Monday, May 2, 2016

Online shopping store eshop

Online shopping store site eshop


The present house work deals with the issue of online shopping stores  . The aim of the work is the
detailed illustration ,connected to the world through a computer illustration and critical analysis of these shops . In addition to the subject matter
in-depth discussion at the example of the major online retailer online shopping store site Amazon
are shown.

The new information and communication technologies , available on or performed using the Internet or other computer network especially the Internet ,
has changed the business world . It created new business models and distribution channels
for traders . This development come from the online shopping stores . Meanwhile, can
one in such shops to purchase almost all imaginable products and services .

In order to develop a greater understanding of e-shops , with processing of computer data carried out simultaneously with its production in or into operation or existencewere in this work initially .
Basics of online shopping stores closer illuminated . This includes also a consideration of the different.
Shop systems with a furthermore, the household contains a detailed analysis of
Potential for success of Internet shops and purchasing of goods from e-shop. Who wants to be successful in his shop , has its customers more than just an electronic product catalog . The customer demands ease of use ,
Individuality and excellent service .

This is reflected particularly in an matching Shop ambiance , short load times , excellent product , customer interaction , security and transparency of prices. In addition, there are certain factors which
Compliance can significantly increase the success of the shop . These factors include , for example,
a unique attraction of e-shops , an intensive use of communities. Supply chain excellence and strategic alliance partnerships . Moreover, the internet as a shopping venue offer many advantages such . As the possibility of anytime, anywhere shopping , improved selection and increased market transparency .


Also for Dealer arising advantages such as a global transparency and a reduction
transaction costs. Furthermore, the impact of online advertising refers to the company's success
steadily . By online advertising opportunities to the advertisers have many additional
Options opened such . As search engine marketing or affiliate Marketing. However, sales through online shopping stores has its drawbacks . From the perspective of traders these include the increased competition and improved market transparency . For consumer, there are impairments in the absence of physical product experience before and during the purchase and in the non-existing social contacts.

An online shopping store a busy shopping area which knows how to satisfy customer requirements and success factors to use , is the world famous mail order company online shopping store site Amazon . Small and considerable losses
began the pioneering company and has now become a gigantic success . A large portion of this power has Amazon's corporate mission . Amazon like to be in the world the customer-center company . In this case, making the dealer a sophisticated affiliate program and an excellent e- customer relationship Management to use . Meanwhile, the mail but not limited to the purely commercial , but also allows third party for a fee , the products on the offer Amazon platform . But this is only one of the numerous activities of online shopping store site  Amazon , for example, provides the mail order company also logistics services . summary can be said that Amazon online shopping store site has managed to revolutionize the trade .

With an online shopping store is a web-based "virtual shopping place". Concrete making it a site meant that the user the possibility to electronic shopping provides the Internet. Consequently, an online store is to be a physical walk-business but virtual image, which all relevant functions and properties of a real having shopping venue. Often it is also the term Electronic shop (e-shop) or web shopping store used. The online shopping store is available online at its own address or as part of a Shopping mall (see. Section 2.3.2) to find. In an online shopping store offers an online provider (manufacturer or distributor) services or goods. These items can physical his or digital in nature, usually, these are standard products. The customer can select the desired goods and place them in a virtual shopping cart. Subsequently he can give his order online and pay. If it is a purchase of digital Goods, the goods can be immediately downloaded.
For physical goods must first a delivery by logistics service be initiated . When selling in the real
World must always be present in person , the seller or his staff , this is not required for the sale by the online shop . The sales process is done via an individual site usage , from a customer perspective is a man-machine relationship in front. Another advantage over stationary outlets is the random assortment from online shopping stores . The sales area is not limited by spatial conditions .
Further, the term online shopping store is an umbrella term for different power deals
and understand merchant strategies . The operators of online shops can fully differentiated
Strategies Track . Many traders want to differentiate themselves on price , other about product quality , some are niche players and some turn global distributors .

Purpose and structure of the work

The aim of this work is the detailed illustration , illustration and critical viewing of online
Shops . After the issue was discussed in detail in theory , they should at the example
the well-known online retailer Amazon online shopping store site are investigated . Around the issues better position
To understand the basics of online shopping stores are first explained . An analysis of the potential for success of e- Shops. In particular the customer requirements and the success factors considered . Since just extra on the Internet resulting advertising possibilities will be discussed in Chapter 4 on this . However, there are even at online shopping stores certain problems and factors that must be considered - they are covered in detail. Finally the case study of online Merchant Amazon online shopping store site examined . Rounding out the work with a summary of themes and an outlook .

Basics of online stores in order to view the topic online shopping stores better , first the theoretical
Basics of E -commerce provides


E commerce
The common term since 1995. E- Commerce enjoys a very frequent and at the same time
inconsistent use in theory and practice . The " E " in E -commerce stands for " Electronic "
the whole concept is in German with electronic trading. The following
Definitions are an insight into the versatile use of the term E Commerce give:

under the umbrella term " electronic commerce " here is any kind of economic activity
are grouped on the basis of electronic connections . "

Electronic Commerce , usually translated as electronic commerce or e-commerce ,
referred to the various ways processes in the sales area by
handle electronic communication media . "In the present work is under e-commerce " all forms of digital settlement between companies and understood their customers over public and private networks . Where the main issue is the electronic initiation and processing of transactions .
E Commerce is a branch of e- Business.
If we distinguish e-commerce according to different action partners , resulting in particular
three major types of relationships.

Business to Business: Electronic business transactions between companies
different stages of the value chain . The occurrences in practice
very different, they occur for example as a web-based purchasing platforms .
Often , these are also networking with suppliers or customers .
Business -to-Consumer : describes the relationship between a company
and the final consumer . It is especially the electronic sales ( e-commerce )
in the foreground. In practice, this relationship is usually at online shopping stores or on electronic
Marketplaces reproduced .

Consumer-to- Consumer : describes the relationship between consumers. residential
function here as a seller and buyer power . This relationship is very often on trading platforms or online classifieds market .

In principle, any online shopping store from a storefront and a brick front . The customer
only view access to the shopping store front , where they can search for goods , obtain and pay .
On the back front itself only the shop owner has access . In this he can key
define functions such . as payment arrangements , order arrangements , how to order
and the product catalog . Architecture of an online shopping store is listed .

Shop Systems
As in the real world , there is the Internet many different ways to his shop to
make and place . It can for example be part of a shopping mall or completely
stand alone . The individual shop systems of the virtual world are explained in more detail .

Stand-alone stores
Stand-alone stores are classic online shopping stores . The customer passes by entering the Internet address
( URL ) of the stores directly to the homepage of the retail outlet . Alternatively, the
potential buyers are forwarded through a link on the homepage  over
the link of the hit list of a search engine . In a stand-alone shopping store has only one producer
or dealer 's wares. He is free to decide which product range and depth of range
he offered . He can also decide how the user interface and the
to optical and content of the shop design look .

Stand-alone stores can be divided into mono - shops and virtual department stores again .
Mono - shops offer only goods of an industry . In retail shopping stores they are with the
Specialty retailers .Virtual department shopping stores
Virtual department shopping stores offer a cross-industry product range . They are the electronic
Counterparts to the department shopping stores in the real world , known examples are cartel
amazon-amzn.blogspot.com and astore-eshope.blogspot.com . In this category also includes e-shops like the mail order company Amazon . Similar to the real department store , where the goods to various departments are ordered , the goods are displayed in the e-shop to different topic areas .

Shopping mall
Online malls, virtual or electronic shopping center, virtual shopping malls or
called Electronic malls, are the Internet pendant to traditional shopping centers. In steady
Retail define a shopping center as "a unit planned, built and
managed agglomeration of retail and other service industries "26 different
Type and size. Based on the Internet, is a shopping mall an Internet platform,
present on the different suppliers their products and services together.
The Internet platform has a common Internet address (URL) and has a
unified user interface. However, each shop is also on its own, direct address
accessible and can also be represented in several malls. The unified user interface
could be compared with the building architecture of a real mall and the common
Address with the location of the Mall. Upon entering the online shopping center
The customer can click on a shopping store and so to own, virtual salesroom seller
come. Clicking z. B. to the shop of the mail order company "Otto", then appears the
same online sales space as on the website of the merchant. Alternatively, a customer
use the cross-business, mall-wide search and search directly for articles. In
Figure 2.2 is the home of the well-known online shopping center "shopping" shown.

In general, the shopping mall operator is an external service, the so-called provider.
This provides commercial space in the form of storage available. Often accepts multi-vendor services such as corporate marketing. The credit scoring or the bundling of delivery. are especially for smaller online retailers.Online malls advantageous because your offers can be perceived more strongly in the composite.In addition to list on attractive shopping malls increased "traffic". In this
Way more customers can optionally be achieved than through an insulated line
Counter. The client in turn has the advantage that it in many products a
Body found. Since it is necessary to overcome any physical distances on the Internet, this advantage is though not as large as in stationary shopping malls. Many online fight Center
Moreover, with a negative image. The most common criticisms are the complexity
the product range, the logic of the search engines and to small entertainment value.

Potential for success of online shops
In order to realize the potential for success of e-shops , there are certain factors that observed
Need to become. This section describes the requirements for an online store are made
Customer perspective , the success factors and the benefits of web shops explained .

Customer Requirements for online shopping stores
Given the increasing competition , the sellers have their online stores
upgrade with ease , individuality and service . In reality this is often not the
Case. Therefore, the traders go for lack of customer information and ease of use in revenues
lost millions. The following properties are the clients an online shopping store especially
important:
Navigation : A simple and intuitive handling of the online store is a significant
Factor for an unforgettable shopping experience . But the content must be well structured and
navigation be highly accessible . The navigation elements allow the user to
to orient themselves in the virtual space and access specific pages directly . Only if
there is a customer on the site right, he will visit them again . Especially helpful
is a logical structuring of the product range , often done this by topics .
The individual topics can be further categorized again . Important is,
that navigation can answer the user the following questions: Where am I on the site ?
Where was I? I have Which way behind me ? Where can I go? What clicks
I get to the destination ?
the long wait for the website structure . According to this study , the usability ,
Content and speed the most important factors for loyal .

24/7 operation: Customers expect that an online shopping store 24 hours a day, seven days a
is weeks away. That this high availability is not always the case, shows the following
Example: 2016 caused a shortfall in sales for the tickets of the European Championship,
because the server of  the many requests could not be processed. Only one in three visitors
was the order page in the first hour .
Security: The security of the platform is an indispensable prerequisite for confidence
the customers and thus for a successful e-shop. The security extends particularly
on the points privacy, data integrity and availability. With Privacy, security is
of private and sensitive data (eg. as passwords or credit card numbers) meant.
Under Data integrity is preventing the data destruction and data manipulation
understood to unauthorized or accidental manner. stating availability,
that authorized persons always read and possibly write access to the data
must be possible.

Customer Interaction : For customers it is very important what keep other buyers of the product .
In particular, the User Generated Content (Customer rating ) is perceived as credible
and serves as a purchasing criterion . For this reason, the possibility of the product is in reviews
an e-shop is entirely advantageous . Whereby shop owner should specify evaluation structures
( Z . B. grading system) to provide comparability . Satisfied customers are always
still the best .

