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... g destination to find anything. Currently there are only a few types of products available, books, music, toys, electronics, movies, and home improvement items. Branching into other areas such as automotive, apparel, jewelry, office equipment, and recreational merchandise, to name a few, is necessary to achieve Amazon.

com's goal of providing every type of product. Even though someone may want to buy a pack of gum online, Amazon. com needs to decide on boundaries for its product lines to prevent unprofitable maintenance of merchandise rarely purchased online. The harder an item is to find in the real world, the more profitable it would be to sell that product online.

The following chart shows the total percent of sales Amazon. com took in for each category last year. For example, Amazon. com had 61. 5 % of total book sales over the Internet.

The order of market share for each category, from highest to lowest, is the same as the order Amazon. Com began selling merchandise in each of the categories. Price: Price at a Low but Profitable Margin The largest part of competition is generally the price of the product. A store that has the lowest price for something whose quality is the same (a name brand product) generally gets the sale.

In the virtual marketplace, competition is literally global, forcing Internet businesses to have the lowest price of any other business. Startup Internet retailers often sell their merchandise at or below cost just to get the loyal customer base. Even though customers may buy the products, the retailer will have to eventually raise prices to make enough profit to pay off their loans and to satisfy stakeholders. Amazon. com has had below-cost prices for a long time and this has gained them global recognition, a form of advertising.

Soon Amazon. com will have to start acclimating their client base to slightly higher prices and hope all the loyalty they bought pays off. Distribution Outlets: Advertise on the Top Ten Most Popular Web Sites Amazon. com has been rated the number one most popular Internet retailer and that's a start. There are still nine other Internet sites listed in the top ten (not necessarily retail oriented) that Amazon. com could buy banner advertisement space and promote their retail web site.

One group rated web as the number one most useful web site this month. The next few were Dialpad. com - making free long distance calls, didyouknow. com - interesting trivia, and dating 911. com - getting dating advice and reading about dating disasters. Amazon.

com's Internet Movie Database site made number six and as shown above, there is already an advertisement there. There are a couple of options for obtaining popular advertising space. Amazon. com could buy popular sites and run them any they see fit. This is the case with the Internet Movie Database; a place used long before Amazon. com had popularity.

The other option is to rent space or barter services with willing web sites. This is by far the least expensive means of advertising and just as effective. The sales force should only consist of people creating banner advertisements and sales people getting contracts with suppliers and maybe distributors. If Amazon. com chooses to add real person online help for the customers through a chat window, staffing costs could go through the roof. How many people should be hired to support 20 million customers in a timely fashion?

However customer support is handled, the sales force has an easy job when word of mouth is doing the work for you. Service: Efficient & Widely Available Service with Fast Turn-Around Every business wants the customer to be happy and every customer wants his or her merchandise cheaply and quickly. This is the ultimate goal of Amazon. com, as well it should be.

One example from last Christmas, just before the cutoff deadline an order was placed by a customer at 8: 05 p. m. on December 23, left the dock at 1: 05 a. m. on December 24, and was delivered to the customer in Honolulu at 3: 55 p. m.

on December 24. It was a Deluxe Scrabble set. Sales Promotion: Develop an Advertising Campaign to Promote Consumer Awareness, New Products, and Better Distribution Even though a sales pitch says one thing, that doesnt necessarily mean the product delivers. In the case of Amazon. com, they could advertise that they have the most popular site on the Internet, they have a constantly revolving inventory of products, and the best distribution network on the Internet. Once the consumer gets to the retailers site, the same old thing woos them.

This is the current strategy of the sales pitch, getting the customer in the door. People go places with no intention of spending money, whether it be in the real world or virtual. So the goal of the marketing department is to get as many people to see the merchandise as possible, even if it means lying to the public. Honesty certainly doesnt hurt, but it wont put you on top of your ruthless competitors. Advertising: Decrease Sales Promotion Budget by 10 % and Advertise on High Traffic Web Pages, Television, Newspaper, Radio, and New PC Owners Of Amazon. coms total operating expenses, 54 % was dedicated to marketing and sales.

