EXCECUTIVE SUMMARY

Amazon.com is an American electronic commerce company which has become as a symbol

of internet business. It was first founded by Jeff Bezoz in 1995 when he began selling books
online and to the date now, Amazon.com is the leading online market worldwide for its books
and various other products. It was when the company aimed to be successfully the World's
most customer oriented company. Customers can discover various products they wish to buy
at reasonable and affordable prices. The strategy used by Jeff drove him to become the online
leader of market. The main strategy used was to orient the business towards customers and to
be innovative with continuous improvement in online shopping skills. Initially, it was used to
be online sale of books and with the use of strategy and innovative approaches the business
was expanded its boundary with introduction of various other products like toys, CDs, DVDs,
computer software, apparel, furniture and goods etc. Amazon offers a large selection of books
and wide range of products thereby making itself distinct from its competitors.

But there are also twists and turn in a business. Similarly, Amazon had a significant history of
hard work with many downfalls in terms of debts and loss in income in the beginning. It was
in 2001 when Amazon made its first profit. To the date, Amazon is biggest and one of the top
convenience online business store. As mentioned earlier, to reach to such a successful status,
Amazon has faced many problems and threats. But the credit lies in the name of the magnetic
leader like Jeff Bezos who possessed the ability to frame up the marketing strategies and
moves in a way to establish a successful business in order to gain largest share in E-market.
During the period between 1997 and 2006, Amazon build up partnerships with other business
models by making use of strategies resulting in securing the number one position in online
market. Therefore, it can be well said that the Amazon success was not the result of the
matter of time but rather the result of its hard work for years and its willingness to put in its
efforts, dedication, innovation, strategies and its partnerships with other business models
thereby offering various products, technology and more importantly better customer
experience. There are many threats in e-commerce industry and so it was a challenging task
for Amazon to establish itself in highly competitive market.. Therefore, the study will analyze
and evaluate the ecommerce industry and its competitive marketing strategies.

1
CHAPTER ONE

INTRODUCTION

2
WHAT IS MARKETING?

The activities of a company associated with buying and selling a product or service. It
includes advertising, selling and delivering products to people. People who work in
marketing departments of companies try to get the attention of target audiences by using
slogans, packaging design, celebrity endorsements and general media exposure. The four 'Ps'
of marketing are product, place, price and promotion.

Many people believe that marketing is just about advertising or sales. However,
marketing is everything a company does to acquire customers and maintain a relationship
with them. Even the small tasks like writing thank-you letters, playing golf with a prospective
client, returning calls promptly and meeting with a past client for coffee can be thought of as
marketing. The ultimate goal of marketing is to match a company's products and services to
the people who need and want them, thereby ensure profitability

WHAT IS STRATEGY?

Strategy is a high level plan to achieve one or more goals under conditions of
uncertainty. In the sense of the "art of the general", which included several subsets of skills
including "tactics", siegecraft, logistics etc, the term came into use in the 6th century C.E. in
East Roman terminology, and was translated into Western vernacular languages only in the
18th century. From then until the 20th century, the word "strategy" came to denote "a
comprehensive way to try to pursue political ends, including the threat or actual use of force,
in a dialectic of wills" in a military conflict, in which both adversaries interact.

Strategy is important because the resources available to achieve these goals are
usually limited. Strategy generally involves setting goals, determining actions to achieve the
goals, and mobilizing resources to execute the actions. A strategy describes how the ends
(goals) will be achieved by the means (resources). The senior leadership of an organization is
generally tasked with determining strategy. Strategy can be intended or can emerge as a
pattern of activity as the organization adapts to its environment or competes.

3
It involves activities such as strategic planning and strategic thinking

WHAT IS MARKETING STRATEGY?

Marketing strategy is the goal of increasing sales and achieving a sustainable competitive
advantage Marketing strategy includes all basic and long-term activities in the field of
marketing that deal with the analysis of the strategic initial situation of a company and the
formulation, evaluation and selection of market-oriented strategies and therefore contribute to
the goals of the company and its marketing objectives.

TYPES OF MARKETING

1. AFFINITY MARKETING

Also known as Partnership Marketing, this technique links complementary brands,

thereby creating strategic partnerships that benefit both companies. While one adds value to
existing customers by generating more income, the other builds new customer relationships.

2. ALLIANCE MARKETING

Here two or more entities come together to pool in their resources to promote and sell
a product or service, which will not only benefit their stakeholders, but also have a greater
impact on the market.

3. AMBUSH MARKETING

This strategy is used by advertisers to capitalize on and associated themselves with a

specific event without the payment of any sponsorship fee, thereby bringing down the value
of sponsorship. It has sub-categories like direct or predatory ambushing or indirect
ambushing by association, to name a few.

4
 4. CALL TO ACTION (CTA) MARKETING

CTA is a part of inbound marketing used on websites in the form of a banner, text or
graphic, where it is meant to prompt a person to click it and move into the conversion funnel,
that is, from searching to navigating an online store to converting to a sale.

5. CLOSE RANGE MARKETING (CRM)

Also known as Proximity Marketing, CRM uses Bluetooth technology or Wifi to

promote their products and services to their customers at close proximity.

6. CLOUD MARKETING

This refers to the type of marketing that takes place on the internet, where all the
marketing resources and assets are transferred online so that the respective parties can
develop, modify, utilise and share them.

7. COMMUNITY MARKETING

This technique caters to the needs and requirements of the existing customers, as
opposed to using resources to gather new consumers. This promotes loyalty and product
satisfaction and also gives rise to word of mouth marketing among the community.

8. CONTENT MARKETING

In this case, content is created and published on various platforms to give information
about a certain product or service to potential customers and to influence them, without
making a direct sales pitch.

5
 9. CROSS-MEDIA MARKETING

As the name suggests, multiple channels like emails, letters, web pages etc are used
to give information about products and services to customers in the form of cross promotion.

10. DATABASE MARKETING

This utilizes and information from database of customers or potential consumers to

create customised communication strategies through any media in order to promote products
and services.

11. DIGITAL MARKETING

This strategy uses various digital devices like smartphones, computers, tablets or
digital billboards to inform customers and business partners about its products. Internet
Marketing is a key element in Digital Marketing.

12. DIRECT MARKETING

This is a wide term which refers to the technique where organizations communicate
directly WITH the consumer through mail, email, texts, fliers and various promotional
materials.

13. DIVERSITY MARKETING

The aim of this strategy is to take into account the different diversities in a culture in
terms of beliefs, expectations, tastes and needs and then create a customized marketing plan
to target those consumers effectively.

6
 14. EVANGELISM MARKETING

It is similar to word-of-mouth marketing, where a company develops customers who

become voluntary advocates of a product and who promote its features and benefits on behalf
of the company.

15. FREEBIE MARKETING

Here a particular item is sold at low rates, or is given away free, to boost the sales of
another complimentary item or service.

16. FREE SAMPLE MARKETING

Unlike Freebie Marketing, this is not dependent on complimentary marketing, but rather
consists of giving away a free sample of the product to influence the consumer to make the
purchase.

17. GUERRILLA MARKETING

Unconventional and inexpensive techniques with imagination, big crowds and a

surprise element are used for marketing something, a popular example being flash mobs. By
keeping in mind the distinctive features of the product, the demographics of the target
consumer and their spending power, and the current strategies of existing companies, an
effective marketing strategy may be successfully created.