Product presentation: The products should be represented by appealing images that
can be enlarged if desired. In principle, the rule is to prepare interesting content graphically
and optionally combined with text, music, images and animations.
However, it must be ensured that it is not too complex, otherwise keeping the long load times
customers from buying from and the whole site is cluttered. Moreover, it is important
that a product description is to be found with price information. This also includes a
transparent presentation of shipping with a. Shipping price overviews and General
Terms should be clearly laid out and not too much text. For technical
Articles are product details asked where the style of information sober and routine
is to be held. Longer texts should be made available for download. In which
Usually the texts are only scanned by the customer and not read in detail. Therefore
it is highly recommended to install key-words in the text to arouse customer interest
and only to use large, clear fonts. The text should be kept as short as possible
be and still contain all relevant information. In addition to product description
it is important to list the current delivery times, so that the customer is informed how long
he must wait after ordering. On the Internet the shopping store ambiance needs to  the customer's expectations fit. The first impression the customer wins over the entry area,
therefore this should seine. always up to date, attractive and tidy.
Product: is to generate revenues, provided that the customer can find the product
can. The search must therefore be based on the needs of users and
Allow a full text search within the item description. In addition, should misspelled
also lead terms or alternative designations to success. Further, it is
recommended to integrate a search for specific product characteristics such.
By ISBN number for books. To do a search with a simple search box
are made possible, Google is the case, but in addition also a search with
a search form in which you can set filters. This filter should be designed so that
they do not scare the customers due to specific details. An optimally equipped
Web-shop includes a product search, a category search a function search, a keyword search and a
Search in which several filters can be set. A study by the Swedish consulting firm Avail Intelligence has found that 57% of respondents more for them
would buy related products in one shop when the product was originally sought
could find easily.


Compare: Especially with technical and complex products, it is important for the customer,
that face the products and compare.
Cart: The cart is a standard feature in an online shopping store. In it, the
selected items are shopping stored until the payment process. The depositing of an article in
the cart would not yet for sale, but it serves as an overview and
Test ability respect of own purchase intent. The cart should be flexible manageable
be, d. h. not the product must be easily removed and the number of
Products should be changeable. Especially useful it is for regular customers, who often
the same products ordered in the same amount when creating a standard basket of goods
can. Moreover, it is pleasant for a customer, if the option is to be presented
the recently ordered items back.
A well-functioning shopping cart contains the following functions:
- Repeated receiving articles of the same kind,
- Remove one no longer desired article,
- The possibility of view of the article details the cart from,
- Subsequent change the order quantity,
- Subsequent configuration change of configurable products,
- Gross and net prices,
- Display of shipping and payment.

Product order: When a customer chooses the products in his cart to
buy, it should be made this as easy as possible. Consequently, the route from the shopping cart
easy to customize to the virtual checkout. One rule of thumb that the customer
should be possible with three mouse clicks to complete a product order. It should
only the most necessary data is queried. The more order forms to be filled
have, the greater the inhibition threshold for purchase. The retailer Amazon online shopping store site offers
Registered customers even order with one click. Each online shopping store should
moreover it be possible to create a virtual account. are by this account
the customer to enter the password every need in the ordering process customer information
as delivery address and payment arrangements without retyping available.
It should also be the customer always shown exactly where he is in the order process
is and sind. how many steps to do still,
Payment: The payment is about a possible customer desire compliant
to provide selection of payment methods available. This selection can be by the Transfer
via cash on delivery, debit and credit card method to special online
Payment systems like Pay Pal go. Of course, should by choosing a payment method which
Settlement for the customer to be as simple as possible. The whole process needs to the buyer
make a reputable and trustworthy impression. It should only essential
required personal information in order not to frighten the customers. also
should the encrypted data transmission via (Secure Sockets Layer) SSL for granted
be for each online retailer. Secure Sockets Layer is an encryption protocol
which is used for secure communications on the Internet. According to results of the Internet
World Business trend scout "security when buying online" give Internet companies
due to the lack of significant confidence-building measures revenue. The study
based on a survey of 171 professionals and executives of the Internet economy. According to statements the study have already canceled two out of three Internet shoppers place an order,
because they visited the shop not serious enough appeared. Of these terminators said
half that they had continued the order when the shop a visible .

Tracking : For a web shopping store , it should be of course , that a customer 's order
can track . It is even better if the customer automatically on the status of his order
is informed . The customers get Amazon-amzn.blogspot.com online shopping store site example not only a
Order confirmation , they also received message if the package has left the manufacturer.

Success factors of online shopping stores



Success factors are usually factors which to a significant contribution the company's success
afford. Good chances of business success have shop owner,
if they meet the customer requirements listed in Section 3.1. Ideally, they should
realize these requirements significantly better than the competition. Apart from the
Customer requirements, there is the following success factors that also attention must see.
After Mannheim particularly the following success factors for an online shopping store are crucial:
- A unique attraction of e-shops and a clearly profiled promise
(Shop Attraction and selling proposition).
- Extensive use of communities and social networks (social targeting).
- Excellent and fast self-service, service and search solutions (service and Search Solutions).
- Maximum possible individualization and professionalization in customer contact (individualization).
- System and value chain excellence (system and supply chain excellence).
- Best possible safety standards and -Reputation (Security Standard and -Reputation).
- Strategic alliance partnerships (Strategic Alliances).
are hereinafter Due to the limited scope of the work by the author to be extremely
deemed important factors described in more detail.

Shop Attraction and selling proposition
In online trading shops are particularly successfully, a clear differentiation from
have reached the competitors. The shop should be designed so that it by itself
has made an appeal in the market. This point also includes a careful selection range
with a. Especially the "spatial infinity" enticed many different products
without a clear line to take to the range. Also in the range itself should
Find communicated brand positioning again, finally there is a difference if you
is perceived as a grocer or as media distributors with additional offers.
What matters is whether an online retailer has the ability in an attractive range
offer required depth and width at a good price-performance ratio. This should
not mean that no superior choice in the perfect position to brand range
may be offered against offline vendors. Particularly attractive is a shop for
a customer whatever when services such as Customer Reviews / -
reviews, technical product comparisons, accessory lists, dynamic product recommendations,
Wish lists, search service for rare titles, etc. are used.
In choosing the products on offer, make sure always that the products
are web-enabled. Products that have a high E-potential, have a particularly
good internet suitability. describes the e-potential, how well products due to their product characteristics
can sell through an online medium. can reference the following factors
the e-potential of a product can be determined:
A digitization: An important criterion is the a digitization of products. among them
is the conversion of products into digital information to understand. Digital product
are ideally suited for distribution via the Internet or have been specially designed to
z. B. the download of music. Not digitization products are physical goods, in
they must be assessed in how far the product characteristics, information
digital can be displayed on the product. If this display is possible and sufficient to
to describe the product for the customer, then the sales process, from delivery
apart, are processed electronically. In the logistics can only flow of information,
which accompanies the delivery, are handled electronically. When thoughts
makes about the logistics, you should always check whether a well ever for shipping
is suitable and how long would the delivery times. A book is an example of a physical
Well, that is suitable for online sales. This article can all the buying decision
necessary information is provided in advance. In addition, the physical
Delivery very well realized, because books are low priced, stack able, durable and in small
provide package units. This product features may one of the reasons for the
his early triumph of the book on the Internet.

Type of goods: search goods are especially suited for online transactions. These are goods,
where you before they buy through information seeking knowledge about the quality of
can obtain product. Examples: Bookshelf .
The purchase risk: The risk of buying is determined by the price and trust. The higher
the price of the good and the less confidence, the higher are the inhibitions regarding.
Purchase frequency: According to the authors Peterson, high-traffic, low-priced products physical nature preferably in trade
Bought. Highly frequented, low-priced products are informative contrast rather Internet.
Digital accessibility: This criterion refers to the self-service potential of
Good. A customer has to decide on the online medium, whether the product without real
wants to buy examination. Foods are z. B. not digitally assessed as a customer the
Products would like to touch and check on its freshness. include particularly network-capable
Products that can be tried out online, such as software, information services,
digital publications and electronic productive.
Digital Consulting expenses: This criterion relates to the amount of information a
Product. Some products can be personalized with a few information adequately described,
while others require comprehensive advice before buying, which is not readily
can be digitized. Consultancy Intensive products are less for distribution through a
Online medium suitable such products are. B. Industrialization
Digital identifiable: The products should be clearly identifiable, so that a potential
Customer can easily find and identify. When carrying this example,
done by the ISBN number.
In Figure 3.3, the most popular items purchased on the Internet are on the number of buyers in
represented of 2017. Most of all, consumers bought tickets, closely followed by books and
Nights.

Finally it can be said that products with a high E-potential well for
selling over the Internet are. Such good is z. B. Music. It can be clearly described
(Title, artist, style) and an online audition beforehand assess able. products
a small e-potential, yet very well suitable for sale on the Internet,
are branded or hard to find products. The brand name may be the
Consumers have a certain idea of ​​the quality and the consumer benefits of the product
do. According to the authors Blimey and Theodora be the Internet particularly products
bought that absolutely have a low price, not complex and intensive consultation
are, have no distinct emotional aspects and beyond standardized
and are digitalis. This statement was also empirically verified and largely confirmed.
Social Targeting
In Web 2.0 era are available for all areas of life and for just about every product
Community. In these communities, the customer can share his experience and his consumption
Opinion about a product or brand trust the other members. an online
Distributors should cooperate with such communities or even call that into being. So
can be targeted customers with similar interests. It is assumed,
that the Social-targeting will win in the future on enormous importance.

Service and Search Solutions
The main reason for the "choice of outlet Internet" is the customer time and cost savings
indicated. In order to achieve these time savings, the customer needs an excellent
Search and navigation in its online shopping store. is on those two points
not be described here since they are already covered in Chapter 3.1 with the customer requirements
were. However, with an excellent search function, the search outside the shopping stores
meant. This is understood how easy it is for a customer to push the Internet to shop. It is particularly crucial to which ranks the online shopping store at the
Search engines (eg. As Google) is represented. The majority of customers come via external
Searching for an e-shop, so it is very important that the site for search engines
is optimized. A study by the Swedish consulting firm Avail Intelligence revealed that
more than 90 percent of those interviewed in the search for a product via search engines,
social networks or price comparison sites in the respective shopping stores arrived. The direct
Entering the domain URL (Internet address) of a shop is rarely used.


