Report B2C Strategy Behind

Amazon: Report on 8 key Elements of Business Model / Report: B2C Strategy behind the Success of Amazon

E-commerce -- a subdivision of e-business -- denotes a wide range of activities involved in selling of products via electronic channels (such as the Internet). A novel emerging business model in the e-commerce domain is the web-based social shopping, which has gained immense popularity, of late. The e-commerce website, Amazon, allows customers to search for, and purchase, products online. As a business-to-consumer (B2C) website, Amazon leverages eight powerful major components of its business model for drawing buyers and maintaining an edge over competition (Amazon, 2015).

This study is aimed at analyzing the major components of Amazon's business model and coming up with suitable strategies, which may be utilized for improving future profit margins. Thus, value proposition, market, revenue model, competitive advantage, competitive environment, management team, organizational structure, and value chain will be critically analyzed, as will future strategies for building consumer trust in the company, for adequately grasping the context.

Contents

Introduction 5

Findings Analysis 5

Strategies Company should Use 9

Conclusion 10

References 12

Introduction

An online B2C retailer founded in the year 1994 and based in Washington's Seattle, Amazon.com has a North American as well as international market. The company operates via AWS (Amazon Web Services), International, and North American segments. It caters to online buyers by means of retail websites, (amazon.com, amazon.com.mx, and amazon.ca); these web-based marketplaces basically include content and goods bought from vendors for resale, in addition to third-party offered goods. Further, the company provides programs, which allow sellers to put up their stock for sale on Amazon websites, as well as personal branded websites. Via Amazon, app developers, authors, filmmakers, musicians, etc. can also put up their content for sale online. Additionally, Amazon caters to businesses and developers by means of AWS, which offers services in computation, storage, analytics, database, deployment, and applications for start-ups, educational institutions, corporations, and governmental agencies (Yahoo Finance, 2015).

Also, Amazon produces and markets Kindle e-readers, fire TVs, fire tabs, fire phones, echo and other electronic devices. It provides a web-based platform, Kindle Direct Publishing, to independent publishers and authors to self-publish their books on Kindle. Another company feature is its yearly membership program, Amazon Prime, which offers to members free merchandize shipping, access to Kindle books, access to instantaneous TV-episode and movie streaming, in addition to publishing, ad services, Amazon credit card, and subscriptions to digital content (Yahoo Finance, 2015).

Findings Analysis

A company's business model outlines how it captures, develops and provides value. The business model must be perceptive, taking into account all areas of interest; in other words, it must incorporate all conditions necessary and sufficient for organizational operations. Its concept needs to be all-inclusive, straightforward, and applicable, while taking care not to oversimplify the complexities underlying the actual functioning of businesses. Business models are very vital to ensuring proper establishment and smooth running of a business (Ranjan, 2013). The eight elements of Amazon's business model are:

Value Proposition

The company is famous for its superior customer service, interoperating ability, hardware, content ecosystem, and prices. Some aspects have been kept consistent. Irrespective of the service or product, Amazon's value proposition is always convenience and price; low prices are retained by ensuring self-service and near-total automation of its client relationships. The company is expected to continue venturing into novel territories, while retaining focus on its two major value proposition facets (which hold good in all product categories), enabling the company to enter new markets and strengthen bonds with customers (Baer, 2014).

Market or Audience

Amazon is a B2C company, targeted at everyone in the society. There are more than six billion global Internet users, making it evident why B2C and B2B Internet marketing enhances awareness of organizations and their offerings. This assists Amazon in reaching a large number of individuals, thereby increasing profit margins of the company (Ranjan, 2013).

Revenue Model & Cost Base

On Amazon, products are sold either directly, or by charging a commission. The company's fixed-price web-based market, Amazon Marketplace, enables sellers to put up their merchandize or sale alongside those offered by Amazon. Shoppers can purchase third-party second-hand and new articles directly via Amazon.com, through its Marketplace. This has been a very lucrative program and approach for the company. The company charges a transaction charge, variable closing charge, and selling-price-based commission rate. In the current year, Amazon's net sales rose to 25.4 billion dollars (i.e. a 23% rise) during the third quarter, as compared to 20.6 billion dollars in the previous year's third quarter (Amazon, 2015). Furthermore, the Affiliate business model also helps create revenue. The company is counted among the foremost online businesses that took an affiliate approach. An affiliate product of Amazon, aStore, allows website owners to develop an online marketplace on their website. It doesn't permit direct selling of personally-made products by website owners; rather, they select merchandise from the Amazon platform and receive referral payments on items their viewers buy. Currently, an identical fee structure exists for aStore as for other affiliate options, ranging from 4-10% of the price of the article. This leads to an overall rise in customer base, and consequently, profits and net income (Dung, 2008).