7
 CHAPTER TWO
RESEARCH METHODOLOGY

8
DATA SOURCES

• The data is purely secondary in nature and the knowledge has been
obtained only through various articles available on various websites.
• There is no scope to collect primary data in any form as the topic is
theoretical in nature and does not include any kind of questionnaire to
be filled.

RESEARCH OBJECTIVES

The objective of this dissertation is

• To study the efforts of Indian companies in this field and their impacts on the
company

• To find out how Marketing strategy is serving as a determinant of

corporate success.

RESEARCH METHODOLOGY

The research commences by searching for the articles related to the topic
.Then having a detailed knowledge of the same.

Then, studying the steps taken and efforts made in this field by various Indian
companies for organization structure. Taking examples of Indian company
AMUL

Then explaining by examples of various study that how it has lead to increase
in profits and is one the reason of corporate success. Also there is special
emphasis on an Indian company which can explain the topic better and help to
achieve the objectives.

9
LITERATURE REVIEW

Seekingalpha study
Much of the bull and bear debate on Amazon.com centers on future growth rates, operating
leverage, and the success of new ventures. While these are undoubtedly important factors for
consideration when investing in the company, they are inherently difficult to predict.
Personally, I know I am not smart enough to predict the future of amazon with nearly the
same degree of precision of the sell-side analysts whose research I occasionally peruse. If you
are, feel free to disregard the balance of this article because it will only waste your time.

My goals when allocating my capital are twofold: i) imprecisely estimate the amount of
future cash that the security considered for purchase will deliver to me over its lifetime and ii)
determine if the price I can purchase the security at provides a wide enough margin of safety
to cover potential errors in my calculation. For these reasons, I try to spend much of my time
thinking about free cash flow, return on invested capital, and returns on incremental invested
capital.

Free cash flows, current and future, are important because on a discounted basis they
ultimately determine the present value of a security. Return on invested capital is important
because it is the ultimate arbiter of how efficient management is at allocating the capital it
doesn't distribute to shareholders to generate more free cash flow in future periods. With that
in mind, let's take a closer look at AMZN on these metrics. Amazon isn't generating much
free cash flow. This is typical for a company growing at the rate AMZN currently is, given
the perceived growth opportunities. No problems so far. However, it is atypical for a
company to outspend its free cash flow by 240% repurchasing stock and still dilute existing
shareholders. To summarize, if you owned AMZN shares at the end of 2011, you now have
$565 million less net cash and you own the same percentage of AMZN's future cash flows. In
other words, AMZN's main accomplishment this year for equity holders was to create an
incremental cash liability. Note that cash balances grew on the balance sheet because AMZN
was a net issuer of debt and increased accounts payable, which creates a corresponding
liability.

10
Antipope organization studied on What Amazon's ebook strategy means
By Charlie Stross

It seems to me that a lot of folks in the previous discussion don't really understand quite what
makes Amazon so interesting—and threatening, for that matter—to the publishing industry.

So I'm going to take a stab at explaining.

Amazon was founded in 1994 by Jeff Bezos And today it's the world's largest online retailer.

I submit that, as with all other large corporations, you cannot judge Amazon by the public
statements of its executives; they are at best uttered with an eye for strategic propaganda
effects, and at worst they're deeply self-serving and deceptive. Rather, you need to examine
their underlying ideology and then the steps they takeand the actions they consider
legitimate—in order to achieve their goals.

Disintermediation is the removal of intermediaries in a supply chain: "cutting out the

middleman". Instead of going through traditional distribution channels, which had some type
of intermediate (such as a distributor, wholesaler, broker, or agent), companies may now deal
with every customer directly, for example via the Internet. One important factor is a drop in
the cost of servicing customers directly. Disintermediation initiated by consumers is often the
result of high market transparency, in that buyers are aware of supply prices direct from the
manufacturer. Buyers bypass the middlemen (wholesalers and retailers) in order to buy
directly from the manufacturer and thereby pay less. Buyers can alternatively elect to
purchase from wholesalers.

It should be fairly obvious by now that the internet is an intrinsically disruptive force in
traditional distribution channels because it makes disintermediation very easy. Jeff Bezos
recognized this very early on, and designed Amazon to be a disruptive disintermediary: to
buy wholesale and sell retail, using the internet as a tool to reach remote customers directly.
Initially Amazon relied on large warehouses, but as its database expanded they moved to just-
in-time ordering, whereby obscure items would be listed as available but only ordered from
the supplier when a customer requested one.

11
 CHAPTER THREE

AMAZON GLOBALLY

12
AMAZON.COM HISTORY

Jeff Bozos, Amazon.com founder and CEO, dreamed about books. In 1994, he
created Amazon.com, Inc., which he labelled as “Earth’s Biggest Bookstore.” The
ecommerce company went online in 1995 and soon expanded into other media, including
DVDs, VHS, CDs, MP3s, and eventually a wide range of other products, including toys,
electronics, furniture and apparel. As such, the tagline soon changed to “Earth’s Largest
Selection.” But books were only the beginning of Bozo’s up-and-coming enterprise.

Amazon.com went public in 1997. In the first shareholder letter, Bozos penned the
fundamental foundation for Amazon.com’s success: “Start with customers and work
backwards … Listen to customers, but don’t just listen to customers – also invent on their
behalf … Obsess over customers.” This policy was backed by a startling business philosophy
– Bozos planned on operating at a loss for 4-5 years. It was not until 2001 that Amazon.com
posted a net profit at a minuscule one-cent per share. Yet, despite its bizarre business
strategy, Amazon.com claimed over 1.4 million customers after only two years of being
online.

Now, 45 million satisfied customers shop at Amazon.com for everything from books
(most popular) to fashion apparel to fine jewellery to Christmas toys. It has one of the most
recognized brand names in the world and garners an estimated 50% of its sales from overseas
consumers. Surviving the dot-com bust of the late 1990s and early 2000s, Amazon weathered
the e-storms and now thrives in the retail marketplace, challenging vending giants like Wal-
Mart and Target. Focused on technological innovation and cantered on customer fulfilment,
Amazon.com proceeds into the next decade with a profit firmly in one hand, and the capacity
to blow it out of the water in the other hand.

13
AMAZON.COM’S BUSINESS PHILOSOPHY

Amazon.com’s self-proclaimed mission statement is: “We seek to be Earth’s most customer-
centric company for three primary customer sets: consumer customers, seller customers and
developer customers.” In a special for the Miami Herald, journalist Jack Hardy declares:
“Customer obsession; innovation; bias for action; ownership; high hiring bar and frugality.
These six core values focus Amazon.com’s operational strategies.” It is committed to long-
term growth based on consumer satisfaction.

One of things that is kind of fascinating about Amazon is everybody, the average
person, thinks about Amazon selling books and now music and Kindles and things like that.
But one of the things that they have been doing on the side, which I think is actually kind of
one of the big hidden stories of Amazon, is Jeff Bozos believes that Amazon should become
a public utility. We don’t have power generators in our backyard; we just plug in to get
electricity. We don’t have to dig our own wells. We have water that comes in.

Jeff’s philosophy is if you want to start a website, if you want to start a company, if
you need storage and bandwidth, he wants Amazon to be a public utility. You just plug-in
and all the storage, all the servers, all the bandwidth that you need is right there, basically
accessible without you having to then get a rack, and install the equipment, and buy the
hardware, and not knowing whether you need 40 machines or five machines.

