INDUSTRY ANALYSIS REPORT – E-COMMERCE SECTOR

Submitted in partial fulfilment of PGDM 2018-20 in

SVKM’s NMIMS
School of Business Management, Hyderabad

Submitted By: Faculty Mentor:

Gitansh Luthra Dr. Kavita Kulkarni
80303180106

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ACKNОWLЕDGЕMЕNT

Thе satisfactiоn that accоmpaniеs thе succеssful cоmplеtiоn оf any task wоuld bе
incоmplеtе withоut thе mеntiоn оf thе pеоplе whо madе it pоssiblе and whоsе cоnstant
guidancе and еncоuragеmеnt crоwn all thе еffоrts with succеss. This acknоwlеdgеmеnt
transcеnds thе rеality оf fоrmality whеn wе wоuld likе tо еxprеss dееp gratitudе and
rеspеct tо all thоsе pеоplе bеhind thе scrееn whо guidеd, inspirеd and hеlpеd us fоr thе
cоmplеtiоn оf оur prоjеct wоrk.

I am thankful tо Dr. Prithvi Yadav (Dirеctоr, NMIMS Hydеrabad) fоr giving us an

оppоrtunity tо dо thе prоjеct оn Industry Analysis. I wоuld alsо likе tо thank tо оur guidе Dr.
Kavita Sasidharan Kulkarni (Assistant Prоfеssоr, Markеting) whо has cоntinuоusly hеlpеd
and gavе valuablе suggеstiоns tо guidе us in thе succеssful cоmplеtiоn оf thе prоjеct wоrk.

My thanks tо all оur Tеachеrs and friеnds whо havе dirеctly оr indirеctly hеlpеd us in
cоmplеting thе task succеssfully.

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PREFACE

E-commerce as anything that involves an online transaction. E-commerce provides multiple

benefits to the consumers in form of availability of goods at lower cost, wider choice and
saves time.
The general category of e-commerce can be broken down into two parts: E-merchandise: E-
finance. E commerce involves conducting business using modern communication
instruments: telephone, fax, e-payment, money transfer systems, e-data interchange and
the Internet. Online businesses like financial services, travel, entertainment, and groceries
are all likely to grow.
Since 2014, the Government of India has announced various initiatives namely, Digital India,
Make in India, Start-up India, Skill India and Innovation Fund. The timely and effective
implementation of such programs will likely support the e-commerce growth in the country.
Forces influencing the distribution of global e-commerce and its forms include economic
factors, political factors, cultural factors and supranational institutions. It has an impact over
the economy of many countries among which India is on the top of that list. It has named as
new gold rush in e-commerce. E-commerce has many reasons that why it is very crucial in
developing the country.
In this report detailed analysis on all the parameters which could be taken into account
while doing industry analysis of E commerce sector is done. This report helps us to get
insights about the industry and further explain what all is happening in and around the
specific industry.

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EXECUTIVE SUMMARY

The report aims to analyze the rapid growth of E-commerce industry which is very
competitive. The report gives а detailed insight into the emergence of Ecommerce with
changing innovation and technologies namely, Internet and how it has reshaped the
business landscape into the various market types of the industry. The report also provides
information on how the sector’s flexibility and ease of use has led to the evolution of the
industry over the various users domestically and globally.
The report also walks us through the major market share both globally and domestically
followed by their market structure, market size and forecast for the years to come.
The report studies various E-commerce Companies like Walmart, E-bay, Shopify, Netflix,
Amazon. The selection of these companies was carefully done so as to have an
understanding of the different comparative advantages of both global and national
companies from different segments of the industry.

The report attempts to cover each of the aforementioned companies comprehensively with
respect to а brief Company Profile, Strategy, Five forces of competition, financial analysis
and few other parameters.The report gives us insight into how the various external factors
like political, economic, social, technological, environmental and legal factors play an
important role in the rise and fall of the trends, market size and share of the industry.

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Contents
ACKNОWLЕDGЕMЕNT...........................................................................................................................2
PREFACE...........................................................................................................................................3
EXECUTIVE SUMMARY......................................................................................................................4
Table of Figures................................................................................................................................5
Chapter 1 : Introduction...................................................................................................................6
Chapter 2 : Industry and Competition.............................................................................................11
2.1 Market Size and Characteristics.................................................................................................11
2.2 Market Trends...........................................................................................................................14
2.3 Characteristics of Competitors...................................................................................................16
Chapter 3 : Industry Analysis –Metrics............................................................................................22
KEY PERFORMANCE INDICATORS OF AMAZON...............................................................................29
Chapter 4 : Insights.........................................................................................................................31
Bibliography...................................................................................................................................34

Table of Figures

Figure 1 - E-commerce Retail Logistics................................................................................................11

Figure 2 - E-Commerce Market Size.....................................................................................................12
Figure 3 - KTIs......................................................................................................................................14
Figure 4 - Retail E-commerce Ranking.................................................................................................17
Figure 5 - Amazon Sales Share by Segment.........................................................................................18
Figure 6 - Amazon Sales Share by Product Category...........................................................................18
Figure 7 - Amazon Revenue Mix..........................................................................................................19
Figure 8 - Porter's 5 Forces..................................................................................................................20
Figure 9 - Value Chain Analysis............................................................................................................22
Figure 10 - Amazon's Supply Chain......................................................................................................27

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Chapter 1 : Introduction

What is E-commerce?
Ecommerce literally means electronic commerce and is basically the activity of buying or
selling of products on online services or over the Internet & the transfer of money and data
to execute these transactions. E-commerce not only consists of buying and selling of
tangible items but also provides intangible items and services for buying and selling.
E-commerce is the act of selling or buying of products and online services using the Internet.
Electronic commerce works on trending technologies such as transferring of funds
electronically, mobile, supply chain management, online transaction processing, digital
marketing, inventory management systems, electronic data transfer and systems to
automatically collect data. Presently electronic commerce particularly uses the World Wide
Web for a minimum of one section of the transaction's entire life cycle.

