Founded by Jeff Bezos in 1994, Amazon.com has remained the pioneer and the leading online retail firm worldwide. The initial business idea was to create an online bookstore that would create easy access to literature in an attempt to satisfy the ever-increasing demand for ideas and knowledge around the globe. Today, the activities of the firm range from online shopping services to the provision of merchant partnerships such as online search for items such as books, movies, computer hardware and software, and compact discs.
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The success of Amazon.com has seen the business strive through tough business times when the firm had to reevaluate its decisions and operational structure numerous times in an attempt to meet the changing customer needs. Nonetheless, the focus of the firm to have the largest online action stores, wide-range selection of free-electronic cards, toys, electronics, compact discs, and millions of literature materials contained in eBooks and other electronic sources has remained its standpoint. Amazon.com Inc.’s online business strategy earned the firm a strong competitive advantage over brick and mortar stores such as BestBuy and Wal-Mart. This essay explores Amazon’s sales and distribution model and marketing strategies that make it better than brick and mortar stores.
Amazon’s Sales and Distribution Model
Internationally, there is a major variation of the sales and distribution models between online-based and brick and mortar retail stores. Amazon’s sales and distribution model has undergone numerous reviews since the establishment of the e-commerce firm. The online retail store is a low-cost retailer that assumes a traditional merchandizing strategy (Swain and Hellerstein 16). The application of the low-cost strategy explains why Amazon sells its huge and diverse online merchandize at the lowest possible costs while obtaining small profits. Nevertheless, Amazon’s contemporary business framework is one that creates a great value for its customers.
Mellahi and Johnson divulge that Amazon defines its sales and distribution network with regard to product and service sales, fulfillment of orders, customer satisfaction, publishing, digital service subscriptions, and advertisements (445).
As a result, the online firm has committed its efforts to providing its clients with a myriad of benefits, which include ease of purchase, shopping convenience, speed of transaction, decision-enabling information, wide-range selection of products and services, suitable discounts on prices, and reliable systems for completion of orders. To sustain a highly competitive sales and distribution model, Amazon synergistically combines the above benefits to create holistic information services and logistical processes for clients. The firm’s sales channels utilize a websites to create virtual stores that facilitate the sale of products and services to clients. Classically, Amazon’s sales and distribution model comprises a single sales channel that provides full-service e-commerce (Panagiotelis, Smith, and Danaher 16).
Ease of Purchase
With the continued development of sophisticated telecommunication technology, Amazon Inc. has invented features that ease the process of purchasing goods and services for clients. For example, Amazon’s new Fire Phone has a feature known as ‘Firefly’ that synchronizes movies or television video shows with compatible televisions, laptop computers, and palmtops among other telecommunication displays. Firefly uses audio and object recognition capabilities to allow clients make easy identification and comparisons between different products and services throughout the online store. Furthermore, the compatibility of the feature with other cellphone brands makes it universal for all Smartphone users. Apparently, it heightens the shopping capabilities of clients around the globe, thereby strengthening the firm’s sales and distribution framework (Panagiotelis, Smith, and Danaher 17).
Shopping Convenience and Speed of Transaction
Amazon’s website has features that facilitate fast transactions between the client and online retailers. Amazon.com Inc. has developed the website to enable easy placement and execution of orders. The firm has developed its online store in a way that enhances product selection, suitability, competitive pricing, and personalized transactions among other attractive features. In addition, the firm has made it possible for clients to search products and services through various criteria such as products or service category, status, reviews, and promotions among other standards of selection.
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Furthermore, the construction of the website enables clients to participate in auctions, promotions, and/or check the status of their present orders. The firm has eased the speed of transaction through the introduction of the electronic chip technology. According to Thompson, the chip technology has made it easier for clients to use electronic shopping carts to complete transactions by the use of the credit cards (26). Further, the author reveals that Amazon.com Inc. has widened its distribution capacities to facilitate speedy transactions by the establishment of enormous fulfillment stations across several strategic locations in the United States of America and Canada.
Amazon has developed a decision-enabling information systems platform that facilitates the choice of products and services. Amazon has developed a high-tech informational system that blends a virtual storefront and operations. The company uses a set of applications on its online platform to facilitate the authentication of client orders, placement, organization, and management of the orders with respective suppliers.
