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Amazon ecommerce
The document discusses the evolution of e-commerce in India through various waves. It began in the late 1990s with job/matrimonial sites (first wave) before expanding to duplicate global models like travel, retail, deals in the 2000s (second wave). Key sectors now include apparel, electronics, while challenges relate to logistics, cash on delivery, and warehousing. The document also analyzes Amazon's business model evolution from books to AWS and Kindle, as well as their service concept, pricing, distribution network and marketing strategy focused on customer experience.
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Amazon ecommerce
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- 2. E-commerce: Market evolution Firstwave: advent of online Naukri.com and Shaadi.com • Introduction of internet in India in 1995 • Economic liberalization after the launch of reforms in 1991 attracted MNCs and brought about the growth of the IT industry. • The implementation of liberalization policies led to the demise of the license regime, and high taxes and import restrictions, as well as facilitated the growth of SMEs. • The IT industry and SMEs were the early adopters of internet.This led to the emergence of B2B, job searches and matrimonial portals. • B2B directory : 1996 • Online matrimonial : 1996 • Online recruitment : 1997
- 3. Second wave: duplicationof global business models and improvement in ecosystem • Online travel: The entry of Low Cost Carriers (LCCs) in the Indian aviation sector in 2005.Travel emerged as the largest segment.They developed their own websites and partnered with OTAs to distribute their tickets online and, thus, contain costs.The Indian Railways had already implemented the e-ticket booking initiative by the time LCCs commenced their online ticket booking schemes. • Online retail: The growth of online retail was partly driven by changing urban consumer lifestyle and the need for convenience of shopping at home.This segment developed in the second wave in 2007 with the launch of multiple online retail websites. • Group buying: Starting in 2010, the group buying and daily deals models became a sought after space for entrepreneurs in India, emulating the global trend. • Social networking actively used by organizations to reach out to customers: In the second wave, social networking gained steam in the Indian online space. It has gone on to become an integral part of people’s lives. Initially used for staying connected with friends, social networking websites have now emerged as an anchor in any company’s digital strategy.Termed as social commerce, it is a key avenue for e-Commerce players to reach out to target customers. Companies have started establishing their presence in the social media space for branding activities, connecting with customers for feedback and advertising new product launches.
- 4. Headlines – EcommerceIndustry Current Value of Rs 170 billion Rise of 20% over 2013 Apparel and footwear gaining popularity Most important internet retailing channel in 2013 Dell India is the leading player 8% value share in 2013 Changing phases of the consumer –They are online now Apparel & Footwear Internet retailing Forecasted to increase at a CAGR of 12% *Euromonitor
- 5. MajorTrends The Showrooming Consumer Availability and variety Payment Options Convenience and Comparison Drivers of Online purchase India’sOnline market population 2014 164 million 2015 2016 280 million 2017 • Currently 3rd largest and set to outpace USA by 2018 • Growth in internet usage driven by faster internet technology, higher awareness and increasing sales of broadband and smartphones • Mobile users form a lions share of internet users but contribute only 9% to internet sales 202 million 244 million *KPMG *McKinsey Traditional brick and mortar consumer The online consumer Apparel Computer Software Comparison Shopping Consumer Electronics Computer Hardware 21% 16% 15% 13% 11% Percentage reach of various online retail categories FragrancesJewellery/luxury goods Food Travel & Tickets 90% 26% 25% 18% Percentage growth of some high growth categories Dominant and key emerging categories • Private label products widely available in leading department stores and footwear and apparel specialist retailer chains like lifestyle, shoppers stop, pantaloons Etc. were the most negatively affected • Cash-on-delivery remained the most popular mode of payment in online shopping • Try and buy concept gaining popularity *KPMG *Euromonitor
- 6. Competitive Landscape Leader inonline retailing Internet remains its primary retail channel More options while shopping online than in-store Witnessed the strongest growth of 400% with its value sales increasing to Rs. 2.6 billion Primarily because of the variety and discounts it offers E-marketplace and consumer-to- consumer transactions are increasing Mainly popular among the age group of 18-30 Aggressive marketing campaigns on Internet retailing by category: %Value growth 2008-2013 B r a n d S h a r e s • Pure players continue to outperform multi- channel rivals • Both pure players and bricks-and- clicks retailers are focusing on reducing delivery times and increasing variety of products • Price positioning and branding are increasingly gaining importance • Increasing number of acquisitions in internet retailing
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- 8. Key decision Points MarketBased model Warehouse Based Model