Generally, there are three sectors in e-commerce: online retailing sections, electronic
markets, and auctions hosted online.
E-commerce is a subset of electronic business. Typical e-commerce transactions involve the
procurement of online books and music purchases, and to a less extent, customized or
personalized online inventory services for a liquor store.”

Businesses involved in e-commerce may also implement some or all of the following:

1. Online shopping for retail sales direct to consumers via mobile apps and Web sites, and
customer service via live chat, chatbots, and voice assistants
2. Business-to-business buying and selling;
3. Providing or participating in online marketplaces, which process third-party business-to-
consumer or consumer-to-consumer sales
4. Gathering and using demographic data through web contacts and social media
5. Marketing to prospective and established customers by e-mail or fax (for example, with
newsletters)
6. Business-to-business (B2B) electronic information trade
7. Taking part in pre-tail for propelling new products and services

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8. Online financial exchanges for cash trades and exchanging purposes.
The three primary processes which are enhanced:

1. Production processes: are those which include procurement, ordering and replenishment
of stocks, processing of payments and electronic links with suppliers and production control
processes, among others.
2. Internal management processes: are those which include employee services, training,
internal information-sharing, video-conferencing, and recruiting. Electronic applications
enhance information flow between production and sales forces to improve sales force
productivity. Communication between the groups at work and electronic publishing of
internal business information are likewise made more efficient.
3. Customer-focused processes: are those which include promotional and marketing efforts,
selling over the Internet, processing of customers’ purchase orders and payments, and
customer support, among others.

Why E-Commerce?
At present, E-Commerce is the most vast and popular business
sector. Main reasons for having E-commerce are:-

 High reachability – High reachability factor of E-commerce is a very crucial factor

which has shifted the focus of the customers from traditional ways of buying the
product and services to the modern one that is E-commerce.
 High Conversions- E-commerce enables businesses to increase their conversion
rates as customer base is also increased on an E-commerce website and hence
conversion rates also increases.
 Customer satisfaction - Customer is the main part of any E-commerce business so
it’s very important to make your customer happy and satisfied. By providing quality
and desirable products, on time delivery, 24*7 customer support, and timely sale &
best deal offers you can make your customer happy. It is one of the main objectives
of E-commerce.
 Social popularity - Unless and until you are not famous and popular among people
you cannot establish your brand. Social presence with Omni channel & Digital
marketing is essential for any E-commerce business.

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Types of E-commerce
E-Commerce is divided into 6 major categories all with different characteristics.
They are -
1. Business-to-Business (B2B)
B2B encompasses all electronic transactions of goods or services conducted between
companies.
E.g.- TPN
2. Business-to-Consumer (B2C)
B2C encompasses trade exchange between a business and an end user. Generally, the term
was utilized to refer to a process of selling products directly to consumers, including
shopping in-store or eating in a restaurant, yet is presently more used to portray exchanges
between online retailers and their clients.
E.g. Amazon
3. Consumer-to-Consumer (C2C)
C2C encompasses all electronic transactions of goods or services conducted between
consumers. These transactions are usually conducted through а third party, which provides
the online platforms where the transactions are actually carried out.

E.g. - Quikr, e-bay.

4. Consumer-to-Business (C2B)
C2B is а complete reversal of the traditional sense of exchanging products. This type of е-
commerce is very basic in crowdsourcing based projects. А large number of individuals
make their services or items available for purchase for companies seeking precisely these
types of services or items. E.g.- Priceline
5. Business-to-Administration (B2А)
B2A encompasses all transactions conducted online between companies and public
administration. This area that involves а large variety of services, particularly in areas such
as fiscal, social security, employment, legal documents and registers, etc. E.g. – E-
Government.
6. Consumer-to-Administration (C2А)
C2A encompasses all electronic transactions conducted between individuals and public
administration.
E.g. - NMIMS distance learning program, filing tax returns etc.

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History of E-commerce
The history of ecommerce started 40 years ago and, to this day, continues to grow with new
technologies, innovations, and thousands of businesses entering the online market each
year. Electronic Data Interchanges and teleshopping in the 1970s paved the way for the
modern day ecommerce store. The history of ecommerce is closely intertwined with the
history of the internet. Online shopping only became possible when the internet was
opened to the public in 1991. Amazon.com was one of the first ecommerce sites in the US
to start selling products online and thousands of businesses have followed since. The
convenience, safety, and user experience of ecommerce have improved exponentially since
its inception.

Trends of E-commerce
Recent research clearly indicates that electronic commerce, commonly referred to as e-
commerce, presently shapes the manner in which people shop for products. Secondly, there
are predictions of increased mobile purchases and an expanding internet audience. The e-
commerce market has also gained much popularity among the western countries, and in
particular Europe and the U.S. These countries have been highly characterized with
consumer-packaged-goods. However, trends show that there are future signs of a reverse.

Top Companies under E-commerce

8 Largest E-Commerce Companies in the World

 Amazon Inc.

 Jingdong.

 Alibaba Group Holding Ltd.

 eBay Inc.

 Rakuten, Inc.

 B2W Companhia Digital.

 Zalando.

 Groupon.