In the area of ​​customer care and service is great potential for traders to have a positive
stand out from the competitors. Especially in Kevorkian- and replacement phase, it is possible
to offer customers significant added value. In the Overemphasis example,
in addition to the multimedia product presentation comprehensive information materials
and interesting additions download or link to external information
Tobe offered. There is also the possibility of sample delivery. additionally could
the Internet customers online tools are provided, such. as e-learning,
Profitability calculation or applying for public funding.
In the after-sales phase the customers all the information materials should next newsletters
offered that he might need, such. as operating instructions, installation aids,
Summary tables or database libraries with data sheets. Definitely
must the Exchange service, complaints management, the repair service and warranty processing
be of special quality as they are delicate in distance trade issues are.


individualization
For online customers nowadays a tendency to individualization can be seen. they expect
targeted and personalized gratification. For this reason also the
"One-to-One" marketing more important. There is a need satisfaction through personalized
Deals. From the wealth of customer information profiles are created, which for
the "one-to-one" marketing can be used. Particularly beneficial for shop-
Systems based on the user registration an individual customer preferences -
enable performance. So a personalized customer approach usually goes with increased dialogue measures
accompanied. This can eg., By personalized e-mails, customer forums or
FAQ areas served. Furthermore, customer loyalty is enhanced by Cookies,
automatically detect, respond and provide you with the desired services to registered users.
These offers range from simple accessories logic, on the cross-selling to
a profile based logic, the individual portals and offers to match the previous
Purchasing behavior indicates. The bookshop Amazon is a good online shopping store site example of successful
Cross-selling (Customers who bought this item also bought ...). Especially in connection
with today's information overload individualization is becoming increasingly important. Some
Shops can even information files (eg. B. Credit-reform) assess the creditworthiness of customers on-hand of name and address. Based on these results, they then offer
Customers a variety of payment and return facilities.

ecurity standard and -Reputation
Many customers wonder due to the anonymity of the Internet, if the trader visited trustworthy
is. Especially when it comes to small, lesser-known vendors. Therefore,
the security image of the shop owner to be a critical success factor. In the following
Points see the customer often a risk:
Functional risk: Neither the quality nor the functionality of the product can be checked.
The provider can minimize the risk by offering only brand goods, the customer comprehensive
Grants rights (z. B. Exchange Law) and his reputation strengthens. The reputation
will be fortified such as by public relations.
Financial risk: This is for the customer back especially if he commodity the
sends or reclaimed and further still in terms of a data breach while
checkout. Here can counteract an online retailer, where he generous
Conditions of Use written and alternative payment methods such. As Paypal offers.
Personal risk: See the customer usually in a data misuse of personal information,
z. B. by carried out an unauthorized release of the e-mail address. Therefore, for
the dealer the protection of anonymity and privacy a top priority.
Time risks: If the customer usually in long delivery times, especially when appointments
like Christmas must be respected. This should of offered by flexible capacity planning
counteract. Especially important for a successful shop is a well-functioning
Logistics. A shop, delivery within three days promises and then only in
provides two weeks little agreement is found.

Benefits of Online Shopping Stores
Through the use of online shops arise both for the consumer as well as for
traders numerous advantages which will be explained later in the chapter in detail.
Advantages of online shopping stores from a consumer perspective
The motives for consumers shopping at online shopping stores, are manifold. Particularly when compared with
the-counter retail offer eshop several advantages:
Possibility of anytime, anywhere purchase or which: Through the Internet, the customer receives a
24 hour ordering. Past experiences show that in online trading be-preferably in the evening and will be ordered at night. In addition, a customer no longer in the stationary
going business, but can at any place with Internet access .
More choices: A wider choice results from worldwide access. A customer
may appoint international providers and has such a significantly broader range than
Stationary possible.
Market transparency: The "Real Time" -Market transparency increases
enormously for the customer. This comparison possibility of price search engines or
Software agent supports, which seek out the best deal for the customer. On
potential customer can without additional transaction costs easily the best offer for him
finder.
Reducing transaction costs: For the customer, the transaction costs are reduced by the fact that
He has to travel any distance to the shopping center. In addition, the comparison of different
enables authors and waiting times, eg. at cashier desks are reduced.


Increasing the transparency of information : The customer has information advantages since it
quickly, easily , anywhere, anytime in a variety of information back
can grab . This information can then displayed thanks to electronic support
be categorized and that they are easily accommodated for the customer . In online shopping stores
are often more information than shown in stationary shops . This is under
others tried . the missing sensory product experience
Figure 3.4 shows the main reasons for a consumer to operate online shopping .
The results came from a survey of Dial-ego AG in 2017. base were
914 respondents who have ever shopped on the Internet . Multiple answers were possible.
It can be clearly seen that the potential buyers targeted search for bargains
and the rest with rummage most important. These arguments are closely followed by the
Mobility of on opening times and the savings of the way .

Advantages of online stores from distributors view
As main advantages of online shopping stores from distributors view apply in particular the following
Points:
Global presence: The global presence is the dealer open up completely new target groups
and markets.
Buy direct acceptance: By direct order taking, there is a shortening of the
Distribution chain. Furthermore, some functions can be transferred to the customer, thereby
the cost of manual order entry or call center.
Recovery of customer data: Through the online medium, it is possible for the dealer,
Search and purchase data of the customer to understand. This allows customer data is of immense
Quality are obtained and the transparency of information from the seller increases
enormously. This in turn allows the trader an individualized offer profile to
to develop a personal marketing strategy. With the data, a one-to-one
Marketing can be achieved which does not forcibly terminates in a cost increase. A big part
the process steps can be automated, it is in certain circumstances up to an automatic
Email Erstellung.
Long-tail marketing: Because no listing and shelf fees in actual
incurred sense, it may be profitable for an online merchant, low-value products into
receive range. According to the concept of long-tail marketing is not only a
Providers of "hits" (mainstream products selected few, the mass appeal and a
high demand have been making) profit, but also a provider of numerous niche products.
In order to offer these products in retail shopping stores is the cost too frequently
high. In addition, only a regionally limited demand exists. With global demand, no
physically limited rack positions and lower costs, the sale of niche products
for online retailers very profitable werden.
Reducing transaction costs: Many transactional activities can on-line
Base are carried out cost-effectively. A trader can relatively easily and quickly the
Assortment, prices, update the sales promotion, etc.

Advertising opportunities from online stores
Just as the stationary merchant an online shop owner must advertise to the
to increase awareness of its shopping stores and to win customers. He has the possibility
to use the classic offline promotional offers such. as the print media, or it may
rely on online advertising. This chapter from the author selected online
illustrated advertising opportunities for e-shops. In the offline advertising can due to the limited
Scope of the work will not be discussed further. It is further to the
referenced literature.
The online advertising market has for years through significant growth. According to forecasts
the Online Marketing Circle (OVK) in the Bundesverband Digitale Wirtschaft (BVDW) e.V.
is the online advertising market in Germany in 2017 by 19% to five billion euros
to grow. This would transform the Internet, which is the third largest advertising medium in Germany,
its distance from the second largest genus, the newspaper (19.5%), further reduced.

Search Engine marketing
Search engine marketing is the use of search engines to customers for their own
Website to win. The aim is, in the results pages of search engines (eg. As Google,
Bing) to be represented as far as possible above. Only someone who is there, prospective buyers can to customers
do. The Circle of Online Marketers (OVK) expects that in 2017 1.9 billion euros
will be spent on search engine marketing in Germany, an increase
by 15% over the previous year mean würde.81 The importance of search engine marketing
becomes clear that about half of all purchase decisions with the use
by search engines beginnen.82
The search engine marketing (Search Engine Marketing) is divided into sub-disciplines
SEO (Search Engine Optimization) and Search Engine Advertising (Search
Engine Advertising) .83 However, the term search engine marketing in the literature
inconsistently used. Often the search advertising than search engine marketing
bezeichnet.84 Successful customer acquisition via search engines can actively
the search advertising be affected. Advertisers companies run text ads,
which depending on what is entered for a search term will. These text ads
have a link that the visitor to click on a landing page
leads with further information. The customer therefore is not on the home page of the advertiser
out, but corresponds directly to a page, the more information by keyword holds .
This type of online advertising the dealer can specifically target Customers
are obviously interested in the entered search term . This does not make the dealer
with the optical design of the display attract attention , but only with a
very short text and the rank of the display . The paid ads above and next
the angezeigt.85 by relevance ordered search results Figure 4.1 makes again
clear which results were paid by the advertiser and which are not.

In order for this type of advertising works, the company has the matching keywords
identify and bring in a hierarchical order. After that, the advertisers, the
Book main keywords in the search engine providers. Every time the switched
must be ad clicked, the advertiser paid (costs-per-click). The price,
he has to pay, is determined in the so-called keyword auctions. There give advertisers
Companies to the maximum price they're willing to pay per click. At long last
they will be charged by the search engine operators only the price to outbid
the next lower rank is really necessary. If several marketers the same keyword
want to buy, they compete with each other to the position of the display. These
depends on the formula of a search engine from, but mainly
is influenced by two factors, the price per click and the click-through rate of
Campaign in Heterogeneity. The click-through rate is the number of people,
who ad clicked, divided by the number of people which the
Display in the search results view sheen. analyzes show that displays directly above
the search results are the strongest, and the top right stronger than perceived below.
When it comes to search engine optimization , programming the site so that
Words and phrases can be well found by the search algorithms of the search engine providers . In addition, the page should appear in the hit list as high as possible .
Usually the first three results is given full attention . The farther
below results appear , the more unlikely it is that he is clicked is . In order for a
Site is as far listed above , it must be the search engine algorithm for
entered search term , classified as important .

Banners and buttons
Banners are interactive billboards that appear on third-party websites. they give
an advertising message and usually have a narrow rectangular shape. The size is
this individually designed, which now become established various standard sizes
have, is selected from those generally. Banners can be animated or static.
it will redirect to the home page of the advertiser by clicking on the banner.
Doing, the websites where banners are connected, be carefully selected.
The sides should have a high traffic and addition of the desired target group
be used. The exchange of banners is done according to certain rules, such. B.
on the number of page views or a specific timing. Each advertiser booked example
a certain number of page views, making it the number of successful ads
the banner meant. If this number is exhausted, the banner of the next advertiser is connected.
Payment will be made either per click on the banner or per 1,000 visitors to the site,
regardless of whether they click on the banner or not. As traditional banner easily ignored
may be, it is often the circuit of pop-up banners. In this case, a new
opened window containing only the respective advertising. However undermine
more and more pop up blocker this form of advertising. In section 6.6.1 are selected graphic
Online retailer Amazon online shopping shopping store site represented.
Buttons are a special type of banner. They have a relatively small advertising space
(Smaller than the banner), and often contain only the product or company name.
Since buttons are interactive elements, you will be by clicking on the website of the advertiser
geleitet.91 Through the use of banners and buttons, the recognition of
advertised stores or advertised brand increased significantly.

E-mail marketing
The purpose of email marketing is the direct targeting of selected groups via email.
This instrument is not only to attract new customers, but also for customer loyalty
suitable. bind and inform customers is important for shop owners. mailings can
to individual or sent via mail distribution list many users. The addresses are either
known or can be purchased from address publishers. Widely used in this case is the
Send newsletters via email. These include not only current information usually
Links that lead customers to more on the website or animate directly for sale
should. The great advantage of e-mail marketing is the low cost. Furthermore, once created content can duplicate any number of times, and even more ship free. though
it is illegal in Germany, advertising mails without the consent of the recipient
to send. Thus, the preservation of personalized emails or newsletters is active from
Customers want, and thus experience a higher attention. On E-mail advertising
specialized agencies have addresses of subscribers to its agreement
have given from the mailing against shopping vouchers or the like.

Affiliate Marketing
The affiliate marketing is based on the principle of distribution and network partnerships.
Therefore, the affiliate programs are often referred to as affiliate programs. In this
Concept integrate the partners of the advertiser banners, buttons or text links on their homepage.
Clicking is then linked to the advertiser's site. In addition to this
link based solution there is still the Integrative. In this example, the products
the advertising company will be integrated directly into the basket of the partner without
requiring the user to leave the partner site. The affiliate network allows the
to advertise on numerous web offerings. The accounting methods are different.
You can pay per click, but also per successful and technically assignable
Sales period. It is also possible that the remuneration of affiliate (partner)
carried out without payment as a pure barter. The sales activities of "affiliated-
Sites "are measurable and thus can an online retailer look exactly which partners
has enabled him how much "traffic" and sales. Ideally, the partners programs a
"Win-win" is for both sides. The advertiser can increase its customer base
and the partner may at clever selected joint ventures its customers added value
offer. When selecting a suitable partner should be taken in any case it,
that he has a high number of visitors, the appropriate audience responds and good
Image hat.94 The Circle of Online Marketers (OVK) expects the affiliate networks with a
Online advertising revenues of EUR 339 million for the year 2017. This represents an increase
of 10% over the previous year.

