Amazon Case Study

Why Amazon Succeeds?

Duc V Dao

Keuka College

MKT 360 Retail Marketing

Spring 2016

02/24/2016

Professor Mark McNaney

Why Amazon Succeeds?

In 2014, when I was traveling to the United States to study in Keuka College. At first I though I can buy everything the United State but I was wrong. There were many things that I need to buy, and I could not get to the store for the first few weeks. I started to study about online retailer in the United States, in particularly Amazon. Then, thanks to several reasons I came up with the final decision of shopping via Amazon instead of waiting to sign up for shopping mall trips sponsored by Keuka College.

First of all, Amazon.com was founded by Jeff Bezos in 1995. When it started out, the founders simply promised more books than anyone else, their vision was to build a virtual shopping place for instructors, students and book lovers. Amazon.com operates in three general segments: media, electronics and other merchandise. Recently, Amazon opened the first brick-and-mortar retail store in Seattle after two decades of selling books over the Internet.

In 2008, Amazon describe the vision of their business as to: “Relentlessly focus on customer experience by offering our customers low prices, convenience, and a wide selection of merchandise”. The vision is still to offer "Earth’s biggest selection and to be Earth’s most customer-centric company”. Achieving customer loyalty and repeat purchases has been key strategy to Amazon’s success. Many company failed because they succeeded in achieving awareness, but not loyalty. Amazon achieved both, in their SEC filing they stress how they seek to achieve this. SEC states "We work to earn repeat purchases by providing easy-to-use functionality, fast and reliable fulfillment, timely customer service, feature rich content, and a trusted transaction environment”. Their key features of amazon include editorial and customer reviews; manufacturer product information; Web pages tailored to individual preferences; 1-Click technology; secure payment systems and include excellent customer service by file an A-to-z Guarantee claim to protect their customer. They also offer “Look Inside the Book” and “Search Inside the Book” features. Their community of online customers also creates feature-rich content, including product reviews, online recommendation lists, wish lists, buying guides. All of those features help Amazon to build up the strong customer loyalty. For instance, I had bought a cell phone on Amazon, but the seller was not an integrity vendor, the phone has never come to my address, but after few days working with Amazon’s specialist via Guarantee Centre I had received my money back.

Amazon also create the new business platform and build up Amazon ecosystem. It is something else, consists of the rules, its reviewer database, community, the amazon marketplace and vendors who sell through Amazon. For example, the key feature is applying new technologies to give Amazon a competitive edge, in particularly by the develop of Kindle “Whispersync” update to ebook reader. Amazon reported in 2011 that Amazon.com is now selling more Kindle books than paperback books. For every 100 paperback books Amazon has sold, the Company sold 115 Kindle books. Kindle apps are now available on Apple iOS, Android devices and on PCs as part of a “Buy Once, Read Anywhere” proposition which Amazon has developed.

When Amazon was established, many people thought that Amazon would only be a bookstore, but Jeff Bezos really did intend to eventually stock every product. According to Grey (2015), Amazon sells over 480 million products in the USA. Amazon’s product has expanded by 235 million in the past 16 months, which are categorised into 35 departments. There are almost 30 million items in the combined Clothing, Jewelry department, almost 24 million in Sports & Outdoors, 60 million in Home & Kitchen. There are over 6.7 million Office Products, 96 million Electronics, 1.7 million in the Beauty department, 1.2 million Baby products, and 900 thousand Grocery items. For instance, there are almost every needed items for student such as books, clothing or even chair which are available on Amazon.

According to Amazon’s Return Policy, items shipped from Amazon.com, including Warehouse Deals, can be returned within 30 days of receipt of shipment in most cases. Some products have different policies or requirements associated with them. For example, in my case, I was returned several times, and most of return items have a little fee such as shipping fee, or restock fee. However, there are some kind of products such as electronic products or watches often offer free return on their products. On the other hand, when Amazon’s customers order from a seller that fulfills and ships its own inventory (also called a third party seller), their return will be sent back to the seller instead of Amazon.com. Most sellers offer a returns policy equivalent to Amazon.com's, some seller returns policies may vary. Customers can view the Seller's return policy before purchase an item by viewing the Returns and Refunds Policy section of the Seller's profile page. Otherwise, if a seller does not provide a return address in the United States or free return shipping to an international address, buyers may file an A-to-z Guarantee claim to seek help with their return.

In addition, Amazon.com consistently works toward maintaining competitive prices on their products, Amazon do price math eligible purchases of television with select retailers but for all other items, Amazon does not offer price matching with other retailers. Amazon does not match competitors but does offer 30-days protection on their own prices dropping. Amazon's 30-day returns policy, which provides a full refund for most unopened items returned within 30 days. But that's different from the 30-day price guarantee, which requires only that buyers need to pay attention to whether Amazon lowers its price within 30 days after their purchase item. If it does, Amazon will refund the difference.

In the media segment, Amazon competes with auction site eBay; media game-changer Netflix; Apple with iTunes; Google with its Play Store. Amazon also has several competitors in the electronics and general merchandise segment, many of which are brick and mortar rivals including Walmart, Kroger, Target, Best Buy, Walgreen, Family Dollar and RadioShack. In the electronics and general merchandise segment online competition includes Alibaba Group, Overstock.com, Macy’s, Nordstrom.

I believes the main competitive factors in Amazon’s market segments include "selection, price, availability, convenience, information, discovery, brand recognition, personalized services, accessibility, customer service, reliability, speed of fulfillment, ease of use, and ability to adapt to changing conditions, as well as our customers’ overall experience and trust in transactions with us and facilitated by us on behalf of third-party sellers". For services offered to business and individual sellers, additional competitive factors include the quality of our services and tools, their ability to generate sales for third parties we serve, and the speed of performance for our services. Today, competitive prices of products are available through third-party sellers in the ‘Amazon Marketplace’ which are integrated within the standard product listings. The strategy to offer such an auction facility was initially driven by the need to compete with eBay, but now the strategy has been adjusted such that Amazon describe it as part of the approach of low-pricing. Although it might be thought that Amazon would lose on enabling its merchants to sell products at lower prices, because  Amazon makes greater margin on these sales since merchants are charged a commission on each sale. Besides, it is the merchant who bears the cost of storing inventory and fulfilling the product to customers. As with eBay, Amazon is just facilitating the exchange of bits and bytes between buyers and sellers without the need to distribute physical products. There are a few features such as Amazon Prime and Amazon Prime Pantry and also 3 or 6-month free trial that provides free shipping for items ship and sold by Amazon would make the order fulfillment much quicker. However, free 2-day shipping is the key that make people who does not have time to go shopping or who lives in the countryside, far away from stores would chose Amazon to buy things. According to Jenkinson and Sain, 40% Amazon's customers are frequent users, their customer always come back. Amazon does retain customer b satisfying its best buyer through excellent service and effective communication