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Amazon Case Study

Amazon Case Study

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Published by Vishal Dixit

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Published by: Vishal Dixit on Aug 26, 2010
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08/12/2013

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AMAZON CASE STUDY
I recommend students studying
Amazon in my books
checkout the latest
Amazon revenue andbusiness strategies
from their SEC filings. The annual filings to give a great summary of eBaybusiness and revenue models.E-consultancy also has a useful news feed which I use to
update my Amazon case study
. Thisgives summaries of acquisitions, new technologies or revenue growth.SEC is the Securities and Exchange Commission (SEC) which is a government agency for whichcompanies have to submit an open evaluation of their business models and marketplace conditions.
2008 Update on Amazon logistics
Some interesting figures on the
site loads and fulfillment that Amazon needs to manage
from myfriends at Internet retailing:"
 Amazon.com has finished its 13th Christmas season and the results are the best everseason, withits busiest day being December 10. On that day, Amazon customers ordered more than 5.4 millionitems, which is 62.5 items per second.
 
 Amazon Worldwide 2007 (Including results for the US, UK, Germany, France, Japan and Canada)shipped more than 99 percent of orders in time to meet holiday deadlines worldwide and on the peak day this season, Amazon's worldwide fulfilment network shipped over 3.9 million units to over 200 countries. Amazon.co.uk received orders for over 950,000 items on its busiest day in the run up to Christmasthis year ± at a rate of 11 orders per second ± exceeding all previous sales records. At its busiest, Amazon.co.uk shipped over 700,000 units in one 24 hour period, which represents 375 tonnes of goods. That means that on average, a delivery truck was leaving an Amazon.co.uk distribution centreonce every seven minutes.
"
Amazon Case Study Context
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hy a case study on Amazon? Surely everyone knows about who Amazon are and what they do?Yes, well that¶s maybe true, but this case goes beyond the surface to review some of the µinsider secrets¶ of Amazon¶s success.
 
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L
ike eBay, Amazon.com was born in 1995. The name reflected the vision of Jeff Bezos, to produce alarge scale phenomenon like the Amazon river. This ambition has proved justified since just 8 yearslater, Amazon passed the $5 billion sales mark ± it took
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al-Mart 20 years to achieve this.By 2008 Amazon was a global brand with other 76 million active customers accounts and order fulfillment to more than 200 countries. Despite this volume of sales, at December 31, 2007 Amazonemployed approximately 17,000 full-time and part-time employees.In September 2007, it launched Amazon MP3, a la carte DRM-free MP3 music downloads, which nowincludes over 3.1 million songs from more than 270,000 artists.
Amazon Vision & strategy
In their 2008 SEC filing, Amazon describe the vision of their business as to:³Relentlessly focus on customer experience by offering our customers low prices, convenience, and awide selection of merchandise.´The vision is to offer Earth¶s biggest selection and to be Earth¶s most customer-centric company.Consider how these core marketing messages summarising the Amazon online value proposition arecommunicated both on-site and through offline communications.Of course, achieving customer loyalty and repeat purchases has been key to Amazon¶s success.Many dot-coms failed because they succeeded in achieving awareness, but not loyalty. Amazonachieved both. In their SEC filing they stress how they seek to achieve this. They say:"
We work to earn repeat purchases by providing easy-to-use functionality, fast and reliable fulfillment,timely customer service, feature rich content, and a trusted transaction environment.
 
Key features of our websites include editorial and customer reviews; manufacturer product information; Web pages tailored to individual preferences, such as recommendations and notifications; 1-Click® technology; secure payment systems; image uploads; searching on our websites as well as the Internet; browsing; and the ability to view selected interior pages and citations,and search the entire contents of many of the books we offer with our ³Look Inside the Book´ and ³Search Inside the Book´ features. Our community of online customers also creates feature-richcontent, including product reviews, online recommendation lists, wish lists, buying guides, and wedding and baby registries.
"
 
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In practice, as is the practice for many online retailers, the lowest prices are for the most popular products, with less popular products commanding higher prices and a greater margin for Amazon.Free shipping offers are used to encourage increase in basket size since customers have to spendover a certain amount to receive free shipping. The level at which free-shipping is set is critical toprofitability and Amazon has changed it as competition has changed and for promotional reasons. Amazon communicate the fulfillment promise in several ways including presentation of latestinventory availability information, delivery date estimates, and options for expedited delivery, as wellas delivery shipment notifications and update facilities.This focus on customer has translated to excellence in service with the 2004 American Customer Satisfaction Index giving Amazon.com a score of 88 which was at the time, the highest customer satisfaction score ever recorded in any service industry, online or offline.Round (2004) notes that Amazon focuses on customer satisfaction metrics. Each site is closelymonitored with standard service availability monitoring (for example, using Keynote or MercuryInteractive) site availability and download speed. Interestingly it also monitors per minute site revenueupper/lower bounds ± Round describes an alarm system rather like a power plant where if revenue ona site falls below $10,000 per minute, alarms go off! There are also internal performance service-level-agreements for web services where T% of the time, different pages must return in X seconds.
Amazon Customers
 Amazon defines what it refers to as three consumer sets customers, seller customers and developer customers.There are over 76 million customer accounts, but just 1.3 million active seller customers in it¶smarketplaces and Amazon is seeking to increase this. Amazon is unusual fora retailer in that itidentifies ³developer customers´ who use its Amazon
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eb Services, which provides access totechnology infrastructure such as hosting that developers can use to develop their own web services.Members are also encouraged to join a loyalty programme, Amazon Prime, a fee-based membershipprogram in which members receive free or discounted express shipping, in the United States, theUnited Kingdom, Germany and Japan.

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