Growth & Prospect of E-tailing-

GROWTH OF E-tailing-

Despite the disadvantages and the dotcom crash, the advantages are driving a growth in e-
Shopping in the U.K ,atleast in certain categories.Sales had reached 3.3 billion by 2001.It was forecast
that most people will buy groceries, books , CD's and even clothes by e-shopping making up 10
per cent of total shopping by 2009 books. It has been forecast that 94- per cent of e-Retailing will
be at the expense of the high , with only 6 per cent arising from incremental growth.
According to Verdict, in 2001 grocery would account for half of all e-Sales — £1.3 billion,
which sounds massive, but accounts for only 5.6 per cent of groceries. The market leaders in
their sectors were Amazon (books, plus CDs and videos), Tesco (groceries), Dell (computers)
and Next (clothing). Average spend has risen faster for men (+15 per cent) than women (+5 per
cent), leading Verdict to comment that ‘the proliferation of female-orientated sites . . . have
failed to motivate women to shop significantly more’. The proportion of e- Shoppers preferring
to shop from e-Sites run by high street retailers rather than Internet-only is soaring (up from 22
per cent in October 2000 to 33 per cent in April 2001).

The Internet-based businesses are nowadays gaining momentum.With the surge in PC

penetration,Internet awareness,and computer literacy,people are using the Internet more as an
enabler and facilitator of work than mere for messaging and entertainment.Internet and Mobile
Association of India(IAMAI),along with Indian Market Research Bureau(IMRB) conducted
surveys across 30 and 65,000 users across India in the year 2007.
According to recent estimates made by the IAMAI,e-retailing crossed Rs 9000 crore in 2007-08
from Rs 7000 crore in 2006-2007 and Rs 570 crore in 2004-05,representing a growth of 32%
over the previous year.This has surpassed the previous estimate of Rs 2300 crore for the fiscal
year 2006-07.
Some of the findings of the research done by IAMAI on e-retailing trends in India are as
follows:-

 Rs 9000 crore worth of e-commerce was conducted online in 2007-08 from Rs 7000
crore in 2006-07,an estimated 29% plus growth.
 55% of the visitors have adopted the Internet as a shopping medium.
  In the year 2000,77% users were from metros,whereas in 2007,the share of metros has
fallen to 38%.People from smaller cities have increased their presence.
 21% of the regular online shoppers are college students in the 18-24 age group,33% are
young men in the 24-35 age group,and 15% are men in the 36-58%age group.11% of the
online shoppers are working women and just 6% are house wives.
 83% of the user base is educated with a bachelor or post-graduate degree,representing a
well-educated audience.54% of the online shoppers are at an executive level,while 24%
are professionals or self-employed,indicating an assured spending power.
 The Internet ownership has shown a growth of 32%,whereas share of the Internet cafe
has gone down to 38% from 52% in 2003.The trend shows that people want to shop from
the convenience of their home.
 81% of online shoppers own credit cards and 75% own debit cards.
 51% of netizans,who use the Net for some activities,use the Internet for e-mails,20% for
information search,13% for entertainment,and 11% use the Net for chatting.A meagre 5%
use the Internet for e-commerce activities,which indicates a huge potential for e-retailing.

Statistics of Online business :

1) Majority of U.S. online teens have shopped on the net:

84% of U.S. online consumers ages 19 to 21 and 54% of teens under 18 have shopped online,
according to a new study from a Research.

2) Older teens had more spending power—about $183 per month—compared with $86 for
younger teens.-
In addition, older teens spend an average of more than 14 hours online each week and have been
using the Internet for an average of nearly seven years, according to the study.

3) Of teens 18 to 21, 86% go online weekly and 14% go online monthly.

The majority of online teens also have access to broadband—85% of younger teens and 92% of
older teens, Studies have shown that consumers who use broadband spend more online.

4) The items teens purchased most often online includes-

DVDs(22%) and books(34%)

Airline tickets/Reservations(21%)
Clothing/Accessories/Shoes
FUTURE PROSPECTS IN WORLD

Without doubt, it can be said that Internet is the most influential and impactful thing to have
happened to the business world and global economy in a long time. The world is becoming more
and more dependent on the Internet day by day and it is now touching all aspects of human life,
be it shopping, eating, business or utilities. A proper appreciation needs to be made of the fact
that Internet will shape the future of the world in all possible ways. A major surge in Internet
usage is to be witnessed in developing countries like India, China, Brazil etc. which is driving
the current growth of Internet and given the low penetration levels of Internet in these countries,
there is a plethora of opportunities for Internet-driven services and applications to blossom and
flourish in these regions.

One such avenue for rapid and innovation-driven development in the future is online retail or e-
tail. Companies have slowly realized the utility and importance of using Internet as a medium to
sell goods and services and in the last few years, e-tailing has taken the world by storm. India
and China are witnessing growth of nearly 40-50% in the online retail segment and many
companies have come up dedicated to providing services through the virtual world. All this has
happened due to many benefits of e-tailing as perceived by consumers and retailers alike.
Convenience, cost benefits to the sellers as well as the buyers and a large potential reach which
transcends boundaries of space are some of the factors which have made e-tailing a big
phenomenon of our age.

