The E-Commerce Marketplace - Case Study Example

 The e-commerce marketplace has grown to be intensely competitive where no competitive advantages exist. Firms in e-commerce face constant challenges, threats from competitors and the need to innovate. Duplicating websites and imitations are common in e-commerce. Customer satisfaction seems to be the keyword for success. Amidst all these challenges amazon.com rose from the traditional brick and mortar industry and made a name for itself, to day it being one of the five most recognizable brands on the internet. In fact, amazon.com is now synonymous with e-commerce. Amazon.com was the first company to move book retailing online. In less than a decade, it has become one of the most recognizable brands on earth. It expanded from being a book retailer to a virtual marketplace where all sorts of buyers and sellers of rare, used, and collectible items found a platform. Today it offers even online auctions including toys, music, DVDs, house ware, and a variety of other products and it is the world’s most customer-centric company. It sells virtually anything to more than 38 million customers (Success story). Amazon.com is renowned for its customer experience and overall satisfaction. They used technology to constantly improvise and innovate. "We work hard to refine our technology, which allows us to make recommendations that make shopping more convenient and enjoyable," explains Diane N. Lye, Ph.D., Amazon.com's senior manager for worldwide data mining. " (SAS). Amazon.com uses the SAS technology to analyze the results of their ongoing efforts to improve personalization. Multi-threading allows amazon.com to apply multiple processors to complex analytic tasks. They constantly evaluate the new product page layouts and new search technology. It is their ‘technology base that allows customers to find, discover and glean out of hundreds of millions of products, those that really interest them, says Rick Dalzell, the CIO of amazon.com (Success story). Amazon.com has one of the world’s largest data warehouses, which allows it to personalize customer satisfaction. Their goal has always been customer satisfaction and hence any technology that they incorporate is to help the customer find what he finds easily and enable a simple and convenient purchase process. Data warehousing allows them to manage growth according to Mark Dunlop, Director (Success story). Their data includes order data, inventory data, and customer data. The data warehouse is connected to almost every system in the company. The very name of the company suggests a continuous flow like the river after which it has been named. The very nature of the company too is being available 24x7. This remains a major concern. It produces and uses data round the clock. Amazon.com has demonstrated how web can overturn conventional assumptions about distribution (Mellahi K & Johnson M). Mellahi and Johnson cite that rapid and continuous innovation in the e-commerce area has been the company’s heritage. Amazon.com was also the first company to allow customers to search for and order hard-to-find books. They further innovated by offering the customers one-click program, which streamlines the buying process. Detailed customer information including the credit card number could be stored. Amazon.com adopted the collaborative-filtering technology through which they could analyze the customer’s purchase and suggest other books purchased by others with similar tastes. This led to mass customization and increased their online market manifold. Monitoring customer experience is important to amazon.com. They constantly correlate their measurements with changes that they have made on their site to see what’s fetching more responses, what should be deleted, and how to position things on the pages. Their concentration is on improving all aspects of the buying process. It is not just the designers or the usability specialists that constantly improvise. Their engineers too are strong in thinking about customer experience (Olsen). The back end people look into the finer details of customer satisfaction like whether the boxes are easy to open, what materials to be used for the packing, and whether the packing material is recyclable. They hired the brightest and the intelligent. Another innovation that amazon.com brought in was to develop comparison-shopping that allows customers a way of finding products that they do not sell directly. On a reciprocal basis amazon.com runs affiliates program too. A quarter of million participants direct customers from other sites to the Amazon store site (Mellahi & Johnson). Participants receive commissions from each purchase made by their referrals. Amazon.com has also been a pioneer in reminding customers and tracking their orders through email alerts. Amazon.com spends 40% of its revenue in brand building (Mellahi & Johnson). They rely on a firm belief that customers look for a strong brand when making online purchases. In fact, it even gives credit to its diversification strategy to its customers who kept demanding more at each stage. Since they store a lot of information on the buying habits of their customers they remain proactive and are able to guess the customer’s wants. Because of their strong data input they are able to forecast demand. This helps them to negotiate better with the publishers, as their return rate is less than 0.25 percent against the industry average of 30 percent. Being the first online company, they could capture customers and have been able to hold on to them with new products and new deals every now and then. It has also been found that once customers get used to amazon.com they are reluctant to switch to other sites and again go through the process of getting to know the layout. Amazon.com’s technology partners like HP, Nine systems and SAS have a great role to play in helping it update, innovate and achieve. The company keeps its eyes open to opportunities. Their celebration for the tenth year in business coincided with the release of the sixth book of Harry Potter (Nine Systems). They were on the look out for yet another innovative way to share the joys of these two events with their customers. They seized this opportunity and launched the first ever Harry Potter Kids Review Panel, where Harry Potter fans under the age of 18 could submit ‘audition videos’ to amazon.com explaining why they should be selected as Amazon’s Harry Potter experts. It is ideas like these, which give it a competitive edge in the online marketplace. The distinguishing feature that differentiates it from other online businesses and what allows it to claim that it has changed the world is its business model and the way it changed the rules of finance upside down (M/Cyclopedia). The success in terms of profitability came to amazon.com much later but it derived customer satisfaction and a global brand name for itself. They knew how to use the money to make more money and put it at the right place. Their marketing and promotional strategy too were remarkable. They purchased banners on portals like AOL and established partnerships with search engines like Yahoo. Pricing was another distinguishing feature where they offered the same product at a cheaper rate that what was available elsewhere. In nutshell, it was the company’s amazing strategies in marketing, promotion, diversification, pricing, and heavy reliance on technology that helped it to reach where it has today. The CEO Jeff Bezos’s focus remains on customer experience and innovation. In his words, "Our vision is the world's most customer-centric company. The place where people come to find and discover anything they might want to buy on line." Bibliography: Customer Success (SAS 2006), 5 February 2006 M/Cyclopedia of New Media (2004), http://wiki.media-culture.org.au/index.php/Companies_-_Amazon> 5 February 2006 Mellahi K & Johnson M (2000), The case of Amazon.com, Journal: Management Decision, Volume: 38 Issue: 7 Page: 445 – 452, 5 February 2006 Nine Systems (2005), Amazon.com relies on Nine Systems to deliver high-profile events, < http://www.ninesystems.com/pdf/ninesystems_amazon.pdf> 5 February 2006 Olsen H (2002), The key to Amazon.com’s success, < http://www.guuui.com/posting.php?id=232> 5 February 2006 Siva K (2005), Great Ideas and Tips for Entrepreneurial Success, < http://www.agora-business-center.com/1105bezos.html> 5 February 2006 Success Story (2002), 5 February 2006 Read More