Amazon.com Inc – Retailing Giant to High-Tech Player?

Source: Case Study

  1. Amazon is becoming a high-tech company because they are based on high-tech and they have shift their focus on rolling out new high-tech product such as new Kindle. Recently, they have just released the Echo, which is a new technology for residential use as a voice activated tool to accomplish many internet related tasks (Amazon.com). This is an understandable direction of development for Amazon since they want to build competitive advantage. There are many types of e-commerce which is plainly a virtual market for trading goods. Amazon has streamlined and created a good reputation in delivery, quality of product listings as well as buyer’s protection and seller’s support. However, for the long term strategy, or for the marketing strategy, Amazon needs the high-tech products to keep customers excited and interested in the site as well as the company. Without technology, Amazon.com had not been realized. Since the entire business model is based on an online platform, it is not unusual to see Amazon as a technology company. In fact, high-tech is the building block of the company.
  2. According to an article on Forbes about selling the Kindle Fire below costs, it makes sense in the long run for Amazon to sell barely below its cost. The research estimated the cost of a Kindle Fire to be $209.63 while the sales price is $199. It is even cheaper now, the Kindle Fire is now on sale for $139. In the long run, the analysts argued that Amazon is aiming for the benefits of selling the contents online such as books, media and games. Therefore, they can absorb the marginal costs of selling below costs in the beginning and make up for this by selling digital contents. This makes sense because without the kindle device, customers cannot easily access the digital contents from Amazon through anything else besides the computers. Nowadays, mobile device is a part of life, so it is crucial for Amazon to find a way to be competitive in pricing to encourage customers to buy. The goal is to make the Kindle contents to be parts of customer’s life.
  3. Amazon should not collect sales tax in every state, because collecting taxes means paying taxes to state government. There is limited laws on how to collect taxes of online products. This is actually one of the incentive of opening an e-commerce market. Amazon saved millions of dollars, as well as Amazon customers saved a lot of money by using Amazon to buy things. Both Amazon and customers participate in e-commerce for the same incentive of not having to pay taxes. Therefore, if the Amazon starts collecting taxes, they must be able to handle the costs. Customers would not be happy as a result, and would seek other markets to buy online, where they do not have to pay taxes.
  4. Investing in same day delivery is a huge commitment which Amazon cannot do on their own unless they redefine means of transportation. They have been trying to find a cheaper and alternative mode of delivery rather than trucks. Amazon cannot control gas prices, which is a big part of same day delivery costs. Recently Amazon has tried using drones to deliver packages. This is an exciting new way of delivery but it is also very controversial because the air traffic is as complicated and busy as ground traffic (Gross, 2013).
  5. The streaming content should be expanded to include the pre orders of new movies, music and book release. The digital is supposed to be the fastest to provide customers with instant gratification. The main competitor of Amazon in this streaming content segment is Netflix. Besides, broadcasting companies also offer free and paid online streaming of their contents. Mobile devices makers such as Apple or Google have their own digital stores for streaming contents as well. Therefore, in order to keep their high-tech devices competitive and the website to be current and relevant, Amazon has to keep up with the digital streaming content.
  6. Amazon can compete with Sony, Apple and Samsung because they have good warehouse system, new delivery method and cheap devices. Customers are drawn to Amazon because of the low price and the convenient of buying things online. Products of Apple are always sold out. People lined up for days before Apple’s new release of a new product. Amazon’s customers are not necessarily these trend seekers. Amazon’s target customers care about pricing, the fast delivery and buyer’s protection. Most of the time when a person chooses Amazon and Amazon’s products, their reason is the price is cheaper than other devices and that they can get it shipped to their house fast. Sure they can also buy Apple, Sony and Samsung products on Amazon.com too. This is the other side of business that Amazon can use to compete. Since Amazon is still a retailer and an e-commerce platform for everyone to trade, including those competitors, Amazon still has some leg up in the game.

 

References

Internet. Amazon’s Echo. http://www.amazon.com/oc/echo/ref_=ods_dp_ae

Savitz, Eric. Amazon selling Kindle Fire below cost, analyst contends. Forbes. Published 9/30/2011 @ 5:40PM. Retrieved from http://www.forbes.com/sites/ericsavitz/2011/09/30/amazon-selling-kindle-fire-below-cost-analyst-contends/

Gross, Doug. Amazon’s drone delivery: How would it work?. CNN. December 2, 2013. Retrieved from http://www.cnn.com/2013/12/02/tech/innovation/amazon-drones-questions/.