Opened in 1995, Amazon is one of the pioneering companies in e-commerce. While it did not invent the concept, it certainly defined and developed retail marketing on the internet. It is a virtual company. It aims to be the world’s truly customer-centric company. Its server various customer sets including: consumers, sellers, enterprises, and content developers. Aside from selling and retail services, it also offers such services as advertising and co-branded credit cards. The company manages its operations geographically divided into two segments: North America and International. Most of its operations are conducted and its costs incurred in the US. Amazon is both the corporate name and the brand of a global web store.
The company’s strategic approach has three elements: strong customer orientation, a view for the long term, and continuous innovation and improvement. These three elements have guided the company’s growth since its founding.
Amazon is web store opened almost everywhere in the world. It enjoyed a very big first mover advantage. It was one of the first stores to open on the internet, only within a short period after the internet was founded. It was initially founded as bookstore. It has thus been accessible to any place in the world with internet service since the late 1990s.
Amazon is not just an ordinary web site or store. Otherwise, it would be like any other else. It is a package of unique services and experiences that make shopping on the internet approximate those of brick-and-mortar stores. One can even browse through books. The experience is not exactly the same as the ones in physical bookstores. However, it satisfies the need of customers to check the contents of books before purchasing.
Through the years, the company has grown and its offerings expanded beyond books. It now offers wide range of products and services totaling about 130 categories. The categories are a combination of products and services that are for sale and given away free. Many of these—like Kindle and Amazon Prime—are also forms of promotion at the same time. For example, the Kindle is a product that is being sold at a low price. It will be good if the company earns profit from sales of this good. However, the company does not mind if it loses profit on it. Its chief purpose is to sell other products. If there are more Kindle devices around, Amazon will have more sales of Kindle Books. This approach is in essence what the strategy of Amazon is all about. It is there for the long term. It does not mind losing money in the short term. It believes that it will gain back all its losses at some future time.
Nevertheless, it would be highly incorrect to consider Kindle as purely a promotional activity. The device in itself is a revolutionary product. It practically created and industry and changed people’s reading habits. People have now gotten used to reading e-books. It has spawned a host of competitors including the Nook from Barnes and Noble and the Kobo Glo from Kobo . It has also influenced the development of the tablet industry. Many features of the Kindle were adopted by the tablets.
Perhaps, the most important contribution of Kindle is that it introduced a totally new media for publishing, distributing and reading books. Sales of Kindle books have continuously grown since its introduction . Not only have sales grown, they now account for about 30% of Amazon’s total sales ,
This strategy is what Amazon applies to most of its innovative services. They are treated as both a means of promotion and sellable product itself. Amazon Prime is an expensive membership club. It costs $75 to join. However, it offers great benefit for members: free delivery. This would encourage bigger purchases from clients. It also gives Amazon a competitive advantage that competitors may not be able to match. More importantly, it could make shopping at Amazon cheaper than going to big discount outlets.
Amazon classifies its products and services into 13 groups: 1. unlimited instant videos; 2. digital music; 3. Appstore for Android; 4. Amazon Cloud Drive; 5. books and audible; 6. movies, music and games; 7. electronics and computers; 8. home, garden and tools; 9. beauty, health and grocery; 10. toys, kids and baby; 11. clothing, shoes and jewelry; 12. sports and outdoors; and 13. automotive and industrial . Its biggest product group is electronics and computers with 18 product categories. The product categories in each group are a mix of tangible merchandise, digital items, online services and promotional services. The extent of products and services that Amazon offers is helping fulfill the company’s objective of becoming an “everything store”
In spite of the company’s being a virtual store, it has a strong identity. Its logo and basic web design is applied to all its subsidiaries. The identity is applies on all merchandising materials including boxes for shipment. Amazon makes it a point that buying at the store feels like buying at a brick-and-mortar outlet.
Amazon is virtual store. It can be accessed by anyone almost anywhere in the world. Its location is in the internet. On the internet, it would have 11 locations: 1. Amazon.com (US and rest of the world); 2. Amazon.com.uk (United Kingdom); 3. Amazon.de (Germany); 4. Amazon.fr (France); 5. Amazon.co.jp (Japan); 6. Amazon.cn (China); 7. Amazon.ca (Canada); 8. Amazon.it (Italy); 9. Amazon.es (Spain); 10. Amazon.com.br (Brazil); and 11. Amazon.com.mx (Mexico). These outlets serve the needs of local sellers so they can sell to end-customers more cheaply. These outlets also save on delivery and shipment cost. If one compares prices of items at these outlets, the prices would be different. The US or international outlet would seem cheaper. However, that is because Amazon does not include shipment costs and taxes in the retail price. Presumably, if the other costs are added, the local outlets’ total costs would come out cheaper. That is a commitment of Amazon to its customers: Sell at the lowest price possible .
