E-commerceG1-Case3 Amazon


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E-commerceG1-Case3 Amazon

  1. 1. “Amazon.com named after the BIGGEST river in the world”
  2. 2. We see our customers as invited guests to a party, and we are the hosts. It's our job every day to make every important aspect of the customer experience a little bit better. Jeff Bezos N INNOVATIO N INNOVATIO
  3. 3. AMAZON History History • Founded : 1994 Seattle Washington, U.S. Founder : Jeff Bezos • “Anything they might want to buy on internet”. • Web's most successful pure online retailer. • “Internet was evolutionary , only the big early on company would survive” Jeff Bezos. • Started with selling books, CDs and DVDs.
  4. 4. History • Pass through explosive early growth, huge loss, then on to profitability • First profitable quarter in fall 2002, first profitable year in 2003. • Face a big fluctuation from 1999-2008. • Stock price swing from $6 - $105 per share. • Sites in US, Japan Germany, UK, French and Canada. History • In 2002, Diversified to other products. • Objective “Offer the Earth’s biggest selection and the be Earth’s most customer-centric company where customer can find and discovery anything they may want to buy.”
  5. 5. History • Path to Success Feature Rich content Lowest Price. User's review content Best Selection. Fast , Reliable Convenience. Ease of use • Millions of Unique new ,used and collectible items • 11 Major Categories of Goods “To be Shopping Portal” • Provide online shop who rents Space from Amazon • Bring user to other places on Web , if things are not found on Amazon. • Competition • Market Place : Ebay • Portal : Yahoo ,MSN and Google.
  6. 6. AMAZON VISION STATEMENT Vision To be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online
  7. 7. AMAZON BUSINESS MODEL 1994 - 2000 • From Brick-and-Mortar to E-tailer • 1 Click Shopping • From 1 department to 10 departments • Acquire many other business company – IMDB – Alexa – A9
  8. 8. 2003 2003 A9.com > Product Search • Customer-Focused • Search Inside The Book Clickriver Ads > Advertising Network • Interface like Google Adwords • Matching Services to Content 2006 2006 March introduces Amazon Web Services • Simple Storage Service (S3) • Elastic Compute Cloud (EC2) • Simple Queue Service (SQS) • SimpleDB • Flexible Payments Services (FPS) • Amazon Mechanical Turk
  9. 9. Model I : RETAILER
  10. 10. Model I : Retailer Offer customer 3 things • Lowest price • Best selection • Convenience Model I : Retailer Offer new, used, collectible item of 11 category : • Books • Movies, Music & Game • Digital Downloads • Computers and Office • Electronic
  11. 11. Model I : Retailer Offer new, used, collectible item of 11 category : • Home and Garden • Grocery, Health and Beauty • Toys • Kids and Baby • Sport and Outdoors • Tools, Auto and Industrial Model I : Retailer • Cookies • Recommend
  12. 12. Model I : Retailer • Search Engine • Information Model I : Retailer • Customer Review • Ranking
  13. 13. Model I : Retailer • Free Shipping over $25 (for some item) • Amazon Prime : paid $79 Annual Fee to get 2-Day shipping free. • Traceable Order Model II : MARKET CREATOR
  14. 14. Model II : Market Creator Merchant service Enable 3rd parties to integrate their products into Amazon’s web site and use Amazon’s customer technologies (started on 2002) • Amazon Market place (individual and small business) • Merchants@ program (large and branded business)
  15. 15. Model II : Market Creator • Amazon Market place – Only product in Amazon’s category Model II : Market Creator Amazon Market place - Merchant must register - Merchant’s product will show on Amazon’s site - Amazon Collect Money (include Shipping cost) - Merchant ship product to customer (Amazon will support transaction cost) - Amazon take $0.99 + referral fee 6%-15%
  16. 16. Model II : Market Creator • Merchants@ program Model II : Market Creator • Merchants@ program – Paid $39.99 per month + Referral Fee – Merchant Upload their Inventory
