3 Explain what distinguishes Amazon in its uses of technology for competitive advantage. Why a case study on Amazon? Surely everyone knows about who Amazon are and what they do? Yes, well, that’s maybe true, but this case goes beyond the surface to review some of the ‘insider secrets’ of Amazon’s success.

Like eBay, Amazon.com was born in 1995. The name reflected the vision of Jeff Bezos, to produce a large-scale phenomenon like the Amazon river. This ambition has proved justified since just 8 years later, Amazon passed the $5 billion sales mark – it took Wal-Mart 20 years to achieve this.

By 2005 Amazon was a global brand with over 41 million active customers accounts and order fulfilment to more than 200 countries. Despite this volume of sales, at 31 December 2004 Amazon employed approximately 9000 full-time and part-time employees.

Vision and strategy In their 2005 SEC filing, Amazon describe the vision of their business as to:

Relentlessly focus on customer experience by offering our customers low prices, convenience, and a wide selection of merchandise.

The vision is to offer Earth’s biggest selection and to be Earth’s most customer-centric company. Consider how these core marketing messages summarising the Amazon online value proposition are communicated both on-site and through offline communications.

Of course, achieving customer loyalty and repeat purchases has been key to Amazon’s success. Many dot-coms failed because they succeeded in achieving awareness, but not loyalty. Amazon achieved both. In their SEC filing they stress how they seek to achieve this. They say:

We work to earn repeat purchases by providing easy-touse functionality, fast and reliable fulfillment, timely customer service, feature rich content, and a trusted transaction environment. Key features of our websites include editorial and customer reviews; manufacturer product information; Web pages tailored to individual preferences, such as recommendations and notifications;

1-Click® technology; secure payment systems;

image uploads; searching on our websites as well as the Internet; browsing; and the ability to view selected interior pages and citations, and search the entire contents of many of the books we offer with our ‘Look Inside the Book’ and ‘Search Inside the Book’ features. Our community of online customers also creates feature-rich content, including product reviews, online recommendation lists, wish lists, buying guides, and wedding and baby registries.

In practice, as is the practice for many online retailers, the lowest prices are for the most popular products, with less popular products commanding higher prices and a greater margin for Amazon. Free shipping offers are used to encourage increase in basket size since customers have to spend over a certain amount to receive free shipping.

The level at which free shipping is set is critical to profitability and Amazon has changed it as competition has changed and for promotional reasons.