In addition, Amazon exports directly to 75 countries. Customers from these countries (which still include those from countries with an Amazon subsidiary) can order directly from Amazon US or international almost any product on the site.
Amazon also has warehouses or what they call FCs or Fulfillment Centers in 18 states in the US: Arizona, California, Delaware, Indiana, Kansas, Kentucky, Michigan, Nevada, New Hampshire, North Dakota, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, and Wisconsin . Fulfillment Centers are not ordinary warehouses. These are operations center where customer orders are put together, packaged, and sent off to shipping sites .
Amazon has also announced that it would be opening a brick-and-mortar store in New York. In doing so, it would be competing with such companies as Barnes and Noble and Walmart.
Amazon does not do much advertising in other media. Instead, it uses its own site to promote itself and all the products and services being sold on the site. Many of the services offered for sale, like the Kindle, are also the means to promote and generate more sales. Aside from the Kindle, it has other services.
Amazon Prime is a kind of warehouse cloud and discounting scheme. Customers have to pay a fee of $75 to become a member. In return, the customer enjoys free delivery. . The fee may seem expensive. However, for customers who buy a lot, this translates into enormous savings. The promo also encourages customers to make more purchases without accumulating shipping costs. Shipping costs can be very expensive. In the end, heavy buyers will be saving more than the $75 they have paid for.
As with any retail outlet, Amazon offers a lot of discounts and gives away products free to encourage bigger and repeat purchases.
Like supermarkets, Amazon gives customers coupons. To promote certain products, it emails customers discount code numbers. Customers may redeem these coupons to enjoy discounts when they purchase the item being promoted. Coupons are also given out for certain types of purchases.
Amazon also bundles some free or heavily discounted products with items for which they could be used. Extensive free Kindle Books are bundled with Amazon Prime membership or Kindle device purchase. In addition, it bundles several products together. The customer sees this discounted bundle offer when he is purchasing an item that is included in the bundle.
Amazon also offers a number of deals to increase customer purchases. These deals are packaged under program Gold Box Deals. The deals include short term sale, usually for one day, of selected items. Some of these items are bundled with coupons. So, customers enjoy not only regular discounts but also additional discount coming from the coupons. A limited number of coupons are set aside for the sale. The sale is good only until the coupon lasts or until the day is over whichever comes first. Aside from these, the company also showcases storewide sales so customers can see them quickly.
The company also offers rebates to customers that turn out to cost higher than at other outlets. Customer need to apply and show proof of both the purchase and the price of the lower-priced item.
Pricing is the most important component of Amazon’s strategy. It aims to offer the lowest price on all items relative to comparable retail outlets.
The lowest pricing at Amazon though can be a matter of perception for international customers. For one thing, the price does not include shipping cost and taxes. Amazon does not offer price matching except for the list it provided . The goods that international customers have bought may not necessarily be the lowest.
Amazon is a tough negotiator. It has pressured its suppliers to give them the lowest prices possible. For many suppliers, it is better to be available at Amazon than out of it because of the company’s size and power.
Because of its economies of scale and scope, Amazon is able to negotiate preferential pricing for them from suppliers. For shipping, it uses DHL, FedEx, UPS and the government’s USPS (United States Postal Service). It ships very large volumes daily. Withholding shipment from a company can result to huge losses on the part of the company.
Internationally, it groups the countries by region and offer each region simplifies pricing rates. It has divided the globe into four major regions: 1. the USA with 11 destinations; 2. the Americas and the Caribbean with 58 destinations; 3. Europe, Middle East and Africa; and, 4. Australia, Asia Pacific and Japan. There are slight variations per country depending on the courier providing service in the area. Shipping prices are comparable or lower than regular shipping rates using these services.
Taxes are not included in the prices of goods sold at Amazon. Depending on the destination, customers may pay when the taxes when they receive the packages, or Amazon collects the taxes. The computation of taxes done only as a customer checks out and pays for the purchased items. Amazon originally did not collect any taxes. However, laws were modified and taxes were imposed. There was initial resistance from shoppers . The company however seems to have overcome this problem as it had posted continuous growth in the past few years.
Today, Amazon is one of the largest retailers in the world. Its sales have grown continuously in the past few years. This is chiefly the result of its excellent management of its marketing mix.
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