- 9. Challenges • Logistics • Severalplayers have begun building their in-house capability to manage customers’ deliveries. • The number of express courier companies in India has grown significantly over the last decade, with more than 4,500 companies covering a large number of pin code areas across the country. • The cost of logistics in India is, however, among the world’s highest due to the substandard quality of physical infrastructure. • inadequate airline fleet size of express courier companies • Logistics companies in India lag behind in terms of their technology infrastructure and limited investments in technology • GPS systems for fleet, bar codes/RFID tags on packages and hand- held devices for their field force • Cash-on-delivery • Extra charges levied by logistics providers to collect cash from customers • Delays in remittance of cash collected by logistics providers • Poor returns management and associated costs • Warehouses location • Tax reduction guides decisions on the location of warehouses due to the non uniform tax structure and multiple tax rates across states • Complex tax structure for the retail sector in India • Implementation of GST expected to eliminate most tax issues Lack of touch-and-feel a mental barrier for online shopping Increased competition with the entry of global players Low margins prompting e-Commerce players to look at new business models
- 10. BUSINESS MODEL EVOLUTION 1995• Online book retailing 1999 • Auctions and zshops 2000 • Marketplace 2001 • Partnership & logistic services 2002 • Ecommerce platform / web services 2007 • Ebooks/kindle 2009 • Amazon Publishing 2013 • Amazon AutoRip
- 11. Business model Innovation •Found a new channel to the customer • 1 click check out Eliminate • Next generation platform & infrastrucutre Raise • Amazon web services Create • Short term Profitabililty Reduce
- 12. Analysis of businessmodel Online retail • Earth’s biggest selection • Lowest cost , small profit • Serves as a channel for other retailers • Long tail retailer • Seller market place Internet services • Deeply intertwined • Amazon Prime - free two-day shipping on retail purchases, on- demand video streaming, free access to the Kindle library • AmazonWeb Services (AWS) Kindle eco system • Manufacture & Distribute • Originally an electronic book reader , now a fully functional tablet. • Library of e books , online games and videos.
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- 16. Amazon service conceptmodel Auctions Amazon marketplace AmazonFresh Amazon MP3 Amazon appStore AutoRip Amazon Web Services Amazon Simple storage service Facilitating elements Books Consumer Electronics Apparels Baby products Beauty products Gourmet food Groceries Health and Personal care items Industrial and Scientific supplies Kitchen items Jewellery and watches Sporting goods Core offering Guaranteed single day delivery Cash on Delivery option Buyer friendly returns policy Delivery through drone Predictive analytics in shipping Delivery processes
- 17. Pricing Amazon does makemillions of price changes daily Some categories are more price dynamic than others Price dynamism varies by season
- 19. Service process flow Customersearches for the product on Amazon Customer selects product from catalog and places in his/her Cart Customer is prompted to log in or create an account with Amazon Delivery details are obtained and estimated time-to- delivery provided Mode of payment is selected • customer is redirected to the payment gateway if necessary Order is confirmed • Customer is provided an order and tracking number Order details are passed to the seller to initiate order processing
- 20. • Throughput: • Wholeprocess from product selection to payment can be completed within 5 clicks • Global average for permissible page load time: 3 seconds • Capacity: • Amazon has one of the largest server clusters in the world: Estimated to be over 150,000 • Amazon claims the number of ‘objects’ stored on its S3 servers crossed the trillion mark in 2012 • Assuming 1 object occupies 1 Mb of memory, size ofAmazon’s servers = 1 exabyte • Currently, number of products sold onAmazon: Source:http://www.clustrix.com/company/news-and-events/press-releases/clustrix-releases-industrys-first-specialized-database-e-commerce/
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- 22. Implications for customers •Consumers • The one-stop shop for everything • The ultimate convenience store • At-a-glance comparisons across categories and products • Sellers • At its peak (2013) Amazon sold over 400 items per second • Be where the customer is • Fulfilled by Amazon:Amazon as a logistics partner
- 23. Promotion through offer products and services Customerfriendly interface Easy scalability Efficient use of products and services of affiliates Utilizes universal behaviors and mentalities Use existing communication systems Amazon- Six pillars of marketing strategy
- 24. • Technology enhancementto help customers for simple navigation • Convenient one payment order processing • Continuous analysis of web traffic • Simple-to-use and faster site functionality • Amazon engages in under-the-table investigations to garner new information through noiseless experiments • Model to draw more traffic to their websites • Advertisers pay the website owners or publishers when their sponsored ads on their pages are clicked • Amazon purchase PPC advertisements on Google to direct their potential customers to their website Pay per click advertising • Amazon realized that offline advertising methods are 10 times less effective than online direct marketing • Lower customer acquisition costs Continuous website improvement Streamlined ordering and navigation Reduced offline advertising spend Amazon- Sublime/Indirect marketing
- 25. • Amazon hassigned contracts with many partners to operate, host and manage websites of other partner retailers along with its own websites. • This results in listing of Amazon products when partner sites are searched and diffuses the customer checkout enjoyed by Amazon to it’s partners • Amazon’s web services helps small online firms to create a reliable and scalable platform to revolutionize their business • E commerce fulfillment programs offered by Amazon allows merchants to direct their inventories to Amazon’s fulfillment centers thereby freeing them from complex ordering process • Amazon affiliates ( third-party OR associate retailers) agree to place links in their websites directing to Amazon.com or specific amazon products. • The third party can also place their links on the affiliate websites if they list their products in Amazon • Associates receive a fee if customer visitsAmazon through their website and extra commissions for a completed purchase. Strategic partnerships and web services Affiliate marketing
