Amazon Organization Is Involved in Online Retail Trade - Research Paper Example

Amazon Introduction Amazon is among the greatest organizations that are involved in online retail trade. The organization sells its products through technologically enabled systems for example the internet. The main clients of the company include individual consumers, retailers, other companies and content writers. Its major business strategy focuses on price, variety of choice and convenience. These have made it a trusted company by clients and led to the improvement of its general reputation worldwide. Amazon sells diverse products such as books, electronics, furniture and clothing. However, when it was founded in 1994, it was a bookseller. In addition, it manufactures electronics, such as the Amazon Kindle, for clients and provides cloud-computing services. Additional revenue for the company is from marketing services. This is mainly by online advertisement and co-branding of credit cards (Schneider, 46). The company operates in the United States and in other countries such as France, Germany and China. Strategy Amazon usually delivers products to the customers after transactions are complete. This usually takes a couple of days depending on diverse logistical factors that include distance and address. However, the company has introduced a new system, popularly called same day shipping. This enables clients to buy products online and then the products are delivered to them the same day. This remains its clear-cut strategy to ensure the achievement of competitive advantage. Indeed, the large range of products that it sells is one of the noble strategies that the company is integrating. Buyers can find variety of products such as toys, electronics, and books that are in excellent form. It customizes the experience of the buyers and gives recommendations for advancement in service delivery that contributes in customer retention. Additionally, it does customer tracking to enable it gain more customers and retain them. It also gives individuals opportunity to sell various commodities via its platform (Rosenbloom, 174). These can be either new goods or those that have been used. The advantage that Amazon has had over its competitors is that it does not charge sales taxes. This is mainly because its clients perform online purchasing that ensures effective ordering and delivery of the items with immense convenience. The company’s prior operating strategy was to avoid establishing networks in the nations that have adopted unfriendly tax policies, and thus such states do not have Amazon distribution warehouses. However, the new strategy that it is adopting requires that it sets warehouses across the United States including those tax unfriendly states. This means that the company will give up the lead it has over competitors. However, more warehouses in many states in the US will mean that products are closer to clients thus can be delivered the same day that purchase takes place. This can benefit individuals who are last minute gift shoppers. Local commercial institutions usually push these states to collect sales tax from Amazon because lack of such revenue gives the company a price advantage over them. However, online retailers such as Amazon are exempted from paying sales tax in states in which they do not have physical existence. Currently, Amazon has warehouses in six states and thus contributes sales tax in six states. These are Washington, Kentucky, New York, Texas, Kansas and North Dakota (Rosenbloom, 174). With the new strategy, it will have to collect sales levies in more states. Presently, it is unclear how the strategy will affect the revenues. Effects on competitors, consumers and Revenues Amazon has eluded charging sales tax from its clients. This has enabled it to offer products at cheaper prices than its international rival institutions and local stores. However, with the introduction of same day delivery method, the company will have to set up warehouses in many states and thus will have to collect sales tax from clients. The company had a few warehouses in the past and thus delivered purchases made with much convenience in ensuring consumer satisfaction. That is the delivery procedure was convenient to buyers and the prices were low due to lack of tax returns. Indeed, setting up more warehouses seeks to ensure that the company is able to deliver purchased items within 24 hours to the respective customers. However, the price will be higher due to the imposition of the new tax charges (Skrabec, 247). The effect of this new move on the company’s competitors and the retail sector is not under establishment. Many consumers find it convenient to buy products from internet especially from the reliable organizations such as Amazon. They prefer this method instead of going to retail stores especially if it means that they will be able to save some money. This is why Amazon was preferred. Indeed, consumers who need their products immediately and cannot wait for more days will prefer the same day shipping method and will be comfortable with the extra money charged as sales tax. Thus, if Amazon will be able to charge the sales tax and deliver the products the same day, then local retailers and other competitors who will be unable to advance their operations will face very stiff competition. This will also have a positive effect on the revenues of Amazon since more customers will come from the competitors. The company is taking a risky strategy with the expectation that benefits of fast delivery and convenience to clients will outweigh the effects of charging sales taxes. A study by Citigroup revealed that 52% of the company’s clients who do not pay sales tax are likely to stop shopping from the site if they had to pay sales tax and this can have adverse effect on its revenues. The instant delivery model requires a lot of capital injection for it to work and Amazon has invested billions on the project. The fastest ways of delivering products currently is through services offered by FedEx and UPS that hold the capacity to foster convenient delivery of products.. Amazon could thus work with these shipping services companies to make the strategy work. However, this will have effect on revenues. Clearly, the instant delivery method to be used by Amazon has considerable effect on the consumers. Amazon plans to use more than 1 billion dollars in setting up new warehouses. The effect of such a move is to bring the products closer to consumers. They will thus have opportunity to get better services. Kiva system robots will be integrated into the warehouses to aid effectiveness in service delivery. The robots will help in making the processes of shipping goods faster and more efficient hence the consumers getting their products faster (Skrabec, 247). Additionally, to ensure that same day shipping method succeeds, the warehouses will have lockers. Customers can then pick their goods from them the same day. The only requirement for the customers will be the password. The password enables them to take the product they purchased from the web. Conclusion Amazon is among the leading online retailers in the world that has immense reputation due to its reliable delivery services. It uses its website to sell and market its products with an aim f attaining global market share. It has warehouses in states that are considered to be tax friendly where its products are stored. This has enabled it offer products at lower prices than many retail stores. However, the need to access more customers has led it to adopt a new strategy that ensures efficient and timely delivery of products to clients. This has considerable logistics issues such as delivery means. The method chosen may have negative effect on the revenues of the company. The higher prices that will be associated with the new method may also make the company loose some customers. However, clients who wish to get their products the same day they make online purchase may not mind the additional levy or the services. Works Cited Rosenbloom, Bert. Marketing Channels. S.l.: South-Western, 2009. Schneider, Gary P. Electronic Commerce. Boston, Ma: Course Technology, 2009. Print Skrabec, Quentin R. The 100 Most Significant Events in American Business: An Encyclopedia. Santa Barbara, Calif: Greenwood, 2012. Print. Read More