In 1994, before other market platforms had come to light, Jeff Bezos realized the need for digital commerce in the world of business. He understood how digital commerce would radically transform business processes. Therefore, to monetize his insight, Bezos would have to reinvent logistics. At first, he focused on the growth of the company at the expense of the net income (Rivet, 2017, p. 351). He reinvested most of the proceeds into building the diversified giant in order to be a household name. Today, the company is still pushing most of its cash into huge strategic plays such as Alexa, Amazon studios, Prime and Amazon web services.
Amazon is exceptional since its tied together by extraordinary leadership in its operations (Rivet, 2017, p. 359). By linking cloud computing, robotics, data science, healthcare and consumer retail, Jeff Bezos has realized a global operation that includes synergies and economies of scale. Hence, Amazon is seemingly involved in about everything and also seemingly everywhere from books people read to websites used, and food consumed. This has caused international conglomerates to sigh with envy (Ahmad and El-Sady, 2018, p. 2).
Besides, Jeff Bezos has expanded his empire to incorporate space exploration, philanthropy and newspaper publishing. This move had ideally cemented both his economic and political influence that would last for decades.
As Amazon began its bookstore, it disrupted the traditional approach adopted by companies such as Barnes & Noble by making the first online bookstore (Newcombe et al, 2015, 71). In the beginning, Amazon worked with wholesalers and distributors in order to fulfill orders. Later, it conceived a secondary marketplace in which inventory could be both bought and sold hence making Amazon dominate in competition regarding convenience and choice (Kahn, 2018, 191). By 1997, the company had about one and half million customers in a hundred and fifty countries with a total sale of a hundred and forty-eight million dollars.
Next, Amazon capitalized to expand the range of consumer products rapidly. In early 2000, Bezos rushed into the market for digital commerce ahead of other companies hence being a competitive advantage for them. However, instead of keeping quiet of their competitive advantage, they began monetizing their expertise to other companies (Satyanarayanan, 2017, p. 36). In the process, Amazon web services was born. As the years passed by, the smartphone market exploded; hence the demand for server space for app developers grew tremendously. Amazon claimed a place among the tech giants such as Microsoft and Google by providing such services. Today, revenues of Amazon Web services are over twelve billion (Rivet, 2017, p. 346).
In addition, Amazon is a key stakeholder in the global fintech industry. The company disrupts financial services through the use of cloud computing to lower the barriers to entry for all the fintech startups thereby calibrating the industry. For example, an app-based current account known as Starling Bank is built on Amazon’s cloud. Amazon has leveraged Artificial Intelligence to optimize data storage hence lowering costs (Newcombe et al, 2015, 69). At now, processes that costed about thirty million are now provided for thirty thousand dollars thanks to Amazon Web services.
In conclusion, Amazon is making itself indispensable to a new generation of innovative startups hence future-proofing itself for decades.
What aspects of Amazon’s operations management are based on the increased globalization of world trade?
Amazon’s e-commerce success is dependent on the efficiency of its operations management since it measures productivity in the company (Gupta and Rodriguez, 2013, p. 201). In combating the increased globalization of world trade, Amazon has strategically aligned some aspects of its operations. To begin with, we have its distribution strategies. Easy reach of customers has been the goal of every global business since the transportation costs are reduced and more sales are promoted (Ayers and Odegaard, 2017, p. 34) . Amazon’s fulfillment centers in different countries have encouraged reduced delivery times of products. Amazon’s distribution is majorly intensive therefore its many workers both seasonal and permanent have ensured products are shipped more quickly primarily during peak shipping times.
In addition, Amazon’s Fulfillment by Amazon (FBA) service has gained more traction since it’s a major component for its success in foreign markets. In 2016, the company experienced a tremendous global growth of about 40% in relation to its fulfillment centers for its sellers (Lasserre, 2017, p. 399). This indicated that the FBA was a critical advantage in drawing sellers to its marketplace. Also, the presence of Amazon in countries with less-developed infrastructure has helped the company establish a reputation through the fast and reliable delivery of products hence becoming a market leader in those regions.
Amazon Prime has also been a key operations management tool that helped Amazon become more competitive globally. For example, in the United States, approximately 56% of the households have obtained the Prime Memberships (Wrigley and Lowe, 2010, p. 56). However, there is still more room for Amazon to grow the Prime service in its domestic market. In contrast, as Amazon is making its headway internationally, there is more potential to expand the Prime service in other markets.
Amazon’s supply chain network strategy has also grown over the years due to the advancement of the market. The company is listed to have one of the best supply chain structure in the world. Amazon uniquely handles its customers since the customer is the key focus (Gupta and Rodriguez, 2013, p. 127). This means they spend much money on items customers like hence attracting more consumers. Besides, innovation into their supply chains has assisted the company with their supply networks. Through offering a broader product assortment, Amazon is able to fulfill different customer preferences hence ensuring excellent customer service (Lasserre, 2017, p. 324). According to Jeff Bezos annual shareholder letter in 2015, it was stated that the third-party sellers sold about 50% of the total units on Amazon. Therefore, the marketplace provides the consumers with a unique selection of products which is great for sellers (Wrigley and Lowe, 2010, p. 44). For example, about 70,000 third-party sellers in Amazon make more than $100,000 by selling on Amazon hence being able to reach a broad spectrum of consumers worldwide.