If the years-long double-digit growth in online spending isn’t evidence enough, the latest e-retail
American Customer Satisfaction Index report from Foresee Results Inc. provides further proof
that consumers like to shop online.

The report, part of the University of Michigan’s American Customer Satisfaction Index and
released by Foresee to coincide with the E-tail conference this week, ranks consumers’
satisfaction with e-retailing at 83 out of 100, up 6 points from last year’s 77. “It’s an incredibly
strong showing,” says Larry Freed, CEO of Foresee Results. By contrast, offline retail ranked a
74.6. The score across all industries was 72.9.

The rankings mean that retailers will have to continue to meet customers’ high expectations
about online shopping, Freed says. “Continuing to provide excellent customer satisfaction will be
a challenge because expectations will continue to rise,” Freed says.

But they also mean that the future for e-retailing remains bright, he says. “All business measures
are backward looking; they tell you what happened yesterday,” Freed says.But the satisfaction
index is forward looking. It’s a very good indicator of what’s going to happen. It shows that this
industry should continue to grow.”

Also showing up high in the rankings was eBay.com Inc., which earned an 82. The score for all
online auction sites was 75.

But every coin has two sides. With all the positive aspects of online retail being highlighted
everywhere, it is important to note that there are many arguments still being presented against the
phenomenon. While e-tailing has all the desired aspects of less capital requirements, better
inventory management, cost savings, large product variety possible, easily available information
and a potentially very large customer base, people still have security concerns over buying
online, there is a lack of the touch-feel-hear experience which matters a lot to the Indian
consumers and retention of customers is a big problem to be addressed.

Considering the future growth prospects of e-tail in the country, certain improvements at the
infrastructural level and at the business level need to be made. Better supply chain logistics
mechanisms need to be worked out to ensure better delivery satisfaction as well as a good quality
of product delivered to the customers. Also, rapid and extensive technology development and
deployment needs to be undertaken and extensive integration of WEB 2.0 technologies like Ajax
etc. needs to be performed with the web portals. Finally, innovative business model approaches
need to be developed to attract customer attention and make for easy retention. A desirable
approach is innovation in untapped markets. But this cannot always be done. Hence concept
arbitrage should be used to bring untested models to India from other countries and tweak them
to suit Indian conditions.

Recent results for 'future of e retailing'

Aug. 20, 2009 Facebook finds a friend in e-retailers—and added revenue, one expert says

 Aug. 19, 2009 Landmark Canadian Outdoor Sporting Goods Retailer La Cordée Selects

iCongo’s E-Commerce Storefront Platform
 Aug. 17, 2009 Demand Media Announces Twitter Integration with Pluck Social Media
Platform
 Aug. 14, 2009 Shabby Apple Mobilizes Retail Store With Unity Mobile
 Aug. 13, 2009 Cred-Ex launches as an alternative online payment method for retailers

BRANDING ON THE WEB

AMAZON

Amazon.com, Inc. (NASDAQ: AMZN) is an American-based multinational electronic

commerce company. Headquartered in Seattle, Washington, it is America's largest online
retailer, with nearly three times the Internet sales revenue of the runner up, Staples, Inc.

Jeff Bezos founded Amazon.com, Inc. in 1994 and launched it online in 1995. It started as an
on-line bookstore but soon diversified to product lines of VHS, DVD, music CDs and MP3s,
computer software, video games, electronics, apparel, furniture, food, toys, etc. Amazon has
established separate websites in Canada, the United Kingdom, Germany, France, Japan, and
China. It also provides international shipping to certain countries for some of its products.

On January 15, 2009, a survey published by Verdict Research found that Amazon was the UK's
favorite music and video retailer, and came third in overall retail rankings.

The History and Present Day of Amazon.com

Jeff Bezos and Amazon.com did not witness pure success immediately, it was a few years before
the e-commerce giant began proving to be the online sensation that was predicted. In 1995,
Amazon was just another business willing to try the online market and identified its opportunity
to sell books online . However, Amazon.com was not placed in the same category as other
businesses trialing online servicing. What distinguished Amazon.com from these other online
businesses and what now allows Amazon.com to claim that it changed the world, includes its
business model and the ways in which it turned the rules of finance upside down .

After its introduction on the global internet stage in 1994, it was not until 2004, that Amazon
boasted its first profitable year. To achieve this success, Jeff Bezos manipulated and
experimented with many conventional business models to obtain his dream of Amazon.com .
After looking at the software that was available, Bezos and his colleagues realized that they
would have to devise their own programs. So through the process of Amazon.com’s
establishment, not only was an online retail service being formed, but also the creation of the
sophisticated technology that has enabled the e-commerce and online shopping phenomenon .