Competitive Environment

There is direct competition in healthy market economies. Rivals include all who do the same business, i.e., other online bookstores, Google Play, pure-click companies, pure-play websites, brick-and-mortar companies with online division, and online retailers like flipkart and eBay. Direct competition comes from web-based retail sites like Overstock.com, Buy.com, and Barnes & Noble's online store. Direct competitors of the company's Marketplace (zShops and Amazon Auctions) are auction stores such as Ubid.com and eBay. Indirect competition comes from companies that sell both offline (brick-and-mortar stores) and online. In spite of marketing a large number of same merchandize, websites like Walmart.com, Bestbuy.com, Kohls.com, and Lowes.com aren't considered direct rivals of Amazon, as they technically do not operate within the same sector. Amazon's competitive environment has undergone changes due to technological advances and evolving trends among consumers, in regard to mode of product purchase. For instance, the company altered buyer expectations and how enterprises distributed merchandize. It introduced the 'long-tail' concept, wherein enterprises could offer wider assortments of products for sale at decreased volumes, due to lower cost of distribution. This allows Amazon to retain its competitiveness and develop innovative programs for gaining an edge over competitors (Bouchard, 2008).

Value Chain and Marketplace Positioning

Amazon plays the role of an intermediary retailer or reseller, as well as Kindle manufacturer. It has created its own internal value chain for ensuring best added value and retaining a competitive edge. The company employed Michael Porter's value chain concept, described in his book, Competitive Advantage: Creating and Sustaining Superior Performance. It enables the company to construct a powerful technological structure using a lone platform, invest heavily in the area of technology (e.g., Kindle) for optimum leveraging of digital products, print according to demand, and solicit a constant stream of feedback on novel products. Amazon offers the features of an effective product forecasting process, quick and easy payment system, free good return within 1 month, and round-the-clock operations (Ranjan, 2013).

Competitive Advantage

Amazon has entered, this year, into the bricks-and-mortar business world, making it accessible online as well as offline. The company's business model incorporates both offline (physical store) and online (website) operations. This allows the company to strengthen brand loyalty, generate increased reviews, offer a retail experience to its customer base and make it more convenient for them to try out an item or return it to the company. A foothold in both offline and online markets offers the company unique competitive advantage, development and growth opportunities, leaving other similar businesses hard pressed to get more inventive and develop multiple strategies (including alternative modes of distribution and differentiated products) (Neil, 2015).

Organizational Structure

The organization has an efficient structure that enhances profitability. Its key advantage is its partnership with United Parcel Service (UPS). Amazon Prime shipments principally take place through UPS. For destinations that UPS does not reach, Amazon uses the services of carriers such as DHL and FedEx. UPS does not deliver packages on Saturdays, therefore, when a shipment's likely delivery date is a Saturday, FedEx will most likely be utilized. The U.S. postal service is used for shipping most Free Super Saver packages; however, for bulky or costly articles, shipment will be done through UPS. The services of local courier agencies (e.g., OnTrac for California and A1 Courier Services for Delaware and Philadelphia) will be used if an ordered product is obtainable from an Amazon warehouse lying within a forty or fifty mile radius of product destination. This ensures customer satisfaction and enables speedier delivery of products (Chopra, 2012).

Management Team

Amazon sets a great store by leadership and management development. The company is a combination of manufacturer, broker and retailer, which facilitates rapid company development, ahead of all rival companies. Also, the company has had a tremendous growth spurt in the last 10 years, bringing in returns of approximately 75 billion dollars in 2013, owing to its CEO's exceptional, and probably ruthless, style, which has worked to the company's benefit (Baer, 2014).

Strategies the Company should Use

An organization can employ numerous strategies for garnering customer trust.

Testimonials

At times, a small amount of reassurance from customers who have already used a company's services or products is all a new buyer requires for overcoming trust issues. Amazon can utilize satisfied buyer testimonials as an effective means for doing away with last-minute shopper skepticism. The company can go about this tactic by acquiring testimonials from at least three real buyers; it must contain a photograph of each of these buyers, and background data like name and country of residence for imparting credibility to the testimonial. This will contribute significantly to garnering trust, drawing in more shoppers and increasing company popularity (Jemers, 2015).