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ASSIGNMENT – 1
BUSINESS MODEL AND SUPPLY CHAIN ANALYSIS

Amazon’s Business Model Centre’s around Amazon to Buyer, Multilevel eCommerce,

Customer Tracking and Technology. And the same is analyzed in the proposed Heads
as under.

1. Customers of Amazon
Both buyers and sellers can come together in Amazon’s platform considering how it is a
mass market. Where its brand is concerned, anyone that inherits internet connection is a
potential customer.

Amazon’s customer base is also its most loyal one. Millions of people across the world have
a Prime subscription and pay their fee for its services respectively.
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2. Value Proposition of Amazon

Competitive pricing, selection of goods, convenience and fast fulfillment all carry weightage
to Amazon’s value.

The consumers who buy various goods on Amazon are directly responsible for their current
successes. Amazon has cemented its position as providing a safe, reliable and well-stocked
platform for shopping which is why they continue to utilize its services repeatedly.

The Amazon brand in and of itself cannot be replicated. It has remained consistently diverse
and consistent throughout the years. The selection of goods it sponsors is authentic and
widely sought after. It’s convenient, and fast-tracked services make for a robust strategy as
well.

3. Channel of Amazon
Amazon’s website operates as its largest channel. Different versions exist on its site that
aids and abets customers worldwide. Nowadays, apps have been created to accelerate
sales growth. Many affiliates have also taken their role in acting as a channel for Amazon
like the Amazon Affiliate Program.

4. Customer Relationships of Amazon

Amazon is a brand that is heavily invested in the retention of its consumers. It has enjoyed
a healthy and productive relationship with its customers for a long period of time. Some of
their customer interactions take place with the reviews or comments shoppers can leave on
their webpage.  Amazon also offers customer service through phone, online chat or email.

5. Key Activities of Amazon

Amazon’s key activities are as follows:

1. Merchandising of its digital and physical goods.

2. Development, design, and optimization of its Platform (website or apps).
3. Manage supply chain and logistics
4. Secure and build a partnership with its supplier and sellers
5. Support the production of movies or show on its prime video platform
6. Acquire new ventures to support its ecosystem
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6. Key Resources of Amazon

Amazon’s physical resources such as fulfillment centers (warehouses), and supply chain
automation help in its physical resources. Its technological infrastructure, in particular, is
crucial for its everyday business model.

The same is the case with its software engineers who are responsible for the creation of
its online platform infrastructure. Much of the popular culture has also served the purposes
of Amazon well where it is used to generate attractive product sales.

7. Key Partners of Amazon

Among Amazon’s key partners – Sellers are by far its most important who singularly
generate the most revenue for Amazon. Other authors, publishers, and logistic partners
increase its value and aid in the conversion of many people into customers. Amazon values
such partners and has many times credited them for their assistance.

8. Cost Structure of Amazon

Amazon’s cost structure is driven by value. It means that Amazon function on a system that
only benefits them economically. It’s IT, and fulfillment center is also a vital component in
this regard as it enables Amazon to operate on a global scale. Other essential elements
utilized in the cost structure of Amazon include its customer service centers as well
as software development centers across the world.

9. Revenue Stream of Amazon

Prime remains Amazon’s primary Revenue Stream as it is accessible to more customers
and in turn, generate the most revenue for them.

Other Amazon Revenue Models includes the Commission and Transaction Fees it makes

from its products as well as the recent sale of E-books and digital content it has been
utilizing in its sales.
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Stocking Policy (Business Leverage).

Amazon Values Inventory

Sellers who maintain consistent levels of inventory and successfully avoid untimely
fluctuations are typically favored by Amazon. Ideally, Amazon sellers should strive to
develop a steady and stable positive gain in their inventory levels over time. Sellers who
have enough inventory in stock to fulfill sudden increases in demand generated by Buy
Box typically receive priority in the results listings. Amazon usually awards the most Buy
Box shares to sellers who have a strong stock history, consistent sales and a large
inventory at the time.