An initial reason for the choice of books as the first product for sale on Amazon.com was that
selling books online provides consumers with a virtually limitless selection of books available
for their online perusal or purchase. In 2004, Amazon.com now has 4.5 million books on offer to
customers around the world . Additionally, the internet’s retrieval and interface technology
enables the consumers to search the entire database for books in print . Books require little need
for hands-on product trial . ‘Everybody understands what a book is’, therefore there is no
need for product explanation and would be the same as that purchased in a bricks and mortar
bookstore and this was one of the fundamental reasons behind Bezos’ choice for an online
bookstore.
Although in 1995, Amazon.com had barely lifted off the ground, there were extravagant visions
and expectations set. From the beginning, Bezos knew Amazon.com’s potential and that its
future was not limited to only books .One of Bezos’ colleagues was an avid kayaker and
Bezos once said:

In the future, when you come to Amazon.com, I don't want you just to be able to search
for kayak and find all the books on kayaking. You should also be able to read articles on
kayaking and buy subscriptions to kayaking magazines. You should be able to buy a
kayaking trip to anywhere in the world you want to go kayaking, and you should be able
to have a kayak delivered to your house. You should be able to discuss kayaking with
other kayakers. There should be everything to do with kayaking, and the same is true for
anything .

That was his vision, amazingly clear and ‘gigantic in scope’ .

Amazon.com's sales have been growing gradually. The secret to its success and profitability is
customer retention - ensuring customer loyalty and repeat customers. Amazon.com pioneered
new technologies, such as collaborative filtering, which suggests products that each individual
buyer might like by comparing them to other users's preferences. Also, Amazon.com is
continuing to work on further price reductions as well as offering free all-year-round shipping.
Therefore, nearly 70% of Amazon's sales are from repeat customers.

Business Model

As Amazon.com was being established, Bezos was also building a completely new business
model and consequently wanted employees who could think on their feet, so initially, Bezos
insisted on hiring the brightest, most intelligent and versatile people who could find, even for the
packing room . He wanted people whom could share his vision and were willing to work to
achieve it

Bezos suspected failure in the first few months of operation and unfortunately Amazon.com went
broke. At a critical stage for the company and with the doors about to be closed, Bezos did not
step down, with his confidence still shining, he was prepared to wait for the world to come
around to his idea when it was ready .After many setbacks, venture capitalists, investors and
strategic partnerships (with Target, Toys R Us, Babies R Us and Office Depot) were signed, with
a new strategy and business model – Get Big Fast, driven by momentum and enthusiasm to
achieve what they set out to do. Jeff Bezosâ˜burning passion and raw intelligence’ enticed
Eric Dillon, a stockbroker and venture capitalist into the company, along with many other
financiers .This is when Amazon.com expanded, intensified and most of all, succeeded.

This Get Big Fast strategic imperative drove the company to success by embracing a 'land grab'
logic and staking out large areas of online space at the one time, rather than gradually expanding
its online presence .As recognition of Amazon.com began to expand and fortunes began to grow,
with the implementation of their Get Big Fast business model, in a matter of only a few months,
Amazon.com went from thousands to millions, and eventually to billions and tens of billions,
demonstrating that Get Big Fast was the strategy for Amazon.com. After Bezos achieves
profitability, he knows how to use his money to make more money because he knows how to put
the money where it is needed. For example, purchasing banners on portals like AOL, creating a
variety of offline promotional activities and established partnerships with search engines like
Yahoo.

1. E-Commerce - Consumer2Consumer
2. E-Commerce - Business2Business
3. E-Commerce – Business2Consumer

Business Strategies

In recent years, online shopping has become extremely popular and many organisations have
been covetously observing the online market. But, how does Amazon.com stand head and
shoulders above others? Within its major Get Big Fast strategy it pursues many unique strategies.
Strictly speaking, there are three strategies that have helped Amazon.com to enhance its
competitive advantage, including cost-leadership, customer differentiation and focus strategies –

.The first strategy- cost-leadership is pursued by Amazon.com by differentiating itself primarily

on the basis of price. Due to this strategy, Amazon.com always makes sure that it offers the same
quality products as other companies for a considerably less price.

Their second strategy- is customer differentiation. Amazon.com provides current and

prospective customers with differentiation though design, quality or convenience and
Amazon.com always selects a differentiator that is different among the competitor. So,
Amazon.com consumers can recognise and differentiate its product from competitors.

The last strategy that it uses, is a focus strategy. This strategy takes one of the two earlier
strategies and applies it to a niche within the market .Amazon.com focuses on outstanding
customer service as a niche but not the whole market because each niche has its own demand and
requirement.

Amazon.com's Value Proposition

Values play an important role in Amazon.com's succeeding. A value is like a goal and forms an
ongoing objective. Amazon.com's values and philosophy is at the center of the organization and
often determines the difference between success and failure of the enterprise . There are two
strong values that are practised by Amazon.com. These include customer satisfaction and
operational frugality. These two values complement Amazon.com's operational strategies in
achieving and maintaining an effective competitive advantage and encouraging employee and
corporate performance. For example, Amazon.com's employees are paid base salaries that are
obviously less than competitive rates. So, due to the frugality value, Amazon.com spends much
money on branding and business expansion. However, Amazon.com sustains employee loyalty
through employees' ownership of company shares. Amazon.com injects a message into the
employee's minds - when Amazon.com begins to show a profit, their shares will profit too.

