Amazon Dominates the Retail Industry

Amazon Dominates the Retail Industry

Introduction to Amazon

What started out as a garage operation in 1994, is now one of the largest global online retailers to date. The company publicly launched its website in 1995 as an exclusive book retailer. Today, Amazon.com offers almost anything a consumer demands through its trademark e-commerce site. The company is a retailer of books, apparel, electronics and other general products. “More than 209 million active customers rely on Amazon for everything from flat-panel TVs to dog food” (McCorvey, 2013, p. 70). Amazon has grown from three employees to an excess of 150,000 staff members around the world. “Jeff Bezos, chief executive of Amazon, is single-handedly responsible for changing the way the world accesses and consumes media” (Quinn, 2016, p. 80).

The products offered by the company consist of merchandise purchased for resale from vendors and products presented by third party sellers. The company operates through two business segments. Amazon operates in North America and internationally. The business provides services to four primary customer sets: consumers, sellers, enterprises and content creators. The company delivers services to consumers through its retail websites. Amazon designs its websites to facilitate the sale of millions of exclusive products. Some of these products are sold by Amazon, while others are sold by third party vendors. The company caters to sellers by providing programs that enable its customers to sell their products on sellers’ websites and also on Amazon’s websites. “Amazon serves developers and enterprises through AWS. AWS provides access to technological infrastructure that developers can use to enable virtually any type of business” (MarketLine, 2015, p. 5). The company caters to content creators through programs that allow the authors, musicians, filmmakers, and application developers to publish and sell.

Additionally, Amazon creates revenue through co-branded credit card agreements and advertising services. Amazon is able to target a larger customer base due to its dominant market position in online retail. “However, increasing pressure to collect sales tax on merchandise sold through online websites can render the company’s pricing competitiveness and can be less attractive to customers” (MarketLine, 2015, p. 29). This paper analyzes the strengths, weaknesses, opportunities and threats of the dominate online retailer as it has expanded and continues to plan for the future.

Strengths of Amazon

        Amazon.com, Inc. acquires several strengths in the world of online retailing. The company is an extensive online retailer with an extending product line. It strengthens the technical platform through strategic acquisitions and builds a strong presence in the eBooks space through Kindle. “As Amazon continues to move into completely new industries—its now a serious player in cloud computing, online video, e-readers and other devices—some see a company that’s pioneering a new model” (McGinn, 2014, p. 58).

        Amazon is one of the largest global online retailers. “With revenues of $88,988 million in FY2014, Amazon is much bigger in size than its close competitor eBay (revenues of $17,902 million in FY2014), and Barnes & Noble (revenues of $6,069.5 million in the financial year ended April 2015)” (MarketLine, 2015, p. 29). In 2015, Amazon was ranked among top 100 of America’s largest corporations by a business magazine. The company was also featured among top 10 global brands in the top 500 global brands list. Additionally, Amazon was rated among the top three US retail brands in the top 50 US retail brands list in 2015.  

        Amazon’s online format helps the company rotate its inventory swiftly and reduce its inventory management cost. This allows the company to offer merchandise at a comparatively low price. High inventory turnover ratio allows Amazon to produce revenue from sales before its payments to suppliers come due. In addition, lower prices act as a compelling proposition in captivating more customers. The company is also able to enhance customer satisfaction through its online retail format as it offers a broader selection and greater access to information.

        Amazon has expanded its business operations and products through various strategic acquisitions. Out of the many acquisitions, two have certainly aided in the company’s business expansion.  “In 2009, the company acquired Zappos.com, an online apparel, footwear and accessories retailer. This acquisition enabled Amazon to tap the internet sales of apparel, the largest online shopping category and one in which Amazon has had limited success in the past” (MarketLine, 2015, p. 30). In 2015, Amazon acquired Elemental Technologies. Elemental Technologies is one of the prominent suppliers of software-based video solutions for multiscreen content delivery. Through this acquisition, the company’s position in the media and entertainment industry was strengthened. “The company’s focus on product expansion will enable it to gain significant market share. The strengthening of its technical platform will help Amazon reduce its operating cost and improve operational efficiency and allow it to offer more value to its customers” (MarketLine, 2015, p. 31).

        Amazon has a strong presence in the eBooks space with the Kindle e-reader. “Kindle is Amazon’s portable reader that wirelessly downloads books, blogs, magazines and newspapers to a high-resolution electronic paper display that looks like real paper” (MarketLine, 2015, p. 31). More than 1,000,000 books are offered through the US Kindle store. The Kindle e-reader caters the company with a competitive advantage over its peer group and heightens the revenue generation capacity of the company.

        An overall strength Amazon acquires is the company’s drive and focus. “Instead of focusing on competitors or technology shifts, they continually invest in getting a little bit better. In their core retail business, they grind out incremental improvements in delivery speed and product offerings while chipping away at prices” (McGinn, 2014, p. 58).

Weaknesses of Amazon

        Amazon.com, Inc. also retains weaknesses in the world of online retailing. The company bears patent infringement issues which affect stakeholder confidence. It also bears frequent outages of web hosting and cloud computing servers. In addition, “Over the past two years the company has drawn fire for its treatment of distribution-center workers and the hyperagressive steps taken to weaken rival e-commerce players such as Zappos and Diapers.com” (McGinn, 2014, p. 61). Bezos’s personal management style has been seen as abusive and degrading towards his staff. However, in hopes of potential growth for the company his approach has been reevaluated.