I think that this is actually part of the new world where everything is sorted infinitely
stretchable and expandable in real time. The ability now to create a company is so much more

14
efficient because you don’t have to guess in advance what you’re going to be able to do with
it. Other companies like EMC that provide huge amounts of storage and analytic software are
doing the same thing; they're giving people tools so they don’t have to build these tools for
themselves.

A gentleman was telling me recently that there’s so much demand now for storages that
they’re actually moving - there are actually FedEx'ing hard drives from San Francisco to New
York. IT'S actually faster to actually move the physical hard drives than is to have the stuff
streaming from one side of the country to the other. The other thing is that nobody throws
anything away anymore, like every medical record, every scan, every x-ray, everything that’s
being now digital and stored in the cloud.

Juan Enriquez, who wrote one of the essays in my book, was talking about the fact that he
thinks that we're on the verge of a big data crisis already. That were running out of room;
we’re running out of bandwidth and space to store all of this. That there has to be another
sort of huge leap forward in a way of compressing this data and making it both accessible but
also smaller physically in terms of the storage. I think a lot of us read recently about the
environmental impact of some of these data centers. They're trying to put data centers in cold
environments because they’re actually generating so much heat now; they’re using up so
much electricity.

So I think all of us tend to think of all this as being free; it’s the Internet, it’s free. We're
getting to a point where it’s not to be free anymore, that we're going to have to find another
sort of financial model to benefit from this sort of infinite, infinitely and ever-expanding pool
of data and storage.

15
MARKETING OBJECTIVES OF AMAZON

CORPORATE

• Build Brand equity and grow the company

MARKETING

• Increase market share

• Enhance brand awareness and top of mind recall

DISTRIBUTION

• Increase the reach internationally and increase the product assortments

PROMOTIONAL

• Communicate brand promises of Amazon

• Leverage parent brand name for new businesses

PRICING

• To be cheaper than the competitors

16
CONSUMER INSIGHTS

1. BUILDING TRUST

When Amazon started they found out that their main issue was the doubtfulness
inside the customers towards e-commerce and amazon.com. From this insight Amazon came
up with the idea of customer reviews. When people see other people’s review they feel more
confident to do the purchase.

2. INCREASING SALES

Amazon found out from their database that there is a relation between the next
purchase and current purchase. Based on this they developed a recommendation module
which suggested a set of customized products to the customer.

3. FASTER PROCESS

It was found out that the customers who come to an online shop are there basically
because of the ease of shopping. They like the reduced hassle and no-queue process. Based
on this insight Amazon developed a process called one-click ordering and patented it.

4. PRIME CUSTOMERS

From the insight that many customers feel that delivery charges are non value adding
items and felt looted for paying that Amazon came up with the idea of Amazon prime. For a
subscription price the subscriber gets one year free delivery. This also induced brand loyalty.

SEO

Soon after Google became a leader in online search Amazon identified that many of
the potential customers search in Google for landing into a page for online purchase. Amazon
strengthened its search engine optimization (SEO). Amazon has 248,000,000 pages stored in
Google's index. Each of these pages has the opportunity to rank for any number of keywords
in search engines.

17
TARGET GROUP

DEMOGRAPHIC SEGMENTATION

1. For those who have access to internet

2. When income increases, so does the number of online purchases ( E&Y

Study).

3. 41 percent of online shoppers between the ages of 35 and 49. 55 percent male
and 49 percent female internet users prefer Amazon.com for online purchases

4. Recently increased focus to younger class (20-30 year old)

PSYCHOGRAPHIC SEGMENTATION

1. Focuses on personalization and customer loyalty

2. Keep a modern and dynamic image by renovating site design frequently.

3. Quality customer service department to build long term relationships with

customers

4. Helps customers find and recommend things they enjoy, rather than push
products

GEOGRAPHIC SEGMENTATION

1. Appeals to customers all over the world

2. Sell digital products where their merchandise sales are difficult (e books)

3. US still main revenue generator.

4. Has seven international websites for Japan, China, Canada, UK, Germany,
France and US

18
SITUATION SEGMENTATION

1. Most online purchases done for convenience

2. Keeps on adding categories for catching every customer and every situation

3. Sale inducing gold box deals everyday

4. Attractive offers with video on demand

19
NEW INITIVATIVES OF AMAZON

AMAZON GO

new kind of store with no checkout required. Boasting a "Just Walk Out Shopping
experience",the Amazon Go app users enter the store, take the products they want, and go
with no lines and no checkout. More recently,there have been a range of business model
innovations focussed on hardware and new services: Kindle e-readers, Fire Tablet,
smartphone and TV, Echo (using the Alexa Artificial Intelligence voice-assistant), grocery
delivery, Amazon Fashion and expansion to the business-oriened Amazon Web Services
(AWS). AWS is less well-known outside of tech people, but Amazon is still pursuing this
cloud service aggressively. In 2011, they introduced 82 new features and services, in 2012,
159 and in 2013: 280.They now have 10 AWS regions around the world, including the East
Coast of the U.S., two on the West Coast, Europe, Singapore, Tokyo, Sydney, Brazil, China,
and a government-only region called govcloud
AMAZON PRIME
Amazon primeis a paid subscription service offered by Amazon.com that gives users access
to free two-day delivery (one-day in select areas), streaming video/music and other benefits
for a monthly or yearly fee. As of April 2017, Consumer Intelligence Research Partners
estimates that Prime has more than 80 million paying users.[College students and anyone who
has a .edu domain in their email address can get privileges, including discounts on Prime,
such as free 2 day shipping

20
 CHAPTER FOUR
MARKETING STRATEGIES ADOPTED BY
AMAZON

21
 MARKETING STRATEGIES OF AMAZON.COM

Our marketing strategy is designed to increase customer traffic to our websites, drive
awareness of products and services we offer, promote repeat purchases, develop incremental
product and service revenue opportunities, and strengthen and broaden the Amazon.com
brand name. We believe our most effective marketing efforts result from our focus on
continuously improving the customer experience, which drives word-of-mouth promotion
and repeat customer visits. We also deliver personalized Web pages and services and employ
a variety of media, business development activities, and promotional methods. We employ
various means of advertising, which consist primarily of online advertising, including
through our Associates and Syndicated Stores programs, sponsored search, portal advertising,
e-mail campaigns, and other initiatives. We also participate in cooperative advertising
arrangements with certain of our vendors and other third parties. Our Associates program
directs customers to our websites by enabling independent websites to make millions of
products available to their audiences with fulfilment performed by us or third parties. We pay
commissions to hundreds of thousands of participants in our Associates program when their
customer referrals result in product sales.

We offer everyday free shipping options worldwide and in the U.S. also offer Amazon
Prime, a membership program in which members receive free two-day shipping and
discounted overnight shipping. Although marketing expenses do not include the costs of our
free shipping or promotional offers, we view such offers as effective marketing tools.
Amazon.com is obsessed with a fervour to serve consumer and shareholder alike. Since
its inception over fifteen years ago, Amazon.com has steadily grown from a burgeoning “dot-
com” corporation into a multinational monster, a king in the domain of internet retail..

22
Amazon.com bases its marketing stratagem on six pillars.

1. It freely proffers products and services.

2. It uses a customer-friendly interface.

3. It scales easily from small to large.

4. It exploits its affiliate’s products and resources.

5. It uses existing communication systems.

6. It utilizes universal behaviors and mentalities.

Much of its marketing is subliminal or indirect – it does not run $1 million dollar ads
during Super Bowls nor post flyers in mall marketplaces. Amazon.com relies on wily online
ploys, strong partner relations and a constant declaration of quality to market itself to the
masses.

