensive product line at low prices.• Strong IT system.• Amazon is now internet’s premier shopping destination

for books, video stores, Mp3 stores, gifts shopping, categories from software to apparel.

• Pioneering in “collaborative filtering technology” as powerful mass marketing strategy.

• Single click buying.• Carry relatively smaller inventory.• Having strong brand image expanded globally.

Weaknesses

• Low product margins • Lose focus

Opportunities• Expanding the technology service market• Online movies• Growth in cloud computing

Threats• Dependence on Vendors• Fierce competition• Government factors, taxes, etc.

Benchmarks by Company

Conclusion

Amazon slowly became popular among customers due to:

• Easy buying experience• Largest collection• Low price• First revolution in online for book store followed

by other category of products.• Enriched customer experience.• Key strategic challenge for the company is: How to maintain long term profitability ?

Summarised view how Amazon recovered from its losses

• In 2001 started with changing focus by cutting expenses and restructured its business model.

• Started new year by laying off 1,300 workers(about 15 % of its workforce), closed two warehouses and Seattle customer service centre.

• Better management of the merchandise by adding smaller retailers and pre-sorted delivery of packages according to geographical demands to its local warehouses.

• Transformed into an online shopping portal from a speciality reatiler.• Stopped selling products that weren’t profitable.• Amazon’s sales from third-party vendors are still a small percentage of its

total revenue, but the margins are higher.• Not all growth was organic. From 1998 onwards, Amazon acquired several

companies, notably Bookpages.co.uk (1998), Joyo.com, a Chinese ecommerce website (2004) and BookSurge a POD company, (2005), Mobipocket.com, an eBook software company (2005) and The Book Depository (2011)

Vision, Mission and ExecutionLearning