Now that Amazon. com is a household name, rated number one retailer in all three countries where they host a site, and rates in the top ten of all Internet sites combined, Amazon. com should ride the momentum and divert some funds to improving the web site. The large majority of Internet users are now aware of Amazon. com and a good number have actually made purchases from Amazon.

com. Ten percent of all online purchases were made at Amazon. com for 1999. Having a little extra money to making the web site even better while maintaining the majority of the marketing and sales funds to broaden awareness may make for even happier customers. Adding a feature everyone finds irresistible will catch even more customers through word of mouth compared to a marketing strategy.

The above chart shows the potential number of customers from the given countries. This can be used as an indicator for choosing the next target country for Amazon. com's Internet retail stores. R & D: Develop New Product Lines Such As Apparel, Jewelry, And Automotive Parts To become the one and only place where a consumer needs to go for any item Amazon.

com must develop their merchandise portfolio. Apparel, jewelry, automotive parts, office equipment, office furniture, and recreational items are just a few ideas for product lines that are common enough where people buy these products on a daily basis. Researching competitors and their volume of sales over the Internet for products that Amazon. com currently does not offer would be a first step in deciding which product lines to pick up. Beginning with a rough idea about clothing, Amazon. com would research online distributors of various clothing types and possibly start a product line dedicated to the top seller of the most successful competitor.

Starting small with what has already proved to be the competitors best seller would be a step in the right direction. There is no need to begin a product line that has never been tested before unless there is real proof that it can be made successful. Currently, nearly all products are sold by someone over the Internet and now that Amazon. com is established they can afford to be a little more cautious. Marketing Research: Monitor Competitors More Closely & Explore Consumer Behavior of Internet Purchases Monitoring the competitors may allow Amazon.

com to react in a positive way. Research may indicate that Barnes & Noble Online is debuting a new feature where the customer can hear the description of the book while continuing to look around the web site, Amazon. com could begin to offer the same thing and not lose any customer base over the new feature. If it is believed that the new feature is more costly than beneficial, Amazon. com can wait and see how responsive the customers are before wasting additional funds on the idea. Another example might be Reel.

com, a major competitor in movie sales, begins showing short movie clips to further entice would be customers. Again, having not thought of the idea themselves, Amazon. com could jump on the bandwagon and begin offering movie clips or hold back and assess the profit / loss of the idea. The point is that Amazon. com would have a choice to implement the same ideas.

Not monitoring competitors closely enough and allowing competitors to steal the customer base away may be the most costly. In an effort to expand the Amazon. com brand name we recommend that Amazon. com become a free e-mail provider. This service will benefit Amazon.

com in two primary ways. The first way Amazon. com will benefit is customers that use the service will be forced to pass through Amazon. coms advertising space when reading or sending their mail. A user will logon to the Internet, go to the Amazon. com home page, where they login and check their e-mail.

While they are checking their e-mail, they will see a banner that will display current promotions offered at the web site. Second, with every piece of mail they send Amazon. com can attach a signature encouraging the recipient to visit Amazon. com.

As one Internet user sends their e-mail from the Amazon. com mail service they are essentially providing a positive word of mouth advertisement endorsing the retailer. This feature should be rolled out immediately to existing customers, by allowing them to create an account automatically when they make a purchase. Then the service is expanded to include any user with Internet access in the next six months. Amazon.

com's existing information technology department has already set up an internal e-mail strategy, and can expand these services to focus on external customers as well. There will be a 3 MB limit on incoming mailbox size to decrease the cost for storage space. Customers will be limited to keeping messages for no more than thirty days. The cost increase will be minimal, in the $ 250, 000 to $ 500, 000 range, with most of the costs incurred as a one time new hardware purchase for storing e-mail messages.

Another way to increase Amazon. com's name recognition would be to sponsor Internet radio broadcasts. The same way people listed to a regular radio, computer users attached to the Internet can listen to a radio broadcast that comes over the computer. The broadcasts are generally "talk radio" instead of music broadcasts but cover a very wide variety of topics.

Sponsors are needed to fund the production of the Internet radio just as in traditional radio. Since Amazon. com's primary target audience is computer users, we feel this is a niche market under utilized by advertisers even though the total Internet radio market is relatively small. Expand the accessibility of Amazon. com to include people that do not have Internet access, or even a personal computer. Currently Amazon.

coms customers must use a computer that is connected to the Internet to make purchases. This seriously limits its available market reach. To expand this market reach we recommend a three pronged approach that consists of telephone ordering system, building physical stores and allowing dial in access to its online store. Begin by expanding the number of phone operators. This is the easiest of the proposed plans to increase available market share. These people will accept dial up calls from a 1 - 800 number, and will place orders on the web site for the customers.