Customer Service

Amazon.com prides itself on customer service and aspires to be the earth's most customer centric
company . A study shows that more than half of Amazon.com's customers are repeat customers.
This success is based on customer-value proposition, which is conducted by Bezos. For instance,
in his customer-value proposition, he suggests that vistors to the Amazon.com site must leave
with a positive impression, while also providing potential buyers with reasons to visit the virtual
store again. Besides that, he also expounds that Amazon.com needs to perform as promised, such
as punctual delivery. As a result, Amazon.com can strengthen its customer satisfaction. With
Amazon.com aim to make its bricks-and-morter competitors irrelevant. Three fundamental
value improvements are offered to their customers to achieve this: reduced prices, a wider
selection of titles, and a dramatically improved purchasing convenience Amazon.com also
focuses on additional elements that customers want, such as concentration of quality, reliability,
security and availability of product. Amazon.com's customer loyalty was established from the
beginning and continually improves due to the focus and efforts made by Amazon.com in
continual customer service improvements. In short, Amazon.com always focuses on its
customers and this is one of reasons that has aided in its success.

Customers were of primary importance throughout the establishment of the Amazon.com

interface. Amazon.com customer interface was developed to facilitate each user shopping
experience and provide a hassle free online shopping environment that encouraged their return.
Many elements of the customer interface contribute to the site ease of use. These include
tailoring of the website for each individual user, extensive links to other dimensions of the site as
well as links to outside internet content and the website ability to perform financial transactions.

PRODUCT LINES-
Amazon has steadily branched into retail sales of music CDs, videotapes and DVDs, software,
consumer electronics, kitchen items, tools, lawn and garden items, toys & games, baby products,
apparel, sporting goods, gourmet food, jewelry, watches, health and personal-care items, beauty
products, musical instruments, clothing, industrial & scientific supplies, groceries, and more.

The company launched Amazon.com Auctions, its own Web auctions service, in March 1999.
However, it failed to chip away at industry pioneer eBay's juggernaut growth. Amazon Auctions
was followed by the launch of a fixed-price marketplace business called zShops in September
1999, and a failed Sotheby's/Amazon partnership called sothebys.amazon.com in November.

Amazon no longer mentions either Auctions or zShops on its main pages and the help page for
sellers now only mentions the Marketplace Old links to zShops now simply redirect to the
Amazon home page, while old links to Auctions take users to a transactions history page. New
product listings are no longer possible for either service.

Although zShops failed to live up to its expectations, it laid the groundwork for the hugely
successful Amazon Marketplace service launched in 2001 that let customers sell used books,
CDs, DVDs, and other products alongside new items. Today, Amazon Marketplace's main rival
is eBay's Half.com service.

Beginning August 2005, Amazon began selling products under its own private label, "Pinzon";
the initial trademark applications suggested the company intended to focus on textiles, kitchen
utensils, and other household goods. In March 2007, the company applied to expand the
trademark to cover a larger and more diverse list of goods, and to register a new design
consisting of the "word PINZON in stylized letters with a notched letter O whose space appears
at the "one o'clock" position.". The list of products registered for coverage by the trademark grew
to include items such as paints, carpets, wallpaper, hair accessories, clothing, footwear, headgear,
cleaning products, and jewelry.

On May 16, 2007 Amazon announced its intention to launch Amazon MP3, its own online music
store. The store launched in the US in public beta September 25, 2007, selling downloads
exclusively in MP3 format without digital rights managementThis is especially notable as it was
the first online offering of DRM-free music from all four major record companies.

In August 2007, Amazon announced AmazonFresh a grocery service offering perishable and
nonperishable foods. Customers can have orders delivered to their homes at dawn or during a
specified daytime window. Delivery was initially restricted to residents of Mercer Island,
Washington, and was later expanded to several ZIP codes in Seattle proper. AmazonFresh also
operated pick-up locations in the suburbs of Bellevue and Kirkland from summer 2007 through
early 2008.

In 2008 Amazon expanded into film production and is currently funding the film The Stolen
Child with 20th Century Fox.