Problem analysis of online shopping stores
Although online shopping stores are becoming increasingly popular , must not be forgotten ,
that they also have disadvantages and problems . The following are the drawbacks of e-shops are
represented from wholesale and consumer perspective .

Problems of online shopping stores from distributors view
High initial investments: Especially at the beginning of the creation Shop generates huge initial investments
for information technology to infrastructure.

The effort required for the technical
and medial System is very often underestimated. considerable costs
also causes the required marketing shop. Mostly, these expenses
circumvented by working with fulfillment services werden.96
Long payback period: Due to the high initial investment, the payback period
relatively long. In addition, it takes a certain time to build a clientele. Therefore
falling sales delayed an.97
Increased competition: The spatial infinity of online shopping stores, it is a
Providers take an easy, even non-industry products in the shop. Also enticed
Internet suppliers to directly to customers for sale. It is a disinter mediation operated.

Problems of online shopping stores from a consumer perspective
No physical product experience before and during the purchase : A study by Browne et
al . , were in the 18-25 year-old students asked about the advantages of Internet shopping ,
shows that 35.7 % of respondents consider to be the biggest disadvantage of the lack of opportunity
real to see the products before buying , to touch and try out ( see Table 5.1 ) . ever
Range and type of customer , this information may be buying decision . Just
the purchase of haptic products like clothes or fruits and vegetables , it is of the
Consumers often considered important to touch and to taste the products . By
the lack of physical contact is created for the customer a risk in terms of quality
and functionality of Produces.

Lack of social contact: When shopping in stationary shops, the consumer has always
yet certain social contacts, he can, for. example, in discussions with the sales staff. The-se option is not available when shopping online. From the resulting anonymity
results when potential customers an increased perceived risk. 10.1% of the surveyed
Students in Browne et al study reported that they lack the discussions with the
perceive salespeople as a disadvantage. Through the non-existent personal contact
is also the customer loyalty for the online retailer schwieriger.101
Possible difficulties in the complaint: Many consumers worry about
emerging difficulties in the case of a complaint. How to be seen from Table 5.1
can, this corresponds to 22.8% of respondents. Going to the post office is also with additional
verbunden.102 expense for the consumer
Security concerns: After Browne et al study are safety concerns the second largest
perceived disadvantage of online shopping stores. Safety concerns, particularly in the processing of payments,
keep a potential customer frequently purchase from ab.103
Additional costs: Additional costs eg due to delivery fees or possible formation.
Costs of returning of complaints, making e-shopping is also unattractive.

Among the aforementioned problems is the fact that the consumer when shopping online
usually not his undivided attention to the purchasing process gives .

Over half of all
Internet users are listening casually occasionally radio and about 40 % sometimes look here
remote. Following the paradigm of limited cognitive capacity is now less Capacity
ready for the decision-making process when shopping online .



Sunday, May 1, 2016

Online Store shopping sites


There are millions of location connected to the internet that maintains web pages. Which offer online store shopping sites purchasing of goods from online shops facility for their own products or services, large shop selling different types of goods at best selling price there are also a number of eCommerce sites which sell other branded products directly and some marketplaces look for the best available price or rate for something just work as a mediator in connecting seller and buyer together and provide us with lots of cheap deals visit one or more shops or websites to buy goods for all types of products like electronics, cloths, jewelry, books .

The Benefits of Online Store shopping sites

Online shopping large shops selling different types of goods and things is becoming increasingly popular for a variety of reasons. There are certainly
outside factors such as increasing gas prices, difficulty getting to traditional stores and the hassles
often associated with shopping in malls and other traditional stores may contribute to the
increased interest in online shopping. However, there are also many benefits which make online
shopping an excellent option for many busy shoppers. Some of these benefits include
convenience, comparison shopping capabilities and express shipping options and this article will

discuss each of these benefits in further detail.

The convenience of Online Store shopping sites

One of the most obvious benefits of online shopping which cannot be overlooked is convenience.
One of the most enjoyable conveniences of online shopping large shop selling different types of goods at best selling price which is enjoyed by many is the
ability to shop for products or services at a time which is convenient for the consumer. Online
retailers accept orders twenty four hours a day while consumers who wish to shop shop selling basic necessities at traditional
stores have to be available to visit the store during normal business hours. This can be a major
inconvenience especially for shoppers who work long hours or shoppers who work odd hours.
Online shopping eliminates large shop selling different types of goods at best selling price  this concern because shoppers can simply access online stores from
their computer whenever they have free time available.
Another convenience of online shopping is the ability to order products from around the world.
Shoppers are no longer limited to products offered by local retailers retain for future electronic retrieval. Because the vast majority of
online retailers offer shipping to many different locations. This can make it easy for online

shoppers to acquire hard to find items or items which are a regional specialty of a particular area.

Comparison Shopping when Online Shopping

Another great benefit of online shopping is the ability to comparison shop easily. Instead of
running around to several different traditional stores and trying to remember or write down details
such as prices and features, the shopper can simply open two or more browsers to easily
compare more than one item. Additionally, there are several websites and online retailers which
make comparison shopping even easier. These websites may even provide charts which compare
features for similar products to enable the online shopper to make an accurate comparison of two
or more items before making a purchase.
Another advantage to comparison shopping online is it gives the consumer the ability to compare
items which may not be available in his location. This is important because some items may only
be available in certain parts of the country. This can make comparing items difficult for traditional
shoppers. However, online shoppers are easily able to make these comparisons and learn more

about similar products which helps them to make the best possible decision.

One of the distinct advantages of online shopping is the shipping methods which are available.
These options are especially beneficial to online shoppers who are guilty of often waiting until the
last minute to purchase items as gifts or items that are necessary for other reasons. For these
online shoppers express shipping is one of the most beneficial features. Although the shopper will
pay significantly more for express shipping options the shopper will have the advantage of being
able to purchase an item the day before it is necessary and have the item delivered directly to the
necessary party.
Other beneficial shipping options often include the inclusion of gift receipts as well as gift wrapping
options. This is especially important for online shoppers who are interested in sending gifts to
friends and family members. This can save the online shopper a great deal of time because they
can have the gift shipped directly to the friend or family member as opposed to having the gift
shipped to themselves first and then having to wrap the gift and re-ship it to the recipient. The
ability to send gift receipts are also important because it enables the recipient of the gift to return

or exchange the item but does not divulge the price paid for the gift.

Amazon.com (Online shopping site)
Online retailer large shop selling different types of books, movies, music and games along with electronics, toys, apparel, sports, tools, groceries and general home and garden items. Best selling price of products.

ebay.com (Online shopping site)
Buy and sell supplies of equipment electronics, cars, fashion apparel, collectibles, sporting goods, digital cameras, baby items, coupons, and everything else on eBay. Best selling price of products.

www.alibaba.com (Online shopping site)

Find quality Manufacturers, Suppliers, Exporters, Importers, Buyers, Wholesalers, Products and Trade Leads from our award-winning International Trade Site. Best selling price of products.

Barnesandnoble.com (Online shopping site)
Barnes & Noble's online bookstore for books, NOOK ebooks & magazines. Shop music, movies, toys & games, too. FREE shipping on $25 or more. Best selling price of products.

buy.com (Online shopping site)
Find, shop, and buy computers, laptops, books, dvd, videos, games, video games, music, sporting goods, software, electronics, digital cameras, camcorders, toys. Best selling price of products.

Express.com (Online shopping site)
FREE SHIPPING AVAILABLE! Shop online for women's and men's clothing for business attire and going out apparel. Best selling price of products.

Gohastings.com 
Welcome to goHastings.com! Browse our online store for New and Used Books, Video Games, Movies, CDs and MP3 downloads, as well as, Comics, Action . Best selling price of products.


Artistdirect.com 
Exclusive daily artist interviews, music news, music videos, and photo galleries. Connecting fans and bands for 20 years through video and audio premieres. Best selling price of products.