The information systems enable clients to make decisions on suitable ordering criteria for different types of products and services (Mellahi and Johnson 446). In addition, Amazon’s platform enables customers to send emails to Amazon.com to seek clarifications and/or make consultations that pertain to purchase decisions. The company provides suitable information about its products and services. Generally, the management of information at Amazon matches the digital revolution where the facilitation of customer decisions occurs via interchange of ideas between the client and seller (a robot in most cases).
Wide-Range Selection of Products and Services
The firm offers a wide range of products and services to its clients within its North-American and international business segments. Apart from offering huge collections of eBooks in its online bookstore, Amazon’s merchandise also includes consumer electronics, cellphones and services, camera and photography, computer software and hardware, compact discs (DVDs – including rental videos), toys, shoes and apparels, baby care products, beauty products, gourmet food, health and personal care, home, garden, and outdoor products. The firm also offers jewelry, watches, kitchen and housewares, magazine subscriptions, music and music instruments, office products, sports, and alfresco activities. The design of the sales and distribution system ensures that clients select products and services from a variety of delivery options that include overnight and global shipping options (Mellahi and Johnson 449).
Reliable Systems for Completion of Orders
Amazon has installed effective online retail systems to ensure real-time availability of merchandise and fulfillment of orders. The company has configured the distribution channel to avail products and services within a 24-hour plan. Although some products, especially books, may not be available at the time of order placement for some reasons, the company assures delivery of such products within two to three days after a client makes an order (Mellahi and Johnson 447).
The firm strives to offer exemplary online shopping experience in an attempt to improve client experience. Donici, Maha, Ignat, and Maha reveal that Amazon has invested heavily on information technology to enhance the operational ability of the business in terms of accomplishment of its transactions (254). The belief that online merchandizing offers multifaceted benefits to clients attracts increasingly high sales that the company avails at special discounts. The accomplishment of transactions is convenient for clients. Amazon requires each client to sign up for a personalized account with its website. The account helps the client perform selection of products and services based on category, promotions, and pricing among other attributes.
Amazon versus Brick and Mortar Stores
The online shopping revolution has earned Amazon.com a competitive advantage over brick and mortar stores such as Wal-Mart, Target, and BestBuy among other giant retail merchandizers. Consumers have moved from brick and mortar stores to online purchasing of nearly all consumer goods and services (Donici, Maha, Ignat, and Maha 256). The authors attest that Amazon.com has set the target too high for other brick and mortar stores to meet its standards of operation. The company has achieved its competitive advantage through the application of a number of strategies that relate to information technology systems.
First, the online firm has adopted a low-price strategy that has attracted clients from giant brick and mortar store such as BestBuy and Wal-Mart. The clients appreciate the availability of low-priced products and services at the online retail store. The situation has led to a high-end competition where big-box retailers have to review their sales and distribution models to win back their clientele. Furthermore, Swain and Hellerstein reveal that Amazon offers huge discounts on prices that have resulted in increased number of clients in the last one and half decades (19). As a result, the brick and mortar retailers have had to reevaluate their pricing strategies to offer comparatively lower prices to match Amazon’s discounted prices.
While the brick and mortar stores have focused on product quality and availability of merchandize under one roof and less focus on customer needs, Amazon has prioritized customer service by providing its customers with an option to collect their products from strategic locations or at times offering free delivery of products, especially on Sundays (Mudambi and Schuff 189). Amazon’s ambition is to grow its business across continents by developing and linking as many service providers as possible. The plan is to reach clients from any sphere of the globe by the action of a mouse-click or at the convenience of a Smartphone.
The speed of delivery is comparatively higher for Amazon deliveries than for the brick and mortar retail stores. The brick and mortar stores struggle to deliver products and services within their physical locations. The physical movement of merchandize from one place to another is actually time consuming. In many cases, clients have to travel for considerable distances to access offline retail stores. Many factors such as traffic congestions, bad weather, and other technicalities that occur in the technical world considerably interfere with time plans. On the other hand, Amazon customers simply place orders by the action of a button, whether a mouse-button or an icon on a Smartphone such as the Amazon Fire Phone (Chevalier and Goolsbee 3). The following paragraphs further explore the various marketing and promotion strategies that make Amazon the leader of both offline and online retailers.