  17. 17. Model III : SERVICE PROVIDER Model III : Service Provider • Fulfillment By Amazon (FBA) • Payment Solution
  18. 18. Fulfillment by Amazon (FBA) • Store your products in Amazon's fulfillment centers, and we directly pack, ship, and provide customer service for these products Fulfillment by Amazon (FBA) • There are no additional set-up charges or subscription fees • Fulfillment fees vary depending on the type of item (Media or non-media), its dimensions and weight, and the shipping method used
  19. 19. Payment Solution • Checkout by Amazon • Amazon Simple Pay • Amazon Flexible Payments Service (FPS) Checkout by Amazon™ • Use shipping addresses and payment methods stored in their Amazon.com accounts • Pricing : Fees are assessed on a per- transaction basis. There are no start-up charges, monthly charges, hidden fees, or long-term contracts
  20. 20. Checkout by Amazon™ • Use Amazon's 1-Click® and other tools for sales and post-sales activities • Express Lane Checkout Experience • 1-Click® Checkout Experience • Amazon PayPhrase Experience • Standard Checkout Experience 1-Click® Checkout Experience
  21. 21. Amazon Simple Pay • Use shipping addresses and payment methods stored in their Amazon.com accounts • Pricing : Fees are assessed on a per- transaction basis. There are no start-up charges, monthly charges, hidden fees, or long-term contracts • Payment occurred at Amazon Website Amazon Simple Pay • Amazon Simple Pay Standard • Amazon Simple Pay Subscriptions • Amazon Simple Pay Donations • Amazon Simple Pay Marketplace
  22. 22. Amazon Simple Pay Standard Amazon Flexible Payments Service (FPS) • Offers developers unmatched flexibility in how they can structure payment instructions. These instructions impose conditions and constraints on money movements and can be set by both senders and receivers of funds
  23. 23. Amazon Flexible Payments Service (FPS) • Accept one time payments on your website • Execute periodic or delayed payment features required by subscription • Facilitate transactions between a buyer and a third party seller Model IV : ADVERTISEMENT
  24. 24. Model IV : Advertisement • Product Ads on Amazon • Advertise with Amazon • Advertising for Service Providers Product Ads on Amazon • Product Ads is an advertising program that puts your products in front of millions of Amazon.com customers.As a seller, you simply upload your product catalog and set your cost-per-click bids and daily budget.
  25. 25. Advertise with Amazon • Advertise your products through online product ads, online display advertising or offline package inserts. • List your services next to related products Advertising for Service Providers • Clickriver Ads offers the unique opportunity to promote your services
  26. 26. Model V : WEB SERVICE Model V : Web Service • To utilized the $s billon Amazon’s technology – Simple Storage Service (S3) – Elastic Computer Cloud (EC2) – Simple Queue Service (SQS) – SimpleDB
  27. 27. Model V : Web Service Model V : Web Service • WebStore – Create Web using Amazon’s Framework
  28. 28. Model VI : AFFILIATE Model VI : Affiliate • Amazon Mechanical Turk – Provide a marketplace for work that requires human intelligence – offers access to a virtual community of workers that are available to help you accomplish your business goals. A robust set of APIs and command line tools enable you to programmatically distribute tasks that require human intelligence to a widely distributed, on-demand workforce
  29. 29. AMAZON BUSINESS PERFORMANCE Business Performance • revenue primary from selling products – 65% from media sales like books, CDs, DVDs and music from streaming service. – In 2007, 62% of its revenue ($9.2 billion) is from the sales of media, only 37% from electronics and other general merchandise. – Still not yet achieved the product diversification of offline mass-market merchants such as Wal-mart, Costco or Sears. • International Organization – In 2007, $6.7 billion from Amazon is 45% of $14.835 Billon of gross revenue offshore, which grew up by 39% in sales.
