Amazon.Com Case Study

AMAZON.COM CASE

Steven Kennedy

Midterm

AC 2420

3/21/05

Amazon.com, as an e-commerce website has emerged as a leader in the e-business world. Originally, the company began as a website that sold books at discount prices, now Amazon.com has evolved into a marketplace for the world. Jeff Bezos, the founder and CEO, has changed the business model of the company many times. He is focused on expanding the selection of goods and services offered on the website, in an attempt to please customers. However, he is having trouble managing the priorities of his gigantic company, he should give the existing categories priority and worry about expansion at a later time.

When Amazon.com first began in 1995, as strictly a book retailer, Bezos knew he had discovered an excellent company. After all, a physical bookstore cannot stock anywhere close to the number of books Amazon can offer online. Within a year, the company had a customer base of approximately 340,000 consumers and daily site visits were huge as well. But Bezos wanted to expand the company to offer music and DVDs, because he realized there was little or no barrier of entry. In the next years Amazon would emerge as a marketplace, expanding the company globally offering products from toys to kitchenware. Because of the relatively cheap prices Amazon was offering and also the growing number of online shoppers, the company was doing tremendous amounts of sales and creating profits.

In 1999 Bezos invested huge amounts of money to help Amazon become a more efficient company. He built warehouses in the United States to store inventory, in order to prevent under stocking during the holidays and also offer a greater selection of products that the companies distributors could not. Along with inventory, the company invested in logistics, such as controlling the supply chain through the same technology they used to create their unique website. Also they began to customize their website to individual customers. They stored information about the customers, which in turn made it easier for them to purchase goods on their website, which then reduced threat of the customer going to Amazon's competitors instead. Amazon wants the easiest and most enjoyable experience for customers when they visit the site. Bezos realized, that consumers need to have a good sense of security when purchasing products online, so the company invested in infrastructure and created an integrated system of customer service operations and payment processes.

Amazon.com is so successful as a bookstore because it offers almost 4 million titles, whereas a physical bookstore cannot hold this capacity. Amazon.com has a more expanded section of books which you can search for easily by simply typing in the name of the book or the author, whereas in the physical retailer, you would have to go through the trouble of searching for the book manually or have to ask an employee for help. However, physical retailers have some advantages such as the customers can physically look at the book before purchase, which many people prefer, and also they have access to employees for help. But, I think the main reason that is leaning consumers to online booksellers is the convenience of purchasing a book from home and also the cheap competitive prices due to the huge amounts of inventory.

Amazon generates revenue in a number of different ways. It not only sells products as an online retailer but also handles other companies online business as well, an example of a companies would be Borders, Circuit City and Office Depot. These companies give Amazon a percentage of revenue for their services. Amazon uses a web catalog model to generate their revenue. But along with that Amazon receives revenue from companies such as Wine.com advertising on their website.

Amazon.com's major threat is from Barnesandnoble.com.