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5.2 Amazon’s position


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The E-Business, the E-Customer, their Relationship and Interactivity



KunnskapskildenE-Business –
E-Business, E-Customer, Relationship and Interactivity


The E-Business, the E-Customer,
their Relationship and Interactivity 

Jan Vig 

Dissertation  av Jan Vig om E.Business, E-Customer, Relationship and Interactivity  (286 sider) i forbindelse med Masterstudie i Information Technology and Communication Juni 2000.


The E-Retailer Business, the E-Customer,
their Relationship and Interactivity

Table of Contents

Chapter One Introduction to the study

Chapter Two Business in Cyberspace

Chapter Three E- Retailer Commerce

Chapter Four E-Customer, Relationship and Interactivity

Chapter Five A Successful Case study – Amazon.com

Chapter Six The Future, Critical Success Factors, E-Business Strategy, Results and Conclusion



Chapter 5

A Successful Case Study Amazon,com 



Chapter Five A Successful Case study – Amazon.com

5.1 Introduction
5.2 Amazon’s position
5.3 About Amazon.com
5.4 The Secrets of Amazon.com
5.5 Summary




Amazon’s position 


Among the E-Retailers Amazon.com’s position has been steady at the front, but not concerning profit. One of the reason for that is that one of the strategies from the companies management have to get big fast and get a huge loyal customer base and get into new areas of interest to their customers. This strategy is consistent with an industry looking to consolidate to maximize the value of their customers. The strategy is also consistent with stickiness. Amazon.com’s goal is to entice users to visit their sites and never to leave, let alone wanting too.  These aspects are the defining components of stickiness.

Amazon.com has therefore invested heavily both in backend and front end to reach this goal.

Its effort to build itself a top-class distribution system is racking up huge losses too. A lot of investors begin to be anxious when or if Amazon.com will be profitable. At the start of Amazon.com early investors were told not to expect dividends for at least five years time. Most of the Investors have faith in Bezos, and the problem is not laying in the fact to get Amazon profitable, but that such an expansion to reach the goal of the biggest store online cost tremendous amount of money in early investment to reap the award later on.  And it is known that most investors are not too patient.

As seen below a framework for Amazon.com. The figure summaries the system that originally made Amazon.com unique.



Source: Alter (1999:3)

Figur 5.1 Amazon.com provides a new way to shop for books.


Some headlines about Amazon.com are: (Gardner, April 26,2000)

Financial results from the first quarter of this year show that while Amazon nearly doubled its revenue, it sustained bigger losses than during the same period last year.

Amazon.com reported a loss of USD122 million for Q1, a substantial increase on a loss of USD36 million in Q1 of last year. The company reported a first-quarter operating loss of 35 cents a share significantly lower than the 55 cents per share loss of Q4 in 1999.


The same period last year saw 12 cents per share losses. Sales rose 95% from last year’s calendar first quarter to $574 million from USD294 million in 1999. Total customer accounts were up over 20 million.  The most important metric orders from repeat customers represented 76% of all orders in the period. In tandem with the announcement of Q1 earnings, Amazon announced that it gained 3.1 million new customers in the first three months of this year and now boasts a customer base of 20 million.


The customer growth from last quarter was up 3.1 million accounts to 20 million. And 76% of total sales came from repeat purchasers.  Amazon.com. continues to solidify itself as a well-capitalized long-term player in electronic commerce. At this point, it is in a class by itself, considering its market share and brand presence compared to so many of the world’s other «dot-coms.»


Below some important facts about Amazon.com.com:


Figures about Amazon.com
Sales Valuation
  • Amazon.com’s 1995 sales: $500,000
  • Amazon.com’s 1996 sales: $15.7 million
  • Amazon.com’s 1997 sales: $148 million
  • Amazon.com’s 1998 sales: $610 million
  • Amazon.com’s 1999 sales: $1.6 billion
  • Amazon.com’s valuation in 1997: $300 million
  • Amazon.com’s valuation in 2000: $22 billion
Customer acquisition
«Net» sales conversion rate
  • Amazon.com’s customer acquisition cost: $19
  • CDnow’s customer acquisition cost: $65


  • Amazon.com’s Aug. 1999 «net» sales conversion rate: 8.3%
  • Industry average «net» sales conversion rate: 1%


Customers Average amount spent
  • Total Amazon.com customers in 1999: 17 million


  • Average amount each Amazon.com customer spent in 1999: $116
  • Average purchase value at top 10 e-commerce sites: $48




Source: http://www.topica.com/lists/iconoclash
Table 5.1 Figures about Amazon.com


In the Top 20 E-Tailer’s report during April 2000 the following result was presented:


Top 20 Web Retailers Among US Home Users
April, 2000
Web Site Projected



Buy Rate
1 1 Amazon.com 1,506 21.3 16,260 9.3
2 3 ticketmaster.com 633 7.4% 5,674 11.2
3 4 barnesandnoble.com 439 7.4% 5,663 7.8
4 2 cdnow.com 367 8.9 6,797 5.4
5 29 sears.com 303 3.4 2,627 11.5
6 5 buy.com 302 3.3 2,493 12.1
7 7 drugstore.com 261 2.5 1,900 13.7
8 38 staples.com 236 2.2 1,654 14.3
9 9 jcpenney.com 210 2.7 2,032 10.4
10 22 more.com 172 1.6 1,218 14.1
Source: PC Data Online http://www.pcdata.com/


Table 5.2 Top 20 Web Retailers Among US Home Users April 2000

In another online survey of 1,200 US Internet users by Ernst & Young, both men and women selected Amazon.com and Barnesandnoble.com, and CDNow as their favorite sites.


Top E-Commerce Sites by Gender
Men Women
Site Percent Site Percent
Amazon.com 55% Amazon.com 49%
Barnesandnoble.com 31% Barnesandnoble.com 30%
CDNow.com 30% CDNow.com 24%
Buy.com 25% eToys.com 21%
Egghead.com 22% Drugstore.com 20%
Office Max 16% JC Penney 18%
Best Buy 15% Buy.com 17%
Office Depot 14% Disney 17%
eToys.com 13% PlanetRX.com 17%
Reel.com 13% Bluemountainarts.com 15%
Source: Ernst & Young http://www.ey.com/


Table 5.3 Top E-Commerce Sites by Gender

According to results of Ernst & Young’s survey, which polled 1,283 users, found that while stores such as Amazon.com, Ebay and CDnow are the most popular and most frequently used sites, they are not necessarily the most commercially successful. For that reason, the real online retail winners of the holiday season are not apparent in traffic patterns. For example, while 42.1 percent of shoppers purchased at Amazon.com and spent an average of USD128 each, 3.7 percent of those polled went to Best Buy and spent an average of USD233 each. 2.9 percent of respondents went to Walmart and spent an average of USD167 each while over one fifth of users went to eToys to spend an average of USD127 each. Reasons for shopping by Amazon.com were ease of use, good selection, good prices and good availability of products.


The success of these is due largely in part to the type of product Amazon.com sell and the compatibility of those products with the Net as a distribution medium.

Buying a book online is a relatively stress-free shopping experience. The Customers read the review, look at the cover and if they like what they see, they buy with relatively low risk attached. Clothes, financial services and other things are a different story. The clothes have to fit, the service has to be right and the motivation to buy other things online has to be compelling.


Download Dissertation


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Copyright © 2000-2015 VIG CONSULTING

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