Company Overview
One of the foremost web service providers and online retailers “Amazon.com” started its journey in 1994 and headquarters situated in Seattle, the US (Fetch 2; Kha 85; Amazon 3; and Bezos & Risher 2). This company has changed strategy several times as the growth rate of this company was not satisfactory level from 1995 to1999 (Fetch 2; Kha 85; and Bezos & Risher 2).
Fetch (2) stated that this company has ability to serve a diversified customer base from a one-stop shopping environment since it has strong logistics to deal with a broad product portfolio (books, electronics, digital downloads); in addition, it has efficient and skilled employees and technological support to help the customer to choose right products considering price, quality and other features. However, the next figure shows how it works –
Fetch (2) further addressed that the management teams of Amazon.com concentrates on the pricing strategy while they are committed to offer lowest price in order to increasing number of online shoppers; moreover, the most-advanced tablet Kindle Fire offered end-to-end service along with Textbook rental facilities, which helps the company to develop a strong platform for economic success. On the other hand, it becomes difficult for this company to decrease operating expenses and receive timely payments while it faces liquidity crisis; however, the next table demonstrates overall expenses and receivables to carry on operation in global market –
Table 1: Total operating expenses of Amazon.com
Source: Self generated from Amazon (38)
SWOT Analysis
Strengths
Customer-centric e-business model is one of the strongest points for this company while it has adopted advance technologies to design customer friendly e-portal, and it has included some characteristics in the webpage, for instance, edit option, customers’ feedback, production related information, gift guides, suggestion of the customers, secure payment options, and so on (Fetch 2).
- Advance technology, large product portfolio, brand awareness, logistics, loyal customer base, pricing strategy, free shipping facility are the key strength points;
Weaknesses
According to the annual report 2012 of this company, reduction of working capital, increase of operating costs, and enlargement of debt adversely affected the financial statement and ratio analysis of the company; as a result, business expansion plan and implementation of the strategic decisions have hampered due to such liquidity crisis. Discretionary consumer spending and Stringent Government Regulations for internet, e-commerce, copyrights, consumer protection and electronic devices, taxation, privacy, data protection, pricing, and many other related factors can create hindrance to operate business in global market.
Opportunity
The numbers of internet users have increased tremendously all over the world, which helps to develop online retail business to save time for journey and purchase goods; therefore, global B2C e-commerce profits reached up to 500 billion and expected to grow $950 billion by the next 2 years.
- Rapid expansion using networking system for different countries;
- Create market demand in developing countries like India and China
Threats
Recently, online retailing market became competitive while a number of strong competitors provide similar services, such as, Barnes & Noble, ValueVision Media, eBay, Yahoo, Google and so on; however, the following table provides more information in this regard –
Channels
AWS Solutions (1) stated that in the eCommerce implication web is the major tools to connect customer with the company; in addition, the path of this linkage to bridge product and services with customer is called web channel. There are different types of web channels like advertising channel, order processing channel, and customer service channel those are strongly inked with the supply chain while successful integration of the channels are essential to maximize potentiality of an eCommerce company. The web channels enjoys huge advantages more than the passive medias like television and print media while the power of web channels come from the instantaneous technology that attract higher earning individuals who are easygoing with the use of Internet.
The web channels of Amazon has aimed to provide every users with individual Managed Private Cloud (MPC) that facilitate the users to present their independent Cloud Computing to write comments, books or product reviews from Amazon EC2 and Amazon Virtual Private Cloud (VPC), while an user logged in Amazon site, the user’s environment would be automatically configured by Amazon web service. It also allows the site administrator to provide support service utilizing the advantage of the optimization tools integrated in the Amazon platform.
In fact, the Amazon is too much aware with its web channels to an extent where the company has formed a new company, which has named ‘Amazon Web Services Inc’ with the aim to provide in house service regarding its eCommerce platforms. Amazon (1) confirmed that the web channels of Amazon has integrated ‘Multi-Channel Fulfillment’ scheme that enabled users to maintain advertising, order processing, inventory management, delivery method, payment system, and customer support with exact with enhanced scope to manage and administer complete eCommerce engagement (Amazon1).
E-marketing program of Amazon.com
Smith (1) and Bezos & Risher (2) stated that the investors were unenthusiastic to invest for this company because of slow growth rate, but this position had changed rapidly due to increase of customer base and sales volume; however, this was possible due to taking effective strategic plans particularly e-marketing programs.
However, Bezos & Risher (2), Kha (85), McGrath (1) and Viehland (3) stated that there were few initiatives, which changed the position of this company; for example, portal search, sponsored search, pay per click, and associates program (it was forth-marketing pillar, which gave 800000 website owners a 15% commission for referring clients to purchase its goods).