1. PAY PER CLICK ADVERTISING

Independent Pay Per Click (PPC) advertising has been the black sheep of Amazon.com’s
marketing campaign. Their first PPC campaign attempt, spawned by their subsidiary
company A9, was the mediocre Clickriver, a middling PPC program that kept its head above
water but certainly swam no great channels. ProductAds replaced Clickriver in August, 2008.
It allows any web merchant to purchase PPC ads on Amazon.com’s website, leading some
pundits to sardonically comment about Amazon.com’s possible pursuit of Google’s web
browsing crown.

Despite its potential interest in Google’s regime, Amazon.com continues to purchase PPC
advertisements on Google to direct browsing customers to their websites. It buys space on the
left side of Google’s search listing results, and pays a fee for each visitor to Amazon.com
who clicks on their sponsored link. This is typical of Amazon.com’s marketing strategy. No
big banners, loud colors, or pristine men casually conversing about Amazon.com on
America’s tube – just a demure advertisement on a web page which, incidentally,

23
may wordlessly lead thousands to Amazon.comInitially Amazon.com used Clickriver as a
pay per click strategy. This was replaced by ProductAds in 2008. The program works by
allowing web merchants to buy PPC advertisements on the website of Amazon. Aside from
this, the company also buys PPC ads from Google, in order to drive potential visitors to their
websites. It’s a simple strategy but clearly an effective one in garnering prospective
customers.

2. CONTINUAL WEBSITE IMPROVEMENT

In today’s stop-and-go internet traffic, an engaging, simple and easy-to-use website is a

necessity. Amazon.com expends millions of dollars and hundreds of man-hours to identify
problems, develop solutions, and further enhance the customer’s online experience. Rob
Enderle, head analyst at Enderle Group, states that “Amazon.com has always been very
aggressive about analyzing its website’s traffic to a high degree and making modifications
based on what they see.” This constant pursuit of perfection lead to Jakob Nielson’s
prestigious ranking of Amazon.com’s website usability. In a 2001 study of 20 ecommerce
sites, Amazon.com scored 65% higher than the average of the other nineteen sites’ usability.
It has a class-leading 99.9% mobile device availability, and uploads several seconds faster
than some of its competition. In one test, Amazon.com uploaded in 2.4 seconds, while Target
took nearly seven to finish. A navigable website has consistently topped the priority charts of
Amazon.com

Occasionally, management skirts customer relations and engages in under-the-table

investigations. Following several lawsuits from aggrieved loyal customers, who were charged
several dollars more for the same item than newcomers, Amazon.com apologized for their
underhanded differential pricing and discontinued the project. However, Amazon.com
continues to noiselessly experiment on their website, garnering new information and
augmenting their already popular website.

Amazon.com develops and improves their website continuously, spending plenty of time
and resources in analyzing user behavior and addressing their concerns.

24
For this reason, many find it user-friendly, simple, and engaging. Based on a study
conducted in 2001, Amazon.com topped a list of 20 e-commerce websites in terms of
accessibility, speed, and usability.

3. OFFLINE ADVERTISING

Martin McClanan, CEO of upscale gift cataloger Red Envelope, notes that TV and
billboard ads are roughly 10 times less effective when compared to direct or online marketing
when concerning customer acquisition costs. Amazon.com has observed McClanan’s advice
by reducing their offline marketing, especially during the holidays. In 1999, Amazon.com
spent a gargantuan $80 million in offline advertisements during the fourth quarter.

A year later, during the same time span, the company splurged only fifty million. Later
years brought even more drastic cuts. According to Competitive Media Reporting,
Amazon.com frittered $36 million in offline advertising in 2008, but through August of 2009,
the corporation had spent a meager $9.4 million. However, such cuts have not negated
Amazon.com’s successes. It boasts the highest sells of any online retailer during the holidays,
especially during Black Friday. Amazon.com’s strategy is simple: since customers shop
online, online is where they will be found.

4. STREAMLINED ORDERING PROCESS

Easy ordering is Amazon.com’s Holy Grail. It eagerly develops technology to allow

customers to better navigate and explore their online retail mall. Jacob Lepley, in his
“Amazon Marketing Strategy: Report One,” notes that, “When you visit amazon.com … you
can use [it] to find just about any item on the market at an extremely low price. Amazon.com
has made it very simple for customers to purchase items with a simple click of the mouse …
When you have everything you need, you make just one payment and your orders are
processed.” This simple system is the same whether a customer purchases directly from
amazon.com or from one of the Associates.

25
 5. PARTNERSHIPS & WEB SERVICES

Amazon.com has shook hands and signed contracts with quite a few partners. Not only
does it operate many of its own websites, including A9 and CDNOW, but it hosts and
manages retail web sites for an array of other retailers, including Target, Sears Canada, Bebe
Stores, Timex Corporation and Marks & Spencer. It previously hosted Borders bookstores
websites, but that relationship ceased in 2008. For several years, Amazon.com partnered with
ToysRUs. Typing “ToysRUs toys” and similar query terms would also list Amazon.com’s
Toys & Games tab and products. As a result of litigation, however, this partnership ended in
2006.

The simplicity that pervades Amazon.com’s customer checkout extends to its partner
relations and services, of which there is no shortage. Amazon.com hosts no less than twelve
types of web services, including ecommerce, database, payment and billing, web traffic, and
computing. These web services – many of which are free – create a reliable, scalable, and
inexpensive computing platform which can revolutionize a small business’s online presence.
For instance, Amazon.com’s ecommerce Fulfillment By Amazon (FBA) program allows
merchants to direct inventory to Amazon’s fulfilment centers, and after products are
purchased, Amazon.com will shoulder of the burden of packing and shipping the merchant’s
product. This frees the merchant from a complex ordering process while allowing them
control over their inventory.

6. AFFILIATE MARKETING

Keeping in line with their fourth marketing pillar, Amazon.com sponsors a wildly
successful program called Affiliate Marketing. Using Amazon Web Services (AWS) XML
service, Associates (independent retailers) and third-party sellers agree to place links on their
websites to Amazon.com or to specific Amazon.com products. If the third-party Associates
list their own products on Amazon.com, they may create links to those products as well.
Associates receive a fee for each visitor to Amazon.com that is directed through their links,
and receive extra commissions if the visitor buys a product.

26
However, at the beginning of 2009, Amazon.com decided to terminate PPC referral
commissions to its North American Associates for paid search traffic. In an email sent to all
Associates, Amazon.com said, “After careful review of how we are investing our advertising
resources, we have made the decision to no longer pay referral fees [that] send users. through
keyword bidding and paid search.”

Time will tell how the North America Associates program reacts to this change, but with
AWS, it is unlikely that Amazon.com will lose many of its Associates. To offset this change,
ion August 19, 2006, Amazon.com released aStore, which enables Associates to embed a
subset of Amazon products within, or linked from, another site.

How successful is this program? Nearly one million Associates have joined with
Amazon.com, and approximately 40% of its sales result from its Affiliate Marketing
program. At the conclusion of 2007, Amazon.com reported over 1.3 million sellers through
Amazon.com’s World Wide Web sites. It continues to expand its Affiliate program.