Also, its highly competitive pricing allows the company to place more consideration on both customer value and growth over the short-term profits hence attracting more customers worldwide. Amazon’s economies of scale, logistics, and investments have helped it offer better services than its competitors (Kenney and Zysman, 2016, p. 61). In conclusion, Amazon’s profitable businesses such as Amazon Web Services is assisting the company in subsidizing growth into more attractive but low margin areas such as online grocery. As a result, Amazon acquired Whole Foods in order to meet the groceries demand.
Is E-commerce ever going to truly replace the in-person shopping experience?
In Australia, E-commerce is growing rapidly. In 2017, Australians spent about dollars 1.95 billion on shopping alone (Feinleib, 2017, p. 129). This means a high number of the population have bought an item online even if it’s only once. However, the rapid growth of e-commerce is more than the brick and mortar retailers but this does not crumble their opportunity in the market (Chan, Cheung, and Lee, 2017, p. 206). This is because each channel offers a different value proposition to the customer. Therefore, e-commerce cannot entirely replace the in-person shopping experiences.
Business owners who are able to recognize the various lenses consumers use to see the market, when either buying online or buying in person, are able to design strategies that meet consumer needs irregardless of where the consumer desires to buy from (Lee, Sener, Mokhtarian, and Handy, 2017, p. 49). However, different factors may be considered. To begin with, we have product expectation and price convenience. Online purchase of products provides consumers with control of what they buy and where they buy from (Pappas, 2016, 99). However, the product in question is a critical element in determining whether the customer buys the product in person or online. According to Philip Graves a consumer psychologist, consumers primarily prefer familiar and branded items which have qualities they can predict online. In cases where the product isn’t accustomed to them, customers prefer buying in person.
To leverage this reality, small business owners can strategically promote products in both channels. For example, branded products that consumers have bought before may be cost-efficient to sell online. On the other hand, new-to-market products that consumers have not seen before or felt them in person may be sold in physical stores since consumers are not much confident to purchase the items (Lim, Osman, Salahuddin, Romle, and Abdullah, 2016, p. 406).
Secondly, we have the issue of different effort and same expectations. In cases where customers buy in person, giving something up is a prerequisite. It may be their time, money or effort taken in traveling to a physical store since they believe what they buy has some unique payoff (Pappas, 2016, 94). However, even if the risk of a merchant lacking a particular item in stock is high, customers are eager to take the chance because of the deduced value of buying in person. On the other hand, buying online will not require as much effort as needed in buying from physical stores, although the expectation from the consumer is the same. A consumer who buys online maybe because they expect promotional offers or choice of products (Lee, Sener, Mokhtarian, and Handy, 2017, p. 45).
Lastly, we have an emotional payoff. Shopping is considered to be more than consumerism. This is because it may involve opportunities such as spending time with friends hence altering how one perceives himself or herself when surrounded by a company one desires to keep (Lim, Osman, Salahuddin, Romle, and Abdullah, 2016, p. 407). Despite the universality of online purchasing, these kinds of emotional aspects in shopping may preserve the desire of buying in person. According to a report conducted in 2013 by a retail strategy firm known as WD Partners, it was discovered that about 80% of respondents bought products in person due to instant gratification and the experience of human connection (Feinleib, 2017, p. 129).
The real long-term implications of the increased presence of Amazon to the Australian Retail Industry
Amazon’s presence in Australia was forecasted to cost the local retailers about $12 billion for the next decade it would be in operation. However, still, the impact of Amazon in Australia is hard to predict since its presence will automatically signal disruption by new entrants (Yang, 2018). Besides that, the Australian Retail Industry will both face some long-term threats and advantages due to the presence of Amazon in Australia.
Beginning with the threats, we have the pushing down of prices and profit margin. This will be good for customers but bad for the retailers. Therefore, there is a likelihood of a modest negative effect for the traditional retailers (Chen, 2018, p. 2846). Amazon might attract more Australian consumers due to different factors. One, its sales volume is high hence the prices of its products will be lower than other retailers. Two, its competitive and dominant position in other markets. Since Amazon is a household name, attracting customers will be much easier since the brand sells itself and secondly its low prices will be an added advantage (Chen, 2018, p. 2843). Three, Amazon has highly invested in providing cost-effective and high quality of products.
The second threat is Amazon’s effective logistics. In Australia, the logistics and delivery models are not excellent. Therefore, Amazon’s presence in Australia will undoubtedly impact the logistics option since the company is quite known for its superb distribution and logistics function (Jacob, 2018). On its long-term impact, Amazon will implement logistics options that will affect not just the retailers but also other logistics companies.
