SBE 430 Week 7 Course Project Presentation: Amazon - Graded An A+

SBE 430 Week 7 Course Project Presentation: Amazon Table of Contents Company Evaluation 3 Market Analysis 4 The Marketing Mix 4 Chart 1: Marketing Mix 5 SWOT Analysis 6 Strengths 6 Weakne ...

SBE 430 Week 7 Course Project Presentation: Amazon Table of Contents Company Evaluation 3 Market Analysis 4 The Marketing Mix 4 Chart 1: Marketing Mix 5 SWOT Analysis 6 Strengths 6 Weaknesses 6 Opportunities 7 Threats 7 Amazon’s Customers 8 Amazon’s Competition 9 E-Commerce Evaluation 11 Critique 11 Recommendations 11 Competition Using Improvements 12 Rationale 13 E-Commerce Program 14 References 16 Company Evaluation Ten years ago, what was our method of researching or browsing through a million books before selecting the perfect one? The answer is manual labor, book by book. That’s the reason why the demand for Librarians was so high in the 1990s. In this new technologically advanced generation, the real question is, “What is the best website that offers an abundance of books with page browsing capability and decent shipping rates?” Amazon should be ringing in your ear. In 1995, Jeff Bezos incorporated Amazon.com as a place to buy books because of the unique customer experience the Web could offer book lovers [Ama13]. Soon after, he noticed a niche in the online market and soon began selling a huge variety of products. Amazon sells everything a person need and wants at a click of a button. Not only do they sell books; but they also sell movies, music, video games, electronics & computers, home & garden, tools, toys, kids & baby, grocery, fishes and pet accessories health & beauty, clothing, shoes & jewelry, sports & outdoors; furniture and automotive & industrial[Ama13]. Amazon is the top player in the e-commerce and online auction industry. According to IBIS World, the industry contains establishments that primarily sell goods online (2014). Considering their primary method for selling goods strongly relies on the use of the internet, companies with physical establishments are excluded from this industry. Amazon.com is known to be a business to customers (B2C) because they retail to customers. Their E-tailer business model consist of two different variations; virtual merchant and manufacturer-direct. Virtual merchant is an online version of retail store, where customers can shop at any hour of the day or night without leaving their home or office (Traver 77). Amazon also has an array of products that they manufacture themselves. These popular devices include the Amazon Kindle electronic book, Kindle Fire Tablets, Fire TV, and Fire Phone. With that being said, Amazon is also manufacturer- direct company because they sell their manufactured products directly to their customers. This international e-commerce company has a profound mission, “To be the Earths most customer- centric company where people can find and discover anything they want to buy online” [Ama13]. Market Analysis The E-Commerce and Online Auction Industry has evolved quickly and tremendously over the years. This industry generates revenue of $297.9 billion per year. Revenue is expected to outpace GDP growth over the next 5 years, to 2019 [Ler14]. Since 2009, the industry’s annual growth was 10.3%. Improvements in technology, such as, the mobile payment systems, have positively affected growth [Ler14]. The industry is projected to grow 5.9% till 2019. The e- commerce and online auction industry contains 131,447 companies throughout the United States. It provides $18.5 billion in wages and makes $21.2 billion in profit. The e-commerce and online auction industry is currently is the quantity growth stage of its lifecycle. This means that the revenue is growing faster than the economy, many new companies are easily entering the market, substantial technology and process changes, customers are growing to accept the new innovation, and there’s a great deal of introductions to a new products or brands [Ler14]. The Marketing Mix Product, Price, Promotion and Place make up the 4 P’s of the marketing mix. Amazon’s founder Jeff Bezos understood that in-order to have a good marketing mix you have to understand you customer. Amazons mission statement says, “We seek to be Earth’s most customer-centric company for three primary customer sets: consumer customers, seller customers and developer customers.” The Marketing Mix Product Price Place Promotion Amazon started out in 1994 selling books out of a garage. Understanding their customers wants and needs they have grown to offer music, games, electronics, clothing, web services and more. Understanding the having low prices is very important to Amazon’s customers they have set out to have the lowest prices around. To offset some of the cost of shipping Amazon has offer a subscription service to Amazon Prime which offers free shipping after an annual fee. The positive thing in e-commerce is that as long as a customer has access to the Internet they have access to the store. The big down fall in e-commerce is that a customer has to wait and pay for shipping. Amazon has done has done a great job at offering helping cut the cost of shipping through Amazon Prime. They are also focusing innovated efforts at offering same day delivery. Amazons goals is to Earth’s most customer-centric company. They are able to promote to their customers by understanding their online users search information. Once they understand what the user is looking for they will have ads sent through social media and other web sites on products you have shown interest in. It is also genius that they offer Amazon Prime to college students for free. Giving stuff away to promote your business can be costly but when you think of building a lifetime customer it’s a worthy investment. Chart 1: Marketing Mix SWOT Analysis Strengths • Amazon is a profitable