One of the most successful programs of Amazon.com is affiliate marketing. Through this
program, third-party sellers and independent retailers or associates are invited to place links
on their sites that direct visitors to Amazon.com or Amazon.com websites. For every visitor
that an associate leads to Amazon.com, they are paid a specific fee. If the visitor decides to
purchase a product, the associate also receives an extra commission. This strategy is so
successful that by the end of 2007, a total of 1.3 million sellers have joined up with the site.

7. THE CUSTOMER’S OPINIONS

Amazon.com does more than pay sycophantic lip service to its customers. Each product is
available for consumer reviews, and customers may rate products on a hierarchical scale of 1-
5 stars. Amazon.com members may also comment on other member’s reviews. Some bemoan
Amazon.com’s consolidation of different versions of a product (e.g. DVD, VHS, BlueRay of
a video) into a single product available for commentary. However, this simplifies
commentary and use accessibility, a preeminent concern for Amazon.com.

27
 8. EMAIL MARKETING

For such a money-conscious company as Amazon.com, the lure of free and accessible e-
mail is one delectable temptation that is too potent to resist. Amazon.com engages in
permission marketing, where customers give the company permission to send them e-mails
detailing product promotions. Seth Godin, Online Marketers, writes that “

By talking to only volunteers, Permission Marketing guarantees that consumers pay more
attention to the marketing message.” This strategy has acquired Amazon.com an obsequious
following. Melvin Ram, a satisfied Amazon.com customer, writes on webdesigncompany.net
that “Looking at the e-mails I’ve received from Amazon over the last two years, I did not find
a single e-mail that was irrelevant to me. Every single one seemed like it was hand-picked for
me based on my previous purchases.”

Email marketing is another technique employed by Amazon.com. Through their

permission marketing program, customers allow the company to send them messages about
product promotions. This has proven to be an effective approach, since customers are sent
messages that are relevant to them. Based on their previous purchases, Amazon.com serves
them up with material that they may find interesting.

9. CUSTOMER SERVICE

Jeff Bozos would argue that customer service is not an addition to a corporate goal – it is
the corporate goal. He calls Amazon.com, “The most consumer-centric company.” In a
lecture to Massachusetts Institute of Technology students, Bozos “Tells of technological
advances that have not only enabled customers to find products, (and now at 28 million
items), enabled products to find customers [italics original].” Amazon.com focuses on the
customer experience. It wants customers to quickly access their hearts desire and obtain it
without hassle. It has spent billions enhancing and developing its website interface and
customer relations.There are numerous methods that Amazon.com uses to assist the
customer. All customers may send e-mails to Amazon.com requesting clarification about
purchasing or other information

28
. Nor are all responses automated. Amazon.com engages many employees simply to respond
to customer issues by phone and e-mail.These are but the first few pages of Amazon.com’s
extensive marketing manual. By refusing to compromise with mediocrity, Amazon.com has
revolutionized ecommerce. Millions of customers, who are reading their books, donning their
jewelry, or vacuuming their floor, are a living testament to Amazon.com’s success. Are you
one of them?

10.THE POWER OF PAGE SPEED

Page speed has been a large focus for Amazon.com. The time it takes for a webpage to
load can have a large impact on user experience and sales. After analyzing the ratio of sales to
website performance, Amazon discovered that for every 100ms of page load time there was a
1% decrease in sales. So how fast does your website need to be? Many usability experts
propose that the ideal page load time is 2 seconds or less. You can easily test the page load
time of your own website by using free tools such as WebPageTest.org

11. PERSONALIZE THE SHOPPING EXPERIENCE

One thing that Amazon does very well is personalizing the shopping experience to each
user. Going to Amazon’s homepage you’ll see different sections such as “Related to Items
You’ve Viewed,” “Inspired by Your Shopping Trends,” Recommendations for You in..,” etc.
Amazon knows that the more relevant the product is to the user the more likely users will
purchase. Online retailers can learn from Amazon and personalize the shopping experience as
much as possible. This may be easier said than done but many common ecommerce platforms
offer 3rd party addons to provide similar functionality. An easier alternative involves showing
users recently viewed products. While it might not be as fancy as Amazon’s elaborate
personalization strategy, it’s a simple way to personalize the shopping experience while
improving the average order value.

29
 12.MAKE SEARCHING A BREEZE

The search bar can have a significant impact on the user experience, especially for larger
online retailers with many products. The faster a user can find their desired product the more
likely it is that the user will purchase. Amazon makes searching a breeze by automatically
suggesting popular products and categories. Other ecommerce websites can use this tactic to
drive users straight to the product pages and improve conversion rates.

13.USERS NEED REVIEWS

Users rely on product reviews to make informed decisions before purchasing an item.
Amazon does an amazing job of providing and visualizing customer reviews to help potential
buyers become customers.

Clearly displaying product reviews can significantly improve the conversion rate of a
product page. Amazon also leverages email to solicit reviews from customers. This trick can
help other online retailers build social proof for products and boost sales.

14.RECOMMEND SIMILAR PRODUCTS

Focusing on average order value is often one of the easiest yet overlooked ways to
improve sales. Amazon does a great job of influencing users to purchase more than just one
product.

Bundling products together or including a related products section is an easy way for
online retailers to improve their average order value. The addition of these sections can also
have a SEO benefit by creating internal links and sending “link juice” to other product pages
on the website. Amazon even takes this strategy a step further by suggesting similar products
during the checkout process.

30
 15.TEST, TEST, TEST

Test everything. The success of Amazon can largely be contributed to the company’s
culture to always test new ideas. Amazon’s CEO Jeff Bozos once said “If you double the
number of experiments you do per year you’re going to double your inventiveness.” Adopting
a culture that allows for continuous testing can have a high payoff in the long run. So what
types of tests does Amazon conduct? Product prices, marketing channels, calls to action,
colors, navigation, button styles, messaging, shipping rates, etc. If you can think of it, chances
are they’ve already tested it.

16.CREATE TONS OF CONTENT

Amazon has 248,000,000 pages stored in Google's index. Each of these 248,000,000
pages has the opportunity to rank for any number of keywords in search engines. Now that's
quite a bit of on-page SEO juice!

17.EXPERIMENTATION AND TESTING AT AMAZON

The ‘Culture of Metrics’ also led to a test-driven approach to improving results at

Amazon. Matt Round, speaking at E-metrics 2004 when he was director of personalisation at
Amazon describes the philosophy as ‘Data Trumps Intuitions’. He explained how Amazon
used to have a lot of arguments about which content and promotion should go on the all
important home page or category pages. He described how every category VP wanted top-
center and how the Friday meetings about placements for next week were getting ‘too long,
too loud, and lacked performance data’.

But today ‘automation replaces intuitions’ and real-time experimentation tests are always
run to answer these questions since actual consumer behaviour is the best way to decide upon
tactics.

Marcus (2004) also notes that Amazon has a culture of experiments of which A/B tests
are key components.

31
Examples where A/B tests are used include new home page design, moving features around
the page, different algorithms for recommendations, changing search relevance rankings.
These involve testing a new treatment against a previous control for a limited time of a few
days or a week. The system will randomly show one or more treatments to visitors and
measure a range of parameters such as units sold and revenue by category (and total), session
time, session length, etc. The new features will usually be launched if the desired metrics are
statistically significantly better. Statistical tests are a challenge though as distributions are not
normal (they have a large mass at zero for example of no purchase) There are other
challenges since multiple A/B tests are running every day and A/B tests may overlap and so
conflict. There are also longer-term effects where some features are ‘cool’ for the first two
weeks and the opposite effect where changing navigation may degrade performance
temporarily. Amazon also finds that as its users evolve in their online experience the way
they act online has changed. This means that Amazon has to constantly test and evolve its
features.