Associates Program
Kha (85) and Viehland (3) stated that it is one of the most successful programs to maximize profit margin; in this model, this company provides text, image, banner, and links to the third parties and the business associates to promote the product of Amazon. At the same time, McGrath (1) and Viehland (3) argued that this company gives opportunity to the members who operate a website or blog, must have traffic, have a newsletter or customer list, Facebook or Twitter users; however, it generates about 40% of its sales income from this program; furthermore, the following figure shows commission rate for different categories –
In addition, third-party Associates list their own goods and obtain commission for each visitor to Amazon; however, in 2009, this company changed this strategy and terminate PPC referral commissions for the North American zone and decided to pay nothing for this program, which can negatively affect the company in some extent.
Pay Per Click (PPC) and Portal advertising
1-click was another online advertising attempt of this company, but it was not effective enough in terms of investment, for instance, it used subsidiary company A9 (the mediocre Clickriver) and brought no fruitful result from such initiative. As a result, the marketers of this company changed the channels in order to experience success, for instance, ProductAds replaced Clickriver in 2008 and Amazon pursuit of Google’s web browsing crown (It purchases space on the left side of Google’s search) to direct browsing customers to their websites.
At the same time, this company pays a fee for each visitor who visits through sponsored link; however, this e-marketing strategy was too effective to Google as it earns more than 99% of its profit from this segment in 2006.
Email marketing campaigns
It is most powerful tool and widely used program for e-marketing program because it is cost effective and easy system to reach customers; however, many companies cannot use properly email marketing for which they send fake message as part of direct marketing and damage brand image with reputation. Therefore, Online Marketers Seth Godin stated that Amazon focuses more on the content of the message to satisfy customers by sending message to the existing customer and not providing irrelevant message.
Frequent Website Development
The management teams of this company concentrated more on this factor for which they expend lots of time for the development of the website time-to time, for example, they find out the problems of the systems along with possible solutions to maintain the site, and improve the customer’s online experience; however, this company allocates large budget for this purpose. In addition, the management gives attention on issues related with website usability by garnering new information (regarding differential pricing, new package, and other issues) to develop relation with customers and avoid lawsuits. However, key features are –
- It uploaded in 2.4 seconds while competitors need at least 7 second to complete this task;
- At the same time, it scored 65% greater than other 20 e-commerce sites in 2001;
- It has a class-leading 99.90% mobile device availability;
- According to the annual report 2012, it is very aggressive to generate more traffic and make modifications
Marketing Communications
Chaffey (1) stated that the aim of the communication programs of Amazon is to boost customer traffic, improve customer experience, increase customer satisfaction rate, create awareness of offers, promote repeat purchases, make stronger service range, and widen brand image. However, this is not corporate objective, but the management wants to use advance communication system to assist customers as the most consumer-centric company; in addition, it has revolutionized ecommerce where millions of customers can take services.
Other initiatives
- The Customer’s Opinions: Each product is accessible for customer reviews and they can provide rate using hierarchical scale of 1-5 stars; at the same time, the employees can give comment and reply as well
- Partnerships and Web Services: It has already contracted with a few partners including retailers, such as, A9 and CDNOW, Timex Corporation and Marks & Spencer, ToysRUs; its web service includes e-commerce, database, payment, billing, web-traffic, and computing (Kha 85; and Viehland 3);
- Streamlined Ordering Process, Fulfillment Web Service (FWS) and Fulfillment By Amazon (FBA) program
Doing wrong in its program
Commission from Affiliate Program
Irby ( 1) sated that the people have no interest with Amazon’s affiliate program since the commissions from the product sale are too small (generally 4% to 8% for most of the items except MP3 products, Instant Vedio, Endless.com and Myhabit.com products); however, other competitors and niche markets offer comparatively high commission rate (about 30% to 50%). Therefore, large groups of people think that participation in this program is a waste of time; however, the following figure shows that a member got $170 against the sale of $3000 –
However, the participants of the associate program still rely on Amazon because they believe that payment will be clear at the soonest convenient. The management of this company considers this strategy as it is cost effective method and the company has experienced success using such strategy, but it was unfortunate to the affiliates of North American zone while they decided to stop payment. This segmentation strategic approach was wrong for the future development of the company as online retail industry is highly competitive due to low switching costs, easy to enter and so on; the retail competitors including Apple, Sony, LG and other electronic suppliers provide near 30% commission or above.
Public Relations
In many cases, this company denies to pay referral fees (though they work hard to raising sales) stating that the users of this program violates contract; however, the users get no opportunity to appeal against such claim and the marketers show their reluctance to reply messages of the associates. Therefore, the marketers and board of directors should reconsider this issue to prove that they are reliable and responsive because it is a fruitful e-marketing program for this company.
On the other hand, the affiliate members claimed that it has no corporate social responsibility while it abused and exploited workers using low cost e-marketing program; so, the relationship between this company and public has deteriorated. In this situation, many affiliate members have work hard and used similar technology to develop bad image of the company, for instance, discourage friends about the company, stop promotional initiative, share their bad experience with others (mentioning that it is fraudulent program), and so on.