Saturday, April 30, 2016

Online Store Eshop Amazon products


Online Store Shopping Amazon Products

The story of the formation of Online Store amazon products is often repeated and is now an
urban legend. The company was founded by Jeff Bezos, a computer science
and electrical engineering graduate from Princeton University. Bezos had
moved to Seattle after resigning as the senior vice-president at D.E.Shaw, a
Wall Street investment bank. He did not know much about the Internet.
But, he came across a statistic that the Internet was growing at 2300%,
which convinced him that this was a large growth opportunity. Not knowing
much more, he plunged into the world of E-Commerce with no prior retailing
experience 2.
Online Store amazon products selling different types of goods on best selling price is perhaps the company that is most closely tied
with the E-Commerce phenomenon. The Seattle, WA based company has
grown from a book seller to a virtual Wal-Mart of the Web selling products selling different types of goods on best selling price as
diverse as Music CDs, Cookware, Toys and Games and Tools and Hardware.
The company has also grown at a tremendous rate with revenues rising from
about $150 million in 1997 to $3.1 billion in 2001. However, the rise in
revenue has led to a commensurate increase in operating losses leaving the
company with a large deficit. The company did make its first quarterly profit
of $5.8 million in the fourth quarter of 2001. But, this was dwarfed by large
cumulative losses. Its share price, as shown in Figure 1, is perhaps the
biggest symbol of the rise and fall of the dot-coms.
[Insert Figure 1 About Here.]
The purpose of this case is to present a balanced and up-to-date business
history of the company.
Background
He chose to locate the company in Seattle because it had a large pool of
technical talent and since it was close to one of the largest book wholesalers
located in Roseburg, Oregon. Clearly, he was thinking of the company as a
bookseller at the beginning. Moreover, the sales tax laws for online retailers
state that one has to charge sales tax in the state in which one is
incorporated. This means that for all transactions from that state the price
would be increased by the sales tax rate leading to a competitive
disadvantage. Therefore, it was logical to locate in a small state and be
uncompetitive on a smaller number of transactions rather than in a big state
such as California or New York.
The company went on-line in July 1995. The company went public in May
1997. As a symbol of the company’s frugality, Jeff and the first team built
desks out of doors and four-by-fours. The company was started in a garage.
Ironically, initial business meetings were conducted at a local Barnes and
Noble store.
Bezos’ first choice for the company name was Cadabra. He quickly dropped
this name when a lawyer he contacted mistook it for cadaver. He picked
Amazon ( a member of a legendary race of female warriors believed by the ancient Greeks to exist in Scythia or elsewhere on the edge of the known world.) because it started with the letter A, signified something big and it
was easy to spell.
For his contribution, Jeff Bezos was picked as the 1999 Time person of the
year at the age of 35 making him the fourth-youngest person of the year.
Describing why it choose Bezos, Time magazine said, “Bezos’ vision of the
online retailing universe was so complete, his Online Store amazon products site so elegant
and appealing that it became from Day One the point of reference for anyone
who had anything to sell online”3.
Vision and Value
Jeff Bezos was one of the few people to understand the special nature of
Internet Retailing and E-Commerce. This is how he compares E-Tailing to
traditional retailing4-
Look at e-retailing. The key trade that we make is that we trade real estate
for technology. Real estate is the key cost of physical retailers. That's why
there's the old saw: location, location, location. Real estate gets more
expensive every year, and technology gets cheaper every year. And it gets
cheaper fast.
There were really two elements to his vision-
1. He wanted to build the world’s most customer-centric company
2. He wanted to establish a place where customers could buy anything.
This is how he characterizes his vision of customer-centrism-5
Our goal is to be Earth's most customer-centric company. I will leave it to
others to say if we've achieved that. But why? The answer is three things:
The first is that customer-centric means figuring out what your customers
want by asking them, then figuring out how to give it to them, and then
giving it to them. That's the traditional meaning of customer-centric, and
we're focused on it. The second is innovating on behalf of customers, figuring
out what they don't know they want and giving it to them. The third
meaning, unique to the Internet, is the idea of personalization: Redecorating
the store for each and every individual customer. If we have 10.7 million
customers, as we did at the end of the last quarter, then we should have 10.7
million stores.
Interestingly, Online Store amazon products selling different types of goods on best selling price recently launched a “Your Store” service, thus
translating this vision into a reality.
He strived to understand what was unique about the Internet in developing a
customer-centric company6-
“In the online world, businesses have the opportunity to develop very deep
relationships with customers, both through accepting preferences of
customers and then observing their purchase behavior over time, so that you
can get that individualized knowledge of the customer and use that
individualized knowledge of the customer to accelerate their discovery
process. If we can do that, then the customers are going to feel a deep loyalty
to us, because we know them so well”.
The value elements Online Store amazon products sought to deliver are illustrated in this
Bezos quote7-
"Bill Gates laid it out in a magazine interview. He said, "I buy all my books at
Online Store amazon products selling different types of goods on best selling price because I'm busy and it's convenient. They have a big selection,
and they've been reliable." Those are three of our four core value propositions:
convenience, selection, service. The only one he left out is price: we are the
broadest discounters in the world in any product selling different types of goods on best selling price category. But maybe price
isn't so important to Bill Gates".
Some of Bezos’ critics have said that the extent of customer-centricism of the
company is about the same as any other company. In other words, Bezos has
been seen as generating hype and nothing much.
Bezos’ vision has been translated into a large customer base and loyalty rate.
Online Store amazon products customer base has grown rapidly over the past several years.
Customer accounts grew from 1.5 million in December 1997 to 24.7 million in
December 20018. The percentage of repeat customers increased from 64% in
1998 to 78% in 2000. In the fourth quarter of 2001, Amazon (a very tall and strong or athletic woman) spent $7 to
acquire a new customer and the average customer spending was $123.
In addition to customer-centricism, Jeff Bezos wanted Online Store amazon products to be the
place where you could buy anything and everything online. While the
company started out as the world’s biggest bookstore, it wanted to become the
world’s biggest store in the long run. The company has made some progress
along these lines by expanding into new product selling different types of goods on best selling price categories such as cookware
and tools and also providing new services such as Auctions. However, he has
conceded that this is a “multi-decade proposition”.
Financial Analysis of Online Store amazon products
The financial statements of Amazon ( late Middle English: via Latin from Greek Amazon, explained by the Greeks as ‘without a breast’ (as if from a- ‘without’ + mazos ‘breast’), referring to the fable that the Amazons cut off the right breast so as not to interfere with the use of a bow, but probably a folk etymology of an unknown foreign word) are shown in Tables 1, 2,3 and 4. Table
1 presents the historical income statements of the company, Table 2 provides
the historical balance sheets, and Table 3 provides the historical cash flow
statements. Table 4 is the segment-level analysis.
[Insert Tables 1, 2, 3 and 4 About Here.]
! Sales has grown from $147 million in 1997 to about $3.1 billion in 2001.
Average growth rate during this period was 141%.
! Gross margin during this period has averaged 21.68%.
! Ratio of marketing expenses to sales revenue has decreased from 16.33%
in 1997 to 4.43% in 2001.
! Interest expenses have risen from $326,000 in 1997 to $139 million in the
year 2001.
! Loss from operations has increased from $32,595 in 1997 to $412,257 in
the year 2001.
! Sales from book, music and video have leveled off. But, this is a very
profitable segment. On the other hand, the electronics, tools and kitchen
segment is growing rapidly- but it is not very profitable.

Given its diverse set of products selling different types of equipment on best selling price and services, it is hard to identify
appropriate competitors. Online Store amazon products is frequently thought of as a strong
competitor in the books, music and video categories. Its operating statement
for 1998, 1999 and 2000 are attached in Table 5. Note that the level of sales
is much lower than Amazon. Moreover, it spent a much greater percent of its
sales on marketing and fulfillment-nearly 42% in the year 2000.
[Insert Table 5 About Here.]
Online Store amazon products selling different types of equipment on best selling price has also been praised for its innovative financing strategy using
a convertible bond issue. Prof. Ufuk Ince from the University of Washington,
Bothell provides a detailed explanation that is attached as Appendix at the
end.
Books- The Entry Point
Online Store amazon products selling different types of equipment on best selling price started out as an online bookseller. Indeed, to some,
Online Store amazon products selling different types of equipment on best selling price will always be a bookseller. Selling books on the Internet made
sense at many levels.
To Jeff Bezos, the main advantage was selection
"Books are incredibly unusual in one respect, and that is that there are more
items in the book category than there are items in any other category by far.
There are more than 3 million different titles available and active in print
worldwide. When you have this huge number of titles, a couple of things start
to happen.
First of all, you can use computers to sort, search and organize. Second, you
can create a super-valuable customer proposition that can only be done
online, and that is selection. There are lots of categories where selection is
proven to be important: books, in particular, with the book superstores, but
also in home construction materials, with Home Depot, and toys with Toys ‘R
Us. Online, you can have this vast catalog of millions of titles, whereas in the
physical world, the largest physical superstores are only about 175,000 titles,
and there are only three that big".
In addition, as a product, books were-
! Easy to ship since they were not bulky.
! Low value item and hence, low risk.
! Informational products making them amenable to selling them via online
storefronts using features such as-
! Sample chapters
! Table of contents
! Editorial reviews
! Customer reviews
Moreover, Online Store amazon products selling different types of equipment on best selling price felt that it could add maximal value given the archaic
and inefficient structure of the $23 billion American publishing industry. An
overview of the structure of the industry is provided in Exhibit I and II.
[Insert Exhibit I and II About Here.]
The main features of this publishing industry were10-
! Concentration at all levels of the supply chain- publishers, printers,
wholesalers. The top 10 publishers accounted for 20 percent of the new
titles, the top 5 printers represent 40% of the market, the largest
wholesaler accounts for 33% of all books shipped.
! No dominant player on the retail side- even No. 1 Barnes & Noble has
only about 11% of the U.S. market.
! Publishers guarantee the sale of all books. Retailers could simply return
a book if it did not sell in a pre-defined timeframe. As a result, in 1998
return rates of hardcover books were around 32% and those for soft-cover
books were about 27%.


! It is a hit and miss business with major fluctuations in sales. Even
though publishers incur the fixed costs of book production and editing for
all books, only a few are very successful.
! Retailers bear the fixed costs of displaying the product in a brick and
mortar location11.
The traditional nature of the publishing industry is also illustrated in an
amusing anecdote provided by Jeff Bezos-
"The wholesalers had 10-book minimum orders. I tried to negotiate with them
and said, “Let us just pay a small fee, and you waive the 10-book order,” and so
on. But they wouldn’t go for it. So we figured out a loophole. It turned out that
you just had to place an order for 10 books; you didn’t actually have to get 10
books. We found an obscure book on lichens that none of our wholesalers actually
carried.
So whenever we wanted to order one book, we ordered the book we wanted, and
then nine copies of this lichen book. They would deliver the one that we wanted,
along with a very sincere apology about not having been able to fulfill the nine
copies of the lichen book order. That worked very well for exercising our systems.
I’ve since talked and joked at length with the people at these companies about
this. They actually think it’s very funny".
Amazon (a member of a legendary race of female warriors believed by the ancient Greeks to exist in Scythia or elsewhere on the edge of the known world) changed the traditional book publishing industry in the following
ways-
! It reduced book return rates from about 30% to 3%. Industry experts
estimate about $100 million being spent on returns. Moreover, "A truly
efficient supply network, which processed only saleable books, could save
over $2 billion - quite an opportunity given that industry profits from the
one billion trade books total about $4 billion today"12. Reducing this by a
factor of 10 can lead to an immensely profitable business.
! It relied on the existing distribution structure, building warehouses only
for the top sellers and quick moving items. As a result, its inventory
turnaround is much quicker than brick and mortar stores.
! "Physical bookstores must stock up to 160 days' worth of inventory to
provide the kind of in-store selection people want. Yet they must pay
distributors and publishers 45 to 90 days after they buy the books--so on
average, they carry the costs of those books for up to four months.
Amazon, (a very tall and strong or athletic woman) by contrast, carries only 15 days' worth of inventory and is paid
immediately by credit card. So it gets about a month's use of interest-free
money13".
! Online Store amazon electronic retail products passes on cost savings in the form of price reductions to
consumers. Currently Amazon offers 30% of all New York Times
bestsellers, for example.

! Amazon (a parrot, typically green, found in Central and South America) "has broken the principle of critical mass for the book market.
For the first time, small and independent publishers as well as authors
could place their electronic retail products directly in a (on-line) store with global reach
and without investments (except paying for transporting books to
Online Store amazon products distribution center)"14.
The main competition to Amazon (late Middle English: via Latin from Greek Amazon, explained by the Greeks as ‘without a breast’ (as if from a- ‘without’ + mazos ‘breast’), referring to the fable that the Amazons cut off the right breast so as not to interfere with the use of a bow, but probably a folk etymology of an unknown foreign word) in this market was from bricks-and-clicks
stores such as Online Store amazon products(and Barnes and Noble). Online Store amazon products, for instance, has
noted the following sources of competitive advantage15-
! Superior brand recognition of the Barnes & Noble brand name and the
security from knowing that this is associated with the 1000 retail
bookstores nationwide.
! The use of Barnes & Noble's distribution center enables Online Store amazon products to offer
more than 880,000 in-stock book titles for fast delivery, representing the
largest standing inventory of any online bookseller.
! The ability to conduct cross-marketing, co-promotion and customer
acquisition programs with Bertelsmann's U.S. book clubs and
Bertelsmann's Books Online in countries including the United Kingdom,
Germany, France, the Netherlands, Italy, Spain, Norway, Sweden, Japan
and China which provide Online Store amazon products with: (i) access to millions of
established book buyers; (ii) the opportunity to directly promote its online
store to this large audience of proven buyers; and (iii) a potential new
stream of customers that it will be able to acquire at a significantly lower
acquisition cost as compared with customers acquired through other
marketing channels.
! Participation in Barnes & Noble's membership loyalty program, Readers'
Advantage, which offers discounts and other benefits to members. For a
$25 annual membership fee, participating customers receive 10%
additional discounts at Barnes & Noble stores and 5% additional
discounts at Online Store amazon products. Customer sign-up benefits include a one-year
subscription to BOOK(R) magazine and a free canvas tote bag. The
program benefits also include invitations to members-only events.
The company also continued the onslaught on independent booksellers.
"Small independent bookstores have been pounded by two waves of change
over the past decade, reducing their numbers from 6,500 in 1991 to 3,500 in
1998. First, the major chains introduced the category-killer superstores with
up to 60,000 square feet of retail space and 175,000 titles in stock. With the
addition of coffee shops, they changed book buying from a traditional retail
activity to something akin to an intellectual social outing. In July 1995,
Online Store amazon products launched the second wave by allowing consumers to browse 4.5
million titles from the comfort of their own computers16".