18.AMAZON.COM TECHNOLOGY

It follows that the Amazon technology infrastructure must readily support this culture of
experimentation and this can be difficult to achieved with standardised content management.
Amazon has achieved its competitive advantage through developing its technology internally
and with a significant investment in this which may not be available to other organisations
without the right focus on the online channels.

As Amazon explains in SEC (2005) ‘using primarily our own proprietary technologies, as
well as technology licensed from third parties, we have implemented numerous features and
functionality that simplify and improve the customer shopping experience, enable third
parties to sell on our platform, and facilitate our fulfilment and customer service operations.
Our current strategy is to focus our development efforts on continuous innovation by creating
and enhancing the specialized, proprietary software that is unique to our business, and to
license or acquire commercially-developed technology for other applications where available
and appropriate. We continually invest in several areas of technology, including our seller
platform; A9.com, our wholly-owned subsidiary focused on search technology on

32
www.A9.com and other Amazon sites; web services; and digital initiatives.’

Round (2004) describes the technology approach as ‘distributed development and

deployment’. Pages such as the home page have a number of content ‘pods’ or ‘slots’ which
call web services for features. This makes it relatively easy to change the content in these
pods and even change the location of the pods on-screen. Amazon uses a flowable or fluid
page design unlike many sites which enables it to make the most of real-estate on-
screen.Technology also supports more standard e-retail facilities. SEC (2005) states: ‘We use
a set of applications for accepting and validating customer orders, placing and tracking orders
with suppliers, managing and assigning inventory to customer orders, and ensuring proper
shipment of products to customers. Our transaction-processing systems handle millions of
items, a number of different status inquiries, multiple shipping addresses, gift-wrapping
requests, and multiple shipment methods. These systems allow the customer to choose
whether to receive single or several shipments based on availability and to track the progress
of each order. These applications also manage the process of accepting, authorizing, and
charging customer credit cards.’

19.DATA DRIVEN AUTOMATION

‘Data is king at Amazon’. He gave many examples of data driven automation including
customer channel preferences; managing the way content is displayed to different user types
such as new releases and top-sellers, merchandising and recommendation (showing related
products and promotions) and also advertising through paid search (automatic ad generation
and bidding).

The automated search advertising and bidding system for paid search has had a big
impact at Amazon. Sponsored links initially done by humans, but this was unsustainable due
to range of products at Amazon. The automated programme generates keywords, writes ad
creative, determines best landing page, manages bids, measure conversion rates, profit per
converted visitor and updates bids. Again the problem of volume is there, Matt Round
described how the book ‘How to Make Love Like a Porn Star’ by Jenna Jameson received
tens of thousands of clicks from pornography-related searches, but few actually purchased the
book. So the update cycle must be quick to avoid large losses.

33
There is also an automated email measurement and optimization system. The campaign
calendar used to be manually managed with relatively weak measurement and it was costly to
schedule and use. A new system:

• Automatically optimizes content to improve customer experience

• Avoids sending an e-mail campaign that has low clickthrough or high unsubscribe
rate
• Includes inbox management (avoid sending multiple emails/week)
• Has growing library of automated email programs covering new releases and
recommendations

But there are challenges if promotions are too successful if inventory isn’t available.

20.AMAZON PARTNERSHIP STRATEGY

As Amazon grew, its share price growth enabled partnership or acquisition with a range
of companies in different sectors. Marcus (2004) describes how Amazon partnered with
Drugstore.com (pharmacy), Living.com (furniture), Pets.com (pet supplies),
Wineshopper.com (wines), HomeGrocer.com (groceries), Sothebys.com (auctions) and
Kozmo.com (urban home delivery). In most cases, Amazon purchased an equity stake in
these partners, so that it would share in their prosperity. It also charged them fees for
placements on the Amazon site to promote and drive traffic to their sites. Similarly, Amazon
charged publishers for prime-position to promote books on its site which caused an initial
hue-and-cry, but this abated when it was realised that paying for prominent placements was
widespread in traditional booksellers and supermarkets. Many of these new online companies
failed in 1999 and 2000, but Amazon had covered the potential for growth and was not pulled
down by these partners, even though for some such as Pets.com it had an investment of 50%.

Analysts sometimes refer to ‘Amazoning a sector’ meaning that one company becomes
dominant in an online sector such as book retail such that it becomes very difficult for others
to achieve market share. In addition to developing, communicating and delivering a very
strong proposition, Amazon has been able to consolidate its strength in different sectors
through its partnership arrangements and through using technology to facilitate product

34
promotion and distribution via these partnerships. The Amazon retail platform enables other
retailers to sell products online using the Amazon user interface and infrastructure through
their ‘Syndicated Stores’ programme.

For example, in the UK, Waterstones (www.waterstones.co.uk) is one of the largest

traditional bookstores. It found competition with online so expensive and challenging, that
eventually it entered a partnership arrangement where Amazon markets and distributes its

books online in return for a commission online. Similarly, in the US, Borders a large book
retailer uses the Amazon merchant platform for distributing its products.

Toy retailer Toys R’ Us have a similar arrangement. Such partnerships help Amazon extends
its reach into the customer-base of other suppliers, and of course, customers who buy in one
category such as books can be encouraged to purchase into other areas such as clothing or
electronics.

21.AMAZON MARKETING COMMUNICATIONS

Amazon state that the aims of their communications strategy are (unsurprisingly) to:

1. Increase customer traffic to our websites

2. Create awareness of our products and services
3. Promote repeat purchases
4. Develop incremental product and service revenue opportunities
5. Strengthen and broaden the Amazon.com brand name.

Amazon also believe that their most effective marketing communications are a
consequence of their focus on continuously improving the customer experience. This then
creates word-of-mouth promotion which is effective in acquiring new customers and may
also encourage repeat customer visits.

Amazon used the personalisation enabled through technology to reach out to a difficult to
reach market which Bozos originally called ‘the hard middle’. Bezos’s view was that it was
easy to reach 10 people (you called them on the phone) or the ten million people who bought
the most popular products (you placed a superbowl ad), but more difficult to reach those in

35
between. The search facilities in the search engine and on the Amazon site, together with its
product recommendation features meant that Amazon could connect its products with the
interests of these people.Online advertising techniques include paid search marketing,
interactive ads on portals, e-mail campaigns and search engine optimisation. These are
automated as far as possible as described earlier in the case study. As previously mentioned,
the affiliate programme is also important in driving visitors to Amazon and Amazon offers a
wide range of methods of linking to its site to help improve conversion.

Amazon also use cooperative advertising arrangements, better known as ‘contra-deals’

with some vendors and other third parties. For example, a print advertisement in 2005 for a
particular product such as a wireless router with a free wireless laptop card promotion will
feature a specific Amazon URL in the ad. In product fulfilment packs, Amazon may include a
leaflet for a non-competing online company such as Figleaves.com (lingerie) or Expedia
(travel). In return, Amazon leaflets may be included in customer communications from the
partner brands.

22. USE THE CROWD TO CREATE "SEGMENTS OF ONE"

Amazon and many of these sites are brilliant at leveraging the wisdom of the crowd to
create "segments of 1," or segmentation that is so granular it focuses on each individual
person and their specific online behavior, wants, and needs.