Acquisitions and spinoffs

  In April 1998, Amazon bought the (IMDb).
 In August 1998, Amazon bought -internet based PlanetAll for 800,000 shares of Amazon
stock. PlanetAll operated a web-based address book, calendar, and reminder service. In
the same deal, Amazon acquired Sunnyvale-based Junglee.com, an XML-based data mining
startup for 1.6 million shares of Amazon stock. The two deals together were valued at
about $280 million at the time.
 In June 1999, Amazon bought Alexa Internet, Accept.com, and Exchange.com in a set of
stock deals worth approximately $645 million.
 In 2003, Amazon purchased the rival online music retailer CD Now.
 In 2004, Amazon purchased Joyo.com, a Chinese e-commerce website. It also debuted
A9.com, a company focused on researching and building innovative technology.
 In March 2005, Amazon acquired BookSurge, a print on demand company, and
Mobipocket.com, an eBook software company.
 In July 2005, Amazon purchased CreateSpace.com (formerly CustomFlix), a Scotts Valley,
California-based distributor of on-demand DVDs. Since the acquisition, CreateSpace has
expanded its on-line services to include on-demand books and CDs, as well as video
downloads. On July 30, 2007, the National Archives announced that it would make
thousands of historic films available for purchase through CreateSpace
 In February 2006, Amazon acquired Shopbop, a Madison, Wisconsin-based retailer of
designer clothing and accessories for women.
 In May 2007, Amazon acquired dpreview.com, a London-based digital photography
review website created by Phil Askey as his personal hobby website and Brilliance Audio,
the largest independent publisher of audiobooks in the United States
 In January 2007 created Endless.com, a separate e-commerce brand focusing on shoes
 In January 2008, Amazon announced that it would acquire audiobook provider
Audible.com for $300 million in cash.
 In June 2008, Amazon announced that it had acquired Fabric.com, an online fabric store.
 In July 2008, Amazon's IMDb subsidiary purchased Box Office Mojo, a site that tracks
movie sales in theatres.
 In August 2008, Amazon announced it had an agreement to purchase Victoria, B.C.
based AbeBooks, seller of new, used, out of print and rare books. Later that month
Amazon announced that it would acquire Seattle-based Shelfari, a book-based social
network site, for an undisclosed sum. As part of its acquisition of Abebooks Amazon also
got an additional stake in Shelfari's competitor LibraryThing, which AbeBooks had
previously purchased a 40 percent stake in, and whole ownership of Bookfinder.com,
Gojaba.com, and listing-management service FillZ, all owned by AbeBooks at the time of
acquisition.
 In October 2008 acquired Reflexive Entertainmenta casual video game development
company.
 In July 2009 Amazon agreed to acquire Zappos, an online shoe and apparel retailer. The
deal will close this fall.

Amazon web services

The Amazon Web Services (AWS) are a collection of remote computing services (also called
web services) offered over the Internet by Amazon.com.

Launched in July 2002, Amazon Web Services provide online services for other web sites or
client-side applications. Most of these services are not exposed directly to end users, but instead
offer functionality that other developers can use. In June 2007, Amazon claimed that more than
330,000 developers had signed up to use Amazon Web Services.

Amazon Web Services’ offerings are accessed over HTTP, using REST and SOAP protocols. All
are billed on usage, with the exact form of usage varying from service to service.

Customer Interface

Amazon.com stands not only as a supreme leader of online shopping, but also as a pioneer of
Web .This successful and well-defined website to run Amazon.com's business strategies and
processes. The home page of Amazon.com reveals that Amazon.com is the Web's lagest and
most influential retailer. This is because Amazon.com provides a variety of informaton such as
new releases, product details, related partners' links and so on. The quantity of content can help
Amazon.com to attract more consumers from different backgrounds and have different demands.
Amazon.com attempts to establish new demands to consumers as well. Consumers may use
Amazon.com to purchase an item that they need. However, while they open the home page of
Amazon.com, the "Amazon.com Visa Card" advertisement may grab their attention and
unconsciously affect them. As a result, some consumers might unconsciouly realise that they
might have the demand of Visa Card and therefore register as a user.

As with all web applications, the success of Amazon.com's interface is based on two strong
models and they include the conceptual model and structural model. The conceptual concept is
based on the concept of a reference catalogue. Amazon.com uses magazine style-catologues on
its website and it appropriates them to Amazon.com and this allows Amazon.com to arrange its
product categories. In addition, this model implies the presence of several methods for finding
specific products, such as a table of contents and multiple indexes .The conceptual model of a
reference catalogue not only gives users a clear understanding of what the site offers and how it
organised, but also provides a solid foundation on which the interface can grow and develop .The
website exploits one of the Web's exclusive resources: a community of users. Amazon.com
allows its users to review and rate products, in effect democratizing the book-buying experience
in a way unimaginable before the advent of the Web. Another model is the structural model.
Because of its huge content in its web page, its structural model looks like a hub. The center of
the hub contains the product details and category index pages and the spokes link to functional
areas, such as checkout and account management. Amazon also uses the structural model as a
guide for its checkout process and another hub for its account management area . So, due to this
model, Amazon.com can establish a effective One-Click Ordering system and consumers can
purchase the products without going through the troublesome checkout process.

The Importance of Amazon.com

Most people think of Amazon.com as an e-tailer, and value it for how it sells products and
distributes them. Those people make the fundamental mistake of comparing Amazon.com with
other retailers and direct-marketing companies. Amazon.com was the virtual bookstore to
emerge on the web and set the standard for online retailing. Amazon.com pays much attention to
their customers' experience. For example, it was the first online retailer to feature the readers
who bought this, also bought? device, listing three other titles in the same subject area or books
by the same author that are similar to the preferences of other users of Amazon.com.

Amazon.com should also be thought of as a technology company. It may be the only company to
have mastered the use of technology in serving individual customers.Amazon.com tracks what
its customers purchase and then uses that information to satisfy and meet customer expectations.
Since Amazon.com investigated security software, it was among the first website to accept credit
card purchases over the Internet. After customers purchase from Amazon.com, they receive an
confirmation email within a few minutes of order processing. Amazon.com was the first online
company to initiate proactive order confirmation. And it was the first online company to realize
that customers would welcome proactive e-mail notifications about things they are looking for.
When customers sign up to receive notifications by topic or by author, they will begin receiving
e-mails from Amazon.coms 'Eyes' service.