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STAKEHOLDERS
1. Customers: E-commerce brings convenience for customers as they do not have to leave
home and only need to browse website online, especially for buying the products which are
not sold in nearby shops. As seen the trend most of the customers are now moving online
to buy products as the cost is reduced also time convenient. The impact of customer on e-
commerce is tremendous making a billion dollar industry attracting more investment into
the industry.
2. Employees: E-commerce helps create new job opportunities due to information related
services, software app and digital products. It also causes job losses. The areas with the
greatest predicted job-loss are retail, postal, and travel agencies. The development of e-
commerce will create jobs that require highly skilled workers to manage large amounts of
information, customer demands, and production processes. In contrast, people with poor
technical skills cannot enjoy the wages welfare.
3. Shareholder: There’s been a tremendous growth in shareholders’ money in e-commerce
industry. Initially there were only small amount of VC firms investing money but the seen
the growth of the market many foreign investment is coming in Indian e-commerce
industry. As seen the trend India's retail market is estimated at $470 billion in 2011 and is
expected to grow to $675 Billion by 2016 and $850 billion by 2020, – estimated CAGR of
10%. As a impact many foreign companies are seeking to merge or acquiring Indian e-com
companies to enter in the market developing a strong economy in India.
4. Suppliers: Supplier’s is a major stakeholder in the industry. As seen in history the
suppliers are reluctant to enter the digital industry but as the market is growing many
suppliers are now only visible online only. As seen the trend many big brand are moving
from offline to online. Suppliers are creating great impact on industry as now the availability
of products is 24*7.
5. Regulatory Bodies: a. Income Tax Department- The tax department has major impact on
e-commerce industry as change in tax laws affects the business and now the government is
on to promote online business by giving subsidies
b. Communication Department - internet speed i.e. 2g, 3g, 4g and the upcoming technology
has great impact on business. As these are main resources from which the business is
running
c. Consumer Affairs Department- to protect consumer fraud govt. are making strict rules
5. Cyber Security: The cyber security cell is making strict laws as to maintain the integrity of
the consumers and the firms.
6. Local Bodies: These bodies also plays a major role in running the online business as
the laws made by them also have to be taken into considerations for smooth running of
business.

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 Chapter 2 : Industry and Competition
2.1 Market Size and Characteristics

Propelled by rising smartphone penetration, the launch of 4G networks and increasing

consumer wealth, the Indian e-commerce market is expected to grow to US$ 200 billion by
2026 from US$ 38.5 billion in 2017 Online retail sales in India are expected to grow by 31
per cent to touch US$ 32.70 billion in 2018, led by Flipkart, Amazon India and Paytm Mall.
During 2018, electronics is currently the biggest contributor to online retail sales in India
with a share of 48 per cent, followed closely by apparel at 29 per cent. The fast growing e-
commerce market in the country will touch USD 84 billion in 2021 from USD 24 billion in
2017 on account of a healthy growth in organised retail sector.
As the internet penetration in the country increases and more international retailers start

Figure 1 - E-commerce Retail Logistics

operating in India, the share of organised retail market is expected to increase from 12 per
cent in 2017 to 22-25 per cent by 2021. India continues to hold a strong position as far as its
market potential is concerned and is on its way to becoming the third largest consumer
market in the world, poised to grow close to USD 1.2 trillion by 2021.
The fast growing e-commerce market in the country will touch USD 84 billion in 2021 from
USD 24 billion in 2017 on account of a healthy growth in organised retail sector. A fast
growing economy and robust demographics provide a positive outlook to the consumer
businesses in India.

Global ecommerce grew at a faster clip last year—18.0%—than online sales in the more
saturated U.S. market, which Internet Retailer expects to increase 15.3% from 2017.

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Consumers worldwide purchased $2.86 trillion on the web in 2018, up from $2.43
trillion the previous year, according to our early projections.
This would be a slowdown from 2017, when global web sales grew 21.3% year over
year from $2.00 trillion in 2016, according to Internet Retailer’s estimates.

The Indian consumer internet mаrkеt is еxpеctеd to grow by 44 pеr cеnt yеаr-on-yеаr to
touch US $65 billion in 2017, up from US $45 billion in 2016. Onlinе trаvеl аgеnts
аccount for thе lаrgеst mаrkеt shаrе (70 pеr cеnt) in thе intеrnеt consumеr mаrkеt,
whilе thе
rеmаining 30 pеr cеnt is еngаgеd by horizontаl е-tаiling, fаshion, furniturе, grocеry, hotеl,
food tеch, cаb аggrеgаtors, еducаtion tеchnology, аnd аltеrnаtivе lеnding аmong othеrs.
Thе intеrnеt industry in Indiа is likеly to doublе to rеаch US $250 billion by 2020, growing to
7.5 pеr cеnt of Gross Domеstic Product
(GDP), with thе numbеr of mobilе intеrnеt usеrs growing to аbout 650 million аnd thаt of

Figure 2 - E-Commerce Market Size

high-spееd intеrnеt usеrs rеаching 550 million. Аbout 70 pеr cеnt of thе total automobile
sаlеs in Indiа, worth US $40 billion, аrе еxpеctеd to bе digitаlly influеncеd by 2020 аs
аgаinst US $18 billion in 2016.

Overall e-commerce market had reached Rs 1, 07,800 crores (US$24 billion) by the year
2015 with both online travel and e-tailing contributing equally. Another big segment in e-
commerce is mobile/DTH recharge with nearly 1 million transactions daily by operator
websites.

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A new sector in e-commerce is online medicine, selling complementary and alternative
medicine or prescription medicine online. There are no dedicated online pharmacy laws in
India and it is permissible to sell prescription medicine online with a legitimate license.
Online sales of luxury products like jewellery also increased over the years. Most of the
retail brands have also started entering into the market and they expect at least 20% sales
through online in next 2–3 years.

