The inspiration of the name “Amazon” comes from the lar - PowerPoint Presentation

Slide1

The inspiration of the name “Amazon” comes from the largest river of the world.

This reflects the vision of breadth and selection of Amazon.comThe meaning of the arrow http://www.youtube.com/watch?v=nEL55ZOjlS4&feature=relatedSlide2

Foundation of Amazon

The CEO, Jeff Bezos, was graduate of Princeton with a B.S degree in computer science and electrical engineering.Bezos investigated 20 retail categories by the emergence of internet.Then, focusing on book selling due to the greatest relative selection advantage in books category through the internet compared to traditional retail store.Slide3

The Retail Model

Opened in July of 1995 with the claim of “Earth’s biggest book store”1 million titles increased quickly to 2.5 million.60% of its orders sourced from a single distributor , Ingram Book Distributors.Stocked generally best sellers.Slide4

The Retail Model

Ordering the books on demand enables Amazon to limit: working capital warehousing investmentsSlide5

The Retail Model

1st quarter of 1996 $875,000 in sales 1st quarter of 1997 $16 million in sales

Again in the 1st quarter of 1997 nearly 340,000 unique customers,80,000 daily site visitsSlide6

The Retail Model

Amazon engaged in IPO ( Initial Public Offering ) after the 1st quarter of 1997. The company ended its first day trading with a market capitalization of $560 million.The remarkable cash flow associated with its operations appeal to investors.At that time the core business of Amazon was book selling.Slide7

Expanding the Product Range

In June of 1998 began selling musicWithin months, it became the largest online music retailer in the world.In November 1998 entered in

video/ DVD

business.Slide8

Expanding the Product Range

For both these categories Amazon completed full range of commerce functions including:BuyingWarehousingMerchandisingShippingCustomer ServiceSlide9

Expanding the Product Range

During the last half 1999, Amazon started to sell toys, electronic products, tools, and software.During 2000, it added kitchen products, cell phones and wireless services.Slide10

Expanding the Product RangeSlide11

Investing in Distribution

In 1999, Amazon decided to invest in its warehouses and fulfillment categories in product categories where it could not rely on third-party distributors.The company built several warehouses, distribution facilities and customer service centers.Slide12

Supporting the Business and Technology

Key efforts around technologyInvested $800 million :Customer service unitPayment Processing SystemsWarehouse OperationsA number of innovations in customer-facing technology including:

One-click buying

TabsSlide13

Supporting the Business and Technology

Leading in the use of Web site personalization and customization such asGreeting by namePersonalized special offersRecommendations and predicted preferences Convenience for customers to buy from Amazon and raising the switching costs to the competitorsSlide14

Supporting the Business and Technology

Deep investments in its e-commerce infrastructure that allowed fully integrated operations inPayment processing systemsCustomer Service OperationsAn enormous database of product and customer informationSlide15

Supporting the Business and Technology

In the words of one observer,“Amazon has built much of this on its own, to very high standards of Security, Reliability and Scalability. They run the largest, most sophisticated e-commerce operation in the world.”Slide16

The Marketplace Model

1) Entering the Auction Space In early 1999, Bezos saw the potential power of auctions to expand the sources and selection of products availabe to customers.Difference from e-bay’s offering

Financial protection from fraud of customers

Access to Amazon’s experienced customer service phone representativesSlide17

The Marketplace Model

2) zShopsIn the fall of 1999 Amazon introduces zShops that facilitated transactions between customers and third party sellers.zShops provided small and medium size merchants with the opportunity to storefronts within Amazon’s website.Slide18

The Marketplace Model

3) Merchant RelationshipsPartnerships with other Internet Retailers, including Drugstore.com , Living.com,Greenlight.com and Wine.comSlide19

The Marketplace Model

4) Evolving Commerce ModelsOn the role of commerce partnerships at Amazon Bezos said:“There are things we’ll never be able to do that partners can do effortlessly. Likewise, we bring certain skills and a customer base to the table that would be difficult for partners to acquire”Slide20

The Marketplace Model

Traditional Retailing BusinessMultiple distribution centers.

