Amazon Case Study

Alexander Kuehn

Adrianna Horvat

Professor Hortensia Sampedro

IDH 3034

October 27, 2017

Amazon

Started in 1995, Amazon’s founders quickly realized the growth rate of internet users, understanding that being online would become of great importance and that interactive retailing would become a “killer application”. Debating on which market to focus on, the company decided to enter the book retail market due to its larger size and greater diversity. With only 8 million dollars as initial investment and a 500 square feet warehouse, the company started small. Within just one year, the company experienced hyper growth, allowing them to move into a 45,000 square feet warehouse to keep up with the increase in demand. During that time, Amazon’s workforce increased by a fourfold.

        With book retailing increasing in the 1980’s in the US, megastores by companies such as Barnes and Nobles started to spread around the country. Those megastores usually offered items at discounted prices, while also expanding their repertoire to all sorts of entertainment, including lectures, CD’s and artistic performances. In the late 1990’s, online book retail experienced high growth through the increased use of personal computers, giving more people access to the internet. Several online retailers emerged, supporting the fact that 14% of U.S retailers had established websites or planned to, compared to just 4% a year earlier.

To enter a rapidly increasing online retail market, Amazon co-founder Bezos believed that convenience, selection, price and customer service were crucial elements to propose value to an almost limitlessly increasing potential customer base. With the opportunity for customers to place orders any time a day, 7 days of the week, the company managed to establish a convenient way to shop. Through an easy to use “search engine”, allowing customers to browse inventory sorted by title, subject or key word, Amazon was able to offer seven times the selection of any megastore present. When it comes to pricing, the company managed to sell most of its books at a discount, some best sellers even at a discount up to 30%. To make up for the loss in sales, Amazon charged slightly more for shipping, while buying in bulk from the distributers. To make the customer experience as enjoyable as possible, Amazon created an easy to use registration process that stored the shoppers’ info, secured by a bill of rights that protects the customers’ privacy. In addition, help via e-mail was available in case any questions would arise, later expanding into tracking systems. To increase traffic on Amazon’s site, the company started with word of mouth and press advertising, later shifting more towards online advertisement that allowed for easy to evaluate success. Furthermore, Amazon created the eyes and editors program that notified customers about book arrivals in selected categories and genres. To shape a successful corporate culture, Bezos successfully established a climate of friendliness and intensity. As role models, he perceives FedEx and Starbucks to be perfect examples for their extraordinary customer service in types of hyper growth and ability to guerrilla market on a large scale.