Characteristics of E-commerce market -

1. Universal Standards- E-commerce technologies is an unusual feature, is the

technical standard of the Internet, so to carry out the technical standard of e-
commerce is shared by all countries around the world standard. Standard can greatly
affect the market entry cost and considering the cost of the goods on the market. The
standard can make technology business existing become more easily, which can
reduce the cost, technique of indirect costs in addition can set the electronic
commerce website 10$ / month.
2. Richness- Advertising and branding are an important part of commerce. E-commerce
can deliver video, audio, animation, billboards, signs and etc. However, it’s about as
rich as television technology.
3. Information Density- The density of information the Internet has greatly improved,
as long as the total amount and all markets, consumers and businesses quality
information. The electronic commerce technology, reduce the information collection,
storage, communication and processing cost. At the same time, accuracy and
timeliness of the information technology increases greatly, information is more
useful, more important than ever.
4. Ubiquity- The traditional business market is a physical place, access to treatment by
means of document circulation. For example, clothes and shoes are usually directed to
encourage customers to go somewhere to buy. E-commerce is ubiquitous meaning
that it can be everywhere. E-commerce is the worlds reduce cognitive energy required
to complete the task.
5. Personalization- E-commerce technology allows for personalization. Business can be
adjusted for a name, a person’s interests and past purchase message objects and
marketing message to a specific individual. The technology also allows for custom.

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 6. Global Reach- E-commerce allows business transactions on the cross country bound
can be more convenient and more effective as compared with the traditional
commerce. On the e-commerce businesses potential market scale is roughly
equivalent to the network the size of the world’s population.
7. Interactivity- Twentieth Century electronic commerce business technology is
called interactive, so they allow for two-way communication between businesses
and consumers.

2.2 Market Trends

1. Activist Consumers: The Rise of Ethical eCommerce

Consumer awareness of the environmental and ethical footprint of their purchases is
on the rise, including digital purchases and the “real or hidden” impacts and cost of
eCommerce – and consumerism in general. From sustainability to excessive
packaging, consumers are rewarding merchants who resonate with their value
system.

2. The End of Free Returns?

Return rates from eCommerce sales are 2 to 4 times greater than in brick-and-
mortar retail, and customer expectations of generous return policies is bringing
retailers to an expensive tipping point. 2019 will see a multitude of retail initiatives
to deter returns, ranging from more complex or conditional return policies to
incentives to pick up items in store, in order the curb the unsustainable pace at
which returns are growing.

Figure 3 - KTIs

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3. Sales Taxes: The Tax-Free Party is Over for Consumers and Merchants
The tax-free party is over for both merchants and consumers, who will have to deal
with regional sales taxes in 2019, no matter where the merchant has a physical
presence.
Merchants, both B2C and B2B, will have to determine which tax applies to which
clients, regions, products and more, and then to calculate and charge state-specific
sales tax on their online sales, and remit those taxes to a multitude of states and
agencies on time.
Tax rates will vary across the different states and jurisdictions, with variable
eligibility and applicability criteria. Tax rates will depend on what is being sold and
possibly the jurisdiction where consumers reside.

4. Mobile Faster As PWAs (Progressive Web App) Blur Lines Between Sites and
Apps “It’s a site, it’s an app – no, it’s both.” PWAs are changing how eCommerce
and mobile coexist. Brands and retailers will begin moving from sites and apps to a
new standard; the Progressive Web App – a hybrid between sites and apps which
combine the upsides of each and does away with the limitations.

PWA Features:

 Load 2 to 10 times faster than mobile sites

 Have offline capability
 Can be added to a home screen without ever requiring updating
 Allow push notifications

5. Social Media Gets Transactional

Not satisfied with simply selling leads and traffic, social media platforms are looking
to bridge the ecommerce gap by becoming transactional; users will be able to
complete purchases without leaving the platform.

Social buying is already standard in China, where 55% of social app users reported
buying goods or services directly on a social app.

Private messaging services, which are exploding in popularity, are also expected
to become transactional. WhatsApp, Snapchat and Facebook Messenger are
showing engagement numbers running into the billions.

6. Retailers Will Hire Their First AI Employee

Product content is the heart of eCommerce. It provides superior product discovery
and selection capabilities, which require detailed product information and critical
product-specific attributes, coupled with semantic search. Even the biggest retailers
are struggling to produce product content fast enough to properly commercialize

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 and merchandize their selection. This creates a need of bringing artificial intelligence
into place.

7. The QR Code Strikes Back

Anyone with the latest mobile phone can now use their camera to detect QR codes
and dig into product descriptions, pricing and other related product information.

Users will see a prompt on screen once their device recognizes a QR code, with an
option to click a link, which takes the user to the desired location. This addresses
brand manufacturers’ challenge where limited space on packaging can make it
impossible to display all relevant product information – all the while providing an
opportunity to create a direct brand-to-consumer relationship.
By making QR code detection a native part of iOS and Android, Apple and Google
have removed the main barrier to QR code use and adoption: it’s dependance
on apps to read QR codes.

8. In-Car eCommerce: Shopping On The Go

Nearly half of the 135 million American commuters use their smartphone to
discover the closest gas station, order and pay for coffee, take-out, groceries,
parking and more. In all, 77% of commuters who go online while driving engage in
commerce of some kind. Some estimates suggest that once commerce is integrated
into the car, as many as 83% of ALL commuters would engage in in-car commerce.