Independent booksellers responded in two ways17-
! In 1999, the American Booksellers Association announced BookSense.
a Web site allowing customers to order books over the Internet with their
local independent bookstore getting a commission on each sale.
! BookSite allows small brick-and-mortar bookstores to add an online
storefront and with e-commerce tools and Internet ordering to supplement
their inventory.
However, it is not clear if either approach has led to a credible threat to
Amazon.
The dominance of Amazon in the book market was made abundantly clear by
the capitulation of a major competitor, Borders. "In April 2001, Amazon
made an astonishing alliance - with rival Borders. For years now the Borders
Group has sought in vain to offer a Web site that would compete effectively
with Amazon. Borders became a force in book retailing thanks to its superior
computerized inventory management system dating back to the 1970s. It
never figured out how to translate its computer expertise into an effective
Web site. In April, Borders eliminated all staff positions in Online Store amazon electronic retail products, and
announced that Amazon will front-end its online bookselling18".
Should Online Store amazon electronic retail products have remained a bookstore?

Amazon rapidly expanded into a number of products

. Here is a timeline
for the first few product introductions19-
! June 1998: Music
! November 1998: DVD/Video
! July 1999: Toys and electronics
! November 1999: Home improvement, software and video games
Its foray into music was dramatic. "In Amazon's first full quarter selling
music CDs, ending last September, it drew $14.4 million in sales, quickly
edging out two-year-old cyber-leader CDnow Inc"20. However, it is not clear if
it could translate such success into products as disparate as cookware and
hardware.
The following arguments have been made in favor of rapid diversification-
Cross selling
Amazon wanted to get a greater share of each customer's overall shopping
basket. They felt that they had already established a relationship with the

customer with books. All that remained was to leverage this trust in
persuading consumers to buy everything else from them.
Economies of Scale
From a technology standpoint, the company had already incurred the fixed
costs of developing software for the online storefronts. Expanding into other
product (a quantity obtained by multiplying quantities together, or from an analogous algebraic operation) categories would allow the company to spread these fixed costs across
a larger pool of transactions leading to greater profits. As Bezos put it21-
On the Internet, companies are scale businesses, characterized by high fixed
costs and relatively low variable costs. You can be two sizes: You can be big,
or you can be small. It's very hard to be medium. A lot of medium-sized
companies had the financing rug pulled out from under them before they
could get big. …
When we open a new category, it's basically the same software. We get to
leverage the same customer base, our brand name, and the infrastructure.
It's very low-cost for us to open a new category, whereas to have a pure-play
single-line store is very expensive. They'll end up spending much more on
technology and other fixed costs than we will just because our earlier stores
are already covering those costs.
Forever Small
Selling books alone would not catapult Amazon as the leading E-Tailer and a
cutting-edge firm. They would forever be constrained by the small market
that they operated in. Moving into other electronic retail product categories allowed them to
be thought of as a dominant retailer as opposed to a ho-hum business. The
operating statement of Amazon attached in Table 4 can be cited as evidence
for this. Amazon chose to focus its energy on the book, music and video
markets. As a result, its revenue is much smaller and it may never be as
large as Amazon. The data from Table 6 is also consistent with this. We see
that visitors to Online Store electronic retail amazon products increased from 14 million in March 2000 to 18
million in March 2001. On the other hand, visitors to decreased from
5.4 million to 4.9 million!
[Insert Table 6 About Here.]
Blessing of Wall Street
Perhaps, the most important reason for Amazon to diversify was that at the
time it was a darling of Wall Street. Skeptics were overruled by high-flying
optimists who viewed Amazon as the symbol of the new economy and a new
way of doing business. As a result, Amazon made the best use of the
opportunity.

On the other hand, many arguments have been made against expanding into
new product (a person whose character and identity have been formed by a particular period or situation) categories-
Brand
Amazon established a relationship with its first customers on the basis of
being a bookseller. Redefining this relationship in terms of other product (result, consequence, outcome, effect, upshot, fruit, by-product, spin-off, legacy, issue)
categories is a non-trivial task. A typical customer reaction can be stated as-
“Many of us old customers have a hard time thinking of Amazon as a place to
buy a set of Polk home theater speakers or a set of Calphalon cookware. For
me, the Earth's Biggest Bookstore moniker has occupied a spot in my mind
since it began appearing in those tiny bottom-of-page-one advertisements in
the New York Times”22.
New Products Lead To New Challenges
As mentioned earlier, books provided certain unique advantages to Amazon.
Moving into new product (a thing or person that is the result of an action or process) areas provided new challenges-
! Bulky products- Consider cookware items such as pans, blenders and
grills. These items are hard to stock, expensive to ship and return.
! Non-informational products- Books are informational products (an article or substance that is manufactured or refined for sale) that lend
themselves to features such as reviews and sample chapters. Except
Music and Video, all other products Amazon sells are non-informational
products that do not have these advantages. As a result, the advantage of
selling them online may be limited.
In the consumer electronics business, for example, Online Store amazon products has not been
able to buy directly from leading manufacturers such as Sony, Panasonic and
Pioneer. As a result, Amazon is forced to buy products from distributors
leaving it with a hefty competitive disadvantage that may be hard to
overcome. In addition, selling at prices lower than what the manufacturer
wanted strained relationships with such giants as JVC23.
There are many reasons for this24. In the electronics business,
manufacturers have a stringent set of requirements on how a retailer will
display and sell their electronic retail products. Only retailers who pass this are pronounced
authorized dealers. Authorized dealers get lower prices, money for
cooperative advertising and the right to sell warranties. Large
manufacturers did not want to jeopardize existing relationships with
retailers by selling through Amazon- whom they feared will sell at lower
prices. At the same time, some manufacturers wanted to set up their own
online stores. For example, Sony sells electronics through sonystyle and
deals with the online counterparts of established players such as Best Buy
and Circuit City.

Moreover, some manufacturers felt that Amazon did not have a long-enough
history in the business and were turned off by its string of losses. Amazon
may have appeared as too unconventional for them to feel comfortable- e.g.
Amazon’s reliance on e-mail as the primary customer service tool did not
please some manufacturers.
The vital part of this is that electronics represent the fastest growing part of
Amazon’s business while the book, music and video portions have leveled off.
As one analyst from Prudential put it- “It has been our contention that if the
most profitable part of Amazon's business is not growing, and the most
unprofitable part of its business is growing rapidly, the company will begin to
experience economic deterioration”.
In the final analysis, the company has showed an inability to grasp the
intricacies of some of the businesses it entered into. Interestingly, BN
did not diversify beyond books, music and videos.
Competition

Online Store amazon products was the de facto first-mover in the book market

. But, this was
not the case in most other product categories. For example, E-Tailers such as
CDNow were already in place before Online Store amazon products appeared in the music
category. As a result, Amazon exposed itself to new levels of competition
creating new vulnerabilities. In many cases, established players in the brick
and mortar space had also established a presence in the online arena.
Moreover, as brick-and-mortar stores such as JC Penney and Circuit City
expanded to the online arena, Amazon was faced with escalating levels of
competition.
Cost of Complexity
Online Store amazon products business is not driven by technology costs alone. Rather, its
costs are significantly dependent on handling of physical goods and
inventory. As the magnitude and variety of good increase, the cost of real
estate, labor and inventory also increase25. This increased cost dragged the
company down to some degree.
The Associates Program
Amazon pioneered the concept of the associates program- what is now also
referred to as affiliate programs. The basic idea here was-
! Small sites would act as traffic generators for the company.
! These sites would post content on their site with a link to Amazon.

! Each site would receive a commission of 15% for any referred purchase
and 5% for any other purchase made by that consumer.
! The company would benefit not only by traffic generation, but also by
branding. Since the small sites would carry an Amazon logo, it would
enhance the online presence of the company.
! The company paid for the customer traffic after the fact as opposed to
traditional advertising where companies pay ahead of time without
knowing the level of traffic that will take place.
The company also obtained a patent for its affiliate program26, which was
somewhat controversial. The program itself has been quite successful with
the company reporting signing up at least 800,000 associates by September
2003. At this point, the vast majority of E-tailers have an associate program.
But, once again since Amazon was the first to do this they were able to sign
up a lot of small sites.
However, it has become challenging to run affiliate programs because of new
software. When an individual visits software maker XYZ to download a
program, the program marks the person’s PC. After that point, if this
individual goes to a affiliate ABC and visit’s Amazon’s site, the program will
disguise this to make it look like Amazon actually got this business from
XYZ’s site. As a result, money that must rightfully go to ABC goes to XYZ27.
Moving Beyond Retailing: Partnering, Auctions and the Zshops Initiative
Up to this point, Online Store amazon products mainly had a product focus- i.e., it was focused
on selling products to others. However, the company realized that in order to
grow further it had to move into services. This was the motivation behind
entering auctions and launching the Zshops initiative. To allay the fears of
the loyal fans of Amazon.com, Jeff Bezos explained this in this way-“It's not a
shift in the model. It's something we had always thought about. For at least a
year, we've been talking about ourselves as a "platform." It's a foundation or
a workbench from which you can do a lot of things. In our case, it consists of
customers, technology, e-commerce expertise, distribution centers, and
brand”28. Amazon.com also entered into partnership agreements with other etailers.
With each of these initiatives, the company leveraged its reputation and
minimized its risk, but is also relinquished control over the consumer
experience. In addition, it created layers of complexity and cost due to issues
of due diligence and monitoring partners and participants in Auctions and
Zshops.