The pages I view and emails I get from Amazon are unique to me. They offer suggestions
for books, movies, and other products I might like based on my personal purchase history and
shopping patterns. Like Netflix, Google, Facebook, YouTube, and so many other high
trafficked sites, Amazon uses the wisdom of the crowd to personalize the user experience
and dramatically increase conversion .

23. MARKETING TAKEAWAY

Stop obessing about new technology and instead focus on making your
website effective. Rather than spending your time and money on making your site look pretty,

36
spend it on optimizing your website pages, creating remarkable content that attracts visitors,
and optimizing your site and landing pages for lead generation. Your site can be the prettiest
website in the world, but if it doesn't generate leads and customers for your business, what's
the point?

The more pages you have on your website, the more pages your site can be indexed for in
search engines. More pages also means more opportunities for your prospects to find you in
search engines and more chances to rank for your business' top keywords. The best way to
create tons of website pages is by blogging. Start a business blog, publish frequently, and
make sure each post is search engine optimized for your best keywords. The more optimized
content you have, the better your chances will be of getting found online.

24.WHITE SPACE IS OVER-RATED

To be honest, it looks like someone threw up their Halloween candy all over Amazon's
web pages, but it doesn't seem to matter. In fact, really none of Compete's top 10 sites are
particularly Apple-esque in design, which many web designers seem to idolize. Most of them
have near zero white space and are chock full of stuff. That said, if they are the top 10 most
visited websites, it just goes to show that web design isn't the most important thing. Rather,
being effective is what wins

25.E-COMMERCE STRATEGY

Amazon employs a multi-level e-commerce strategy. Amazon started off by focusing on

Business-to-Consumer relationships between itself and its customers, and Business-to-
Business relationships between itself and its suppliers but it then moved to incorporate
Customer-to-Business transactions as it realized the value of customer reviews as part of the
product descriptions. It now also facilitates customer to customer with the provision of the
Amazon marketplace which act as an intermediary to facilitate consumer to consumer
transactions. The company lets almost anyone sell almost anything using its platform. In
addition to affiliate program that lets anybody post Amazon links and earn a commission on

37
click through sales, there is now a program which let those affiliates build entire websites
based on Amazon’s platform.

26.PRICING STRTEGY

That strategy is changing as the company expands into the vast grocery and consumer
packaged goods market through its AmazonFresh business.

Now the priority is convenience rather than the lowest prices, an approach that could limit
how much of this market Amazon can grab from grocery store operators like Safeway and
Kroger and other rivals including Wal-Mart Stores, FreshDirect and the start-up Instacart.

AmazonFresh, which delivers groceries and related items the same day or the next day,
started as a test in Amazon's home town of Seattle several years ago. The service expanded to
Los Angeles earlier this year and launched in San Francisco Wednesday. If those cities
perform well, the company may expand to many other urban areas and even outside the U.S.

27. AMAZON'S KINDLE STRATEGY

Amazon's strategy was simple -- it wanted to make money when people used its products,
not when they bought them. Amazon typically prices its Kindle e-readers and Kindle Fire
tablets at or slightly below cost. By tightly integrating the devices with Amazon's online
store, Amazon hopes to make money by selling lots of e-books, music, movies, and other
stuff to Kindle and Kindle Fire users over time.

However, until recently, the strategy looked like a bust. While Amazon's e-readers and
tablets were popular, the company's media sales growth was lackluster. More recently,
though, Amazon's media sales growth has picked up again in North America. This suggests
that the Kindle strategy is finally succeeding.

28.DISTRIBUTION STRATEGY

Amazon understood that sustainable massive growth can be obtained only through
developing distribution network. They poached 2 of Wal-Mart's critical employees.

38
 O Richard Dalzell as its Chief Information Officer
O Jimmy Wright as its Chief Logistics Officer

With the help of Richard and Jimmy Amazon started its process of developing a
world class distribution network and circumvent other distributors

They massively used IT for developing their supply chain and logistics. This was
copied after seeing the success of Wal-mart.

In 2000 70% of Amazon’s software development concerned about distribution

centers.

As a part of completely controlling its distribution, Amazon Fresh implemented its

own delivery network

Started in-sourcing the value chain to have more control over distribution

Ex. Acquired book surge (now createspace) which was a print on demand company. This
helped Amazon to reduce their dependence on suppliers and also inventory level.

Now entered digital distribution through kindle, Amazon mp3, instavideo etc. This means
every book/song is available in 60 seconds.

29.CUSTOMER RETENSION STRATEGY

• Kindle became another reason for customers to come back to Amazon.

• A customer base of 137 millions makes it impossible for any seller to neglect Amazon
and they joins in which in turn increases customer base due to large collection of
items
• Amazon made it difficult for customers to switch platforms for reading their e-book
through their proprietary format

39
• Plays with various offers in Amazon instant video, the video on demand service.
• Personalized pages tracking past purchase behavior and using modern algorithms to
give recommendations. Also the look and feel of the page keeps on changing to give a
modern outlook
• Annual subscription saving schemes for loyal customers

30.CUSTOMER CARE STRATEGY

• “If you make customers unhappy on the Internet, they can each tell 6,000 friends”Jeff
Bezos (CEO Amazon).
• Amazon’s customer service was ranked No 1 in 2009 and 2011 by American
Customer Satisfaction Index
• Following a bottom-up approach, every decision at Amazon is driven by the
customer's needs.
• Every employee, even the CEO, spends two days every two years on the service desk
to answer calls and help customers
• Amazon introduced many of the current ubiquitous best-practices to e-commerce
industry. Below are a list of innovations bought by them
• Amazon introduced many of the current ubiquitous best-practices to e-commerce
industry. Below are a list of innovations bought by them

40
CHAPTER FIVE

AMAZON INDIA

41
AMAZON INDIA

Even though Amazon only started its online marketplace in India from 2013, the company
established a presence in the country through its software development centers which has
employed numerous software developers and technologists across India since the mid-2000s.
However, although India has the second largest population in the world, Amazon was not
interested in India as a potential market until recently. Performing a PEST market analysis
provides good reasons for Amazon’s decision to delay its entry into India since the market
conditions in India were not favorable for the company to enter until recently.

Perhaps the biggest obstacle that prevented Amazon’s entry into was due to political reasons.
Although India liberalized its markets to foreign investment way back in 1991, the retailing
sector was still closed to foreign retailers (Political/Regulatory). Only recently did the Indian
government introduce reforms that would allow foreign retailers to partner with local partners
to sell their products. Even now direct sales by foreign retailers are prohibited in the country.
Therefore, this implied that the Indian market was not viable for the company until recently
since the company could not replicate its business strategy in India.

Furthermore, the online retail market in India was considered to be too small to be worth the

42
company’s efforts. According to a Forrester’s report, even in 2012, the online retail market in
India was only estimated to be around $1-2 billion dollars. For a company that earns revenues
of almost $75 billion dollars, the India market would not have been an interesting prospect at
all (Economic).

Another vital reason that dissuaded Amazon entering India is that despite the country’s
massive population, internet penetration is very low in the country. As of 2012, the country
only had ~50 million active internet users. This meant that the target segment for potential
customers in the country was too small for the country. Additionally, until recently, the
concept of online retailing was not well established in India. This meant that the company
would not only have to enter a new market, it would also have to build awareness about the
unique selling proposition of online shopping (Sociological/Demographics). Therefore, the
costs of entering the market would not provide a return on investment for the company.