Know-how to solve problems related to customers.

Convenience means location.

Web-based Business

No physical stores. Instead a few centralized distribution centers.

Difficult to design and improve web interface, knowledge does nor transaleted directly to web.

Every place is equally convenient so brand name is more importantSlide21

Integrating the Businesses

Initially, auctions and zShops were seperate business units in distinct areas of the website.In January of 2000, that changed.The plan was to let Amazon’s partner merchants sell their products on the same pages where Amazon sold its own goods.

‘

Single – Store Strategy

’

Bezos: ‘ The idea of the single store was to give customers a level of access equal to our own. ‘Slide22

Integrating the Businesses

After the changes made , many people in the organization started to think of Amazon as a platform for commerce rather than as a retailer. Bezos’ passion to manage for the long term and to have a place for customers to find and discover anything they might want to buy online. Slide23

Executing the Single Store Vision

The requirements of single-store vision:To develop multiple ways of partnering with andTo support the commerce of third party sellers ranging from small merchants to large corporations. Slide24

Executing the Single Store Vision

Small Businesses and IndividualsBy launching; Zshops and Auctions Attraction of thousands of small merchant and individuals For example:

Zshop book merchants able to migrate their catalogs inside the Amazon books tab.Slide25

Executing the Single Store Vision

Large Business SellersDeveloped multiple partnership strategies with large companies as a result of the expansion of product lines and the single-store strategy.Commerce partnerships with large companies in 4 categories:Merchants@Amazon.comMerchants.com

Syndicated Store

Marketing DealsSlide26

Executing the Single Store Vision

Merchants@Amazon.comPartnership with large retailers such as J&R Electronics,Office Depot,Circuit City,Toys”R”Us.Partners could sell their products on Amazon in return for a small fixed fee and a commusion on items sold.While Amazon improved its selection and customer experience, merchants benefit from displaying inventory on Amazon’s high-conversion site.

Merchants.com

Amazon operated third-party web-sites on behalf of merchants.

In contrast to

Merchants@Amazon.com

goods were not merchandised on Amazon but appeared on partner’s own,seperate site.

Amazon took inventory of merchants into its distribution centers and completed most fulfillment functions.

Syndicated Stores

It is same with merchants.com. However, this gives responsibility for all product development and operational tasks in support of the website.(buying,shipping,stocking,pricing and servising products.)

Fully integrated and completely outsourced commerce solution.

Amazon’s role is invisible except “Powered by Amazon” tagline at the bottom of site.

Marketing Deals

Amazon promoted its partners’ products or services on its website

In these cases , it allows its customers to click over to its partners’ Web sites . For example, drugstore.com.Slide27

The Economics of The Single Store

Fee Structure ranged from a maximum of 15 % of revenues to a minimum of 5% of the revenues.Bezos gives significant importance to diversification of commerce models at Amazon and creating proper internal incentives for general managers.Bezos said:”One of the keys of making this work is to try to get our economics to the point where we are agnostic about wheter customers buy from us or a

third-party

. In the end, if we satisfy our customers and partners they will remain loyal to us and we should have no angst about cannibalizing our own business.”Slide28

The Apparel Opportunity

There were several proposals to take Amazon more deeply in apparel business.There were two options:Buy,stock,merchandise,ship in the same way books, music and videos.Manage web-sites on behalf of large apperal companiesSlide29

CONCLUSION

“We are committed to expanding across categories. That’s not a hard issue. What is difficult is deciding which opportunities to pursue when.”This sentence summarizes why Amazon has grown so much – the company’s obsession of maximizing selection alternatives and the happiness of customers. Slide30

QUESTIONS

Discuss the expansion process of Amazon’s product range in chronological order.It started with books. Then, music, DVD/Video ,toys, electronic produstc, tools, software and apparel.What is the advantage of ordering on demand?This enables to Amazon to limit working capital and warehousing investments.Slide31

QUESTIONS

What attracted the investors at the time of the IPO although Amazon was only dealing with books ?The remarkable cash flow associated with its operations appeal to investors.What are the differences between web based business&traditional retailing business?Slide 22Slide32

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