Case Study of Amazon
Amazon.com started in the 1990s as a unique online book store with aims to revolutionise the market place.
Reasons for Success
Through use of a unique business model when on-line retailing was a new concept the organisation looked to reduce overheads whilst capturing key demographic groups on a global scale. The on-line model offered the opportunity to offer increased customer choice beyond the traditional retailer and mail order companies. Whilst the 1990s saw the boom of the on-line venture or dotcom as they were termed shareholders became concerned by the slow growth exhibited by Amazon.com in the beginning, however in a situation akin to the tortoise and the hare whilst many dotcom ventures peaked and folded in the 1990s the slow and steady growth of Amazon.com provided longevity within the market place.
The success of Amazon.com and the pathway which led to such steady growth can be found in the diversity of the business which applies to both the product offering and architecture but also within the operational practice. Whilst originally known as a book retailer the organisation moved into alternative media to expand the scope of the business this can be seen through the acquisition of internet movie database company IMDb. Amazon found further opportunity to grow their customer database through direct marketing using the PlanetAll company acquired in 1998; this provided the opportunity to target market demographic categories using limited marketing expenditure.
From 2000 onwards further developments have been made through ventures with partners and through acquisition in order to develop and adapt use of technology, this can be seen with the acquisition of Joyo.com who specialise in developing innovative technology and the partnership with Microsoft to develop EBook opportunities.
In order to retain a point of difference within the market place Amazon.com have adopted a user review function which allows patrons to rate and discuss the books, music or films on line in order to share feedback with others. This function is cited as the primary reason Amazon.com exceed the number of users on other primary retail sites by more than double. However the system for user reviews has also suffered criticism due to opportunity for abuse this function offers and has been seen in previous years with authors and musicians inflating reviews for their own products under anonymous names which can stimulate sales and is described by some as unethical.
Whilst it can be argued there is opportunity for abuse in many situations Amazon.com are also praised for the strength of the on-line market place which offers the opportunity for customers to buy and sell used products at reduced rates. Whilst this concept is commended by some others suggest this is simply the remains of the failed attempt Amazon.com made to compete with EBay.
Threats and Problems
Whilst the future for retailers of all models is estimated to be economically harder than previous years particularly within UK and US markets there are potential positive opportunities to be evaluated for Amazon.com within which growth can be sustained. Whilst there is the recent acquisition of Abebooks in 2008 which supply used, out of print and rare books this is a limited market and will only bring limited incremental sales to the profit and loss, however the proposed acquisition of audible.com would add value within the audio books market which has boomed through the use of IPods and MP3 or MP4 technology.
However along with opportunity for growth and development come challenges, Amazon.com have to face increasing fulfilment and transportation risks which will focus the business into prospective new models whilst at the same time working towards a consumer interface with customer service as a priority.
The hard economic climate would suggest many mainline high street retailers with presence on-line will be competing for the same customer in terms of product offer and promotion therefore Amazon.com require the advantage in order to retain the loyalty of the customer.