Amazon Case Study  Amazon.com was born in The name reflected the vision of Jeff Bezos, to produce a large scale phenomenon like the Amazon river. This ambition has proved justified since just 8 years later, Amazon passed the $5 billion sales mark – it took Wal-Mart 20 years to achieve this.  By 2008 Amazon was a global brand with other 76 million active customers accounts and order fulfillment to more than 200 countries. Despite this volume of sales, at December 31, 2007 Amazon employed approximately 17,000 full-time and part- time employees.

Amazon Vision & strategy Bezos characterizes his vision of "customer-centrism" by having three goals.  The first goal is to be, "Earth's most customer-centric company“.  The second is "innovating on behalf of customers“.  The third is "the idea to personalize... the store for each and every individual customer“. Amazon.com is perhaps the company that is most closely tied with the E- commerce phenomenon. It has grown at such a tremendous rate rising from $150 million in revenue in 1997 to $3.1 billion in 2001 and $10.7 billion in In the fourth quarter of 2001 the company made its first quarterly profit of $5.8 million. Though small relative to the size of the company, it was certainly important symbolically. Amazon has since remained profitable, though it's cumulative profits still remain negative due to the fact that the profits don't add up to the initial debts.

Bezos napkin diagram

Competitive Edge Amazon—Relentless Focus on Customers: How Amazon Uses the Internet to Save Its Customers Time and Increase Convenience: Many of the most important criteria for shopping for goods and services online were pioneered by Amazon, including fast and secure credit card processing, informative merchandise evaluation using pictures, descriptions, and reviews and even virtual community chat rooms for customers. A more specific example includes Amazon’s pioneering of the “1-click” ordering system, which made it possible for returning customers to place new orders without having to tediously re- enter basic and payment information.

From Clicks to Bricks—Amazon Changes its Policy to Increase Customer Satisfaction In order to deal with the distribution delays posed by using distributors for fulfillment operations, Amazon reversed its policy of minimizing infrastructure and began building distribution centers across the United States. Amazon now believed that in order to provide its customers with the best possible experience it had to control its own fulfillment operations. By 1999 Amazon had built over 4 million square feet of warehouse space at a cost of $300 million. In 1999, the first year Amazon fulfilled the majority of its orders from its own warehouses, 99 percent of holiday orders arrived on time.

Amazon Experiments with Dynamic Pricing Amazon attempted to maximize profits using a dynamic price model which prices are changes based on demand and supply. Web- based sellers such as Amazon could perform real-time price tests to measure immediate customer responses and adjust prices accordingly. Amazon experimented with dynamic pricing over Labor Day weekend of 2000.

Amazon Uses Web-based Model to Personalize Service Amazon attempted to use personalization to “build the right store for every customer.” Each customer had a Web page personalized based on his or her recent purchases. This is the equivalent of having a unique storefront for each customer in hopes of drawing in as many return customers as possible.

Pricing and Branding :Bezos believed that online customers valued selection, convenience and good service above price. Amazon spent over 19% of sales on marketing in In that same year the Amazon name was more recognizable than Burger King, Wrigley’s, or Barbie, and of course more recognizable than Barnes and Noble. Interbrand, an international brand consultancy based in London, ranks global firms by the value of their brand; Amazon was number 48 worldwide in the 2000 list, just above Motorola and Colgate and well above number 72 Starbucks.

Amazon marketing Amazon does not reveal much about its marketing approach in its annual reports, but there seems to be a focus on online marketing channels. Amazon (2011) states “we direct customers to our websites primarily through a number of targeted online marketing channels, such as our Associates program, sponsored search, portal advertising, marketing campaigns, and other initiatives”.

Amazon Media sales unlike some retailers, Amazon displays relevant Google text ads and banner ads from brands. This seems in conflict with the strategy of focus on experience since it leads to a more cluttered store. However in 2011 Amazon revealed that worldwide media sales accounted for approximately 17% of revenue!

Amazon Partnership strategy 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%.

Amazon Marketing communications Increase customer traffic to our websites Create awareness of our products and services Promote repeat purchases Develop incremental product and service revenue opportunities 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.

In mid-06, a big change occurred. Before that point, Amazon was growing 2-4% slower y/y than e-commerce and then from mid-06 forward, their growth materially accelerated to 20% faster than e-commerce and has kept up that pace for the last two years. This is a really important point to look at, to understand what Amazon did and why it's working.

Conclusion Amazon's relentless focus on value and selection along with their innovations around shipping and handling cost reductions, ease of use and merchandising built on the foundation of trust from the a-to-z guarantee have given them the most enviable position in e-commerce.