{"id":2829,"date":"2015-12-08T01:19:44","date_gmt":"2015-12-08T06:19:44","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/amazon-taking-over-the-retail-world\/"},"modified":"2015-12-08T01:23:31","modified_gmt":"2015-12-08T06:23:31","slug":"amazon-taking-over-the-retail-world","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/amazon-taking-over-the-retail-world\/","title":{"rendered":"Amazon: Taking over the (Retail) World"},"content":{"rendered":"

For anyone who experienced the frenetic shopping over the Black Friday weekend, it\u2019s likely you visited Amazon, whether to browse, research or buy. Amazon has overtaken Walmart as the largest retailer on the planet, with $90bn of sales in 2014, over 220,000 employees, and 244m active users. With a vision to be \u2018Earth\u2019s most customer-centric company\u2019, Amazon is revolutionizing retail and customer expectations of shopping.<\/p>\n

Amazon\u2019s retail business model is actually quite simple, with three core tenants to its customer promise: (1) a huge selection of products (over 350m SKUs!), enabled by online that allows almost limitless inventory, and its Fulfilment by Amazon (FBA) model; (2) the lowest prices; (3) unparalleled convenience \u2013 making sure that customers find the best deals effortlessly, and providing customer-orientated services such as Prime, one-hour delivery, and even drones. Amazon has achieved all this through tight alignment between its business and operating models:<\/p>\n

Company scope and investment in facilities<\/strong><\/p>\n

In addition to selling its own products, Amazon stores a third-party seller\u2019s inventory in Amazon\u2019s fulfillment centers (FCs), and picks, packs, ships and provides the customer service for these products. Named FBA, this partnership allows Amazon to increase its selection exponentially, without tying its own money in inventory. When a customer orders an FBA item and an Amazon-owned item, both are shipped in one box \u2013 a huge efficiency gain. Another valuable byproduct of FBA is that instead of sellers worrying about competing with Amazon, by allowing sellers to access its FCs, Amazon offers them access to infrastructure they could never replicate on their own.<\/p>\n

Skeptics of Amazon\u2019s business model argue that despite its 30%+ p.a. revenue growth, Amazon struggles with profitability. Amazon has made a strategic decision to prioritize growth over profits to sustain its competitive advantages. It has invested heavily in FCs and logistics, with over 70 high-tech FCs and sorting facilities across the country. In the world of e-commerce, these expansive physical assets can create insurmountable barriers to entry, allowing Amazon to provide faster, cheaper services to a wider audience.<\/p>\n