9. Product Content Syndication

Product content is at the heart of eCommerce and is one of the keys to a consistent
Omni channel experience. Product information is now as important as the physical
product itself. – without product information, digital consumers cannot discover,
research, compare or make an informed purchase decision.

2.3 Characteristics of Competitors

Coming to the competition part of E commerce industry we can analyze different companies
which come under E commerce industry and compare with the one I have been studying
about, i.e., Amazon.
So to begin we can go through the Amazon’s market size, structure, its share in the industry,
how it works, and simultaneously comparing it with the other companies as well on the
same parameters.

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Amazon is the leading e-retailer in the United States with close to 232 billion U.S. dollars in
2018 net sales. The majority of the company’s revenues are generated through e-retail sales
of electronics and other products, followed by third-party seller revenues, subscription
services and AWS (Amazon Web Services) activities. Due to Amazon’s global scope and
reach, it is also considered one of the most valuable brands worldwide.

Figure 4 - Retail E-commerce Ranking

Also striking is the fact that Amazon’s marketplace is exploding — the marketplace refers to
transactions that take place via third-party sellers, instead of a shopper buying one of
Amazon’s in-house brands.
Sales generated from the marketplace will be more than double Amazon’s direct sales in the
U.S. by the end of the year, e Marketer said. By 2019, marketplace sales are forecast by the
firm to be more than 70 percent of Amazon’s overall e-commerce business.

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 Figure 5 - Amazon Sales Share by Segment

In breaking down the product categories, eMarketer has predicted computers and
consumer electronics to be the top group of items sold on Amazon.com this year,
representing about 25.5 percent of sales — but that’s down slightly from 2017.
Growing more rapidly is the apparel and accessories category, which is expected to be a
little more than 15 percent of sales this year. The category will have grown a whopping 38
percent from the end of 2017, eMarketer said.

Research firm Gartner estimated in April that global IT spending will total $3.7 trillion this
year. Amazon Web Services (AWS), whose 2018 revenue consensus is at $25.6 billion, might
account for around 1% of that after factoring the revenue produced by ecosystem partners.

Figure 6 - Amazon Sales Share by Product Category

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Figure 7 - Amazon Revenue Mix

The Amazon sales rank (ASR) provides an indication of the popularity of a product sold on
any Amazon locale. It is a relative indicator of popularity that is updated hourly. Effectively,
it is a "best sellers list" for the millions of products stocked by Amazon. While the ASR has
no direct effect on the sales of a product, it is used by Amazon to determine which products
to include in its bestsellers lists. Products that appear in these lists enjoy additional
exposure on the Amazon website and this may lead to an increase in sales. In particular,
products that experience large jumps (up or down) in their sales ranks may be included
within Amazon's lists of "movers and shakers"; such a listing provides additional exposure
that might lead to an increase in sales. For competitive reasons, Amazon does not release
actual sales figures to the public. However, Amazon has now begun to release point of sale
data via the Nielsen BookScan service to verified authors. While the ASR has been the
source of much speculation by publishers, manufacturers, and marketers, Amazon itself
does not release the details of its sales rank calculation algorithm. Some companies have
analyzed Amazon sales data to generate sales estimates based on the ASR,

Though Amazon states:

Please keep in mind that our sales rank figures are simply meant to be a guide of
general interest for the customer and not definitive sales information for publishers—we
assume you have this information regularly from your distribution sources.
Now since we have looked into Amazon’s market size and share we can talk about
its competitors and how does Amazon face any competition.

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Starting with the Porter’s 5 Forces we can go through the following:-
The Ecommerce industry has flourished at an impressive rate during the last few years. The
reasons include growing economic activity around the world and the growth of technology.
Both these factors have an important influence on the growth of the e-retail industry.

Particularly, it is in the US and Asia Pacific where the rate of growth is expected to remain
the highest in the near future. Some of the major players in the industry include Amazon,
Ali-Baba, E-bay and Flipkart. Apart from it Walmart and Costco have also made their foray
into e-retail. Moreover, the growing use of mobile technology has also proved favourable
for the industry and led to an increase in revenue and profits.

With new local and global players entering the industry, the level of competition has also
grown. The major global players like Amazon and E-bay have made significant investments
in technology to provide their customers with a personalized shopping experience. This is a
Porter’s Five Force analysis of the Ecommerce industry. The Porter’s five forces model deals
with the factors that affect an industry’s attractiveness and competitiveness. These five
forces are there in every market and industry and determine its attractiveness.

Figure 8 - Porter's 5 Forces

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Bargaining power of suppliers:
In the Ecommerce industry, the bargaining power of the suppliers is generally low to
moderate. The reason is that the rules are set by the brand and the suppliers have to follow
the code of conduct set by them. Most of the ecommerce brands are highly cautious
regarding their supplier relationships and set a code of conduct related to quality, labor and
wages as well as sustainability. Despite the number of players in the industry having grown,
the suppliers do not have too many options and therefore are bound by the rules that the
brands have set. It is why the Ecommerce brands have the upper hand and the bargaining
power of the suppliers is low. Some of the suppliers may have some bargaining power
because of their size and quality.

Bargaining power of the buyers:

The bargaining power of the buyers is moderately high in the ecommerce industry. It is
because several small and big brands ha e cropped up and there is hardly any switching
cost for the customers. Today’s customer is well informed and has every piece of
information available at a single click. Apart from it some of the physical retail brands have
also entered the commerce market and the physical retail market itself adds to pressures.
Most of the brands are trying very hard to retain every customer and for this purpose they
make very large investments in technology and customer service. Due to all these factors
the bargaining power of the buyers is moderately high the factors that can moderate their
bargaining power include brand image, quality of products and service and prices.