Email marketing
At present, the people would like to spend their valuable time for useful purposes for which they have no interest on advertisement; in addition, ISPs use complex junk-mail filters to delete an e-mail from subscribers’ account, no effect to develop long-term relationship. In addition, the employees need to check large number of email and it is difficult for them to differentiate solicited and unsolicited e-mail; as a result, this e-marketing program turns into ineffective program though it is very inexpensive to propagate for the company.
Pay per Click Fraud
Soubusta (1) stated that e-marketing program plays significant role to grow business; therefore, the companies use such program though these companies now face the problem related with Click Fraud because there is no way to either identify or prevent. On the other hand, Soubusta (1) further argued that it is very simple to commit click fraud; however, Amazon also relied on this program and took support from Google; this strategic decision has gap considering present market situation.
Recommendation
It is also recommended that Amazon would be more careful about its web contents, while customers or users write any reviews, comments, suggestion, or blog, they could not use appropriate density of key words, and thus, it is essential to reduce dependency on the free contents gained from user end. Rather, it is most important for Amazon to use professional content writers who really know how the search engines crawl to identifying the key words by using properly written contents from the professional writers, Amazon would be capable to generate more traffic at its website.
Soubusta (1) argued that the companies should change the service providers to avoid fraud problems in pay per click system, for instance, it has opportunity to advertising schemes like Cost-Per-Action. As this company has enormous opportunities to expand services as it has already developed new payment system, timely delivery, and user-friendly features for which it can create brand awareness in the national market and one of the most successful ventures in international markets; it should upgrade websites time-to-time comparing competitors.
The management should emphasis more in the commission for the participate of the affiliate program and they should pay referral fees considering the competitors’ commission rate as Amazon generates 40% sales revenue from this referral links. In addition, it should not be the right decision to stop such advertising and promotional activities;
The management should remember that human resources are the asset for this company; so, it is important to develop communication system to avoid any complains from the side of the associate members. However, it should reply the messages of the associate members to develop public relation though they can violate the provisions of the contract;
The marketers should design the objective of e-mail marketing campaign and it has to be deliberate as access to the email analytics is not prime goal of the company. At the same time, they should monitor e-mail content regularly, check e-mail template before the distribution, suggest different browsers, stop use of Java script and Visual Basic, use subject line with shorter length (less than 50 characters), send to customers valuable content, evaluate receive rate, include both a plain text and an HTML version and so on. Moreover, the marketers should assume that target customers have no knowledge about the company and they should content of the message accordingly, create this program for all range of customers, watch the conversion flows; and so on;
On the other hand, the marketers should arrange integrated marketing program for the future growth, for instance, Google organized online marketing challenge to help the students to create online campaign where fifty thousand students from 100 nations take part in program. However, this report suggests the marketers of this company to introduce IMC campaign as Amazon had not taken such programs to increase sales volume;
According to the ratio analysis of Morningstar (1), it can be said that net profit margin, return on assets (%), return on equity (%), return on invested capital (%), and the EBITDA growth decreased significantly. At the same time, sales revenue increased by 40.6% from 2010 to 2011, but operating income decreased by 38.7% in this period, which adversely affected the net profit margin; therefore, the marketers should change overall e-marketing program to sustain in this competitive market;
In the e-commerce marketing platform of Amazon, there are a large number of sellers who are only aimed to retailing their product and services in the US market, in such case customers from non-US nations face serious troubles to get refund of their money. Although the e-commerce marketing has no border barrier, but some sellers has limitation to handle cross-border shipments, refusal of such orders would occur lose of transaction fees by the customers. To overcome such dilemma, it is essential or Amazon to set up penalties for non-compliance of orders by the sellers, at the same time, the Amazon could prevent the display of such across bolder sellers for non-US IP address.
The cross border eCommerce marketing also hampered due to the lack of integrity of PayPal in the developing countries, for instance Bangladesh is one of the top ten revenue generator in the oDesk and freelance.com for online marketing and associated IT enabled service, but PayPal has failed to cover its payment network in Bangladesh. Thus, Amazon needed to reduce dependency on the PayPal, rather it is essential to integrate those sounds better to process payments in the Asian emerging market; at the same time, and it is recommended that the banks needed to integrate instant payment gateway.
As the eCommerce marketing is a threshold matter for the marketers, this report recommended the company to integrate the negative disclosures of the product and services for customer’s review, after having the negative option, if the customers take it rationally, then he could make his purchase decision. In most of the cases, the eCommerce sites do not disclose their negative attributes, which ultimately indicates the lacking of transparency in the e-commerce marketing, while a customer thinks that he has trapped into a fraud, or cheating, he would share his experience in the social networking to community that could seriously injure the brand image of an eCommerce company. Thus, the marketing drive of Amazon would be much more aware to ensure its transparency to the customers.
