Amazon.com's E-Business Model Case Study

The latest annual report for the Amazon.com, Inc. was released on 14^th December, 2010 and covers 2009 financial year. The year officially ended or dates 31^st December 2009. The report is titled ‘2009 Annual Report’ and begins with a brief statement addressed to its shareholders. Like the last thirteen annual reports since the year 1997, the report contains a brief statement as a letter directed to the firm’s shareowners which bears a signature of the firm’s founder: Jeffrey P. Bezos. The statement also shows an executive post of Chief Executive Officer (C.E.O) being held by the mentioned Amazon.com founder. Both statements are countersigned by the C.E.O (Amazon.com, 2010).

Although the firm undertook various transactions, the C.E.O provides an overview of the major financial behaviors of the transactions. As at 31^st December, 2009, the firm had registered a landmark increase on its annual net sales which summed to 128% in relation to the previous annual sales. This is equivalent to $25.51 billion registering 15 times to what was witnessed a decade ago. The year also saw Amazon.com registering $2.92 billion cash flow with 114% year-over-year increase.

Over the year, the firm also introduced Amazon Prime which was not only well received by the customers but also attracted a significant growth on the Global membership. In response to this size of membership, the firm increased the number of items which at a particular instant were ready for shipment. In comparison to 2008 transactions, this figure increased by 50%. The year saw the firm’s significant growth in product categories with an extra 21 products released to the global market including but not limited to Automotive and Apparel in Japan and China respectively and notably Baby in France. Among other products, the most looming business over the year was on shoes. The firm reinforced its stock through Zappos acquisition which was known for its online retails on apparel and footwear.

In terms of firm/agent-customer relations, the firm embarked on online transaction with agents’ sales rising to almost a third of all unit sales. The sales were further enhanced through the firm’s adoption of the new technologies like Amazon Relational Database among other list. All these lead to customer-reach strategies even to the EU and California which is also in line to the 2010 goals to traverse most of Asia. Notably, although the company had diversified from selling books and publications mostly, the firm nearly doubled the Kindle Store’s bookstore which is based in U.S. although they are shipped to over 100 destinations worldwide. Like any other business, Amazon.com published its set goals which their achievements report is expected in the future annual reports.

Amazon.com is seen to have set pace where most firms have followed suit owing to its success. The now leading online retailer survived over nine years without annual profit which was achieved for the first time in 2003. This was so because it had the long term visions which are now the source of its excellence. As mention before, Bezos launched the firm as a bookstore which was termed as ‘The only bookstore on Earth’. This was the best brand though it was so exaggerated. Now that the firm has competitively expanded to offer several products, its main challenge is to maintain its brand. The difficulty comes from the need to overpower the specialized vendors for instance, the company need to attempt all means to make its brand on computer appliances more powerful than companies as Hewlett-Packard (HP). The founder might have perceived problems and opportunities which were brought by expansion of internet services and change in consumer behaviors and was quoted at one of the interviews: “The logistics of distributions are the iceberg below the waterline of online bookselling” Jeff Bezos, the C.E.O (Schweppes, 2010).

The firm must therefore be keen on the ways to reinstate its weakening brand image as it is continuously introducing products other than books. This brings a lot of confusion to the consumers hence the need to avoid this. One of the methods is to outsource its management to agents under the ‘umbrella’ as Amazon.com. In addition, the firm can liaise with public libraries and publishers who will be providing catalogues of the firm’s products. Unlike in Barnes & Noble and Borders, the firm should maintain the originality of their products with trademarks on their products. In line with this, the company should respect the Intellectual Property Rights. Several cases were filed against the firm, for example; program which infringed a patent owned by Tobin, Parallel Networks, LLC which filed a complaint against us for patent infringement in the United States District Court for the Eastern District of Texas, and Eolas Technologies Incorporated among others pertaining IPRs infringement (Amazon.com).

Other upcoming online retailers are Barnes & Noble and Borders which are seen to be the future competitors to Amazon.com only if they rectify on their shortfalls. Although some methods can be specific to one of these companies; the general strategies are: first, their sites should be such that they can grab the attention of the “scanners” as most people don’t prefer reading all words on the advertisement but scans some keywords which can be stressed by using either bold or italics on such words. Secondly is by embracing graphical appeals by displaying “real” products which fosters powerful sales especially for the Barnes to make the site more real. Thirdly, in an effort to convince the customers, the site should show the urgency as to why buyers need to buy at that instance for example, using terms such as “This is among the last copies!!”, “here is your offer and bonus before the end of promotion!!.” Fourthly, on their descriptions they should try to create problems on the customers’ daily life and show how their products can solve such problems with an intention to show the vitality of their products. Finally , the companies should adopt other strategies of “converting visitors to buyers” by; offering less information which are clear and precise, focusing on content optimization on advertisement, cross-selling by suggesting other complimentary products in the stock, and lastly liaising with public sectors and delivery firms (Gehi, 2010).

Table1 highlights all the qualities the 3 websites discussed so far.

Table1: summary of the 3 websites.

In conclusion, Amazon.com has since 1994 became the most vibrant and visionary online retailer. For it to cope with stiff competition, it has to maintain its brand and subsequently the sales. This is through establishing links with retail stores just like the Dell Company, which was initially an online retailer but currently has their products being sold on many shops. This will be a long lasting solution as one of the strategies to resolve the delivery challenges and maintaining the strength of its brand. This is just a proposal and the most feasible likelihood due to the mentioned stiff competition (Vulkan, 2003).

Reference

Amazon.com (14^th April 2010). Annual reports and proxies. Retrieved on 9^th December, 2010, from <http://phx.corporateir.net/External.File?item=UGFyZW50SUQ9Mzc2NjQyfENoaWxkS UQ9Mzc1Mjc3fFR5cGU9MQ==&t=1>

Gehi, D. (2010). 12 ways to increase online sales. Retrieved on 9^th December, 2010, from <http://www.entrepreneur.com/ebusiness/ebusinesscolumnist/article79002.html>

Schweppes, F, K. (2010). Challenges facing Amazon.com. Business Daily Journal, 23, 44-45.

Vulkan, N. (2003). The economics of e-commerce: a strategic guide to understanding and designing the online marketplace. Princeton: Princeton University Press.