Amazon

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Ch apte r 2. Mini -Case

W atch out A ll Retailers, Here Comes Amazon; W atch out Amazon, Here Comes

Other Competitors

Amazon ’s sa les in 201 4 were $88 .99 billi on , an inc reas e of 19 .4 pe rcen t ove r 2013 . In fac t, its sa les

in 201 4 were a whopp ing 16 0 pe rcen t more tha n its sa les in 2010 , on ly fou r yea rs prior. Amazo n ha s

bee n ab le to ach iev e remarkab le ga ins in sa les by prov iding high qua lity, rap id, an d relative ly

inexpens ive (relative to co mpe titors) se rvice . Amazo n ha s take n on suc h formidab le co mpe titors as

W almart, Goog le, an d Ba rne s & Nob le, amon g othe rs, an d ha s co me ou t of it as a winne r, pa rticu larly

in the las t 4–5 yea rs.

W almart ha s bee n emphas izing its on line sa les as well. In 2014 , it grew on line sa les by abou t $3

billi on , for a 30 pe rcen t inc rease . Tha t see ms like exce llen t prog ress , un til on e co mpa res it to

Amazon ’s sa les inc reas e in 201 4 of abou t $14 .5 billi on . Muc h oppo rtun ity remains for bo th to improv e

as total 201 4 on line sa les were $30 0 billi on .

Goog le is clea rly the gian t sea rch eng ine with 88 pe rcen t of the information sea rch marke t. Howeve r,

whe n consu mers are shopp ing to pu rchas e goods , Amazo n is the leade r. In the third qua rter of 2014 ,

39 pe rcen t of on line shoppe rs in the United States bega n the ir sea rch on Amazon , co mpa red to 11

pe rcen t for Goog le. Interes ting ly, in 200 9 the figu res were 18 pe rcen t for Amazo n an d 24 pe rcen t for

Goog le. So , Amazo n appea rs to be winn ing this co mpe titi ve ba ttle with Goog le.

Ba rne s & Nob le los t ou t to Goog le be fore by igno ring it as a threa t. Toda y, B& N ha s re- es tab lishe d

itse lf in marke t niche s trying no t to co mpe te with Goog le. Fo r exa mple, its co lleg e division large ly

se lls throug h co lleg e books tores , which hav e a ‘monopo ly’ loca tion gran ted by the un ive rsity.

Howeve r, Amazo n is no w targe ting the co lleg e marke t by deve lop ing ag ree men ts with un ive rsities to

ope rate co -brande d webs ites to se ll tex tbooks , un ive rsity t-sh irts, etc. Mos t of the studen ts alread y

sho p on Amazon , mak ing the promotion eas ier to marke t to un ive rsities an d to se ll to studen ts.

A few yea rs ago , Amazo n was referred to as the W almart of the Interne t. Bu t, Amazo n ha s dive rsified

its produc t/se rvice line muc h furthe r tha n W almart. Fo r exa mple, Amazo n no w co mpe tes aga ins t

Netfli x an d othe r se rvice s prov iding vide o en tertainmen t. In fac t, Amazo n won two Golde n Glob e

Awards in 201 5 for prog rams it produced . Amazo n also marke ts high fash ion clothing for men an d

women . Founde r an d CEO of Amazon , Je ff Bezos , stated tha t Amazon ’s goa l is to beco me a $20 0

billi on co mpan y, an d to do tha t, the firm mus t lea rn ho w to se ll clothe s an d food .

It appea rs tha t Amazo n is bea ting all co mpe titors, eve n formidab le one s suc h as Goog le an d

W almart. Bu t, Amazo n still need s to ca refully watch its co mpe titi on . A ne w co mpan y, Je t.co m, is

targe ting Amazon . Je t.co m was founde d by Marc Lo re, who founde d the high ly success ful Diape r.co m an d a former co mpe titor of Amazon , Quids i. Amazo n hu rt Quids i in a major price war an d

even tua lly acqu ired the co mpan y for $55 0 million . Lo re worke d for Amazo n for two yea rs the rea fter

bu t even tua lly qu it to foun d Je t.co m. Je t.co m plan s to marke t 10 milli on produc ts an d gua ran tee the

lowes t price . Its annua l membe rsh ip will be $5 0 co mpa red to Amazo n Prime’s cos t of $99 .

Compe ting with Amazo n rep resen ts a major cha llenge . Howeve r, Je t.co m ha s raise d abou t $24 0

milli on in ven ture fund ing with cap ital from suc h playe rs as Ba in Cap ital Ven tures , Goog le Ven tures ,

Goldman Sachs , an d Norwes t Ven ture pa rtne rs. Its cu rren t marke t va lue is es timated to be $60 0

milli on . Th e future co mpe titi on be twee n the two co mpan ies shou ld be interes ting .

Sou rces : G. Bens inge r, 2015 , Amazo n make s a pus h on co lleg e ca mpuses , W all Stree t Jou rna l,

ww w.wsj.co m, Feb rua ry 1; K. Bhas in & L. She rman , 2015 , Amazo n Cou tre: Je ff Bezo s wan ts to se ll

fanc y clothes , Bloo mbe rg, ww w.bloo mbe rg.co m, Feb rua ry 18 ; L. Dormeh l, 2015 , Amazo n an d Netfli x

sco re big at the Golde n Globe , Fas t Compan y, ww w.fas tco man y.co m, Janua ry 12 ; S. Sope r, 2015 ,

Amazon .co m riva l Je t.co m raise s $14 0 milli on in ne w fund ing , Bloo mbe rg, ww w.bloo mbe rg.co m,

Feb rua ry 11; B. Stone , 2015 , Amazo n bough t this man ’s co mpan y. Now he is co ming for him,

Bloo mbe rg, ww w.bloo mbe rg.co m, Janua ry 7; M. Kwatine tz, 2014 , In on line sa les , cou ld W almart eve r

top Amazon ? Fo rtune , ww w.fortune .co m, Octobe r 23 ; R. W ink ler & A. Ba rr, 2014 , Goog le shopp ing to

coun ter Amazon , W all Stree t Jou rna l, ww w.wsj.co m, Dece mbe r 15 .

Mini-Cas e Ques tion s

1. Can an y firm bea t Amazo n in the marke tplace ? If no t, why no t? If so , ho w ca n

the y bes t do so ?

2. How formidab le a co mpe titor is Goog le for Amazon ? Pleas e exp lain.

3. W ha t are Amazon ’s major streng ths ? Doe s it hav e an y weaknesses ? Pleas e

exp lain.

4. Is Je t.co m a po ten tial conce rn for Amazon ? W hy or why no t?