Marketing and Promotion Strategies
Pioneer to Online Bookstores
Amazon is the pioneer of online bookselling that has published huge amounts of literature on its websites. The pioneering of the virtual book concept has placed the company at a distinguished competitive advantage over other online book merchandizers around the globe. A research conducted by Swain and Hellerstein to evaluate the differentiation of Amazon’s merchandize indicated that the giant online retailer had increasingly become competitive in other areas of retailing through its diversification of products and services (15). The authors reveal that the online retailer has implemented similar online bookselling sales and distribution patterns for other products and services.
Although the original idea was to open an enormous online bookstore, the firm has expanded its market capabilities by providing a wide range of the aforementioned products in an attempt to fulfill the demands of customers for product diversification. The market gap that exists between Amazon and other online book retailers is quite large. This situation has made the company seize a large percentage of the online book market. A research conducted by Swain and Hellerstein reveals that the firm has over 8.3 million registered clients (13). In addition, the authors attest that the business derives about 59.8% of its profits from repeat clientele.
Amazon is a customer-centered business that builds reputation on distinguishable innovation and redefinition of consumer values and experiences. The development of instant email messaging services has facilitated the firm’s communication with its clients prior to and after transactions. The fact that Amazon offers a wide variety of products and services attracts many customers who appreciate the easy procedure of completing purchases (Mudambi and Schuff 186).
The firm uses individual experiences of clients to develop values that intensify client loyalty whilst diminishing client imperfections. The plan is to enhance customer satisfaction by ensuring that they get the desired products and services. As a result, Amazon keeps ample records of client likings that enable them assess the value to their clients. The company realizes the value of the clients through the provision of single-click shopping, endorsements, and development of a notification system for new products and progress of orders. Some researchers have acknowledged that it is difficult for brick and mortar stores to outcompete Amazon’s customer service systems. The system is customer-oriented. Thus, it stores chunks of customer information for the purposes of analyzing the experiences of clients (Panagiotelis, Smith, and Danaher 19).
Ideally, Amazon’s business model revolves around the provision of all products and services in a single virtual store where customers can make purchases of their choice. Moreover, Amazon has created a virtual community that enhances the establishment customer relationships. The virtual community improves communication between the firm and clients whilst developing reputable client values. By virtue of the virtual community, Amazon has created numerous standards that ensure lower capital investment, broadened reach, and disintermediation (Chevalier and Goolsbee 4).
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Building Brand Equity and Advertisements
Amazon is a one-stop shop that tempts a client to shop in a single easy sweep by its brand and advertising strategy. The development of a strong brand and all-inclusive advertisement systems highly determines the reputation of a company. Thompson unveils that Amazon has built its brand gradually since its establishment (26). The firm has differentiated its online advertising strategy from the traditional advertising benchmark. The internet keeps the client fully engaged on products dynamics such as changing prices and product brands. On one hand, the essence of establishing sound online communication systems is to prompt the client to seek the relevant clarification, information about the desired product, or service whilst coaxing them to develop purchase interests. On the other hand, the direct virtual communication between the retailer and the purchaser enables Amazon to determine the most suitable information that is identifiable by clients (Panagiotelis, Smith, and Danaher 13).
As a result, Amazon has furnished its websites with the most crucial and up-to-date information about its products and services. Furthermore, the firm has developed a well-structured online platform that enhances content visibility and site functionality. These features create a modest interface that facilitates communication between retailer and the purchaser. In addition, Amazon uses advertisement banner on other prominent websites such as Yahoo and Altavista among other sites to win the attention of potential customers (Mudambi and Schuff 189).
Choice of Merchandise
For Amazon, the choice of merchandise is a vital marketing tool for the well-being of the business. The online business requires the retailer to thoroughly examine and evaluate the best products and services for the customers. To achieve this objective, the retailer has to put the consumer tastes and experience into consideration. Initially, the firm had developed the idea of merchandizing books in the online store. Jeff Bezos’ idea developed into a strategic business decision with multifarious technologies that enable customers make the right product and service choices. For instance, Klaus reveals that the online firm provides extracts from books to enable clients have an overview of the books’ contents prior to the purchase (444).
