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A PROJECT REPORT ON AMAZON.COM
BY: MANUJ VERMA
INTRODUCTION E-commerce is the use of electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals. In other words Electronic commerce or e-commerce consists primarily of the distributing, buying, selling, marketing, and servicing of products or services over electronic systems such as the Internet and other computer networks. The information technology industry might see it as an electronic business application aimed at commercial transactions. It can involve electronic funds transfer, supply chain management, e-marketing, online marketing, online transaction processing, electronic data interchange (EDI), automated inventory management systems, and automated data collection systems. It typically uses electronic communications technology such as the Internet, extranets, email, e-books, databases, and mobile phones. FUNCTIONS OF ELECTRONIC COMMERCE The four functions of e-commerce are: y Communication- Aimed at the delivery of information and/or documents to facilitate business transactions. e.g. E-mail y y y Process management-Covers the automation & improvements of business processes e.g. networking two computers together. Service management-Application of technology to improve the quality of service. e.g. Federal Express website- to track shipments & schedule. Transaction capabilities-Provides the ability to buy/sell on the Internet or some other online services, e.g. Amazon.com.
Business-to-business (B2B): Business-to-Business refers to the full spectrum of ecommerce that can occur between two organizations. Among other activities, B2B ecommerce includes purchasing and procurement, supplier management, inventory management, channel management, sales activities, payment management, and service and support. Business-to-Consumer (B2C): Business-to-Consumer e-commerce refers to exchanges between businesses and consumers, e.g., Amazon.com, Yahoo.com and Schwab.com. Similar transactions that occur in business-to business e-commerce also take place in the business-to-consumer context. For instance, as with smaller business-to-business, transactions that relate to the ´back officeµ of the customer (i.e., inventory management at the home) are often not tracked electronically. However, all customer-facing, or ´front officeµ activities are typically tracked. These
include sales activities, consumer search, frequently asked questions and service and support. Consumer-to-Consumer (C2C): Consumer-to-Consumer exchanges involve transactions between and among consumers. These exchanges may or may not include third-party involvement as in the case of the auction-exchange eBay. E-RETAIL ACROSS THE GLOBE: Around the globe, despite a less-than-robust economic climate in most parts of the world, there continues to be ample evidence that e-retailing is alive and well. A rapidly growing number of consumers is online and while there, many are shopping and buying. Even so, the sentiment surrounding e-retailing has gone from one of all blue skies and unlimited possibility to one that may more accurately reflect the business realities of e-retailing·s future. E-retailing has become an accepted mode of retailing ² albeit one that will ultimately capture a very small share of total retail sales ² in most of the developed world.
In reviewing the current state of e-retailing across the globe and emerging trends: y E-commerce, including e-retailing, is growing rapidly worldwide. Worldwide ecommerce revenues are escalating year by year. y Internet-based commerce will not look the same from country to country, especially in terms of mode of access. For example, in the U.S. and Canada, it seems that PC-Internet access is likely to be the preferred mode. y As on land, there is only room for a few retailers online to operate profitably in each merchandise category. Shakeout is likely to continue to occur among players as each market develops. Already, rationalization of e-retailers is occurring around the globe in the form of a spate of acquisitions and business failures. y Telecommunications costs are likely to continue to fall as competition increases and government/consumer pressures mount. Lower costs of telecommunications will likely improve the level of online penetration and/or the frequency and length of online visits. y Similarly, the development of e-commerce will force countries to further deregulate their retail markets. y Bricks-and-clicks players and alliances will play a major role in e-commerce. Ecommerce will remain largely in the hands of established retailers. Multichannel players are already well-known entities, creating a higher level of trust and a lower need for advertising and marketing expenditures, compared to pure-play retailers. y E-retailers will continue to stimulate further development of value-oriented retailing in many regions of the world. Online retailers are offering bargainbasement prices to build their customer bases, oft combined with generous shipping and handling promotions. And, pricing across retailers will become
more transparent as consumers can check prices online quickly and easily. Shopping comparison sites are providing assistance in this area as well. Change comes quickly. High-profile players can vanish overnight. Technologies that seem advanced now will soon be eclipsed by competitors· new developments. And, there will continue to be tremendous momentum from consumers, businesses, and governments to boost the economy through ongoing e-business progress.