These operators will be able to interact with the consumer, and can be taken from the same pool of employees that currently offer the customers a 24 hour per day 7 day a week technical support line. This pool of employees will be cross-trained to handle both types of calls (sales and support). By increasing the number of phone representatives it is possible to alleviate the concerns that first time buyers have regarding real time customer support. The cost to provide this service is approximately $ 500, 000 per year, primarily from the increased headcount required to staff phones. This was figured by employing 24 people for 8 hours, paid at $ 6. 50 per hour for the year. The increase in people will allow for faster and easier customer service calls, as there would be a larger pool of employees trained to handle the incoming call volume.

Provide a dial up 1 - 800 number to an Amazon. com web site that will allow users who do not have Internet access the opportunity to shop online for no additional charge. Once online, the customer will be restricted to Amazon. coms web space, and not allowed to browse the rest of the Internet. The intent is not to become an Internet service provider, but allow the consumer another means to make purchases at the store.

Additional hardware costs will include the purchase of several modem banks to handle the incoming call volume, approximately $ 1 million. It will be necessary to contract with major PC manufacturers, including Dell, Gateway and HP, to have them put a link on the desktop of all new PCs that will allow a user easy access to our online store. Finally, to reach the broadest market, it is recommended that real world stores be built. These stores will provide Amazon. com a presence in the off-line environment. These stores will not carry the goods that are available at the online store, but rather provide a portal to which customers can use PCs provided by Amazon.

com to browse the Internet aisle. These Click & Mortar stores will provide PCs with Internet access in a user-friendly environment, including snacks, beverages and coffee that can be purchased while the user is browsing the web site, similar to the cyber-caf concept. The shops will have a small footprint, averaging 2, 000 sq. ft, and will be located in high foot traffic areas, such as local malls. These shops will also sell Amazon.

com specific merchandise, such as T-shirts and coffee cups with the Amazon. com. com logo. These shops will also provide a real world place for consumers to return merchandise. One of the largest complaints of Internet shoppers is the inability to return items to a Brick & Mortar store. This expansion will move Amazon.

com in to a Click & Mortar environment, though the initial cost may be high, the expansion can be rolled out within the next 5 to 10 years. The estimated cost is between $ 10 and $ 20 million dollars per year, primarily on the purchase of retail space and new employees to run the stores. Amazon. coms goal is to become the largest online retailer, and needs to continue to introduce new product lines to maintain its impressive growth. To do this, expand the product lines even further to include grocery, apparel, jewelry, auto parts and travel items.

To do this they will need to merge and / or acquire several other companies, as well as develop key partnerships with suppliers to provide a greater number of choices to their customers. The first area of expansion should be into the auto parts industry. Develop a partnership with key auto manufacturers including GM, Honda, Toyota and Ford that will allow Amazon. com to track the inventory of their parts. Amazon.

com can then develop a page where consumers can search for available auto parts by manufacturer, model and year built. Customers will then be able to purchase factory parts for any car through Amazon. coms web site. Customers will be able to locate hard to find parts using Amazon. coms extensive database of parts, and have the parts shipped directly to their home without having to drive all over town in search of them. Another area for expansion is the food or grocery industry.

There have been several startup companies, such as Home Grocer that have begun to develop this service. Amazon. com should aggressively pursue the take over of companies and use their knowledge base to expand the product offering on a larger scale. Amazon. com can use its industry leading brand image to exploit this new area of E-commerce.

By utilizing the existing resources of the company they acquire to more readily control this new market. Finally the last area that Amazon. com should branch into is the travel industry. The travel industry is one of the hottest fields currently available on the Internet. There are several hundred sites available to Internet users that lists travel specials and packages.

However, one of the big complaints by Internet shoppers is that web sites are too difficult to find. By bringing travel services into the Amazon. com home page, it will provide an easier way for consumers to find the deals they are looking for. Again Amazon. com should not create another site from scratch, as this will prove too costly and time consuming. In this stage of Amazon.

coms development, they need to utilize their brand name by partnering with existing travel sites and consolidating their business into Amazon. com. Amazon. com needs to create strategic alliances with its suppliers and shipping companies. Consumers have emphatically stated that the number one improvement for E-commerce is the price of shipping goods.