The author adds that the experience of previous clients determines the choice of products and services for new clients. Furthermore, Amazon has differentiated its market by increasing its selection of merchandise. Besides running an online bookstore, Amazon has diversified its products and services as abovementioned in an attempt to provide its clients with a wide range of selection that is contained in a single virtual store (Klaus 445).
Value-added Partnerships and Information Services
Amazon has done its best at providing valuable client experience whilst creating outstanding brand equity. These efforts have compelled the firm to develop value-added partnerships and information services. The firm offers value-added features such as book excerpts, assessment, and endorsement pages. These features ease the process of purchase. Factually, block and mortar stores do not offer these customized features since their websites do not support virtual interaction with their clients. The development of value-added partnerships has not only bettered the customer experience but also created an avenue for more diversified products and services in the online store.
In addition, Klaus unveils that clients have found it increasingly easier to locate Amazon on the internet since it has amplified its conspicuousness through ads on renowned internet platforms such as Yahoo!, Altavista, AOL, and Netscape among other prominent websites (447). A research conducted by Mudambi and Schuff to examine the extent to which Amazon has developed its value-added partnerships indicated that the firm has linked over 350,000 websites on the internet (189). Further, the authors reveal that the firm heavily invests on marketing strategies with the view of collaborating with more online service providers to intensify its client base.
The impending potential of Amazon remains unknown owing to the dynamic nature of information technology. With the current trends in e-commerce, many researchers have speculated enormous expansion of Amazon.com Inc. to almost all business sectors. However, the emergence of new businesses in the online retailing business is a predictable threat for Amazon. Although customer focus may not be its major objective, new online stores offer competitive pricing for similar products and services.
Besides online book retailers such as Borders.com and Barnes and Borders.com, Amazon also faces competition from a sizeable number of publishers, wholesalers, and many other store chains that emphasize brand cognizance and sales volume. Furthermore, offline retailers such as BestBuy, Wal-Mart, and Target have attempted to match the discounted prices of Amazon. Based on the detailed expositions that have been made in the paper, the strategy may pull customers to traditional shopping methods. It is true that online retailers have put significant pressure on brick and mortar stores. Nevertheless, these stores have attempted to match information technology with some level that may alter competition to a different dimension. Subsequently, there is a foreseeable decline in profit in the next five to ten years. Therefore, as a leading online retailer, the company has to keep at par with technological changes in an attempt to remain a key player in the online retail industry. The establishment of a dominant presence on the internet and realignment of strategies are important aspects of Amazon’s future business.
Chevalier, Judith, and Austan Goolsbee. Measuring prices and price competition online: Amazon and Barnes and Noble, 2003. Web.
Donici, Andreea, Andreea Maha, Ion Ignat, and Liviu-George Maha. “E-Commerce across United States of America: Amazon.com.” Economy Transdisciplinarity Cognition 15.1(2012): 252-58. Print.
Klaus, Philipp. “The case of Amazon.com: towards a conceptual framework of online customer service experience (OCSE) using the emerging consensus technique (ECT).” Journal of Services Marketing 27.6(2013): 443-57. Print.
Mellahi, Kamel, and Michael Johnson. “Does it pay to be a first mover in e-commerce? The case of Amazon.com.” Management Decision 38.7(2000): 445-52. Print.
Mudambi, Susan, and David Schuff. “What makes a helpful Online Review? A study of Customer Reviews on Amazon.com.” MIS Quarterly 34.1(2010): 185-200. Print.
Panagiotelis, Anastasios, Michael Smith, and Peter Danaher. From Amazon to Apple: Modeling Online Retail Sales, Purchase Incidence and Visit Behavior, 2013. Web.
Swain, John, and Walter Hellerstein. The Questionable Constitutionality of Amazon’s Distribution Center Deals, 2011. Web.
Thompson, Derek. “The Riddle of Amazon: the global shopping behemoth is beloved by investors despite practically nonexistent profits and a bewildering grand strategy. What exactly is Jeff Bezos trying to build?” The Atlantic 312.4(2013): 26. Print.