Case Study - Amazon - One Estore To Rule Them All

Jeniel Z.
Pascual
MBA Student
Assignment
Amazon: One E-store to Rule Them All
October 25, 2012

Dean Lalaine Ruth Galang
Case Study: Amazon: One E-store to Rule Them All Amazon Webstore is a comprehensive, full-featured eCommerce product that enables companies of all sizes to build and operate an eCommerce business. Amazon Webstore manages every aspect of running an eCommerce business from design and merchandising, to catalog and inventory management, to checkout and payment processing with fraud protection. It uniquely combines a comprehensive tool-set for fast design and implementation, with full flexibility and control of branding, design, merchandising and customer experience. Amazon Webstore also enables companies to deliver a personalized, cross-channel experience with applications for website, store and phone ordering, and customer service, and provides a single interface for unified management and visibility across all channels. Webstore incorporates Amazon's eCommerce expertise for ongoing success, easily integrates with other Amazon services like Selling on Amazon and Fulfilment by Amazon, and leverages the strength, security and reliability of Amazon's infrastructure. Amazon.com has soared ahead of other e-retailers to become the leading online merchant of just about everything. What Amazon cant carry in its 22 world-wide warehouses, affiliated retailers distribute for it. Not content to rest on his laurels, CEO Jeff Bezos has introduced a number of new services to keep customers glued to the Amazon site. But will the investments pay off? Discussion Questions: 1. In what ways does Bezoss decision to develop and sell the Kindle show systematic and intuitive thinking? Answer: For Bezos, the most logical thing to sell over the internet was books. Why books? It was because Bezos was willing to bet that book buyers would be willing to give up the cozy, coffee-shop, browsing environment of the local bookstore if he could offer them the earths biggest bookstore, fantastic customer service, and features that no physical bookstore could matchcustomer book review, author interviews, personalized book recommendations and more. Offering Kindle showed a futuristic point of view since digitized media has become more and more prevalent nowadays. It is also based on a systematized thinking that readers tend to be bored with just the plain old book reading and continues to expand their interest not only in digitized books, but other features that the Kindle might be able to offer as well. 2. How do you describe the competitive risk in Amazon.coms environment as it enters the market for digital movie downloads? Answer: Although Amazon recently released Unbox, its video download service, it is far from dominating the sector. Downloadable video for purchase faces competition from the growth of independent online video and charge-free offerings such as YouTube. The initial launch of Unbox was also criticized for being hampered by usability issues-reviewers complained about long download times and limited playback capabilities, caused in part by strict digital rights management limitations. A recent partnership was
Jeniel Z. Pascual
MBA Student
Assignment
October 25, 2012

announced with Tivo that may help improve the Unbox offering, but adoption of Unbox has yet to see significant growth. 3. Which decision errors and traps are the greatest threats to the success of Bezos decision making as Amazons CEO, and why? Answers: Ten years or so ago, some analysts were saying that Amazon would never make money, despite Mr. Bezos making the case for the company investing in its future by sacrificing short-term profits for long-term growth. Today, the Amazon CEO is facing some criticism following a weak quarter for selling the new Kindle Fire tablet at a loss so it can compete for market share with Apple's iPad and Barnes & Noble's Color Nook. Amazon has been reporting "razor thin margins" for the past few quarters and Mr. Bezos warned that the company may dip into the red in the 4th quarter due to heavy sales of the Kindle Fire. 4. Further ResearchWhat are the latest initiatives coming out of Amazon? How do they stack up vis--vis actual or potential competition? Is Bezos making the right decisions as he guides the firm through todays environmental challenges? According to the research done by Foner Books , Amazon could be selling around 24 eBooks per Kindle per year. If we consider about 3 million Kindle units in use in 2010, Amazon could sell 72 million eBooks for 2010. If we consider the average pricing to be around $12 per eBook, Amazon could be earning $864 million in 2010 from eBooks alone that are distributed on the Kindle device. The upside can be even greater if Amazon succeeds in becoming the eBook store of preference on the iPhone (50+ million sold), iPad (3+ million units sold) and Android-based smartphones / tablets, although the number of eBooks downloaded per device is likely to be lower for such devices. If current trends continue, there will be more than 100 million iPhone, iPad and Android-devices in use within the next 1-2 years. Even if each device were to download only one eBook through the Kindle store annually (at $12 apiece), that would imply $1.2 billion of Amazon sales from non-Kindle devices. Early in its history, investors and analysts loved to compare Amazon to other ecommerce competitors like Buy.com, Overstock.com, Bn.com, and Walmart.com. But over the years, such comparisons have been made with decreasing frequency. One of the main reasons this has been the case is that Amazons largest competitor isnt any one company, its the fact that the vast majority of retail sales in the US and across the world still occurs in brick and mortar stores. While the penetration of online sales varies by category (in the US: 1% penetration in food, 22% in computer peripherals), online sales still represent only a small percent of the US retail market overall. The continuing shift towards online purchasing is a major trend which should provide Amazon with sustained long-term growth potential. Amazons continued focus on increasing selection and availability, lowering prices, and providing a great product and service are keystones of its long-term growth strategy.
Jeniel Z. Pascual
MBA Student
Assignment
October 25, 2012

As Amazon continues to expand into new categories and markets and to experiment with building new kinds of businesses, substantial investments will be made today in the hopes of planting the seeds that will become substantial revenues opportunities in the future. Many of these bets will fail, but even if a few of them succeed, they could translate into incredible businesses for the company.
References: http://www.bus.iastate.edu/emullen/MGMT370/Team%20Case%203%20%20Amazon.pdf http://webstore.amazon.com/faq/b/2988390011#What-is-Amazon-Webstore http://seekingalpha.com/article/211807-3-amazon-initiatives-that-can-make-ebooks-a-billiondollar-business http://www.retailwire.com/discussion/15602/amazon-ceo-doing-it-his-way-not-wall-streets http://www.reuters.com/article/2011/10/27/us-amazon-bezos-idUSTRE79P8I820111027 http://www.wikinvest.com/stock/Amazon.com_(AMZN) http://wps.prenhall.com/wps/media/objects/10704/10961611/Online_Chapter_12.pdf

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Jeniel Z.

October 25, 2012

October 25, 2012

October 25, 2012

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