Threat of substitute products:

There two main threats in terms of substitutes for the Ecommerce brands. The first are the
competing e-retail businesses and the second are the physical retailers. Brands try to earn a
competitive advantage through low prices, better quality of products or through a better
overall customer experience. For the customers there are no switching costs and they can
easily switch from one e-retailer to another or from ecommerce to physical retail.

Threat of new entrants:

The threat of new entrants is low to moderate in the ecommerce industry. This is because
there is a need for large investment in technology, human resources and marketing. The
barriers to entry are moderately high. One can enter with enough capital. However, the
difficulty is in terms of building brand image and trust with the customers. So, the overall
threat from the new entrants gets moderated.
Rivalry in the industry:
The level of rivalry in the industry is high because of the large number of players. The
number of local and global brands in the ecommerce market has grown and this has also led
to higher competition. Apart from Amazon, Ebay, and Alibaba, there are several other local
brands like Flipkart, Coles etc along with some of the retail brands like Walmart and Costco.
So, the overall rivalry between these brands gets to be very high.

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Chapter 3 : Industry Analysis –Metrics

Value Chain Analysis

In order to differentiate from other companies, Amazon acquired many IT & e-commerce
start-ups like pets.com, audible.com, Junglee.com, IMBD.com, Zappos.com, Woot etc.
which helped them in providing high value to their customers using existing technology of
the acquired partners at low cost. Amazon has also achieved economies of scale through
extensive product offerings which include electronics, toys and games, apparels, DIY and
many more.
These offerings help Amazon to keep its prices low thereon passing on the benefits to the
consumers. Amazon’s robust customer centric approach to analyse the customer buying
behaviour based upon preferences has helped them to have competitive edge over their
competitors. More than 50% of the consumers are the repeat buyers at Amazon.com.
Further more, Amazon is one of the longest players to be present in the online sector and
has a solid hold in European countries and US. This bottom line is helping the company to
expand in new markets.

Figure 9 - Value Chain Analysis

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 Amazon Inbound logistics
Generally, Amazon does not have long-term contracts or arrangements with its
vendors to guarantee the availability of merchandise, particular payment terms, or
the extension of credit limits. Fulfillment by Amazon (FBA) is the cornerstone of
Amazon inbound logistics for company-owned retail business. Sellers can also use
FBA by stowing their inventory in Amazon fulfillment centers.

In this case, Amazon assumes full responsibility for logistics, customer service, and
product returns. If a customer orders an FBA item and an Amazon owned-inventory
item, the company ships both items to the customer in one box, as a significant gain
of efficiency. The use of FBA is an optional choice for sellers and this choice makes
the products of third-party sellers eligible for Amazon Prime free two-day shipping,
free shipping and other benefits.

 Amazon Operations

Amazon operations are organized into three segments:

1. North America.
2. International.
3. Amazon Web Services (AWS).

 Amazon Outbound logistics

Traditionally, Amazon has relied upon the services of overnight delivery businesses
such as UPS, FedEx and TNT. However, the company recently revealed plans to lease
about 20 Boeing 767 Freighters in an attempt to start its own air delivery business. It
has been estimated that the lease of one Boeing 767 aircraft costs approximately
600,000 to 650,000 a month and the cost for leasing 20 such jets amounts to USD
156 million a year. This is in addition to Amazon’s an air cargo network and
thousands of 53 foot trailers.

The willingness of the company to commit to such massive financial investments can
be interpreted as an evident move of the company towards gaining independency
from the third parties in facilitating its logistics. The online retail giant has also
announced Amazon Prime Air (a drone delivery system) and Amazon Flex (gig-
economy based intra metro delivery service).

 Amazon Marketing and Sales

Amazon’s annual global marketing expenses have been consistently increasing

during the past seven years to exceed USD 10 billion in 2017. This includes
Advertising and other promotional costs that amounted to USD3.8 billion, USD5.0
billion, and USD6.3 billion in 2015, 2016, and 2017. In 2016, Amazon spent more on
marketing than Wal-Mart Stores, Target, Best Buy, Home Depot, and Kroger

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 combined. Therefore, it can be argued that marketing and sales is one of the major
sources of value in Amazon chain of operations, but this value is generated thanks to
excessive marketing investments.

Amazon marketing message conveys the promises of the largest selection of

products and services, attractive prices, fast delivery of products and overall superior
customer services. Several components of the marketing communication mix such as
print and media advertising, sales promotion, events and experiences, public
relations and direct marketing are used in an integrated way in order to
communicate the marketing message to the target customer segment.

 Amazon Service

Exceptional customer service is a major source of value creation for the e-commerce
and cloud computing company. Amazon annual report says “we seek to be Earth’s
most customer-centric company” and accordingly, the company offers exceptional
customer services. Amazon Marketplace and Prime has two types of customers –
sellers on and buyers from Amazon platform. For sellers in particular, Amazon offers
Selling Coach program “alerting sellers about opportunities to avoid going out-of-
stock, add selection that’s selling, and sharpen their prices to be more competitive”.

Moreover, “Amazon’s returns process is dealt with entirely online through a

customer’s account. If there is an issue that does require a customer to speak with a
customer service assistant over the phone, they will have access to the customer’s
account and order details, meaning that any issues can be dealt with quickly and
efficiently.”