Consumers are not excited about additional charges that are incurred when purchasing online. To this end, Amazon. com must aggressively pursue cheaper alternatives to delivering its goods and services. Begin by contracting with a greater number of distribution centers in the countries that have the greatest number of people using the Internet. Having more suppliers also means the customer is less likely to have to wait longer for a popular product purchased online. Book sales for Titanic, after the movie came out, were definitely above average and that caused longer wait times for the customer.

Had there been additional suppliers in a more distributed area around the country, customer satisfaction for this product and Amazon. com's service would have been higher. Consolidated Statements of Operations December 31, December 31, 2001 2000 1999 1998 Net sales $ 9, 000, 000 $ 4, 000, 000 $ 1, 639, 839 $ 609, 819 Cost of sales 7, 200, 000 3, 200, 000 1, 349, 194 476, 155 Gross profit 1, 800, 000 800, 000 290, 645 133, 664 Total operating expenses 2, 250, 000 1, 500, 000 896, 400 242, 719 Loss from operations (450, 000) (750, 000) (605, 755) (109, 055) Interest income 100, 000 70, 000 45, 451 14, 053 Interest expense (400, 000) (240, 000) (84, 566) (26, 639) Net Profit (loss) $ (750, 000) $ (920, 000) $ (719, 968) $ (124, 546) Amazon. com net sales have grown at or around three hundred percent per year for the last two years. It will be impossible for Amazon.

com to maintain this growth rate, and we expect it to approach 225 % and maintain this rate for the next several years when our action plans are implemented. After generating a 65 % market share in the online book sales category the book business branch of Amazon. com has finally begun to turn a profit. Since this was the first branch of business for Amazon. com, we expect the rest of the product lines to begin turning a profit in the next two to three years, similar to the maturity rate of book sales.

For this reason we project that net loss for 2000 will approach $ 1 billion dollars, and will be the peak of loss rate for Amazon. com. Beginning in 2001, Amazon. com will see net losses drop to $ 750 million, and continue this trend as each of the product lines become profitable. Continuing at this rate, Amazon. com as a whole will turn its first profit in the summer of 2002.

In an effort to ensure the Amazon. com action plans are providing a substantial benefit and are accomplishing the objectives identified, each plan will be monitored. The global criteria applied to track each action plans success includes monitoring the volume of orders, orders over time, random surveying and a specific termination threshold for each action plan. The name recognition action plan identifies e-mail hosting and sponsoring / advertising on Internet radio stations as methods for increasing name recognition and order generation. The e-mail hosting service use of banners on e-mail accounts provides an immediate location for e-mail users to place orders, and keeps the Amazon.

com name in front of potential customers. The banners placed on the e-mail hosting section will link directly to Amazon. coms ordering sections and order databases. When users place an order through the web site, through the e-mail banner, the order database will track the orders origination from the banner ad.

In tandem to the banner ad tracking, the database will record orders generated through the e-mail signature applied systematically to all account users outgoing e-mail messages. These two in-points to the Amazon. coms ordering system provide generous information on where orders and user interaction with the main site are coming from. Since the system will record order origination real-time in the main Amazon. com database, up to date reporting on order location can be provided to Amazon. com management.

The report will be web-based and include information regarding the number of orders generated from individuals using the Amazon. com e-mail hosting and orders generated from e-mail recipients. The target threshold for orders per month generated through this action plan is targeted at 5, 000. Based on the low level of investment required to deploy the e-mail hosting and the solutions availability as an out of the box product from software vendors, 5, 000 orders provides an achievable number. In conjunction with the real time recording of order origination, an enhancement to the Amazon.

com order page will include a simple questionnaire that polls customers on how they heard about the site. The poll will provide specific selections for customers to select to allow for quick quantification of the data. Management will track orders generated from the e-mail hosting action plan for a 6 month period and if orders do not approach the 5, 000 mark or the order survey does not indicate the e-mail was the order catalyst, the e-mail action plans viability will be re-evaluated. The second portion of Name Recognition action plan is to sponsor Internet Radiobroadcasts that will be tracked through the order survey and an additional method. The Internet Radiobroadcasts will be run on several of the larger Internet Radio Stations, such as Microsoft's Radio Station Guide web site. These sites can potentially communicate to an extremely large audience.