organization. In 2005 profits for the three months to June dipped 32% to $52m from $76m in the same period in 2004. Sales jumped 26% to $1.75bn. Until recent years Amazon was experiencing large losses, due to its huge initial set up costs. The recent dip is due to promotions that have offered reduced delivery costs to consumers. • Customer Relationship Management (CRM) and Information Technology (IT) support Amazon’s business strategy. The company carefully records data on customer buyer behavior. This enables them to offer to individual specific items, or bundles of items, based upon preferences demonstrated through purchases or items visited. • Amazon is a huge global brand. It is recognizable for two main reasons. It was one of the original dotcoms, and over the last decade it has developed a customer base of around 30 million people. It was an early exploiter of online technologies for e- commerce, which made it one of the first online retailers. It has built on nits early successes with books, and now has product categories that include electronics, toys and games, DIY and more. Weaknesses • As Amazon adds new categories to its business, it risks damaging its brand. Amazon is the number one retailer for books. Toy-R-Us is the number one retailers for toys and games. Imagine if Toys-R-Us began to sell books. This would confuse its consumers and endanger its brands. In the same way, many of the new categories, for example automotive, may prove to be too confusing for customers. • The company may at some point need to reconsider its strategy of offering free shipping to customers. It is a fair strategy since one could visit a more local retailer, and pay no costs. However, it is rumored that shipping costs could be up to $500m, and such a high figure would undoubtedly erode profits. Opportunities • The company is now increasingly cashing in on its credentials as an online retail pioneer by selling its expertise to major store groups. For example, British retailer Marks and Spencer announced a joint venture with Amazon to sell its products and service online. Other recent collaborations have been with Target, Toys-R-Us and the NBA. Amazon’s new Luxembourg-based division aims to provide tailored services to retailers as a technology service provider in Europe. • There are also opportunities for Amazon to build collaborations with the public sector. For example the company announced a deal with the British Library, London, in 2004. The benefit is that customers can search for rare or antique books. The library’s catalogue of published works is now on the Amazon website, meaning it has details of more than 2.5m books on the site. • In 2004 Amazon moved into the Chinese market, by buying china’s biggest online retailer, Joyo.com. The deal was reported to be worth around $75m (£40m). Joyo.com has many similarities to its new owner, in that it retails books, movies, toys, and music at discounted prices. Threats • All successful Internet businesses attract competition. Since Amazon sells the same or similar products as high street retailers and other online businesses, it may become more and more difficult to differentiate the brand from its competitors. Amazon does have its brand. It also has a huge range of products. Otherwise, price competition could damage the business. • International competitors may also intrude upon Amazon as it expands. Those domestic (US-based) rivals unable to compete with Amazon in the US may entrench overseas and compete with them on foreign fronts. Joint ventures, strategic alliances and mergers could see Amazon losing its top position in some markets. • The products that Amazon sells tend to be bought as gifts, especially at Christmas. This means that there is an element of seasonality to the business. However, by trading in overseas markets in different cultures such seasonality may not be enduring. Amazon’s Customers Amazon started by focusing on selling books. When Jeff Bezos was opened up shop out of his homes garage in the Seattle area there was a programed ding attached to every sale. After about 10 days of being open that ding became distracting because of the constant ringing. Amazon has now grown to at least 20 million customers through its Amazon Prime service alone. There Amazons fulfillment centers Amazon has been able to let business sell from Amazon.com. Amazon will then house the products and ship it as well. Amazon is able to have their competition also be their customer. Through Amazon Web Services Amazon is able to enables companies like Netflix to deploy thousands of servers and terabytes of storage. With 20 million Amazon Prime customers that make up the largest group of customers that Amazon has. That means that is 20 million customers that Amazon guarantees 2 day shipping for their Amazon Prime products. For the most part customer’s reviews are positive however there is some discrepancy when it comes to the shipping promise. With Amazon Prime Amazon offers free 2 day shipping for products that fall under Amazon Prime. After reading reviews Amazon has not always been able to keep shipping in just 2 days. Amazon seems to be in a race to be “Earth’s most customer-centric company.” With that comes being the company that can take care of all your needs. The problem is that having a low price is pretty much what every customer wants. That means that Amazon has a very low profit margin in comparison to its competitors. Amazon’s Competition Walmart.com is by far the biggest competitor of Amazon. Walmart is a super-giant chain of retail stores in the world. Walmart have more than 11000 retail stores under 71 banners in 27 countries. E-commerce has taken off and is only going up, so Walmart created its store online and constantly is not on Amazon door. Advantages: • Everyday low prices • Can pick up the order onsite for free & accepts cash(7.7% U.S. homes have no bank account) • Only 15% of stores sales are from credit cards. That means a bigger cash flow. • Its Annual revenue is around $469 billion. • It has an continuous improved visibility of retail items Disadvantages: • Its online infrastructure needs upgrades (Cant resell used items there) • No true market strategy to woo Amazon loyal away • Unable to sell fruits & vegetables online • Walmart demographic is more prone to shopping at its physical storefront than online • 74% of Walmart consumers shop at Amazon, while only 18% of Amazon consumers shop at Walmart as well. Ebay.com is the next biggest competitor of Amazon. When you think of Ebay.com, what do you think of? If you think and virtual auctions, then you are correct. EBay lets you become your own e-commerce corporation, while staying a customer. People and businesses buy and sell a broad variety of goods and services worldwide, truly making the free market globally. Advantages: • For the supplier it’s an online auction where people can continue to bid, causing the price to rise • There is a time limit to each sale; also a buy now option • Sell nationwide or worldwide • You set the price you are willing to pay • Fraud protection for a certain amount of money • Its Marketplace infrastructure Disadvantages: • There are fees on the listing item and sold item; plus the cost of shipping • There can be a high chance of fraud sellers • Hard to sell large items • Buying an “in good condition” is not guaranteed; buyers are cannot examine each item. • Sellers can end up paying more for an item than its retail value. Wal-Mart’s in-store shoppers prefer Amazon.com — not Walmart.com E-Commerce Evaluation Summarize the current program. Critique There area that Amazon is constantly working at improving is the accuracy, cost and speed of its shipping. With much of Amazons innovative efforts going into same day shipping, they are not exactly where they want to be as far as shipping goes. Amazon is trying to cut cost by cutting out the need for a delivery service by offering its own shipping. Currently, this is taking place with Amazon Fresh in California and the Seattle area. Being a logistics company has a more workload than being an online retailer; Amazon is moving slowly to taking on all of its shipping orders. Recommendations Personalize author alerts. Amazon isn't perfect, but users have become familiar with the way it works, and Amazon won't want to mess with a winning formula. It's the same story with eBay. Change isn't so easy once you achieve scale at a global level. Either way I spotted an area where can improve on, Personalize author alerts. If I like an author, actor, or an artist, I’d like to be up-to-date when their new album/book/movie is released. As of right now, Amazon doesn’t provide these kinds of alerts. What Amazon does is alert the customer things that related to your last buy, but that leads to having irrelevant recommendations. Update customer reviews. Amazon is one of the most successful companies in the e- commerce world. Amazon is even considered to be the perfect e-tailer. Even though their customers are mostly fulfilled with their services, they do have areas that need improvement. One area is the way they organize their customer’s comments. One thing that Amazon customers and non-customers enjoy most is the ability to view comments from people that have previously used a specific product. Before making purchases online, internet users look for reviews on a particular product or business in order to make their decision. The only problem with customer’s comments and reviews is the date they wrote it. I’ve noticed many product reviews are from years ago. This hinders the business and the product, especially if it has improved since. It is recommended that Amazon only use comments and reviews that are less than a year old. Older comments may be based on a product’s previous model, edition, or version. Recent comments give customers a better idea of what to expect from the most recent model of the product. Competition Using Improvements Starting a successful business is one aspect, but maintaining that business is a whole other story. Every company strives to be the best in their industry, if not, then why would a business start in the first place. The competition at the highest level is fierce. Amazon.com has already proven why no other websites equate. Amazon’s closest competitors cannot keep up with the advancements of the world. Just to name a couple, Walmart.com and EBay.com are some of Amazon’s competitors. Many of Walmart’s customers are unhappy with their service and products. Many of their products are rated low because of the quality of their products; therefore their reviews are horrible. What makes it worse is that Walmart actually have many physical locations around world. On the internet, Walmart customers prefer to purchase from Amazon.com, not Walmart.com. EBay is based entirely off auctioning new and used products. Extreme fees, fraudulent sellers, and identity thief are some of EBay’s disputes. EBay has many issues to resolve within the company before it can even be considered as competition to Amazon. Even if EBay or Walmart were to be just as proficient as Amazon, they still wouldn’t have customers like Amazon’s customers. Amazon’s customers are loyal to them. They seldom go to other websites when making purchase decisions, especially if they’re a prime member. Rationale Amazon.com needs no justification; the company is listed as one of the top 100 companies in the US, according to Forbes magazine. The company is ranked the highest in its league. They have a large selection of products for everyone. If you’re looking for something on the internet, and can’t find it, chances are, Amazon.com has it. They may even have it at a better price and