Amazon in 2019

Five C analysis – Amazon

• Company – Inception in July 1995
• Founder and CEO of Amazon – Jeff Bezos
• Competitive advantage – first mover advantage, quality, speed of delivery, reliability
• Net sales increase by 31 % i.e 232.9 billion in 2018, Net income 10.1 billion in 2019 vs 3 billion in 2017
• Customer
• B2C – Customers who are tech savvy, online shoppers, like connected devices (Dash, echo)
• B2B – Corporates / Educational institution (Amazon cloud, Amazon Supply, Amazon Inspire )

• Competitors
• Video on demand – Netflix
• Cloud storage – IBM
• App store – Google, Apple
• Virtual Assistant – Google, Apple
• Online Music – apple, google, saavn
• Retail business – Walmart , Best buy
• Collaborators
• Upstream suppliers – amazon studios
• Downstream suppliers – Books, video, ebook , electronics (eg. Cloudtail)
• Context
• Customers are using brick and mortar retailers as showroom of Amazon.
• Amazon continued to lead in most of the business where product is standard
• we need to analyse if traditional retailers can apply new strategy to survive
• Decision Problem
• Traditional retailers are losing business to Amazon. Need to identify long term and short term strategies to counter Amazon.

• Alternatives
• More frequent discount offers to keep the inflow of the customer to showrooms
• Negotiate with OEM/ wholesaler and get the same pricing policy implemented
• Identify target customers and come up with product/ offers for them (For eg: Senior citizen, Kids )
• Provide additional services and value addition in store (For eg: Add on benefits – same day installation)
• Improve mobile app/ website presence, make products online
• Exclusivity in certain product categories
• Introduce loyalty program, reward customer for repeat purchases.

• Framework used for alternatives

• Create unique value proposition for the customer
• Go for differentiation strategy
• Go for Low cost strategy
• Best Alternatives using framework :

1] Create unique value proposition for the customer

Alternative: More frequent discount offers to keep the inflow of the customer to showrooms
Analysis: Retailers with brick-and-mortar need to match the prices what Amazon is offering online which can be done by offering alternative value adds like free home
delivery and installation based on the loyalty track record of the customer. Free servicing guarantees with the product and subsequent low cost annual maintenance package
from the showroom etc.
Alternative: Identify target customers and come up with product/ offers for them (For eg: Senior citizen, Kids )
Analysis: In addition to this retailers also need to maintain a strong data base of their customers, do a segmentation based on age etc. and send them gifts or special coupons
on their birthdays/anniversaries. Further, structure of the store should also be re-designed in a way to cater to needs of different segments.
Alternative: Introduce loyalty program, reward customer for repeat purchases.
Analysis: Loyalty programs and free cash in the form of discount money accrued through shopping online can be a big anchor to attract the customers from on-line to off-line.
If the customer is getting more benefits from off-line retailer he would like to check out things on-line and purchase the same by coming to an off-line store.

2] Go for differentiation strategy

Alternative: Customer preference is changing, need to go online.
Analysis: Retailers have to diversify their business by also having an online presence. The loyal customers of the retailers who due to some reason don’t want to visit the store
can purchase things online from their website. Also, this will open the market to the retailers of those customers which stay far from the store but want to shop through them
due to word-of-mouth from someone. To do this, unique competencies like attractive post sales service plans, loyalty offers need to be doled out by the retailers.
Alternative: Exclusivity in certain product categories
Analysis: Retailers have the products under their private lables which they promote, these products should match with the top selling product of well known brand in terms
of features, the price should be lower than the branded one and should come with an exclusive promise of post sale service.

3]Go for Low cost strategy

Alternative: Negotiate with OEM/ wholesaler and get the same pricing policy implemented:
Analysis: Brick and Mortar retailers should re-negotiate pricing policies with their OEM/wholesalers so that they bring down their cost and pass on the discounts to the
customer.
Recommended Action: Create Unique Value
Proposition for the Customers
• Amazon has created many value propositions which are over and above
the discounted price which the customer gets on their website. Some of
these are memberships like amazon prime which fetches you subscription
to exclusive videos, music, free delivery etc.
• However, there are still huge number of people who do not value the
offering of Amazon so dearly that they will not defect from them. Brick-
Mortar retails should discover or create such value propositions.
• Some examples can be advertising the value of excellent post sales service
which can’t be offered by the online retailers but can be offered by brick
and mortar retailers. Loyalty programs which give you huge discounts in
the form of cash that can be used to purchase products from the same
retailer can also be huge anchor to increase the stickiness of the
customers.
Negatives of missing out other alternatives:
We have recommended to choose strategy of creation of unique value
proposition to the customers as the final solution to the decision
problem over other two options:
-> strategy of differentiation and strategy to go low-cost:
Possible opportunity loss from overruling above alternatives could be:
• Not able to tap those consumers which do not want to switch from
online convenience to some other way of shopping.
• Bearing the cost of discounts given to customers as we will not be
negotiating with the wholesellers/OEMs for lowering the costs.