Supply Chain Management

To start with, Amazon’s SCM has a strategic fit with its competitive strategy of being the
retailer of choice for its customers. The combination of multi-tier inventory management,
superlative transportation, and highly efficient use of IT (Information Technology), and its
wide network of warehouses are all geared towards aligning its SCM with its competitive
strategy.
The next aspect is related to its outsourcing of its inventory management. Amazon
outsources the storage and distribution of products that are not frequently purchased nor
ordered for immediate delivery as well as products where the costs of storing them exceed
the marginal returns on their sales.
On the other hand, Amazon stocks the frequently purchased and ordered items in its own
warehouses so that it can be responsive to the customer needs as well as not compromise
on the delivery times and the lead times. In other words, by segregating its inventory,
Amazon is able to be responsive to the customers as well as cut costs or cut slack where it is
needed.

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Let’s break down the individual pieces of the Amazon supply chain strategy including:
 Warehousing
 Delivery
 Technology
 Manufacturing


Warehousing
A big part of Amazon’s success lies in its expert warehousing strategy, which ensures
products are easily accessible from pretty much everywhere in the world. All the company’s
warehouses are strategically placed near big metros and population hubs, and inventory is
spread amongst them to ensure supply can meet demand. There are even mini-warehouses
in smaller areas to ensure orders can be sent and delivered fast, no matter what is being
purchased.

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Warehouses are also optimized internally. Each with five unique storage areas, the
organization strategy allows team members and pick-and-pack robots to pull products
almost instantly and move them toward delivery.

Delivery
One of the biggest differentiators between the Amazon supply chain strategy and other
online retailers’ is the plethora of delivery options offered.
Sure, those options include the free, two-day Prime deliveries and even the Prime Now
option, which gets products from point A to point B in two hours of less. But what’s the
bigger game-changer?
That’s the number of ways in which Amazon can make those deliveries happen.
Amazon employs a whole host of strategies – from more traditional to super high-tech – to
get its products out in lightning fast times and all over the world.
These wide-ranging strategies allow the company to get orders out faster, easier and more
efficiently to basically everywhere in the world – even remote and rural areas not served by
traditional options.

Technology
The Amazon supply chain management approach is to embrace technology. The company
utilizes countless automation and robotic solutions, both to pick and pack orders as well as
stacking and storing inventory.
These tools not only up the company’s efficiency and delivery speeds, but they also cut
down on warehouse and staffing costs – freeing up funds for other logistics or supply chain
needs.
Though the program’s not fully operational just yet, the drones will eventually allow for 30-
minute deliveries in some of the nation’s biggest markets.
All customers need is an Amazon-branded landing mat (and to live within 15 miles of the
nearest drone-enabled warehouse), and the instant air-side deliveries are within reach.

Manufacturing
Amazon still allows third-party sellers, but the company seems to have learned that many of
those third-party products can be made for much cheaper – and more profitably. The
retailer has taken to manufacturing its own lower-cost products, as well as white-labeling
products from other sellers.Amazon offers branded lines in everything from household
products to pets to babies, and the list of labels just keeps growing. This allows Amazon to
own the whole lifecycle of its products – from creation to marketing to storage to shipment.

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Figure 10 - Amazon's Supply Chain

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Capacity Utilization

Capacity Utilization of Amazon through Fulfilment Centres

 E-commerce giant Amazon India will end 2018 with more than 50 Fulfilment Centers
in 13 states across the country with a combined storage space of close to 20 million
cubic feet, a senior company executive said.
 Amazon's largest Fulfilment Centre in Karnataka was opened near Attibele on the
Karnataka-Tamil Nadu border, close to Bengaluru on September 18, with a view to
enhancing customer experience ahead of the festive season.
 The centre is one of the five announced for 2018, company Vice President (Customer
Fulfilment) Akhil Saxena told reporters. Saxena said the facility would hire 2,000
contractual positions over the next year.
 "There are several hundred people working outside the facility as delivery
associates," he said. Spread over around 350,000 square feet with close to
two million cubic feet of storage space, the centre would enable faster
delivery to customers in the region, he said.
 With this infrastructure, Amazon has increased its storage capacity by more than
one and half times since last year in Karnataka. The company now has close to 3.5
million cubic feet of storage space in the state.
 "The fulfilment centres are present in 13 states and Amazon has 15 'Prime Now'
nodes," he added. Saxena said there are four such centres in Karnataka and
more than 200 Amazon Logistics Stations, besides close to 25 logistics core
stations.
 Besides this, there are 350 Service Partner nodes in 320 cities across the country and
more than 60 in Karnataka alone. Saxena said there are close to 17,500 'I Have
Space' stores in 225 cities and close to 2,000 in Karnataka, which would enable
sellers to use the local infrastructure, save capital and help them grow.

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KEY PERFORMANCE INDICATORS OF AMAZON
What are KPIs?

A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively
a company is achieving key business objectives. Organizations use key performance
indicators at multiple levels to evaluate their success at reaching targets. High-level KPIs
may focus on the overall performance of the enterprise, while low-level KPIs may focus on
processes or employees in departments such as sales, marketing or a call center.

Functional Areas wise KPIs of AMAZON

What are key performance indicators for sales?

Sales key performance indicators are measures that tell you how your business is doing in
terms of conversions and revenue. You can look at sales KPIs related to a specific
channel, time period, team, employee, etc. to inform business decisions.

