Amazon.com retailing
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Amazon.com retailing Document Transcript

  • 1. AMAZON.COM INC IN RETAILING(USA)Euromonitor InternationalApril 2012
  • 2. AMAZON.COM INC IN RETAILING (USA) Passport ILIST OF CONTENTS AND TABLESStrategic Direction ........................................................................................................................ 1Key Facts ..................................................................................................................................... 1 Summary 1 Amazon.com Inc: Key Facts ......................................................................... 1 Summary 2 Amazon.com Inc: Operational Indicators ...................................................... 1Company Background .................................................................................................................. 2Private Label ................................................................................................................................ 2 Summary 3 Amazon.com Inc: Private Label Portfolio...................................................... 3Competitive Positioning ................................................................................................................ 3 Summary 4 Amazon.com Inc: Competitive Position 2011 ............................................... 4© Euromonitor International
  • 3. AMAZON.COM INC IN RETAILING (USA) Passport 1AMAZON.COM INCSTRATEGIC DIRECTION Amazon.com Inc continued to be the leading internet retailer in 2011, by providing consumers with a wealth of items in a wide range of product categories through its feature-rich content, consumer-friendly website and free shipping programmes. The company continues to expand it product portfolio, and in 2011 introduced the next generation of Kindle products, including the best-selling Kindle Fire, and heavily promoted its related ecosystem of digital content and accessories. The company also began testing Amazon lockers at select physical locations for customers to pick up online orders instead of home delivery and may begin to test operating its own retail stores in 2012. The expansion of sales tax collection for internet retailers is removing one significant barrier to Amazon operating physical stores, and with dedicated boutiques, Amazon can showroom its own products and provide a high level of customer service as its competitors do.KEY FACTSSummary 1 Amazon.com Inc: Key FactsFull name of company: Amazon.com IncAddress: 410 Terry Avenue North, Seattle, WA 98109- 5210, USATel: +1 206 266 1000Fax: +1 206 266 1821www: www.amazon.comChannels of operation: Internet retailingRetailing brands: AmazonSource: Euromonitor International from company reports, trade pressSummary 2 Amazon.com Inc: Operational Indicators 2010 2011Year end December DecemberNet sales US$15,848.4 million US$21,897.9 millionOperating profit n/a n/aOutlets n/a n/aSelling space („000 sq m) n/a n/aSales of grocery (%) n/a n/aSource: Euromonitor International from company reports, trade press© Euromonitor International
  • 4. AMAZON.COM INC IN RETAILING (USA) Passport 2COMPANY BACKGROUND Amazon.com, a publicly-held company, is the largest internet retailer in the US and in the world. The company, which began as an online bookseller in 1994, has since diversified considerably, now offering over 40 product categories, including books, music, toys and games, consumer electronics, housewares, health and beauty products, apparel and accessories, and food. Key features of the Amazon website include editorial and customer reviews, manufacturer product information, wish lists, 1-click shopping, extensive search capabilities and the ability to tailor web pages to individual preferences. Purchase orders are fulfilled promptly and customer support, which includes package tracking information, is readily available. Amazon Prime, its membership service, has become increasingly popular. It provides unlimited 2-day shipping as well as video streaming and e-book borrowing for an annual fee of US$79. The company continues to experience considerable success and growth through its eight international operations in Canada, China, France, Germany, Italy, Japan, Spain, and the UK. Sales from outside the US represent approximately half of the company‟s total net sales. In 2011, Amazon and the state of California came to an agreement that Amazon would start collecting sales tax in the state starting in the autumn of 2012 after a prolonged battle. Negotiations with many other states to begin enforcing state sales tax collection within the next few years are ongoing. In other states, the battle continues, with Amazon threatening to cut off ties with affiliates and governments being equally firm in their positions. The Marketplace Fairness Act, introduced in Congress in 2011, has a strong chance of finally enacting a national sales tax applicable to all retailers, including all online retailers. In November 2007, Amazon introduced its own electronic book reader, called Kindle. This wireless device allows a customer to purchase books and have them delivered electronically. In 2011, Amazon reported that sales of e-books surpassed sales of physical books for the first time as the trend towards digital media solidifies. Amazon purchased internet retailer Quidsi Inc, which operated the popular sites Diapers.com, Soap.com, and Beautybar.com, in 2011. In addition to mastering the business of selling low- margin, hard-to-ship products, the culture and dedication to customer service at Quidsi appeared to offer an exceptional fit with Amazon. It has since expanded from baby products, everyday essentials, and luxury beauty products into pet products and toys with the launch of Wag.com and Yoyo.com, and all its sites conveniently share a common shopping cart.PRIVATE LABEL The Kindle line of devices is Amazon‟s first and primary foray into private label products, as it is still principally a retailer of branded products. The first Kindle was introduced in November 2007 and sold out in only a few hours. According to CEO Jeff Bezos, the Kindle was a 3-year development project and is a key part of the company‟s growth strategy. It originally retailed for US$359 and only worked in the US due to wireless network limitations. While there were other e-book reader options offered by other companies, such as Sony, the Kindle was unique in that it functioned wirelessly and also could offer magazines and newspapers in digital form. Additionally, thanks to its native Amazon connection, the Kindle provided the largest selection of books by a wide margin over its competitors and twice the memory space. In February 2009, Amazon.com launched the Kindle 2, with a text-to-speech function, to read the text aloud, and 2GB of internal memory. The Kindle 2 was slimmer than the original Kindle. In October 2009, Amazon stopped selling the original Kindle 2 in favour of an international version it had introduced earlier in the month. The Kindle 2‟s original price was US$389. Due to criticism, the company reduced the price in July 2009 to US$299. In October© Euromonitor International