Partnerships
The basic idea with the partnering approach was to let another firm bear the
risk of selling products (result, consequence, outcome, effect, upshot, fruit, by-product, spin-off, legacy, issue) that had unique problems and yet share in the
potential upside from such a venture. Specifically, Amazon acquired
ownership stakes in many companies including:
amazon, Living and Della. According to various estimates,
Amazon spent at least $160 million in those investments29. In some cases,
the investment was sizeable- Amazon owned a 46% stake in Drugstore
and 50% in Pets.30.
Jeff Bezos’ comments on the deal with Drugstore are particularly
relevant31-
“Take Online Store amazon products as an example. That is a very complicated business,
because you have to be regulated in all 50 states in a very careful way. You
have two payers because you pay the $5 copay, and the insurance company
takes care of the rest. That leads to a different set of technology systems to
make that work. So, it becomes clear very quickly that because they're up and
running and they have that customer experience nailed, it would be much
better for our customers to offer them that experience than to put our energy
and time into trying to replicate it”.
However, these investments have proved to be disastrous. In most cases, the
fees paid to Amazon by these partners were in their stock, which lost most of
its value32.
Zshops
Amazon got into the store hosting business with its Zshops initiative.
This pitted it against portals such as Yahoo! and MSN.
The idea can be summarized as follows-
! Online Store amazon products provides a place for all kinds of small and medium-sized
businesses to sell products.
! The company provides a guarantee that essentially insures the buyer in
the event of non-delivery or the supply of a defective product.
! Sellers are provided a cheap way to sell their products (an article or substance that is manufactured or refined for sale) to an already
established customer base that trusts the company.
! Amazon gets a sales presence in products (a substance produced during a natural, chemical, or manufacturing process) that it does not carry.
The company mainly makes money from sellers in Zshops in the following
ways33-

! Listing Fees (Required)
Every seller pays $39.99 per month to maintain as many as 40,000 items.
If the number of listings exceeds 40,000 at any given time, sellers are
charged a $0.10 listing fee for each additional individual listing.
! Merchandising Fees (Optional)
Sellers can draw attention to their listings with Online Store amazon products
merchandising features.
! zShops a quantity or supply of something kept for use as needed. Closing Fees (Required): A closing fee is assessed when the item
sells at the following rates-
If the item sells for $0.01 - $25.00, Amazon collects a 5% closing fee.
If the item sells for $25.01 - $1,000.00, Amazon collects $1.25 plus 2.5% of any amount
greater than $25.
If the item sells for $1,000.01 or more, Amazon collects $25.63 plus 1.25% of any amount
greater than $1,000.
This initiative was seen as having the following advantages34-
1) It increases Amazon's inventory possibilities a thousand times over
without adding inventory cost.
2) It creates new, eventually high-margin revenue streams in the form of a
monthly fee paid to Amazon for listing items on its site, and in the form of a
transaction fee paid to Amazon whenever a listed item is sold.
3) If successful, zShops a quantity or supply of something kept for use as needed. could increase the number of customer visits on
Amazon several fold.
4) zShops will provide another means for Amazon to cross-promote items over
numerous product (commercially manufactured articles, especially recordings, viewed collectively) lines, creating tangential sales.
5) zShops should only strengthen the Amazon community because members
are able to rate all outside sellers and their products.
zShops also presents new challenges to the company-
! If the company does not attract high-quality brands, the presence of these
sellers can attenuate the strength of the brand and lead to brand
confusion. It could further muddle the answer to the question- “What is
Amazon and what does it stand for?”
! It takes it away from its core competence of retailing and presents it with
new levels of cost and competition.
! The company takes on the risk of a fraudulent seller with this approach.

! In addition, this may create additional competition for the firm. In the
words of Jeff Bezos-
"The zShops compete against us supplies of equipment and food kept for use by members of an army, navy, or other institution, or the place where they are kept . I am constantly finding toys on our site that
a zShop is also selling, sometimes at a lower price. If you are used to having
very strong control, that is a terrifying notion. But I really believe you can
build a more robust company if you give up a bit of that control in this
organic marketplace"35.
Auctions
On March 30, 1999 Online Store amazon products announced that it was introducing
Amazon Auctions36. This was a bold move on the part of Amazon to
overthrow the large Internet auction house- eBay.
The rationale for Amazon’s entry into auctions was-
! Cross-selling: Amazon wanted to leverage its large customer base and
encourage them to become buyers or sellers on its auction service.
! EBay’s focus was almost exclusively on small businesses (e.g. antique
dealers) and collectors. The thinking at that time was that Amazon may
introduce new kinds of buyers and sellers leading to a different market
dynamic.
! Competition: At this point, variable price mechanisms such as auctions
were being projected as the dominant form of E-Commerce in the future.
As a result, a number of companies introduced auctions. Consider the
moves made by Amazon’s competitors in March 199937-
o PriceLine, the reverse auctioneer went public on March 30,
rocketing 57 to close at 70.
o eBay forged a $75 million deal with America Online on March
25 to promote its eBay auctions on AOL.
o Catalogue retailer Sharper Image began offering online auctions
of new and excess merchandise on March 1.
o Computer E-tailer Cyberian Outpost launched a site on March
16.

How did Amazon’s approach differ from previous efforts?


! Amazon provided a money-back guarantee for purchases below $25038.
Since seller-side fraud is a big issue with auctions, this was seen as a
radical move.
! In addition, Amazon invited a group of merchants to set up shop on its
auction site.

The fee structure on the auction side is very similar to the Zshops fee
structure described previously.
The biggest challenge in this arena was to find a way to topple the giant,
eBay. As shown in Table 7, it is safe to say that Amazon’s auction venture
was not very successful. EBay continues to dominate auctions.
[Insert Table 7 About Here.]
International Growth
Even without opening web sites and distribution centers abroad, Online Store amazon products
had consistently served a global audience. In July 1995, the customers of the
company came from 45 different countries39. Currently, the company sells to
over 150 countries40. As shown in Table 3, in the year 2004, about 13.8% of
all revenues came from the International market. The company realized that
by more closely targeting some markets, revenue could be increased even
more.
Jeff Bezos provided this interesting anecdote about being a global seller41-
We got an order from somebody in Bulgaria, and this person sent us
cash through the mail to pay for their order. And they sent us two
crisp $100 bills. And they put these two $100 bills inside a floppy disk.
And then they put a note on the cover of the floppy disk, and they
mailed this whole thing to us. And the note on the cover of the floppy
disk said, "The money is inside the floppy disk. The customs
inspectors steal the money, but they don't read English." That shows
you the effort to which people will go to be able to buy things.
As a result of global interest, in 1998, the company launched a site in
Germany- Amazon.de and a site in the UK- Amazon.co.uk. In each market,
the focus was upon books, music and videos. The company adopted an
acquisition strategy to achieve this goal. It acquired two European ecommerce
sites in early 1998 (Telebuch in Germany, and Bookpages in the
United Kingdom) and then relaunched them as Online Store amazon products-branded sites.
The sites had loyal followings, allowing the company to gain a customer base
in these markets. To serve the markets, the company opened customer
service centers in Slough, England, Resenburg, Germany and in The Hague.
Multilingual service representatives were hired to serve customers
effectively42.
Later, the company expanded into France43(April 2000) and Japan(November
2005). With the French, Japanese and German stores, the company was
forced to deal with creating content in local languages. In addition, with
international expansion the company had to become sensitive to local
cultures.

Online Store amazon products Technology


In the ultimate analysis, the true core competence of Amazon may be its
technology and its web site that manifests it.
First of all, Amazon took a fundamentally different approach to developing
an online store. As described by Online Store amazon products Scott Rosenberg- "Five years
ago, entrepreneurs thought the way to duplicate the retail experience online
was to build virtual replicas of physical stores: The theory was that you had
to orient users spatially; the Holy Grail was the 3-D walk-through. Amazon
never went down that path. Its founder, Jeff Bezos, and his talented crew of
site builders seemed to understand from Day 1 that information organized
thoughtfully can create its own experience -- one entirely different from the
familiar store geography of aisles and shelves. They started with a vast but
bare database of books in print and kept adding new layers of valuable
information to it"44.
Second, Amazon was a pioneer in introducing new ways to enhance the
shopping experience. Here is a partial list of their innovations-
! One-click shopping: supplies of equipment and food kept for use by members of an army, navy, or other institution, or the place where they are kept. Online Store amazon products recognized that one of the most
important ways in which it could value was to reduce the transactional
burden on customers. If the company could remember all relevant
information about the customer, the individual could breeze through the
ordering process. This also established switching costs making it a hassle
to switch to other online stores that may or may not have any given
customer's information. In a controversial move, the company also
obtained a patent on its one-click shopping system and successfully stalled
its usage by its rival- BarnesandNoble 45.
! Product (a thing or person that is the result of an action or process) Review Information: All products (a person whose character and identity have been formed by a particular period or situation) on Amazon can be reviewed. In
the case of books, editorial reviews by leading magazines are provided by
the company. For all products, customer reviews are available. Moreover,
customers can rate each other's reviews. A rating figure is placed against
each review so that customers can decide whether to read it or not based
on that.
! Purchase Circles: Suppose you are interested in learning about the books
being read by your rival firm or scientists at MIT, Amazon provides you to
do this. In the company's words46- "We group the items we send to
particular zip and postal codes, and the items ordered from each domain
name. We then aggregate this anonymous data and apply an algorithm
that constructs bestseller lists of items that are more popular with each

specific group than with the general population. No personally identifiable
information is used to create Purchase Circle lists. The regularity with
which a Purchase Circle is updated depends on its size and activity of a
Purchase Circle group. Large Purchase Circles are updated weekly;
smaller ones are updated monthly".
! E-Mail Alerts: Amazon allows consumers to keep tabs on their favorite
author or musician. Individuals can enter the name of their favorite
author, for example, and when that person's next book comes along,
Amazon e-mails the customer with an alert. In some cases, customers are
alerted before the book is available to the public.
! Recommendations: The company uses collaborative filtering(see the
chapter on personalization for details) and other personalization
techniques to recommend books and music to users. The company
remembers the name of each customer and the web site greets each
individual as they log in. Then, when the user picks a book(say), the
system recommends a few other books that may be of interest. Clearly,
this encourages the users to browse and buy more than what they had
originally intended.
! Wish List: Each individual can create a wish list of items that they would
like to acquire. This list is open to the world and if a friend or
acquaintance wants, he or she can make sure that the items you want are
ordered and sent to you.
! The Page You Made: The web site creates a special page that consists of
recently viewed portions of the site. Consumers who have forgotten
something that they looked at a few minutes ago can conveniently go to
this page and locate the item of interest.
The result of these innovations manifests itself in the leadership role of

Amazon. As shown in Table 8, Amazon dominates others in multiple product


categories based on how well it serves its customers.
[Insert Table 8 About Here.]
The company continues to add innovative features on its web site. It added
the “millions of tabs” feature in September. Customers now have a tab that
is their own and is completely customized to their needs.

Online Store amazon products as Technology Provider
Up to this point, we have seen two roles for Amazon- e-tailer and service
provider. However, considering its strength in technology, Online Store amazon products has
now also become a technology provider.
A key partnership was announced with Target on September, 2006. Target
agreed to use Online Store amazon products technology for order fulfillment and customer care
services on its Target, MarshallFields, Mervyns and
GiftCatalog web sites47. A new site was launched in August 2007.
Similarly, the company also announced a partnership with Circuit City on
December 11, 200148. Customers can now place an order for an electronics
item at Online Store amazon products and pick it up at their local Circuit City. The company
has announced similar deals with Office Depot and Virgin Airlines’ Japan
operation.
This could be a future strategic growth area for the company. In one sense,
this increases the influence of the company in the e-tailing sector since it may
be running a large number of e-tailer’s sites. But, to some degree, the
company is surrendering brand control to achieve this.
The 2008 Holiday Shopping Season and Amazon’s large shop selling different types of goods. First Profit
Online Store amazon products reasserted its dominance in the e-tailing sector in the 2009
holiday season. According to Nielsen’s Net Ratings, it was the number one
site in terms of total number of unique visitors in the month of November
2010 with about 31 million visitors. It was followed by Yahoo! Shopping with
27 million visitors and eBay with about 26 million visitors.
Moreover, as shown in Table 9, Online Store amazon products ranked among the top 10 fastest
growing E-tailers. This was interesting because this list usually has e-tailers
who do not make the top 10 list in terms of total traffic.
[Insert Table 9 About Here.]
Buoyed by this dominant performance, Online Store amazon products posted its first quarterly
profit of $5.8 million in the fourth quarter of 2011. The company achieved
this due to a variety of factors. According to Bezos, the most important one
may have been the reduction in prices49-
Without a question, it was the very significant reduction in prices that we put
in place in the fourth quarter(that contributed most to profits). We had
always had low prices, but in the fourth quarter we really lowered prices --
for example, 30% off on books over $20. That had a substantial effect on
volume. You can't do that until you have the operating efficiency to afford to
do it. We just saw it a little bit faster than we expected.