TALKING ABOUT E-RETAILING COMPANIES:
Amazon.com Amazon.com, Inc. (NASDAQ: AMZN) is an American-based multinational electronic commerce company. Headquartered in Seattle, Washington, it is America·s largest online retailer, with nearly three times the internet sales revenue of runner up Staples, Inc. Jeff Bezos founded Amazon.com, Inc. in 1994 and launched it online in 1995. It started as an on-line bookstore but soon diversified to product lines of VHS, DVD, music CDs and MP3s, computer software, video games, electronics, apparel, furniture, food, toys, etc. Amazon has established separate websites in Canada, the United Kingdom, Germany, France, China, and Japan. It also provides international shipping to certain countries for some of its products. Amazon.com is the most successful e-tailer in the world. Innovative technology is the backbone of the company's success. "Its success has partly been based on superior order fulfillment, allied to a user-friendly interface built around its patented 1-Click technology" and also came up with kindle concept of having books online in a file form like pdf. a computed file . Using its unparalleled customer database that provides the most comprehensive insight into consumer behavior, the company will need to continue to anticipate and address those needs in a unique way before its competitors.
Goals & Objectives We seek to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavor to offer customers the lowest possible prices. Vision Statement Our vision is to be Earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online. Mission Statement The company·s six core values: customer obsession, ownership, bias for action, frugality, high hiring bar, and innovation. The company motto: ¶Work Hard, Have Fun, and Make History·.
Industry Structure of Amazon.com Pros of the E-Tailing Industry y y y y y y Instant growth opportunity Instant wide exposure Stores never close Unique cash flow characteristics Inventory turns fast Assets turn fast
Cons of the E-Tailing Industry y y y y y Instable environment High competition Low margin Distribution problems Consumer confidence
Competitive Forces in Amazon·s Market y Price y Customer base y Distribution capabilities y Innovative technology y Reliability y Alliances y Brand recognisation SWOT Analysis Competitive Advantages and Strengths Economies of Scale Strategic alliances Broad customer base Internet storefront The variety of products and services offered The first mover advantage Customer loyalty
y y y y y y y
y y y y y y y y y
Technological advantages Distribution capabilities Weaknesses Difficulties of handling large number of customers Limited operating history Security awareness Low margins in the sector Opportunities Building Alliances Concentrating on Emerging Segments Concentrating on Developing Markets Threats y Future of online commerce y Offline companies are going online y Heavy investments Amazon must do............... Increase the expenditure in the research and development area. Increase its word-of-mouth advertisement Continue expanding its product lines Further expansion of Amazon.com mostly to the developed countries Strive to offer low, competitive prices to its customers MARKETSHARE: AMAZON GROWTH RATE IN THE PAST YEAR -3.7% TO 5.3%. AMAZON TALLY OF ACTIVE SELLERS IS UP BY 18% FROM YEAR EARLIER.
y y y y y
Amazon.com¶s business model relies on:
With the new business model, the supply side of the market was also modified(strategies followed). y y y Different clients can do business with each other by paying a commission to Amazon.com(third party). New opportunities for small and independent publishers Jeff Bezos summarizes Amazon.com in the following way, "Ultimately, we're an information broker. On the left side we have lots of products, on the right side we have lots of customers. We're in the middle making the connections. The consequence is that we have two sets of customers: consumers looking for books and publishers looking for consumers. Readers find books or books find readers." They also have entered into apparel category. Amazon auctions (known as zShops) were launched in March 1999, in large part as a response to the success of eBay. They were promoted heavily from the home page, category pages and individual product pages. Despite this, a year after its launch it had only achieved a 3.2% share of the online auction compared to 58% for eBay and it only declined from this point.
