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Transcript of Amazon (AMZN)
"The Everything Store"
No Stores? No Salesmen? No Profit? No Problem for Amazon.
So what is their strategy?
Selection and Convenience support a better Customer Experience. Good Customer Experience brings in more customers(increases traffic). Traffic brings more sellers. More Sellers bring more Selection and Convenience. All of that GROWTH supports a lower cost structure with economies of scale, and lowers prices, exponentially adding to the customer experience.
Who says you can't spend your way to profitability?
Why are costs so high?
Amazon spends billions on...
building a strong customer base through services such as free two day shipping
building partnerships and acquiring new companies
Amazon is a tech innovator
This is not by chance, coincidence or pure creativity. Keep in mind that amazon is solely an online store, with no brick and mortar locations, therefore it lacks three of conventional retailings most basic elements:
a showroom where customers can touch the wares
on-the-spot salespeople who can woo shoppers
and the means for customers to take possession of their goods the instant a sale is complete.
Thus everything that Amazon's engineers create is meant to make up for these fundamental deficits.
Amazon At A Glance
The Secrets of Bezos: How did Amazon get to be the everything store?
Jeff Bezos has a public e-mail address, firstname.lastname@example.org. Not only does he read many customer complaints, he forwards them to the relevant Amazon employees, with a one-character addition: a question mark.
When Amazon employees get a Bezo’s question mark e-mail, they react as though they’ve discovered a ticking bomb. They’ve typically got a few hours to solve whatever issue the CEO has flagged and prepare a thorough explanation for how it occurred, a response that will be reviewed by a succession of managers before the answer is presented to Bezo’s himself. These e-mails are Bezos’s way of ensuring that the customer’s voice is constantly heard inside the company.
Even the most successful online retailer, Amazon.com, has a business model that leaves many people scratching their heads. Amazon is on track to ring up $75 billion in worldwide sales this year. Yet it often operates in the red; last quarter, Amazon posted a $41 million loss. Amazon’s founder and chief executive officer, Jeff Bezos, is indifferent to short-term earnings, having once quipped that when the company achieved profitability for a brief stretch in 1995, “it was probably a mistake.”
Amazon is constantly investing money back into it's business.
Amazon spends heavily to create the most advanced warehouses, the smoothest customer-service channels, and other features that help it grab an ever-larger share of the market.
Other big retailers spend heavily on advertising and hire a few hundred engineers to keep systems running. Amazon prefers a puny ad budget and a payroll packed with thousands of engineering graduates from the likes of MIT, Carnegie Mellon, and Caltech.
As former Amazon manager Eugene Wei wrote in a recent blog post "Amazon’s core business model does generate a profit with most every transaction … The reason it isn’t showing a profit is because it’s undertaken a massive investment to support an even larger sales base.”
Traded as: NASDAQ:AMZN
Headquarters: Seattle, Washington, United States
Area Served: Worldwide
Founder: Jeff Bezos (Chairman, President & CEO
Industry: Internet, online retailing
Revenue: US$ 74.45 billion (2013)
Operating Income US$ 745 million (2013)
Net Income: US$ 274 million
Total Assets: US$ 40 billion
Total Equity: US$ 9.8 billion
Amazon seeks to be Earth’s most costumer-centric company.
Build a place where people can come to find and discover anything they might want to buy online, and endeavor to offer customers the lowest possible prices, paired with the fastest possible shipping.
Mission & Vision
Amazon offers products in categories such as...
music & games
electronics & computers
home & garden
kids & baby
shoes & jewelry
health & beauty
sports & outdoors
auto and industrial
One of the main reasons Amazon has become successful is because of their inventory tactics and fast delivery
They have partnered up with UPS, which brings out a great example of a business to business model
To handle the volume of orders on two of the busiest shopping days of the year, Black Friday and Cyber Monday, Amazon needs to make sure it is well stocked on the most popular consumer items and that orders head out onto trucks in as little time as possible:
First an order is placed
Then a person tags the box with the order
Next another person goes around the warehouse and packages the goods
Finally the box is labeled and dropped off at the shipping station
Customers have the option of selling items through Amazon. This way, Amazon acts as the middle man. You are solely responsible for shipping your good. Amazon will charge you a small fee for using them as a selling vendor.
Amazon was the inventor of the "virtual shopping cart," a great invention that almost every online vendor took advantage of. This idea has become a great way to manage your online shopping.
Amazon collects all its customer’s information for years--not just addresses and payment information but the identity of everything its customers ever bought or even looked at.
Amazon uses the most useful data set in the world which is known as Big Data to ensure that customer representatives have all the information they need the moment a customer needs support.
right product in the right quantity to the right place at the right time
reduce redundant inventory
blockage of working capital
low inventory turnover
cost of holding > cost of outsourcing
THUS they outsourced
Essentially, Amazon stocks only popular items and the rest are outsourced from distributors
Build, buy, partner: accelerate development. Amazon hosts many partnerships with other major companies. The Amazon marketplace allows customers, other retailers and third party merchants to sell their new and used goods. By creating a seller service strategy, Amazon makes it “trivially easy” for individuals sellers and merchants to do business on the Amazon platform. Amazon gets sales commissions for each item sold.
Amazon's SWOT Analysis
Brand and customer focus
Earth's biggest selection
Low cost provider
Third party merchants
Hardware and digital ecosystem
Low margin businesses
International operations and F/X headwinds
Taking on competition
Consumer staples and groceries
competition amongst existing players
entry of newer firms
Bezos' 3 Big Ideas
Investment = Power
Amazon's involvement with other companies and third party merchants that sell through Amazon creates little costs for Amazon, in fact Amazon profits from a small fee charged for using their platform.
Amazon has the power to turn a profit the second it decided to stop investing as much as it does.
Amazon has one of the largest online product catalogs. But they don't have everything.
So if some product is not listed, you can make a product detail page.
First, you confirm that your product isn't already listed on Amazon.com. Second, you identify the product category and describe it. Third and last, you set the price and condition for each item.