In order to capture the effectiveness of this communication method, Amazon. coms order information package will be changed. Currently, Amazon. com includes a package of information with each order.

This package includes pamphlets on other services offered and a post-it note pad. A paper survey printed on a post card with pre-paid return postage will be included with the package. The post card will have several short multiple choice questions on the service level the customer received and how they heard about Amazon. com.

By using two survey methods (on-line and paper) it provides a greater chance of a customer providing input as to where they heard about the company and allows for better measurement of the name recognition action plans. Since Internet Radio stations are a new service being utilized by Amazon. com, the target orders to be achieved will be 1, 000 orders. If in a 6 -month time 1, 000 orders have not been generated through this name recognition program, the recommendation is to shutdown the Internet radio ad spots. The second action plan is composed of 3 major components, deploy an 800 phone ordering service, offer an Amazon. com ISP for direct dial-in orders and open Click & Mortar stores which provide a comfortable, coffee shop environment while allowing customer to purchase online.

The second action plan proposal to increase the target market will be controlled and monitored through the use of a contracted 3 rd party company, such as Price Waterhouse. The 3 rd party firm will perform random samples in different geographic regions to determine the effectiveness of the 800 service, the ISP offering and the Click & Mortar Amazon. com coffee shops. The objective nature of the 3 rd party, performing the market survey then quantifying the survey data with an unbiased and clinical approach, is necessary to manage these initiatives. Though the 800 phone order services is of relatively low cost, the investment to create an ISP function and physical coffee shop stores is highly capital intensive. The monitoring controls for each of the 3 components of this action plan are separated due to the very different nature of each project.

The 800 -phone service will be measure on a quarterly basis and will be benchmarked against a 2 % increase in target market growth. If the 800 -phone service fails to broaden the core target market by 5 % in 9 months (3 quarters) the service will be evaluated by the corporate management team and a recommendation by the 3 rd party survey firm will be considered heavily as to whether the program should continue. Considering the slightly higher investment in the Amazon. com ISP initiative that program will continue for a minimum of 1 year and 6 months with the 3 rd party performing sample polls on a quarterly basis. If this particular action plan does not yield a 5 % increase in market share then the program will be reviewed for termination. The final component of this action plan, Amazon.

com coffee shops will also be surveyed on a quarterly basis but the program will run a minimum of 2 years based on the extremely high entry costs. This particular project represents the greatest opportunity for Amazon. com to capture market share. It provides the firm with the opportunity to compete directly with their real-world competitors (Barns and Noble and Borders Bookstores) and offer services not readily available through the web store, such as item returns.

Price Waterhouses quarterly survey on market share increases will dedicate a substantial focus to the effectiveness of the Click & Mortar stores. The expected market increase from these stores is to be around 10 to 12 %. If the stores do not achieve the estimated percentage increases in a 2 -year time, no additional investment will be made and Amazon. com will return to a web-based model only. The third action plan calls for an expansion of product marketing. Though Amazon.

com has experience and has successfully branched beyond their initial book offering, the inventory intensive nature of this initiative will require the firm to execute with caution. The success of the automotive parts offering will be measured on several factors. First, the initial success factor will be the number of partnerships the firm can establish with the automotive manufactures. The strong brand awareness and the automotive industry's acceptance of web technology should allow Amazon. com to create partnerships with at least 2 U. S.

domestic, 2 Japanese and 1 European automakers. If the firm is unable to establish this limited offering in a 6 -month period the resistance of the automakers may make this project nonviable. With the establishment of the 5 automotive producers, Amazon. com will set an initial year revenue goal of 1. 5 million dollars to be fulfilled by automotive products. This is a very low revenue goal, but should be attainable. Management will review order status on a monthly basis to compare and review auto products revenue versus the pervious month.

The superstore nature of Amazon. com should allow the company to leverage its other stores in this area. For example, if a customer is looking at books on 1992 Geo Metros, the online site can cross sell by suggesting the customer look at the auto parts offerings. Measurement and control of success in one of the web based food stores will be considered based on Amazon. coms level on investment in the company. A complete buy out of one of the online grocery stores, which represents a very new market, can be measured by an acceptable operating loss.