Examples of key performance indicators for sales include:

 Sales: Ecommerce retailers can monitor total sales by the hour, day, week,
month, quarter, or year.
 Average order size: Sometimes called average market basket, the average order size
tells you how much a customer typically spends on a single order.
 Gross profit: Calculate this KPI by subtracting the total cost of goods sold from total
sales.
 Average margin: Average margin, or average profit margin, is a percentage that
represents your profit margin over a period of time.
 Number of transactions: This is the total number of transactions. Use this KPI in
conjunction with average order size or total number of site visitors for deeper
insights.
 Conversion rate: The conversion rate, also a percentage, is the rate at which users
on your ecommerce site are converting (or buying). This is calculated by dividing
the total number of visitors (to a site, page, category, or selection of pages) by the
total number of conversions.
 Shopping cart abandonment rate: The shopping cart abandonment rate tells you
how many users are adding products to their shopping cart but not checking out.
The lower this number, the better. If your cart abandonment rate is high, there may
be too much friction in the checkout process.

What are key performance indicators for project management?

Key performance indicators for project management give your insight into how well your teams
are performing and completing specific tasks. Each project or initiative within your ecommerce
business has different goals, and must be managed with different processes and workflows.
Project management KPIs tell you how well each team is working to achieve their respective
goals and how well their processes are working to help them achieve those goals.

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Key performance indicators for project management include:

 Hours worked: The total hours worked tells you how much time a team put into a
project. Project managers should also assess the variance in estimated vs. actual hours
worked to better predict and resource future projects.
 Budget: The budget indicates how much money you have allocated for the specific
project. Project managers and ecommerce business owners will want to make sure that
the budget is realistic; if you’re repeatedly over budget, some adjustments to your
project planning need to be made.
 Return on investment (ROI): The ROI KPI for project management tells you how much
your efforts earned your business. The higher this number, the better. The ROI accounts
for all of your expenses and earnings related to a project.
 Cost variance: Just as it’s helpful to compare real vs. predicted timing and hours, you
should examine the total cost against the predicted cost. This will help you
understand where you need to reel it in and where you may want to invest more.
 Cost performance index (CPI): The CPI for project management, like ROI, tells you how
much your resource investment is worth. The CPI is calculated by dividing the earned
value by the actual costs. If you come in under one, there’s room for important.

The 4 critical KPIs for Amazon sellers

The best at-a-glance picture of the health of your Amazon business lives in these four
metrics:

 Sessions
 Conversion %
 Profit
 Average rating

With these four KPIs, we can measure the growth and performance of AMAZON in the
following ways:-

 How much traffic are you driving?

 How well is your listing turning that traffic into sales?
 How well are you doing with the results of those sales?
 How are your customers rating your product – an indication of future sales?

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 Chapter 4 : Insights

For most eCommerce retailers, moving just a tiny fraction of the amount of product Amazon
sells each year would be a dream come true.
Founded among the first big wave of online shops in the mid-1990s and initially selling only
books, Amazon has become a household name. It is first place people all over the world
think to shop online, and the site now sells over half a billion products. In July 2018, Amazon
became the second company in history worth more than $1 trillion and it collects nearly half
of all eCommerce dollars spent. Amazon has always been an inspiring business. It never
seems to stop expanding and finding new ways to drive more revenue.

1. Put your customers first

Everything Amazon does is customer-centered. They play the long game by relentlessly
focusing on the customer experience. It’s called a vicious cycle.

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Essentially, Amazon’s growth flows from the customer experience. Designing a great
experience creates word-of-mouth and positive press, which leads to more traffic, which in
turn leads to more word-of-mouth. Owning a high-traffic platform also attracts plenty of
quality sellers, which creates a wide selection of products. A big selection of products means
Amazon can take advantage of economies of scale, which drives down prices and further
bolsters the customer experience. And the cycle repeats.

2. Use data to inform your decisions

Amazon has had a culture of experimentation and innovation since the very beginning. They
test absolutely everything, from complex elements like pricing, checkout systems, and
fulfillment, to minor things like button colors, page layouts, and copy.
Amazon likes to deploy changes quickly and measure their results. They aren’t afraid of
failure. They know if they make a change that reduces their conversion rate, they can always
revert it back. A little lost revenue is part of the cost of learning.
The lesson here is clear: avoid making decisions based on your gut or feelings. Don’t make a
radical change to follow a competitor or because one customer complained. Look to your
data to make smart decisions. If you don’t have the right data to make a decision, ask
yourself how you can get it.

3. Provide a personalized experience

Each time you visit Amazon, you see unique pages designed just for you. They fill the site
with products and content based on your needs and preferences.
How does Amazon know what you like? By logging and examining the products you have
purchased and viewed, and comparing your views and purchases to other similar users.
This process not only helps you find products you’re looking for, but it also makes smart
recommendations that entice people to make additional purchases.

4. Let customers help each other

Amazon understands this well. They make reviews a big part of their product pages.
They give shoppers the ability to sort reviews by rating. You can even search the reviews
using keywords if you’re trying to find a specific piece of information.

Furthermore, Amazon takes the customer-to-customer experience one step further

by giving shoppers a place to ask and answer each other’s questions. You can get
specific feedback about purchases before you decide to buy.

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5. Invest in innovation
Amazon wasn’t the first eCommerce store, but almost everything it’s done since its
conception has been innovative. They don’t follow the industry. They lead it.
Amazon is constantly looking for ways to further monetize their customer base. They want
Amazon customers coming directly to them whenever they need to buy something online.
One doesn’t have to own a massive company with expensive engineers and seemingly
unlimited cash in order to innovate. You just have to think like your customer and build
services and an experience that fit their needs.

So these come out to be some of the insights which I could take out while preparing this
report. Ecommerce industry being a vast industry and a growing industry has a lot of
parameters to judge on and take out insights, hence while preparing this project I got to
learn a lot of things about the market and how the ecommerce industry works.
Not only I was able to know about the industry as a whole but I also got to know detailed
information about Amazon, what the company is all about, how it works and so on.

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