In addition to the above problems, online sales in India are complicated further due to the size
of the country and the lack of a developed technology and transport infrastructure
(Technological/Environmental). Even if the country had a sizeable market that could be
compared to most European markets that Amazon currently sold to, the company would need
to create a unique process in order to cater to its customers. Given the unreliability of the
Indian transport infrastructure, the company would need to establish a distribution and sales
process that would be unique to the company.

CHALLENGES FACED IN INDIA

Despite the numerous problems related with entering the Indian market – the sheer size of the
Indian market makes the company impossible to ignore. Furthermore, the overwhelming
success of local online retail businesses such as Flipkart.com – a local online retail business
started by a couple of Indian executives, and Snapdeal has evoked a lot of interest from
online retailers around the world. Flipkart, in particular was especially interesting to Amazon,
since they were successful in adapting many practices currently followed by Amazon to the
local market. Given that the internet penetration in India is expected to grow substantially
over the short term, the number of active of internet users (and therefore potential online

43
customers) is expected to grow multifold over the next few years. According to conservative
estimates, the Indian online market is expected to reach $8.8 billion by 2016.

Additionally, the Indian retail market appears to be on the cusp of liberalization – which
means that it would be important for Amazon to establish a presence early in order to capture
market share organically. Moreover, although the company is still prohibited from direct
retail sales in the country, it has a huge opportunity to replicate the marketplace strategy that
it adopted during the early 2000s in the US. The success of Flipkart and Snapdeal has
inspired many local businesses to go online. However, none of them have the logistical and
distribution capabilities to rival the services of retailers such as Flipkart and Snapdeal.
Amazon on the other hand can provide these services to these businesses by providing
customer to customer sales and earning healthy revenues on these sales.

44
Amazon’s Indian Strategy

Given the change in the macro-economic conditions in India, Amazon decided to enter the
market in 2012 cautiously using a price aggregator service (Junglee.com) that it acquired in
1998. Junglee.com was primarily a shopping comparison tool that would direct users to the
page of the retailer that was actually selling the service/product. The strength of the Amazon
brand in India – along with the growth of the online retail market made the introduction of
Junglee.com a great success. This confirmed to Amazon that the Indian market was worth
entering into. Junglee.com was widely used across the length and breadth of the country for
shopping comparison. Although the site did not provide any revenue to the company,
Amazon was able to mine a lot of very useful information about the demographics, products
that the Indians were interested in most, etc. Using this information, Amazon entered the
Indian market in earnest as a marketplace in June 2013 by launching Amazon IndiaAlthough
Amazon made a limited entry into India in 2013 by launching a marketplace for only two
categories (books and media sales), it has grown at a breakneck speed over the past year to
offer over 15 million products in over 20 categories. Amazon now offers a range of products
that varies from its traditional stores such as books to electronics and clothing apparel. As
mentioned earlier, Amazon only acts as a third party seller for existing sellers in India. It does
not directly sell its products through its website. The company instead provides marketing,
sales, logistics, technology and, customer service capabilities to its third party sellers while
providing a unified, customer friendly marketplace to consumers. The company has adapted
many practices that have enabled the Indian online retailers to capture market share quickly
such as cash-on-delivery payments, liberal return policies, free or subsidized shipping and in-
house logistics. All these tactics were incorporated by Amazon right from the beginning of its
operations – a big advantage that Amazon had over its local competitors that evolved to
incorporate these strategies.[5]

Although originally perceived as a weakness, Amazon’s marketplace strategy is poised to be

very profitable for the company. Since the company is selling services rather than its own
products, the company stands to make very large margins on sales that are generated through
its website. This has meant that Amazon has only been required to invest a very small amount
of money to get its Indian expedition rolling. The company has only required to open a

45
couple of “fulfillment centers” India where third party sellers are required to ship inventories
– which in turn are sold to the customer using the Amazon distribution channel.

Amazon has leveraged the strength of brand to great effect in India. As mentioned earlier,
Amazon was well known in India well before it entered the market for commercial prospects.
The company had earned a lot of goodwill in the Indian population by operating huge
software development centers that have employed a large number of Indians. This meant that
the company was able to capture mind share in the Indian market relatively easily. However,
unlike the US, the company has promoted itself extensively through traditional sales channels
which are still very important in India. The company has launched an extensive ad campaigns
for television, radio and print media. Although the results of these campaigns is yet to be
determined, the company looks poised for future success.

Another important factor to consider is that Amazon has deep pockets that cannot be matched
by its local competition. Amazon has already surpassed its local competition in terms of the
number of products that are offered on its website. Additionally, there are numerous reports
that indicate that local companies such as Flipkart have almost burned through their initial
funding sources. Although these companies can still go public and raise additional funds, it is
highly unlikely that they have the wherewithal, resources or knowledge to compete with
Amazon.

46
RECOMMENDATIONS &

CONCLUSION

47
Recommendations

1. Although Amazon has used its second mover advantage to great effect so far, the
Indian market will be difficult to continuously adapt to. Therefore, the company
should look to acquire local competitors that will be able to extend Amazon’s
offerings and services. For example the company should look to acquire a large stake
in successful niche online retailers who will be able to adapt to the market faster than
Amazon. This will also allow the company to reduce its competition while providing
the company with healthy revenues in segments that it does not have much expertise
in. A good example is the fashion industry in India.
2. In addition to acquisitions, the company should sign exclusive contracts with large
Indian sellers. This would especially work well for Amazon as they could make
additional revenue for taking the Indian brands global. Not only will this allow the
company to increase its product offerings in India, it would also create new product
offerings and categories for its other websites.
3. Invest in a quick and reliable delivery system – Although Amazon has a lot of
expertise in distribution and sales, the Indian market will be very different. The
company’s local competition have developed extensive expertise in delivery systems
in India. Amazon should look to invest a substantial amount of money to develop a
very reliable logistics system. In fact the company itself has a huge opportunity to
develop a logistics system for India – which can then be adapted to other developing
economies. Markets with huge populations such as Indonesia, Pakistan, Nigeria,
Bangladesh, etc. could easily be served with a system that is developed for India. This
would also considerably lower market entry costs for Amazon in those countries when
it wants to enter them. A good method for them to do so would be to acquire existing
distribution services in India such as BlueDart.
4. Amazon can potentially create a new business model by providing logistical,
distribution, sales, marketing and other services for local sellers who do not have the
resources or the experience to do so. Although the company currently provides a
marketplace, it could also create an entire eco-system that could be used by these

48
companies. They could potentially create a huge business for these services very
similar to the way Salesforce.com has created for Customer Relationship
Management. Amazon has both the expertise, resources and the technology that is
required for such a business.

49
CONCLUSION

Amazon has entered the Indian market at a very exciting time in the online retail industry.
India provides Amazon with limitless opportunities over the short,mid and, long term. I
believe that Amazon has entered the market at the perfect time and can wield its second
mover advantage in the market to great effect. The global online retailer stands poised to
grow its market share and presence in India substantially over the next few years.

Although the company faces a few challenges and has a few weaknesses, I believe if the
recommendations I have listed in the section above are followed, the company should be able
to dominate the online retail market in India as well

50
REFERENCE

➢ WWW.AMAZON.COM
➢ WWW.UKESSAY.COM
➢ WWW.MBASKOOL.COM
➢ WWW.STUDYMODE.COM
➢ WWW.MANAGEMENTPARADISE.COM

51