Since consumers might have some strong reservations of purchasing food versus books online, Amazon. com will have to invest heavily in leveraging its strong online brand name to the online grocer. The online purchases will be monitored for strong cross shopping from Amazon. coms existing customer base. These customers are already comfortable with online purchases and probably would be willing to try another type of online shop will little incentive. Amazon.

com will look for 1 out of ten existing customers to make a purchase of $ 50 or more at the online grocer. New customers, ones that are not already making purchases from the Amazon. com stores, will be measured against making 20 purchases at $ 20 each within a 2 -year period. Distribution management will be controlled and measured against two key indicators. First, a reduction in on-hand inventories. Amazon.

com will review inventory-carrying costs monthly and will attempt to drive costs down by $ 800, 000 in 1 year. The company will pursue this action plan by migrating to a just-in-time inventory management program and a supplier managed inventory program. The just in time program will allow Amazon. com to purchase products from its suppliers on an as needed basis and provided consumers a consolidated shipment (i. e.

one package with books, toys, and games). The second inventory program, supplier managed inventories, will require Amazon. coms suppliers to own the inventory in Amazon. coms warehouses without Amazon. com taking ownership of the inventory until the point of sale. An inventory management team will be created and over see the management of the inventory programs on a regular basis.

The second, metric for ensuring the success of this action plan is the deployment of a Supplier Managed Inventory deployment team. The team will be chartered to migrate half of the existing Amazon. com suppliers to a supplier managed inventory program or a just-in-time inventory strategy within two years. The team will be measured against the number of supplier migrated each month and then a management review each quarter. The better Amazon. com manages information, the inventory levels or the programs, the fewer inventories the company must manage and own.

Turnoffs for Online Shoppers in 1998 Not appropriate for luxury items 26 % Guarantee of credit card security 20 % Among those planning to by in 1999 Bibliography: BIBLIOGRAPHY Steven M. Zeitchik "Higher Sales, Losses for Amazon " November 1, 1999 web 82420. asp February 12, 1999 Jim Million. "Amazon. com Eyeing Distribution Improvements" 3 / 22 / 99 web 70964. asp February 12, 1999 Steven M.

Zeitchik. "Amazon. com to Open Two Distribution Centers." May 5, 1999 web 71222. asp February 12, 1999 Josh McHugh. "Amazon dances " November 1, 1999 web February 12, 1999 Penelope Patsuris. "Wanted: a lot of employees" July 23, 1999. web February 13, 1999 Cyberatlas. "Three Million New Internet Shoppers for Christmas" October 18, 1999. web picture / demographics /article/ 0, 1323, 6061 220831, 00. html February 10, 2000 Cyberatlas. "Top E-Tailers of January 2000 " February 15, 2000.

web 304791, 00. html February 21, 2000 Jim Million and Steven Zeitchik. "Sales, Losses Soar at Amazon. com in 1999. " 2 / 7 / 00. web 84431. asp "Amazon. com Suffers Record Losses, But Posts Record Revenues. " 2 / 2 / 00.

web Michael H. Martin, "The next big thing: A Bookstore?" Fortune, 12 / 9 / 96: 168 Joshua Quittner, "An Eye on the Future; Jeff Bezos merely wants Amazon. com to be earth's biggest seller of everything, " Time, 12 / 27 / 99: 56 Venkatram Ramaswamy, "Co-opting Customer Competence, " Harvard Business Review, Jan/Feb 2000: 79 Thomas S. Writer, "Getting real about virtual commerce, " Harvard Business Review, Nov/Dec 1999: 84 Jennifer Hunter, "Amazon's Kingpin, " Maclean's, 6 / 21 / 99: 30 Robert D. Hof, "Jeffrey P. Bezos, " Business Week, 9 / 27 / 99: 24 Katrina Brooker, "Amazon Vs.

Everybody, " Fortune, 11 / 8 / 99: 120 Cyberatlas. "Future of E-Commerce May Rest on Customer Service" January 5, 2000. web 274891, 00. html February 15, 2000 Cyberatlas. "One-Third of I


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