Amazon.com is a company that is closely tied with the
e-commerce phenomenon. Jeff Bezos, the
founder of the company,
broke the rules
of the book business by using
the Internet
rather than conventional distribution channels.
Based in Seattle, USA, the company has grown from a book seller to a virtual
Wall Mart of the Web selling products as diverse as music CDs, software, office
products, electronics, toys, games, cookware, hardware, food, and health
products. The company has also grown at a tremendous rate with revenue rising
from about US$150 million in 1997 to US$5.2 billion in 2003.
Amazon.com was founded by
Jeff
Bezos, a computer science and electrical engineering graduate from Princeton
University. Bezos had moved to Seattle after resigning as a Senior
Vice-President at D.E.Shaw, a Wall Street investment bank. He didn’t know much
about the Internet. But he came across a statistic that the Internet was growing
at 2300%, which convinced him that it was a large
growth opportunity. Not knowing much more, he plunged into the world of
e-commerce with no prior retailing experience.
He chose to locate the company in Seattle because
it had a large pool of technical talent and since it was close to one of the
largest book wholesalers located in Rosenburg, Oregon. He was thinking of the
company as a bookseller at the beginning. Moreover, the sales tax laws for
online retailers state that one has to charge sales tax in the state in which
one is incorporated. Therefore it was logical to locate in a small state.
The company was started in a garage. Initial
business meetings were conducted at a local Barnes and Noble store. Bezos picked
the name Amazon for his company because it started with the letter A, signified
something big, and it was easy to spell.
The company went online in July 1995. In May 1997,
Amazon.com went public.
Sources of
Competitive Advantage
Maintaining and
improvingoperational efficiencies is the
key to sustainable competitive advantage
of Amazon.com. The ability to offer shopping convenience, ease of purchase,
speed, decision-enabling information, a wide selection, discounted pricing,
and reliability of order fulfillment are all tied directly to the company's
logistical competencies.
By purchasing large volumes of products
directly from publishers the company offers a wide selection to customers
and receives great discounts from suppliers.
Amazon.com aims to ship 95% of products on
the day they are ordered. Direct model enables Amazon.com to shorten
shipping times. The company invested also heavily in warehousing and
material handling systems to achieve multifold improvement in
throughput.
Building Brand Equity
Amazon.com has steadily increased its
spending on advertising and promotion to make its
brand
stronger and build brand
equity. By 2003, the brand of Amazon.com was worth US$ 22
billion. "A brand for a company is like a reputation for a person.
You earn reputation by trying to do hard things well," says Jeff
Bezos, the founder of Amazon.com and a great
entrepreneur.
Value Added Information Services
Amazon.com works hard to achieve
value-added
differentiation through customer-focused information
services. Amazon.com's site retains customer preferences and
provides automated customization for users.
Jeff Bezos has a vivid
vision
for how this technology will be used: "Personalization is like
retreating to the time when you have small-town merchants who
got to know you, and they could help get the right products. The
right products can improve your life, and the wrong products
detract from it. Before the era of mass merchandizing, it used
to be that most things were personalized. The purpose of ...
customization is ... you get the economies of mass merchandising
and the individuality of 100-years-ago merchandising."
Amazon.com's market success depends
on its ability to maintain and grow its customer base by
knowing
and
serving its customers better than its competitors and
providing a higher level of value-added differentiation in
customer service. Due to high level of
customer
satisfaction,
repeat customers account for approximately 60% of
Amazon.com's orders.
