Amazon a well-known e-retailer, a place where customer can buy anything, also known as the most customer-centric company.
Is mantra for having billions of satisfied and smiling customer across the global. In marketing, it is commonly known as “distribution”, the last element of marketing mix, as opined by Waterschoot & Van Den Bulte (2016)
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The company defines its lines of business in terms of product sales, service sales, AWS, fulfillment, publishing, digital content subscriptions, advertising, and co-branded credit cards. For your understanding, I’ll define Amazon’s lines of businesses as
1) online retail,
2) internet services, and
3) the Kindle ecosystem.
Business Platform & Function
Amazon today is primarily an online B2C retailer, and having this platform has significant cost benefits as opined by Shao-Kang, Ai-Yun, & Yu-Ping, C 2014. Amazon performs following functions under it’s distribution channel.
- Order Processing
- Ware Housing
- Inventory Management
Gherasim (2016) observe that distribution of products is the intermediation process between production and consumption. In other words, it simply means, right product, right quantity, right place at right time.
As a part of distribution strategy, Amazon doesn’t stock everything that is sold on its website and established as a channel for other retailers to sell their products, taking a cut on every purchase. This is possible by welcoming third-party sellers and Implementing long-term free shipping programs. Initially, this distribution idea was considered unconventional at the time of launch.
Most of the third-party sellers are aware about Amazon’s “Fulfillment by Amazon” (FBA). FBA is Amazon’s fulfillment service and serve as an incredibly powerful incitement for the marketplace’s growth, but it also offers countless benefits to participating third-party sellers.
“You Sell It, We Ship It.”
That is the tagline and the foundation of the Fulfillment by Amazon program. Amazon has been strategically expanding its fulfillment footprint by building fulfillment centers (FCs) around the country in populated regions, bringing products closer to customers with the goal of drastically reducing fulfillment costs.
Less ground between product and customers = lower transportation cost and better tax saving regime
The structure of the program is simple; retailers opts for FBA program and store all the products in Amazon’s network of FCs. When a product is ordered, Amazon picks, packages and ships the item to its final destination, and handles customer service on your behalf.
Although, this model may have limitation for small time retailer as it is hard for them manage task force to handle global fulfillment, logistics and customer service duties.
Despite that the above fact, according to Amazon, 64% of FBA sellers reported that their Unit sales increased on Amazon.com more than 20% since joining FBA; 27% saw increases of 50% and 13% saw sales more than double.
This strategy has made Amazon a leading long-tail retailer, expanding its available selection without a corresponding increase in overhead costs. Further, extended this long tail retail model by introduced the sale of used products through its seller marketplace. Originally developed to compete with eBay, the seller marketplace provides another retail revenue stream for the company without the need to stock products in its warehouses. Advertising and shipping are handled exclusively by sellers, with Amazon taking a cut of every sale simply for providing the channel.
Existing Distribution Contingencies
Amazon’s most significant weakness has always been and still remains its outbound transportation network.
it’s ever expanding network demand retention of human capital; however, automation could be possible solution but as of now thid seems to have limited role.
Amazon’s being a leading long-tail retailor with huge products options and customer services, it has mange to establish unbeatable in following categories.
Price: For most, that’s hard to do, just as it was once hard to beat Walmart on price alone.
Selection: As with price, that’s increasingly hard to do given that Amazon stocks deep and works with partners that carry what it does not carry.
Experience: Amazon invented this type of retailing.
Convenience: It may be hard to get product to a customer as fast as Amazon.
That is why people say ‘When you think of web shopping, you think of Amazon ‘