It is no doubt that Amazon.com is a new company founded by a visionary who understood that
the real opportunity was in using the technology to build long-term relationships with customers.
Amazon.com's importance can be obsreved through a comparision with a physical bookstore.
Such a comparison will reveal that there is a limited selection of books in an actual bookstore
whereas Amazon.com can list a huge catalogue of titles, and is much easier to search among
them online.
Challenges

Contrary to popular belief, the e-commerce entrepreneur faces significant strategic challenges in
setting up an economically feasible business on the internet. Using the example of online
bookselling, this paper explores the nature of those strategic challenges, some of which cut
across industries, and others that are peculiar to the rivalry and structure of the industry segment
the entrepreneur is entering.

Amazon's challengers come from two directions. First, other online retailers are growing rapidly
and appear in various forms. Many of the dotcoms are invading each others' turf. From
auctioning people's old stuff, eBay now also hosts fixed-priced virtual shops offering new goods
for sale. And Google is adding more shopping-type services, such as Froogle, a shopping-
comparison service, and more recently its new Checkout payments system, which rivals eBay's
PayPal.

Second, traditional retailers are rapidly getting their online acts together. This pits Amazon
against giant retailers with huge purchasing power, like America's Wal-Mart and Britain's Tesco.
These multichannel retailers make a virtue of their ability to offer both bricks and clicks. Many
provide online customers with the option of picking up goods from the shop down the road. This
is proving popular with web buyers who want things immediately or are keen to avoid shipping
costs and staying in to accept a delivery. Circuit City, a big American electricals chain, expects
in-store pick-ups to account for more than half its online sales this year.

Amazon.com’s new shipping club, in which customers pay $79 a year for unlimited free two-day
delivery and discounted next-day delivery on in-stock items, has gotten mixed reviews. Some
say the Amazon Prime program is too expensive for customers—and others say it’s too
expensive for Amazon. But at a Friday night meeting of Silicon Valley’s Churchill Club, CEO
Jeff Bozos explained what he’s really trying to do. …

Instead of some kind of windfall, he's hoping the faster free shipping will persuade shoppers to
consider buying more different kinds of products from Amazon--stuff they might have only
bought in physical stores before. "If you pay $79 for a membership, then you'll say, well, if I
want to buy a digital camera, maybe I'll look at Amazon," says Bezos. "It gets people to start
checking across categories."

That points up one of Amazon's biggest challenges: extending its brand beyond media. In focus
groups, Amazon has asked heavy book, music, and video buyers why they don't buy other things.
"They say, 'You don't have an electronics store.' We tell them we've had one for five years, and
they'll argue with us."

Of course, he adds, "If only people who buy a thousand things a year sign up, then we're in
trouble."
Future of Amazon.com

Jeff Bezos wants Amazon.com to be the place for consumers to find almost anything they want--
whether Amazon itself sells the products or simply takes a cut from other merchants selling on
its Web site. Says Bezos: 'We want to build something the world has never seen . Now,
customers can buy many items from Amazon.com, however because of the rapidly changing e-
market, the quantity of products for sale on Amzon.com is not enough. There were a few million
new shoppers to the Web in 2002, which helped bolster those sales, most of the sales are coming
from people that already shopped online, that love the convenience of it, want to stay away from
the malls, took advantage of the free shipping promotions and spent more of their total shopping
dollars online than in 2001 . Therefore, customer retention is so important for amazon.com
future. Amazon.com will create strategies to maintain its customers. Customers of the future will
demand more convenience and privacy. Interactivity will be the norm rather than a one way
pushing of information . For example, Dell can customize computers in response to customers'
online requests. In the future this service will not only be restricted to personal computers. A
customised order may in the future be placed at Amazon.com for a book comprised of six
chapters on Russian stamps from six different books, or a CD with 12 tracks that the purchaser
specifies, or a pair of pants cut to your measurements . Amazon.com is not as developed in
online delivery servies. Someday a customer might be able to order a book as a multimedia file
to download to a CD. It's happening with software and other print media such as magazines so
why cannot Amazon.com.

Also, Amazon.com needs to begin using the Net to enhance production and distribution.
Multichannel retailing will be the norm in the future . Amazon.com will form partnerships with
bricks-and-mortar retailer, the number of companies that will take the bricks-and-clicks approach
will increase and online shopping will be viewed as one channel for gathering information .
Consumers shop at stores that they trust and like. Therefore, brand strength will br paramount in
this sector. Incumbents will have a strong advantage and will be hard to dislodge. The unique
brand position of Amazon.com will be its biggest strength. Amazon.com will be attempting to
occupy marketshares from their off-line competitors. Price reductions and year round and free
shipping continues to aid Amzon.com in sustaining its competitive advantage and maintaining
market share.

In all, Amazon.com has clearly and admirably demonstrated how quickly a business can develop
and grow in the internet environment . Amazon failures, success and achievements have had a
profound influence on virtually every sector of business in the world . Consequently, through its
actions and own experimentations, Amazon.com has established a model for future online
retailers to follow and experiment with themselves.
E-bay

The History of eBay

eBay was founded in Pierre Omidyar's San Jose living room back in September 1995. It was
from the start meant to be a marketplace for the sale of goods and services for individuals.