  30. 30. AMAZON BUSINESS STRATEGY Business Strategy • Maximize growth in sales volume – free shipping for Amazon’s retail (increase order size by 25%) – shorter order fulfillment times – Accelerated shipping – greater product selection – Amazon Market place and Merchants@ program. – Amazon’s syndicated stores program
  31. 31. Business Strategy • cutting prices to the bare bone – optimized the location of storing goods, size of shipment – consolidate order into larger batches – use “Postal injection” (trucked package to U.S Postal system center) AMAZON COMPETITION
  32. 32. Competitors • E-tailer Dimension • Web Portal Dimension E-tailer Dimension • Direct - Online – Clicks: eBay.com, buy.com – Bricks-and-clicks: Wal-Mart, Target • Indirect - Offline – Retailers (Physical stores)
  33. 33. Web Portal Dimension • Yahoo • MSN • Google • etc. AMAZON SOCIAL AND LEGAL CHALLENGE
  34. 34. Lawsuit – Toys “R” us • Toy “R” us sued Amazon over what it claimed was its exclusive right to sell toys on Amazon • Toy “R” us claimed 4000 items is slipped through the cracks. • Toy “R” us won suit against Amazon Variable Pricing • Charges different prices for the same products depending on who visits, and that's hacking off some loyal customers • This leads to creating unequal !! 10? 20? 15? 17?
  35. 35. AMAZON FINANCIAL ANALYSIS Income Statement
  36. 36. Income Statement • Year over year, Amazon.com Inc. has been able to grow their bottom line from $476.0M to $645.0M primarily through revenue growth ($14.8B to $19.2B). • Offer best services such as FREE Super Saver Shipping, Fast delivery • Offer the Earth’s Biggest Selection and to be Earth’s most customer-centric company where customers can find and discover anything they may want to buy • Heavily on affiliates and third party merchants to drive sales (no increase in marketing, administrative cost) • For while the costs associated with cost of goods, Selling General & Admin Expense and income tax all increased as a percentage of sales but eliminating marketing in offline magazines and TV. • Interest expense also decreased as a result of decreasing in Long Term Debt • The growth in top line revenues contributed enough to still see net income improve Income Statement - Quarterly Drop in Q2 2009 came from payment to Toys "R" Us $51 million to settle a lawsuit filed by the toy retailer in May 2004.
  37. 37. Income Statement Balance Sheet
  38. 38. Balance Sheet • This company's debt to total capital ratio, at 19.90%, is in- line with the Internet and Catalog Retail industry's norm • Operating Profits are more than adequate to service the debt. • Amazon stretched out its bill-payment resulted in accounts-payable days have risen from 49.25 days in 2003 to 59 in 2008 before jumping to an average of 64.6 so far in 2009. • Free cash flow has grown to $1.36 billion in 2008 from $346 million in 2003. The stock has been erratic over this recent 10 years; however, it seems to be a upward trend
  39. 39. AMAZON FUTURE PROSPECTS Business Model Innovation “The key to sustained success is business model innovation”
  40. 40. Amazon Giver Amazon Grapevine
  41. 41. Amazon Giver & Grapevine - Benefits •See the Amazon wish list of your friends via Facebook •See the Amazon activities of your friends via Facebook, e.g. Product review, rating, etc. •Currently, It’s no longer Facebook and AWS
  42. 42. Sanptell Snaptell - "Accumulated Signed Gradient" (ASG). Snaptell - Benefits • New way of Product Search • Easy to find product you see
  43. 43. Kindle • E-book reader Kindle - Benefits • Pricing Advantage (Lower Price) • Immediate Delivery Book • Handy
  44. 44. Amazon Affiliate Program Amazon Affiliate Program - Benefits • Earn commission up to 15% • Expand channels around the world • Similar to Google Adsense
  45. 45. Affiliate Program “The answer, we believe, is that Jeff Bezos understands that the key to sustained success is business model innovation” Josh Suskewicz, INNOSIGHT