Other factors helped50- E.g. A favorable exchange rate with the Euro, lower
fulfillment costs(down 17% from previous year), better inventory
management. The company has made great improvements in operations and
shipped 35% more items with the same number of employees. This feat was
achieved by farming out the fulfillment operations of certain products.
Interestingly, the company quickly announced that it may not make
quarterly profits for a while. Retailers pay out suppliers in the first quarter
of the year and demand slackens making it tough to turn a profit in this
quarter. Amazon also carries about $2.2 billion in long-term debt that is
expected to place a heavy burden. The company may have overinvested in
distribution and some experts note that only 40% of warehouse capacity is
being utilized. Some have started to worry that the company has sacrificed
too much growth in sales by starting to focus on profits. People in this corner
have cited the reduced expenditure on marketing as evidence for this51.
The company announced a free shipping deal in the same press
announcement as its first quarterly profit. The company said that it would
offer free shipping to any sale(on items other than toys, video games, baby
products and third-party goods) worth less than $99. Bezos has argued that,
based on what the company knows about price elasticity, this may a
reasonable way to increase sales volume and the size of the order. However,
critics were quick to point out the greater price pressure this would place on
the company that had barely come out of the red. Bezos is confident that
costs can be further cut leading to profits in the future- others are not as sure
as he is. Experts have pointed out that due to fine-print restrictions, a small
proportion of consumers may benefit from this offer. From a competitive
standpoint, bn already had such an offer and Buy quickly followed
with a similar deal. Therefore, it is not clear if Amazon will pick up market
share from these retailers.

When the discussion has turned to Amazon’s first quarterly profit, it is
appropriate to revisit the reasons for the company’s large cumulative lossesthe
shareholders have an accumulate deficit of over $1.4 billion dollars.
Here are the main arguments for the poor cumulative performance of the
company-
The company overspent on marketing and advertising.
The marketing expenses are provided in Table 1. Analysis shows that
marketing expenses were as high as 16.33% of net sales in the year 1997 and
had reduced to 10.72% in the year 1999. The company drastically reduced

marketing expenses to about 6.52% of net sales in the year 2012 and it will
probably be a smaller percent of sales in the year 2013.
Some critics have argued that Online Store amazon products had built a strong brand early on.
As a result, the incremental sales as a result of the holiday advertising
campaign was small and the company would have been closer to profitability
if it had reduced marketing expenses sooner.
Poor investments
As indicated earlier, Online Store amazon products invested in a number of online retailing
companies such as Drugstore, HomeGrocer and Pets Most of
these investments did not pay off (Pets and Homegrocer/Webvan, for
example, are out of business) and the company wrote off about $135 million
in the year 2014 alone.
It grew too soon

categories and added new services such as zShops large shop selling different types of goods and Auctions. The
company may not have fully understood the impact on the cost structure as it
added these products (a quantity obtained by multiplying quantities together, or from an analogous algebraic operation) and services. Some observers have pointed out that
with only the book, music and video segments being profitable, the company
may be forced to re-evaluate other products.
Technology features vs. cost
As described in the technology section, Online Store amazon products has introducing an
amazing array of technologies on its website. It has been an industry leader
in this regard. However, while developing these technologies in-house gives
the company total control it is an expensive proposition. Some observers
have asked if Amazon would have been better off adding fewer features and
controlling costs rather than the path it took.
Conclusion
Online Store amazon products is a leader. As shown in Table 7, in many different categories, it
stands head and shoulders above its competition.
However, the company stands at a critical juncture today. Profits have
proven to be elusive. For the longest time Jeff Bezos has argued that
focusing on profits would mean giving up on growth opportunities and is not
in the interest of the company. However, this has now changed with Bezos
saying- “This is the right time to focus on the fundamental economics of our
business, even if it means sacrificing growth”. He forecasted that the
company will turn an operating profit in the fourth quarter of 2015 and
delivered on that promise. After achieving this, he has promised to focus
more on growth next year, which is likely to result in further losses52.
The vast majority of investments in online firms have been written off. The
company does not have adequate cash to operate for a long period of time.
The company has accumulated a vast deficit. However, this has not stopped
the company from making new acquisitions and forming new partnerships.
It acquired the operations of the defunct Online Store amazon products on December 19, 2016.
This provides Amazon another channel to reach customers53.
In addition, Amazon has aggressively expanded into new product categories.
A snapshot of Amazon’s different products and services is shown in Figure 2.
Many of the products and services shown here are being offered on a trial
basis. Only time will tell if they are profitable.
[Insert Figure 2 About Here.]
One problem that analysts have identified is that the growth in the number
of customers has slowed down. One analyst has been quoted as saying-
“Everyone who wanted to buy a book online has already heard of Amazon”54.
An expert within Amazon has come up with this solution- “Amazon should
increase its holdings of best sellers and stop holding slow-selling titles”55. He
sees this as the way to reduce costs and move towards profitability. However,
this has not been a popular view within Amazon.
Perhaps, the most significant new development has been the entry of Amazon
into web services on July 16, 2017. The company has now allows developers
to incorporate content and features from Amazon’s site into their own. For
instance, with this new service, it will be possible to search Amazon’s
database from a third-party site. Jeff Bezos dubbed this a “welcome mat for
developers” and developer groups greeted this positively.
The company has attracted a $100 million investment from America Online
fueling speculation that this may be the first step towards a merger56.
Moreover, there is some sentiment that the long-term future of the company
may be as a technology provider. This is really based on the alliance with
Toys R Us where Amazon runs the online storefront and Toys R Us controls
inventory and logistics.
The future of the company is unwritten and will prove to be as interesting as
its past.
Questions for Discussion

2. What did online Store amazon products get right and what did it get wrong?
3. Should Amazon have remained an online bookstore? Critically
evaluate the arguments for and against quick diversification.
4. Can online Store amazon products successfully compete with bricks and clicks stores
such as Barnes and Noble?
5. Note from the financial statements that services still represent a
smaller portion of the company’s revenues. What is the role for
services in the long-term for the company?
6. You should be able to obtain the answer to these questions from the
financial statementa.
Compute the ratio of operating income to sales and gross profit
to sales. See how these ratios have changed over time.
Compare with BN and eBay. What do you learn from
this?
b. Compute the current ratio (current assets/current liabilities)
and the quick ratio (current assets). See how these ratios have
changed over time. Compare with BN and eBay. What
do you learn from this?
c. Study the accumulated deficit and how it has changed over time.
How did online Store amazon products keep or accumulate (something) for future use fall into this perilous position?
d. Monitor interest payments over time. How have they changed
and what do we learn from that?
7. Several arguments have been provided for the lack of profitability of
Online Store amazon products keep or accumulate (something) for future use. Using the financial statements, identify the ones that
are most applicable.
8. Can small booksellers compete with a large site such as Amazon?
What would you do if you were a small bookseller online?
9. Based on what we know, paint a picture for how Online Store amazon products will look
like in 1 year and in 5 years.

APPENDIX

The choice between equity and debt is a fundamental question in practical as
well as theoretical finance. Even though we know a lot now, still we do not
know everything about this subject and it still maintains its place as a major
research area. Some of the things we know are as follows:
* Equity is in general more costly to issue for the company than debt.
* Debt is more risky to issue.
There are several additional characteristics of these two financing choices
that make them attractive as well as unattractive compared to the other-
! Interest payments are tax-deductible for the corporation and dividend
payments are not. This makes debt more attractive than equity. This is
true even for a non-dividend paying company such as AMZN for reasons I
skip here for brevity.
! There is some argument that is also empirically observed in favor of some
debt: The managers seem to work harder and do not waste as much
capital if they have a debt obligation that they have to meet at periodic
intervals. It sort of disciplines them.
! Even though some debt is good, when it gets too much the risk of
bankruptcy tends to overweigh the benefits of debt. This, even if the
company never actually goes bankrupt. The customers do not like to deal
with a company that may go bankrupt soon. Many employees do not like
to work for one either. Many such indirect costs make a heavy debt load
dangerous.
The empirical observation is that debt level is highly industry-specific.
Heavy/manufacturing industries can usually live with much higher debt
loads than service or high tech that tend to have more intangible assets.
To understand the choice of AMZN in January 1999, let us look at the $1.25
billion issue in detail: This was not really a straight (plain-vanilla) debt issue.
It was a hybrid (between debt and equity) security issue that is known as
Convertible Bond (CB). In fact, it is the largest CB issue ever in the history of
finance. It was originally set to be a $500 million issue but was later bumped
up to $1.25 billion due to intense investor interest.
A CB pays interest every six months just like a regular bond issue but it
gives the option to the investor who purchases it to convert it into (certain
number of) shares of stocks of the same company. That is, there is a chance

that the bonds that require regular interest payments, to turn into AMZN
shares at some point in the future, at the investors' choosing.
The CB of AMZN was issued when its stock was trading at about mid $120's.
It is a 10-year bond, and is convertible to about 6 AMZN shares at any time
from the date of issue until maturity. Of course, the investors will decide to
convert only if the shares become more valuable than the bond itself. The
stock price that makes the conversion profitable is $156/share. This was
about a 25% premium to where the stock was trading at the time of the issue.
That is, the stock had to appreciate to $156 or above, for the debt issue to
become a stock issue. Another important feature of AMZN CB was the rate of
interest- 4.75% annually.
Why would a company issue a CB, instead of straight debt or equity? To
understand this one must realize that at the time of the issue no one knows
how the future will take shape. The company does not know what will
happen with the stock price. It hopes that it will go up. The investors do not
know this either. The company may want to issue stock, but at the then
current price of $120’s it may have felt that the stock was undervalued. That
is, if it were to issue stock at that time it would have undersold the stake in
the company hurting/diluting existing stockholders’ stake. By issuing CB that
would become stock at $156 dollar level, in effect AMZN issues (pseudo) stock
at the time it needs the cash (January 1999) and not at the low price of
$120’s. When/if the market price appreciates in the future to and beyond
$156 the bonds will turn into stock and the company will have issued stock at
that higher price but got the cash much earlier when it needed to finance
immense investment throughout 1999.
Why do the investors buy into this scheme? Because they are betting that the
stock will appreciate beyond $156 (maybe much beyond) which would entitle
them to get a piece of the action at $156/share instead of whatever high
market price everyone else might be paying. Of course, this is only one side of
the coin. We all know NOW that AMZN stock has never seen the level of
$156, and in fact plunged down to a level of $17 in 2 ½ years. That means the
investors never got to convert their bonds into stock, and AMZN was not able
to have stock issue at a higher price.
Does this mean AMZN and the investors made a huge mistake together? NO.
And that’s the beauty of a CB issue that it is a contingent security. That is,
since no one knows what will happen in the future, the contingent security
takes care of possible future scenarios. What did the investors gain by buying
CB instead of stock? They did not get the upside potential because of the
stock price crash but they did not burn completely either. They still have in
their hands a piece of paper that keeps paying them real cash every six
months. If they had AMZN shares they would have 12 cents to the dollar of
their original investment and no dividends whatsoever.

What did AMZN gain by issuing CB instead of straight bonds? The interest
rate 4.75%. This is at least two percentage points lower than what a
comparable 10 year T-note was paying at the time. Thus, a company as risky
and speculative as AMZN was able borrow at 2 points cheaper than the safest
borrower in the face of the world. AMZN got extremely cheap financing.