In 1998, Pierre and his cofounder Jeff Skoll brought in Meg Whitman to sustain the success.
Meg had studied at the Harvard Business School and had learned the importance of branding at
companies such as Hasbro.

Meg culled her senior staff from companies such as Pepsico and Disney, created an experienced
management team with an average of 20 years of business experience and built a strong vision
for the company -- that eBay is a company that's in the business of connecting people, not selling
them things.

They quickly shed the image of only auctioning collectibles and moved into an array of upscale
markets where the average sale price (ASP) is higher. ASP is a key metric in determining eBay's
transaction fees, so increasing the ASP became an important item. By forging partnerships with
namebrands such as GM, Disney and Sun, eBay has managed to do exactly that. Sun has sold
$10 million worth of equipment and it now lists between 20 and 150 items per day.

e-Bay Mission

eBay describes their purpose as to ‘pioneer new communities around the world built on
commerce, sustained by trust, and inspired by opportunity’

At the time of writing, eBay comprises three major businesses:

1. The eBay Marketplace (approximately 70% of eBay net revenues in 2007). The mission
for the core eBay business is to ‘create the world’s online marketplace’. eBay’s SEC
filing notes some of the success factors for this business for which eBay seeks to manage
the functionality, safety, ease-of-use and reliability of the trading platform.
2. PayPal (approximately 25% of net revenues in 2007). The mission is to ‘create the new
global standard for online payments’. This company was acquired in 2003?
3. Skype Internet telephony (approximately 5% of net revenues in 2007).
This company was acquired in 2005. eBay has suffered an “impairment charge” from valuing the
company too highly, but more recently it has started to provide the service for MySpace users.

Advertising and other net revenues represented just 4% of total net revenues during 2007

This case focuses on the best known, the eBay Marketplace.

e-Bay Business model

eBay has built an online person-to-person trading community on the Internet, using the World
Wide Web. Buyers and sellers are brought together in a manner where sellers are permitted to
list items for sale, buyers to bid on items of interest and all eBay users to browse through listed
items in a fully automated way. The items are arranged by topics, where each type of auction has
its own category.

eBay has both streamlined and globalized traditional person-to-person trading, which has
traditionally been conducted through such forms as garage sales, collectibles shows, flea markets
and more, with their web interface. This facilitates easy exploration for buyers and enables the
sellers to immediately list an item for sale within minutes of registering.

Browsing and bidding on auctions is free of charge, but sellers are charged two kinds of charges:

 When an item is listed on eBay a nonrefundable Insertion Fee is charged, which ranges
between 30 cents and $3.30, depending on the seller's opening bid on the item.
 A fee is charged for additional listing options to promote the item, such as highlighted or
bold listing.
 A Final Value (final sale price) fee is charged at the end of the seller's auction. This fee
generally ranges from 1.25% to 5% of the final sale price.

eBay notifies the buyer and seller via e-mail at the end of the auction if a bid exceeds the seller's
minimum price, and the seller and buyer finish the transaction independently of eBay. The
binding contract of the auction is between the winning bidder and the seller only.
Adversity

Since eBay does at no point during the auctioning process take possession of either the item
being sold or the buyer's payment for the item, user trust is a key issue for eBay. In the
traditional model of trading forums the buyer and the seller usually exchange the item for the
payment at the same time and place, meaning that trust does not play as big a role. For eBay to
be able to convince users to participate, they must deal with the inevitable delay between the
buyer buying the item and receiving it, which is not an issue in the tradition model.

To reduce this anonymity and uncertainty of dealing online, eBay introduced Feedback Forums.
At the completion of a transaction, users are encouraged to submit compliments or criticism to
the trading profile of the trading partner to the Feedback Forum. By looking at the trading
partners history of trades, the user will be able to estimate more accurately the trustworthiness of
the trading partner.

This is by no means a foolproof way to combat misuse, since users may be tempted to wait until
their reputation is good enough that they can start to trade in expensive items before running
away with the buyer's money. This argument may mean decreased scalability of eBay in terms of
item price, at least for person-to-person auctions — more users may be tempted to use traditional
modes to decrease their risk.

eBay Proposition

The eBay marketplace is well known for its core service which enables sellers to list items for
sale on an auction or fixed-price basis giving buyers the opportunity to bid for and purchase
items of interest. At the end of 2007 there were over 532,000 online storefronts established by
users in locations around the world.

Software tools are provided, particularly for frequent traders including Turbo Lister, Seller’s
Assistant, Selling Manager and Selling Manager Pro, which help automate the selling process;
the Shipping Calculator, Reporting tools, etc. Today over sixty percent of listings are facilitated
by software, showing the value of automating posting for frequent trading.

Fraud is a significant risk factor for eBay. BBC (2005) reported that around 1 in 10,000
transactions within the UK were fraudulent. 0.0001% is a small percentage, but scaling this up
across the number of transactions, this is a significant volume.

eBay has developed ‘Trust and Safety Programs’ which are particularly important to reassure
customers since online services are prone to fraud. For example, the eBay feedback forum can
help establish credentials of sellers and buyers. There is also a Safe Harbor data protection
method and a standard purchase protection system.

