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MD253/MK252 Electronic Commerce March 29, 2005 Amazon

MD253/MK252 Electronic Commerce March 29, 2005 Amazon.com. Issues Covered. Amazon’s strategy competitive advantage Inventory efficiencies turns & float Excellence in customer service Personalization & switching costs Partnerships & ‘service’ businesses

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MD253/MK252 Electronic Commerce March 29, 2005 Amazon

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  1. MD253/MK252 Electronic CommerceMarch 29, 2005 Amazon.com

  2. Issues Covered • Amazon’s strategy • competitive advantage • Inventory efficiencies • turns & float • Excellence in customer service • Personalization & switching costs • Partnerships & ‘service’ businesses • Syndication model, merchants.com, web services • Challenges

  3. Amazon’s Strategy

  4. Turnover 3 times / year avg. book in store 121 days Book on shelf 68+ days after paying suppliers Inventory shelf & warehouse stock 30% returns Turnover 16 times / year avg. book in house 22 days avg. 28 days of float / title Inventory all warehouse stock few returns Offline vs. Online Retail Efficiencies

  5. Capital Efficiency – Negative Operating Cycle (Float) 28 Days Day 0 22 25 53 Product Received Supplier Paid Product Shipped Customer Payment Inventory Turns for Full Product Line, 2004Amazon = 16B&N = 3, Home Depot = 5, Best Buy = 5, Wal-Mart = 7

  6. Amazon’s Warehouse Network • 5 facilities, > 4 million sq. feet • Extremely diverse product mix • Mixed Automation & Manual Sorting and Conveyance • Direct to consumer fulfillment Photos: blog link provided by the San Jose Merc News

  7. captures early demand & improves inventory forecasting

  8. Leveraging the Amazon Platform • Amazon.com as seller • AMZN inventory & product detail pages • Syndicated stores / Merchants@ • AMZN tech & inventory, co-branded website • Ex: Borders, HMV, Waterstones, Waldenbooks, VirginMegastore • Marketplace • 3rd party inventory, AMZN product detail pages • Merchant.com (Amazon Enterprise Solutions) • AMZN technology powers partner websites • Ex: Target, NBA.com, Bombay Company, DVF Shops

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