  • 5. AMAZON.COM INC IN RETAILING (USA) Passport 3 2009, Amazon further reduced the price of the Kindle 2 to US$259. The international version was made available for use in 100 countries. In November 2009, the company launched the Kindle DX, an even further enhanced version with a larger screen and the ability to support PDF files. It is positioned to be better suited to view newspaper content and textbooks. The retail selling price of the Kindle DX was US$489. In September 2009, the company launched AmazonBasics, a line of private label consumer electronics products. The collection includes basic items such as audio video cables and blank DVD media, with additional accessories and other items to be added at a later date. In July 2010, a third generation Kindle with 3G support was announced. Kindle 3 is available in two versions. One is the Kindle Wi-Fi, which was initially priced at US$139 and connects to the internet exclusively via public or private Wi-Fi networks. The other version, considered a replacement for the Kindle 2, is priced at US$189 and includes both 3G and Wi-Fi connectivity. It is also smaller than the previous Kindle. Amazon.com has quickly expanded its private label offerings beyond consumer electronics, including outdoor furniture and housewares under the Strathwood and Pinzon brands. In June 2010, the company launched a line of private label kitchen utensils designed by chef Tom Douglas. November 2011 saw the release of the fourth generation of Kindle products, with the Kindle, Kindle Touch, Kindle Touch 3G, and Kindle Fire tablet. Priced aggressively at US$199, the Fire undercut the competition by a wide margin, threatening to disrupt the entire category, while the Kindle Touch eliminated the keyboard to run as a touchscreen device. Kindle devices continue to drive growth for Amazon and dominate the e-reader landscape.Summary 3 Amazon.com Inc: Private Label PortfolioPrivate label brand Category(ies) NotesKindle Consumer electronics Portable e-book readerAmazonBasics Consumer electronicsSource: Euromonitor International from company reports, company research, trade press, trade sourcesCOMPETITIVE POSITIONING Amazon is the leading internet retailer in the US, with a 17% share of value sales in 2011.The company continues to expand its product mix, and operates several service businesses.Also worthy of note is its growing international operations, which currently contribute as muchcombined as do its US operations. Other internet retailers continue to use Amazon as abenchmark for evaluation of consumer experience, satisfaction and product selection. Amazon will continue to face strong competition, not only from other internet retailers, but alsofrom store-based retailers, publishers, and manufacturers. Other retailers are increasinglyhoning in on improved websites and lower prices to compete with Amazon, the so-called Wal-Mart of internet retailing. However, Amazon‟s continued expansion, innovation, and strongbranding will keep the company well positioned over the forecast period. Stiff competition also exists in the e-reader arena. Barnes & Noble launched its Nook devicein October 2009 while now-defunct Borders introduced the Kobo in May 2010. The Nook andKindle continue to be locked in a price war, with each retailer seeking to undercut the other toattract price-sensitive consumers on the margin. One advantage Barnes & Noble enjoys is theability to highlight the Nook and related products in its physical locations while Amazon mustrely on its website and third party retailers such as Target or Best Buy to display the Kindle.© Euromonitor International
  • 6. AMAZON.COM INC IN RETAILING (USA) Passport 4However, if Amazon opens its own boutiques, it can combat this advantage. Furthermore,Amazon has recently entered the fast-moving space of tablet devices with the introduction of theKindle Fire. Barnes & Noble soon followed suit with the Nook Tablet, which retails for more atUS$249. At less than half the price of most other tablets, the Fire is an attractive new entrant,though it remains to be seen how consumers respond to its supposed lesser functionalitycompared with other tablets. Amazon continues to expand by adding new product categories and acquiring othercompanies. It purchased “deal of the day” site Woot.com and Quidsi in 2010. In May 2011, itlaunched membership-only flash sale site MyHabit.com to compete with other private sales sitessuch as Gilt, HauteLook, and eBay‟s fashion outlet. Also in 2011, Amazon added streamingfeatures and free e-book rentals to its Prime membership service, giving consumers even morereason to join and spend more at the site. One of Amazon‟s strongest competitive advantages is its quick and accurate order fulfilment.In addition to free shipping for orders that meet a minimum value of US$25, Amazon Primemembers enjoy unlimited 2-day shipping. While absorbing shipping costs negatively impactsAmazon‟s operating margins, the offer is usually so attractive to consumers that it makes it up inconsumers spending more than they otherwise would. In 2011, Amazon expanded the numberof its distribution centres, allowing it to ship products even faster to consumers.Summary 4 Amazon.com Inc: Competitive Position 2011Channel Retail value share RankRetailing 0.8% 17Internet retailing 16.9% 1Source: Euromonitor International from company reports, trade press, trade interviews© Euromonitor International