Lastly, on the threats, Amazon is a relentless innovator. Innovation has been a critical factor to the success of Amazon and its long-term presence in Australia will positively promote continued reinvestment of innovation in its business operations to ensure better service (Jacob, 2018). This will negatively impact the Australian Retail Industry due to different factors. One, Amazon patented its one-click order process. Two, the drone delivery and robotic warehousing is an added advantage, and lastly, Amazon membership ensures quick delivery of products (Yang, 2018).
The Australian Retail Industry will also gain some advantage from Amazon’s presence in Australia. To begin with, small operators will gain some benefits. Amazon will assist small retailers to extend their reach. Partnerships created with the small retailers will allow them to offer unique products on a vast global base (Xu, Gao and Hammond, 2017, p. 149). Also, since the Amazon marketplace operates in a direct consumer model, selling through Amazon will provide the small retailers with more profits than having to sell on a wholesale basis.
Amazon’s fulfillment options will also be of a long-term benefit for the Australian Retailers. The fulfillment options will offer both distributors and brands flexibility in choosing the best fulfillment option that works better for them (Karinja, 2018). For example, in case the retailers operate on a wholesale basis, and they don’t have a consumer fulfillment experience, leveraging the FBA option will ensure Amazon handles their logistics. Productivity will therefore increase.
In conclusion, the Australian Retail Industry still believes that Amazon’s presence will not surpass two percent share of the total retail sales within its first five years. Therefore, they will have an opportunity to adapt to the post-Amazon world.
References
Ahmad, S. and El-Sady, N., 2018. How the New Technology Impact on E-Commerce?. New Zealand Journal of Computer-Human Interaction, 3(2).
Kahn, B.E., 2018. The Shopping Revolution: How Successful Retailers Win Customers in an Era of Endless Disruption. Wharton Digital Press. 343.
Newcombe, C., Rath, T., Zhang, F., Munteanu, B., Brooker, M. and Deardeuff, M., 2015. How Amazon web services uses formal methods. Communications of the ACM, 58(4), pp.66-73.
Rivet, D.J., 2017. Amazon’s Superior Innovation: A Study of Amazon’s corporate structure, CEO, and reasons behind why it has become the most innovative company in today’s market., pp.341-376.
Satyanarayanan, M., 2017. The emergence of edge computing. Computer, 50(1), pp.30-39.
Ayers, J.B. and Odegaard, M.A., 2017. Retail supply chain management. CRC Press. 129.
Gupta, S. and Rodriguez, M.L., 2013. Amazon in 2017. pp, 127-268.
Kenney, M. and Zysman, J., 2016. The rise of the platform economy. Issues in Science and Technology, 32(3), p.61.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education. pp. 321-456.
Wrigley, N. and Lowe, M., 2010. The globalization of trade in retail services. Organisation for Economic Co-operation and Development. pp, 23-78.
Chan, T.K., Cheung, C.M. and Lee, Z.W., 2017. The state of online impulse-buying research: A literature analysis. Information & Management, 54(2), pp.204-217.
Feinleib, D., 2017. The E-commerce Flywheel. In Bricks to Clicks (pp. 121-138). Apress, Berkeley, CA.
Lee, R.J., Sener, I.N., Mokhtarian, P.L. and Handy, S.L., 2017. Relationships between the online and in-store shopping frequency of Davis, California residents. Transportation Research Part A: Policy and Practice, 100, pp.40-52.
Lim, Y.J., Osman, A., Salahuddin, S.N., Romle, A.R. and Abdullah, S., 2016. Factors influencing online shopping behavior: the mediating role of purchase intention. Procedia Economics and Finance, 35, pp.401-410.
Pappas, N., 2016. Marketing strategies, perceived risks, and consumer trust in online buying behaviour. Journal of Retailing and Consumer Services, 29, pp.92-103.
Chen, J., 2018. Retail Prices and E-Commerce. In Encyclopedia of Information Science and Technology, Fourth Edition (pp. 2841-2850). IGI Global.
Jacob, A. (2018). How Australian Retailers Are Reacting to Amazon’s Arrival. [online] Ordermentum.com. Available at: https://www.ordermentum.com/blog/how-australian-retailers-react-to-amazons-arrival [Accessed 3 Aug. 2018].
Karinja, F. (2018). The real threat to Australia’s retail sector (and it’s not Amazon). [online] Small Caps. Available at: https://smallcaps.com.au/australia-retail-sector-threat-not-amazon/ [Accessed 3 Aug. 2018].
Xu, J., Gao, X. and Hammond, J., 2017. E-tailing in Australia: A preliminary analysis of David Jones. International Technology Management Review, 6(4), p.149.
Yang, D., 2018. Has the arrival of Amazon altered the market structure for consumer electronic goods in Australia?
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