Prioritizing Inventory
In order to keep the most popular items in stock, Amazon sellers need to focus on
adhering to inventory best planning practices. Many sellers are surprised to find that
effective inventory management can be just as profitable as sourcing for new products.
Consistently turning inventory over for a profit without delay should be the foremost
priority of any Amazon sellers interested in sustaining their venture long-term. Ideally,
high-volume Amazon sellers should work towards developing an in-stock strategy that
allows for 30-60 days of coverage.
 

Anticipating Inventory
Some of the largest challenges involved with managing FBA inventory replenishment
are incorporating lead time, anticipating sales spikes and getting accurate sales velocity
calculations. Properly incorporating lead time is crucial to preventing stock outs from
occurring. Successful sellers are able to anticipate and compensate for potential
discrepancies in projected lead times that could result in a stock out. In addition, the
more frequently sellers experience stock outs, the further out of touch they are with how
to accurately restock their inventory for the upcoming cycle.
 

Sales and Stock Outs

Sellers who can effectively anticipate spikes in sales volumes are better suited to avoid
potential stock outs. These sales spikes can be caused by external factors like Amazon
seasonality or the everlasting impact of special promotions. It’s important that sellers
include these factors in their equations when assessing inventory management for the
next cycle. Understanding how to calculate sales velocity, or the dollar amount and
number of seller transactions during any given month, is also helpful for sellers
attempting to avoid early stock outs.
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Brick & Mortar Model Vs Market Place Model

(Rationality).
While the e-commerce giant continues to influence the retail industry’s every move,
traditional retailers need to offer new fulfillment options and a personalized customer
experience. Offline Retailers can reinvent themselves by providing a curated buying
experience, giving buyers options for delivery times, from same day to next day, just like
Amazon, and by providing good customer service in the logistics operation, such as the
ability to track shipments and alert customers if their orders will be delayed. From
limited eCommerce footprint to its virtual takeover.

Amazon sees that the future of retail is blended

A customer might have a preference between online and offline purchases, but when it
comes to how they buy, “very few people exclusively shop online or only in store. They
marry the best of both worlds,” said Berg.
Amazon has understood that what shoppers love most is choice. The retailer sees that
the future of the industry won’t be black or white in choosing only online or only in-store,
it will be multichannel.
But if Amazon remained as only an e-commerce retailer, it would be missing out on all
the ways a customer might want to shop. By entering the world of bricks-and-mortar, the
retailer is ensuring it has a cut of another revenue stream.

Stores will help Amazon to crack the fashion market

If Amazon is serious about beefing up its fashion offering, it can’t do it without access to
stores.
As much as it’s focusing on making the online experience of clothes shopping easier for
its customers, there are still points of friction. The issue of sizing has not been fixed in
online purchases just yet, shoppers still can’t feel the fabric before they buy, or hold it
up to themselves to see how it would look. Amazon was used to selling products like
books, where you know exactly what you’re getting. “Fashion is very different. Quality is
subjective and cannot be determined over a screen”
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Amazon wants to grow its ecosystem

At its very core, a shop is a giant display room for your products. One of Amazon’s
reasons for entering into physical stores is that it allows the retailer to show off its wares
and entice customers to buy even more into its ecosystem. So, having stores where you
can showcase additional products that you can offer to customers will help boost
awareness and sales of Amazon’s wider ecosystem of those products and services.

Stores help Amazon offset rising shipping costs

As one of the giants of e-commerce, Amazon knows only too well the cost of shipping
which is a huge pressure on the supply chain. By accessing store space, it means
Amazon can reduce shipping costs and improve the returns process for customers.
The stores can act as pick-up points for customers, so Amazon lowers its delivery costs.
Even better, it draws customers into store so while they’re picking up their order, where
they might be tempted to shop even more. Customers want to be able to return their
orders easily. A trip to the post office might not always be convenient, so dropping by a
store offers them another option.

“Since the days when online shopping gave the retailer more agility and
flexibility, it has now become somewhat of a restriction.

Entering the bricks-and-mortar retail market is a way for Amazon to

continue its mission to relentlessly innovate, to challenge itself, and deliver the
best customer experience”.
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