Main competitor of amazon.com
EBay EBay was founded in Pierre Omidyar's San Jose living room back in September 1995. It was from the start meant to be a marketplace for the sale of goods and services for individuals. They have created an experienced management team with an average of 20 years of business experience and built a strong vision for the company -- that eBay is a company that's in the business of connecting people, not selling them things. They quickly shed the image of only auctioning collectibles and moved into an array of upscale markets where the average sale price (ASP) is higher. ASP is a key metric in determining eBay's transaction fees, so increasing the ASP became an important item. By forging partnerships with name brands such as GM, Disney and Sun . EBay has built an online person-to-person trading community on the Internet, using the World Wide Web. Buyers and sellers are brought together in a manner where sellers are permitted to list items for sale, buyers to bid on items of interest and all eBay users to browse through listed items in a fully automated way. The items are arranged by topics, where each type of auction has its own category. EBay has both streamlined and globalized traditional person-to-person trading, which has traditionally been conducted through such forms as garage sales, collectibles shows, flea markets and more, with their web interface. This facilitates easy exploration for buyers and enables the sellers to immediately list an item for sale within minutes of registering. Browsing and bidding on auctions is free of charge, but sellers are charged two kinds of charges:
When an item is listed on eBay a nonrefundable Insertion Fee is charged, which ranges between 30 cents and $3.30, depending on the seller's opening bid on the item. A fee is charged for additional listing options to promote the item, such as highlighted or bold listing.
A Final Value (final sale price) fee is charged at the end of the seller's auction. This fee generally ranges from 1.25% to 5% of the final sale price.
EBay notifies the buyer and seller via e-mail at the end of the auction if a bid exceeds the seller's minimum price, and the seller and buyer finish the transaction independently of eBay. The binding contract of the auction is between the winning bidder and the seller only. Adversity Since eBay does at no point during the auctioning process take possession of either the item being sold or the buyer's payment for the item, user trust is a key issue for eBay. In the traditional model of trading forums the buyer and the seller usually exchange the item for the payment at the same time and place, meaning that trust does not play as big a role. For eBay to be able to convince users to participate they must deal with the inevitable delay between the buyers buying the item and receiving it, which is not an issue in the tradition model. Because access to the online trade channel (i.e. Internet) is universal, and the physical assets required to setup an auctioning site are all commercially available, barriers to entry in the auctioning industry are minimal. What comes stronger into play is the network externalities effect, as was mentioned before. Being in a market with huge network externalities makes it extremely difficult for a competitor to get a large share of the user base, since most users tend to gravitate towards the service which already offers the most users (since it will presumable have the greatest number of offerings.) This tremendous switching cost has the effect of locking in customers to a single auction service provider ³ in this case eBay. The key success factor of eBay is online auction which is very distinctive from other etrailer. EBay·s greatest strength is that it was the first to enter the online customer-tocustomer market in 1995. Ever since, EBay gained great popularity and its brand name became synonymous with the online auction industry. EBay·s strong brand image is considered its greatest strength over its competitors. EBay now controls the biggest share in the Customer to Customer e-market and millions of transactions are being processed daily through its website. EBay.com was rated to be the easiest website to navigate by special rating websites like Gomez.com. The site is also easily accessible from anywhere in the world. Because of that, Sellers and customers of EBay developed a sense of loyalty and more than twenty billion dollars worth of goods and services are traded annually through EBay. It is safe to say that this massive customer base and variety of products sold is another strength that is unmatched by any other competition in this line of business. Another point of strength is that EBay has no issues of managing inventory. Unlike
amazon.com and other competitors, EBay is in the business of connecting sellers and buyers through its online website. There are no inventory counts or costs. Other local competitors: onlineauction.com, rediff.com ×india.com etc. even Wal-Mart is a major competitor of amazon.com as in organized retailing and amazon.com is non-traditional form of retail. EBAY SALES OF LAST YEAR RS 8727400000 UPBY 12% MARKETSHARE HAS FALLEN BY 2% FROM 19% TO 17%. DECLINE IN SALES VOLUME 18% DROP. INCREASE IN USER BASE 85.7 MILLION IN 3·RD QUARTER. LISTINGS ARE WAY UP, INCREASING 26%FROM LAST YEAR TO 700 MILLION IN 3·RD QUARTER
Rapid growth in the e retailing
A significant growth opportunity
Who shops online?
Drivers of store/site selection
Point based schemes
Sources: verdict analysis 2007
These analyses show various parameters of e-trailing and provide assistance to the above discussed matter about the industry and players.
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