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Jeffrey Bezos started Amazon.com in 1994, after recognizing that
Internet usage was growing at a rate of 2,300 percent a year. Operating
from a 400-square foot office in Seattle, Jeffrey launched Amazon.com
on the Internet in July 1995. Amazon.com mission is to use the Internet
to transform book buying into the fastest, easiest, and most enjoyable
shopping experience possible. By the end of 1996, his firm was one of
the most successful Web retailers, with revenues reaching $15.6
million.
Almost overnight Amzon.com became the world’s largest
e-tail bookstore in the world. Amazon has continued to expand its
customer base, and sales revenues have increased every year. The firm’s
revenues increased from $15.7 million in 1996 to $2.76 billion in 2000
(Table 1). Today, Amazon.com is the place to find and discover anything
you want to buy online. Amazon offers the Earth’s Biggest Selection of
products to 29 million people in more than 160 countries across the
world making them the leading online shopping site accessed via the
World Wide Web.
Over past several years Amazon.com has grown and developed very
rapidly. The key core processes that have lead to Amazon’s success are
convenience, selection, service, and price. Convenience can best be
described when Bill Gates stated that, “I buy all my books at
Amazon.com because I’m busy and it’s convenient. They have a big
selection, and they’ve been reliable.” With over 106 million adults
purchasing books every quarter, Amazon has capitalized on the
convenience of on-line ordering. The next key process for Amazon is
selection. Amazon is able to offer the world’s largest selection
because they are an e-tailer with virtual directories. Amazon only
keeps recent publications in stock for quick order fill, but directly
orders any other requested books from the publisher. This business
practice allows Amazon to have low warehouse cost, and offer the
largest selection of books at the same time. The third key process for
Amazon is service. Amazon offers customers everything from email
notifications when their orders are filled, to chat rooms so customers
can discuss and recommend books. Amazon also allows customers to search
for books with similar titles or subject matters. Currently about 63%
of Amazon’s business comes from repeat customers. The last key process
for Amazon is price. At Amazon.com, almost all books are discounted.
Bestsellers are sold at 30-40% discount and all other books are at a
10% discount. Amazon is able to offer such discounts because they have
a lower cost structure than physical stores, and they turn their
inventory over 150 times a year. All four key core processes have lead
to the success that Amazon has experienced in its young six years of
operation.
Problem Definition
Although Amazon.com has experienced tremendous growth and increase
in revenues over the past six years, many challenges face Amazon in the
fast paced environment of the Internet. Amazon faces the challenge of
providing excellent customer service, while trying to grow and expand
their business. Amazon also faces the challenge of finding innovative
ways to stay ahead of their competitors.
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