Amazon.
com
A look into Amazon’s business model
Hussein Akberali
[Link]
December 5, 2010
Table of Contents
[Link] Business Model......................................................................................3
[Link] Competitive Advantage........................................................................4
Improvements???.........................................................................................................4
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[Link]
December 5, 2010
[Link] Business Model
Over the years, [Link] has been known to be a one stop-shop for all.
Meaning you can get everything you want from one location. This categorizes it as
a storefront model.
A storefront model has some basic features. It combines Transaction processing,
security, online payment and information storage so as to improve customer
experience. Further to this, it enhances and proposes a 24-hour round the clock
service. Therefore, transactions can happen all the time, every time.
In a typical storefront model, it includes; an online catalog of products, basically a
list of all products and services on offer. [Link] does this by categorizing
their products into appropriate categories such as shown in Fig.1.
In addition to this, order processing is another feature any storefront model has.
Just like [Link], which processes orders using the shopping cart technology,
which allows users to continue to shop and add products to their cart at the same Fig.1
time. Just like any typical department store. You can add stuff to your trolley but
don’t have to pay for them till you get to the check out counter. In Fig.2 and Fig.3
will provide an illustration on how the shopping cart works exactly.
Fig.3
The next essential item for a storefront model is the secure payment
facility. Any payment made to [Link] has to go through a
verification and security system such as Verified by Visa.
The last essential item to identify a storefront model is a timely order
Fig.2 fulfillment facility. This means providing the ordered products in the
time specified and in proper condition, regardless of weather
conditions. [Link] has certain conditions and asks the
customer how they would prefer to receive the product. Depending on the urgency of the matter the
customer would pick the required delivery option as shown in Fig.4.
Fi
g.4
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[Link]
December 5, 2010
[Link] Competitive Advantage
What makes [Link] a cut above the rest? [Link] is well known in the Internet market. It
has several advantages over its competition. First of all it provides a large selection of products. From
categories down to subcategories into individual products. This wide selection gives [Link] an
advantage as it spreads the risk over many products rather than focusing only on one core product.
Secondly, [Link] provides lowest prices available in the marketplace, giving it a price
advantage. This can be better understood through Fig.5 where amazon provide a reason as to why they
don’t show the list price but the retail price.
Thirdly, [Link] is a one-stop shop for all, just like a
shopping mall, where you can but everything. In essence it is
convenient. You can buy electronics all the way to outdoor
equipment with only a few clicks.
[Link] is also well known for its reliability when it comes
to information it provides. [Link] only provides highest
Fig.5 quality information when it comes to the products they offer.
They provide an online experience rather than a purchase.
There are several other competitive advantages that I will list, however, there is one other main
competitive advantage. It is a personalized portal. From this they provide personalized
recommendations and welcome screen as illustrated in Fig.6.
Fig.6
Some other competitive
advantages include; Discovery, brand recognition, accessibility, customer service, reliability, speed of
fulfillment, ease of use, and ability to adapt to changing conditions, and trust in transactions.
Improvements???
What’s next for [Link]? Where can you go from the top? [Link] cannot sit and wait for
competition to catch up with them. They need to be more proactive. They have already improved their
services to a high level. However, [Link] need to improve on their loyalty services. They have
the Amazon prime card. But their focus on the Amazon Prime card is not very high.
Amazon also believe that they’re most effective marketing communications are a consequence of their
focus on continuously improving the customer experience. This then creates word-of-mouth promotion,
which is effective in acquiring new customers and may also encourage repeat customer visits.
As well as this Amazon used the personalization enabled through technology to reach out to a difficult
to reach market that is sometimes called ‘the hard middle’. Bezos’s view was that it was easy to reach
10 people (you called them on the phone) or the ten million people who bought the most popular
products (you placed a superbowl ad), but more difficult to reach those in between. The search
facilities in the search engine and on the Amazon site, together with its product recommendation
features meant that Amazon could connect its products with the interests of these people.
Online advertising techniques include paid search marketing, interactive ads on portals, e-mail
campaigns and search engine optimization. These are automated as far as possible.
For example, affiliates can use straight text links leading direct to a product page and they also offer a
range of dynamic banners which feature different content such as books about Internet marketing or a
search box. Amazon also use cooperative advertising arrangements, better known as ‘contra-deals’
with some vendors and other third parties. For example, a print advertisement in 2005 for a particular
product such as a wireless router with a free wireless laptop card promotion will feature a specific
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[Link]
December 5, 2010
Amazon URL in the ad. In product fulfillment packs, Amazon may include a leaflet for a non-
competing online company such as [Link] (lingerie) or Expedia (travel). In return, Amazon
leaflets may be included in customer communications from the partner brands.
Amazon’s Associates program directs customers to our websites by enabling independent websites to
make millions of products available to their audiences with fulfillment performed by third parties. We
pay commissions to hundreds of thousands of participants in our Associates program when their
customer referrals result in product sales.
