The E-Business Marketplace - Amazon - Essay Example

The e-business marketplace has grown intensely competitive. 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 but any e-business has the advantages, limitations, and risks of using the internet for its business. 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, 2002). By selling a wide range of products it has been able build customer loyalty and by 2005, has 50 million loyal customers (Evans, 2005). One of the main advantages of moving online is the use of sophisticated software that brings in constant innovation. This enhances the customer experience as the software can remember details and sends the shopping cart smoothly and swiftly to the check-out (Evans, 2005). The software also remembers the shipping address and the credit card details. Being online allows fro reviews and recommendations from readers. The key to Amazon.com’s success is the strong customer focused approach. They use technology to constantly improvise and innovate. They work hard to refine the technology, which allows them to make recommendations that make shopping more convenient and enjoyable (Customer Success, 2006). 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 (Success story, 2000). Data warehousing allows them to manage growth (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 & Johnson 2000). 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. 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. E-business has allowed Amazon.com to innovate in the area of 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, 2000). 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. At the same time, the risks of being online have also to be taken into account. It is very easy to duplicate websites and the process and success invariably gives rise to competition. Due to competition, discounts have to be offered to lure the customers away from the traditional stores which lead to cut in profit margins (Evans). Amazon.com allows sale of goods of other manufacturers or vendors through its website which can pose a risk. Business ethics demand that they remain committed to a single vendor in a particular category but this is not always practical from the business point of view. They did fall into trouble allowing Toys R Us to market their products through the Amazon.com website (Samson, 2006). Due to competition in e-business they faced many challenges and the first challenge they faced was from competitors like Buy.com and Barnesandnoble.com. The challenge that they faced was how many distribution centers (DC) to maintain and where to locate them. The next challenge was which product type to stock at each of the DCs. They had a wide range of merchandise on offer with widely different characteristics. Some items were large while some very small; some had regional demand while others had nation-wide demand. Some had seasonal demand whereas others had uniform demand patterns over the year. Maintaining delivery schedules and stock is big challenge. They did employ radio-frequency technology, voice technology and pick profiles. This system was beneficial for single-item orders but for multiple-item orders another step was required. If the demand is not properly forecast it could lead to huge inventory which creeps into profit margins. To avoid holding inventory they tailored software to evaluate multiple fulfillment options. The advanced technology requires well trained staff and maintenance of delivery schedules. The challenges that they faced in Europe was that they were unable to determine if deliveries had been made by the distribution centre as the technology used in US (Electronic data exchange) was not commonly used in European countries. Thus, while the internet and the advanced software do enhance the process, the customer experience, the procurement and deliveries, competition poses risks and challenges. Even vendor relations can be adversely affected if not properly monitored. Nevertheless, the rise from a brick and mortar industry to e-business has great advantages both for the buyer and the seller, as has been experienced by Amazon.com References: Customer Success (SAS 2006), 08 Feb 2008 Evans, S., (2005), Birthday greetings to Amazon.com, 08 Feb 2008 Mellahi K & Johnson M (2000), The case of Amazon.com, Journal: Management Decision, Volume: 38 Issue: 7 Page: 445 – 452 Samson, M., (2006), Toys R Us.com, LLC v. Amazon.com, 08 Feb 2008 Success Story (2002), 08 Feb 2008 Read More