free shipping. Amazon’s method of maintaining their customer relationship plays a major role in their success. They offer a profusion of ways to appeal every different customer. Amazon is completely online so they use every possible channel to communicate solely on the internet. Another advantage to Amazon is their customers. Amazon based their entire model of business off of their customer experience because of that, their customers value their business, rate them high, become loyal customers, and that pass the word along to potential customers. Amazon.com understands that time is a major importance in our individual lives so the company enable users to purchase items by using “one-click method.” Upon request, one-click saves users personal information needed for quick purchases. Of course, not every customer is satisfied, Amazon does have difficulties. These drawbacks are usually based on customer’s personal preference. Considering Amazon.com focuses on their customer’s wants and needs, I’m pretty sure that those small imperfections will be cleared very soon. E-Commerce Program What company do you think of when someone buys a product online? That’s correct, Amazon. Web shopping is already a trend for many consumers, but will become more common by the end of 2020. E-commerce programs are the future of business, while traditional methods can leave you dried up dying for thirst. Amazon is already most the dominant online company making over $61 billion annually. In the virtual world can always be controlled, alternated, and deleted. Amazon e-commerce programs goals are updated for the future, but used for the now. Amazon e- commerce by far the most credible that’s known, but many competitors want to create energy out of nowhere to take the lead in this race. One of Amazon big competitors is Walmart Inc. This monopoly in reality is trying to be a monopoly virtually. They’re adopting similar methods Amazon use, but taking a step further to pick up the consumer purchase at its physical storefront. There’s a rivalry brewing between these two, but Amazon is still currently the champ, by offering same day delivery of veggies & fruits to its customers, while Walmart struggles. “The definition of e-commerce includes business activities that are business-to-business (B2B), business-to-consumer (B2C), extended enterprise computing (also known as "newly emerging value chains"), d-commerce, and m-commerce. E-commerce is a major factor in the U.S. economy because it assists companies with many levels of current business transactions, as well as creating new online business opportunities that are global in nature.” (Define e- commerce!) Amazon e-commerce programs are elite where the company is always looking for ways to improve it. The free market is constantly moving faster where you can make or loss dollar even quicker. With treatments there usually side effects and one of them are impatient consumers. That means its necessary improve the e-commerce programs by focusing ways to improve the webpage load time. The longer it takes to load a page, the more money the company loses. The ideal time should be 2 seconds or less for e-commerce program to load. The next thing to improve on is the personalization of its consumers. You can describe this as “MySpace” program. You will see things like Related to Items You’ve Viewed,” “Inspired by Your Shopping Trends,” and Recommendations for you, but Amazon can take a step even further by offering discounts booking relatable products together. To take a step even further, Amazon can partner up with Facebook so people can like or share what they bought from this online giant. This will boost online sales dramatically. Using the Upselling method is a plus for e-commerce business that Amazon should focus on more. This e-commerce program that offers the consumer add-ons of protection, recommendations, or alternate items that cost more. I see this as a bonus for online businesses. That being said the most things that are looked at on an online business is user’s reviews. People want to be assured that this is the best option for them. I want Amazon to update this program where it shows the most credible reviewer at the top of each item. I know as a customer this will make up my mind the more faster when finding the right product to buy. Something similar to what EBay does with its domain, but for customers instead of suppliers. Budget and Finance Considerations References Amazon.com July (2012). Retrieved from http://www.amazon.com/forum/amazon %20discussions%20feedback? _encoding=UTF8&cdAutohide=0&cdForum=FxLCMW9UN2N6QR&cdSort=oldest&cd Thread=Tx35TPJKF7UC1OE Amazon. (2013, June). Overview. Retrieved from Amazon.com: http://phx.corporate- ir.net/phoenix.zhtml?c=176060&p=irol-mediaKit Bensinger and Stevens (April 2014) “Amazon, in Treat to UPS, Tries It’s own Deiveries” Wall Street Journal Retrieved from http://online.wsj.com/news/articles/SB100014240527023047884045795215227928598 Define e-commerce! (n.d.). Retrieved September 30, 2014, from http://www.umsl.edu/~siegelj/Course5890/definitions.html Lerman, S. (2014, September). E-Commerce & Online Auctions in the US. IBISWorld Industry Report 45411a.. Retrieved from IBISWorld.com: http://www.ibisworld.com/industry/default.aspx?indid=1930 O'Connor, C. (n.d.). As J.C. Penney Battles Macy's For Martha Stewart, Experts Ask: Is She Worth It? Retrieved September 30, 2014, from http://www.forbes.com/sites/clareoconnor/2013/04/17/as-j-c-penney-battles-macys-for- martha-stewart-experts-ask-is-she-worth-it/ Traver, Kenneth Laudon and Carol G. E-Commerce 2012, 8/e for DeVry University. Pearson Learning Solutions, 10/2012. VitalBook file. Walmart.com. (n.d.). Retrieved October 11, 2014, from http://blogs.marketwatch.com/behindthestorefront/2014/04/04/wal-marts-in-store-shoppers- prefer-amazon-com-not-walmart-com