- 26. • Customer reviewsand ratings on the products listed and purchased from Amazon • Acts as a believable trigger for purchase • High focus on customer service by engaging customers through phone and e-mail • Amazon engages in permission marketing through e-mails which results in better attention from customers as it is done with their consent • Helps to target relevant information to the customer resulting in customer satisfaction Customer service and opinions Email marketing
- 27. Future marketing strategies Third-partysales loom as an important part of Amazon’s business future. To grow exponentially throughAmazon Web Services Pushing its Kindle tablet which can act as a catalyst in promoting its merchandise sales Focus on absolute cash flows rather than percentage margins-will continue to offer deep discounts to push its sales Innovate with payments:Those solutions could come in the form of one-click payments (similar to iTunes) outside of its main website, either through third-party offerings or, more likely, through a major acquisition PushAmazon's bundle strategy: Amazon Prime, Prime Fresh Services
- 28. Focus Areas inFuture Focus on collaborations Increased collaboration with partner Channels Communicate to clients in the global market Enhanced integrated marketing Promote products and services Forward Integration Innovative strategies and devices to provide competitive advantage in electronics market Continued focus on R &D Continuous focus on customer service Customer Service
- 29. E-commerce in Europe Contributessignificantly to growth and job creation • E-commerce in Europe has reached a stage of maturity • Higher than most parts of the world • Low prices and time are the most important drivers
- 30. • As spendingincreases, people are shifting to online purchase • Online share is high in music and travel, and low in apparel and grocery • UK, France and Germany account for 60% of European E-commerce Amazon in France • Most visited website with more than 14 million visits per month
Editor's Notes
- #12 Eliminate: Which elements are taken for granted in your business and can be eliminated? Amazon found a new channel to the customer through technology by eliminating the traditional retail distribution channel and developing direct relationships with suppliers. Further, such features as “1-click check out” accelerated transaction times by eliminating the need for the manual input of billing and shipping information for every purchase. Raise: Which elements can be raised above the industry’s standard? Amazon wasn’t the first online store, but the company recognized the potential to transform the way we shop by building the next generation platform and infrastructure that gives customers unprecedented choice, scope and value. By building the online shopping platform, Amazon radically reinvented the traditional retail business model and the fundamental dynamics of how consumers shop. Create: Which elements can be created that the industry has never offered? The Amazon Web Service (AWS) offering, built from the company’s core technology infrastructure, makes web-scale cloud computing cheaper and more accessible. Leveraging Amazon’s vast experience, AWS is an entirely new business model that created a first-mover advantage, and the high growth that goes with it, for the company. Reduce: Which elements can be reduced below the industry standard? Perhaps the most controversial element to Amazon’s business model is the element that it has elected to “reduce” – its’ profitability. By design, the company has reduced its short-term profitability with the hopes of capturing the massive market share and scale that will allow them to drive down costs and increase profitability in the future. This innovative approach has the potential to create high switching emotional switching costs for customers and extremely high barriers for competitors in the future. Eliminate: Which elements are taken for granted in your business and can be eliminated? Amazon found a new channel to the customer through technology by eliminating the traditional retail distribution channel and developing direct relationships with suppliers. Further, such features as “1-click check out” accelerated transaction times by eliminating the need for the manual input of billing and shipping information for every purchase. Raise: Which elements can be raised above the industry’s standard? Amazon wasn’t the first online store, but the company recognized the potential to transform the way we shop by building the next generation platform and infrastructure that gives customers unprecedented choice, scope and value. By building the online shopping platform, Amazon radically reinvented the traditional retail business model and the fundamental dynamics of how consumers shop. Create: Which elements can be created that the industry has never offered? The Amazon Web Service (AWS) offering, built from the company’s core technology infrastructure, makes web-scale cloud computing cheaper and more accessible. Leveraging Amazon’s vast experience, AWS is an entirely new business model that created a first-mover advantage, and the high growth that goes with it, for the company. Reduce: Which elements can be reduced below the industry standard? Perhaps the most controversial element to Amazon’s business model is the element that it has elected to “reduce” – its’ profitability. By design, the company has reduced its short-term profitability with the hopes of capturing the massive market share and scale that will allow them to drive down costs and increase profitability in the future. This innovative approach has the potential to create high switching emotional switching costs for customers and extremely high barriers for competitors in the future.
- #13 Long tail retailer – expanding available selection without corresponding increase in overhead costs Seller market place – advertising shipping handled by sellers of used goods , amazon takes a cut on providing a channel AWS – lease out its server to other companies and individuals