It has evidenced that most of the online markers present unclean, fraudulent, or misrepresented offers regarding their product and services, which may not make any specific sense, and confusing in nature; therefore, it is suggested to Amazon to disclose its products and services offering in a clean and understandable way to avoid confusing attributes;
Similarly, the marketers often keep their sales and site using terms in a hidden place where it is difficult for customers to read and understand, their intention is that the without reading or understanding customer would select the radio button that he has agreed with the terms, as the terms contain very unethical and unparalleled terms even against the legislation. It is recommended to Amazon to place its terms and conditions very open and without reading the whole, the customers could not pace any order.
There are raising complains of customers regarding the processed payment, some of them are hacked credit card details and making unauthorized transaction from other eCommerce sites that create confusion about the implication of data protection act and violation of privacy of the customer including theft of others property without his prior consents. Amazon needs to modify its database for not to preserve the credit card derails of the customer and make it clear announcement in the marketing drive that the company don’t sell customer data to any third party.
Most of the online marketing tools Amazon has already used and most of them has massively misused with unethical behavior to the users and vendors, the unethical alignment occurred from the nonpayment must be resolved by Amazon to recover its clean image. Millions of people have dues payment to Amazon for marketing purpose, the company needs to make payment all of those outstanding bills of identifying the marketers who worked hard for the company. Amazon has already used the traditional eCommerce tools like SEO, PPC, Social Network and Affiliates, Blog and lining, so the company needs to identify some new tools for online marketing where the company needs to invest for improvement of technology in this regards.
Amazon has recommended improving the dynamics of the web channels of Amazon has built in system to control over the corporate data solutions surrounding the three mission-critical functional fields such as analysis of that data, to make interaction with the user end and to generate management decision for further modification or improvement of the system. The Channel Dynamics of Amazon has recognized as one of the top software companies of the United States providing web channel solution to the SME companies to integrate eCommerce where the advertising channels, order-processing channel, and customer support channels have strapping inked with the supply chain. The web channels of Amazon needed to provide on-demand infrastructural support to its all users through Software-as-a-Service (SaaS) protocols backed by the manual configuration from Amazon EC2 platform where management could perform monitoring and administrating job of cloud servers by using Windows Server or SQL Server with language Java and J2EE.
In the marketing drive of Amazon, it has observed that the markers ask for customer’s reviews and feedback for their existing product, but there is no option to add customer’s perception and expectation for future products and services, but customers at their day to experience could generate tremendous recommendations for future product development. In the existing practice of Amazon, it is essential to integrate algorithms to individualize every customer’s account, while every seller could make radically changes of his stores in accordance with the customer interests by using different programming tools adopting customized software.
Three most common web features such as traditionally shared filtering, collect modeling, and search-based modeling could implement such improvement; comparing these it is recommended that the algorithm of item-to-item shared filtering. Would be more effective for Amazon where customers would get more enhanced facilities to improve their cataloging with independently of increasing product display.
It is also recommended the Amazon would conduct web-based research to identifying a suitable solution for Amazon that would deliver time-to-time upgrading of strategic position of Amazon’ website through a phase by phase renovation process with a reasonable cost as well as resourceful manner to progress in the degree of quality of the website and its valuable contents.
Summary
In SWOT analysis, it described that loyal customers, diversified business strategy, product portfolio and low pricing model of this company is different from other online shopping service providers, for instance, direct-to-consumer online model assists in rising its inventory turnover, sales volume, and ROI; moreover, it is truly global company as it has specific websites and networking system for different countries. At the same time, Amazon has already created a large loyal customer base and expanded its customer reach; however, the customers get the opportunity to track their orders online, and they can communicate with customer service centers if they need any information or complain against the company.
Moreover, Fetch (3) stated that this company concentrated on the expansion and it considered acquisitions to incorporate new technologies, extra product portfolio, innovative material handling technologies, improve the productivity and geographic; however, It acquired Kiva Systems, Marshall Cavendish Children’s Books, LOVEFiLM International Limited in 2011.
In addition, e-marketing program of Amazon includes pay per click, and associates program, email marketing campaigns, frequent website development, marketing communications, partnerships and web services, fulfillment web service; however, this report demonstrates that associates program is one of the most successful project, but this is controversial program to the members or participants while it refuses to pay referral fees.
However, the marketers of this company used small budget to pay referral fees in e-marketing program for which entire project has brought negative result on sales revenue due to deteriorate public relation and communication system. Therefore, this report provides some suggestion to overcome problems related with e-marketing program, such as, increase commission rate, develop good relationship with public, clear payment of referral fees, change service providers, reallocate marketing budget, and conduct integrated marketing campaign and so on.
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