According to the SEC filing, eBay summarises the core messages to define its proposition as
follows:

For buyers:

 Selection
 Value
 Convenience
 Entertainment

For sellers:

 Access to broad markets

 Efficient marketing and distribution costs
 Ability to maximize prices
 Opportunity to increase sales

In 2007, the sellers proposition is described slightly differently:

 Access to broad markets

 Cost effective marketing and distribution
 Access to large buyer base
 Good conversion rates

eBay stresses the importance of developing its “Value-Added Tools and Services” which are
“pre-trade” and “post-trade” tools and services to enhance the user experience and to make
trading faster, easier and safer.

In January 2008, "eBay announced significant changes to it’s Marketplaces business’s three
major areas:- fee structure, seller incentives and standards, and feedback. These changes have
been controversial with some sellers, but are aimed at improving the quality of experience.
Detailed Seller Ratings (DSRs) enable sellers to be reviewed in four areas:

(1) item as described,

(2) communication,

(3) delivery time, and

(4) postage and packaging charges.

This is part of a move to help increase conversion rate by increasing positive shopping
experiences. Powersellers with positive DSRs will be featured more favourably in the search
results pages and will gain additional discounts.

eBay Objectives and strategy-

The overall eBay aims are to increase the gross merchandise volume and net revenues from the
eBay Marketplace. More detailed objectives are defined to achieve these aims, with strategies
focusing on:

1. Acquisition — increasing the number of newly registered users on the eBay Marketplace.
2. Activation — increasing the number of registered users that become active bidders,
buyers or sellers on the eBay Marketplace.
3. Activity — increasing the volume and value of transactions that are conducted by each
active user on our eBay Marketplace. eBay had approximately 83 million active users at
the end of 2007, compared to approximately 82 million at the end of 2006. An active user
is defined as any user who bid on, bought, or listed an item during the most recent 12-
month period.

The focus on each of these 3 areas will vary according to strategic priorities in particular local
markets.

eBay marketplace growth is also driven by defining approaches to improve performance in these
areas.

First, category growth is achieved by increasing the number and size of categories within the
marketplace, for example: Antiques, Art, Books and Business & Industrial.

Second, Formats for interaction. The traditional format is auction listings, but it has been refined
now to include the ‘Buy-It-Now’ fixed price format. Another format is the “Dutch Auction”
format, where a seller can sell multiple identical items to the highest bidders. eBay Stores was
developed to enable sellers with a wider range of products to showcase their products in a more
traditional retail format. eBay say they are constantly exploring new formats for example through
the acquisition in 2004 of mobile.de in Germany and Marktplaats.nl in the Netherlands, as well
as our investment in craigslist, the US-based classified ad format. Another acquisition is
Rent.com, which enable expansion into the online housing and apartment rental category. In
2007, eBay acquired StubHub an online ticket marketplace and it also owns comparison
marketplace Shopping.com.

Finally marketplace growth is achieved through delivering specific sites localised for different
geographies as follows: You can see there is still potential for greater localisation, for example in
parts of Scandinavia, Eastern Europe and Asia.
eBay Competition

Although there are now few direct competitors of online auction services in many countries,
there are many indirect competitors. eBay (2005) describes competing channels as including,
online and offline retailers, distributors, liquidators, import and export companies, auctioneers,
catalog and mail-order companies, classifieds, directories, search engines, products of search
engines, virtually all online and offline commerce participants (consumer-to-consumer, business-
to-consumer and business-to-business) and online and offline shopping channels and networks.

BBC (2005) reports that eBay are not complacent about competition. It has already pulled out of
Japan due to competition from Yahoo! and within Asia and China is also facing tough
competition by Yahoo! which has a portal with a broader range of services is more likely to
attract subscribers.

Before the advent of online auctions, competitors in the collectibles space include antiques
shops, car boot sales and charity shops. Anecdotal evidence suggests that all of these are now
suffering at the hand of eBay. Some have taken the attitude of ‘if you can’t beat ‘em, join ‘em.
Many smaller traders who have previously run antique or car boot sales are now eBayers. Even
charities such as Oxfam now have an eBay service where they sell high-value items contributed
by donors online. Other retailers such as Vodafone have used eBay as a means to distribute
certain products within their range.

eBay's Position in the Industry

Because access to the online trade channel (i.e. Internet) is universal, and the physical assets
required to setup an auctioning site are all commercially available, barriers to entry in the
auctioning industry are minimal. What comes stronger into play is the network externalities
effect, as was mentioned before.

Being in a market with huge network externalities makes it extremely difficult for a competitor
to get a large share of the userbase, since most users tend to gravitate towards the service which
already offers the most users (since it will presumable have the greatest number of offerings.)
This tremendous switching cost has the effect of locking in customers to a single auction service
provider — in this case eBay.

Given network externalities and the relative ease one company can mimick and duplicate another
company's innovations online, the main tact rivals can deploy is to lower the price of their
service, which is exactly what Amazon and Yahoo have done.

Currently eBay is extending to markets overseas; it is now operating in eight of the top ten
countries by online market size outside of the United States. In Asia eBay is in 80% of its largest
e-commerce markets. eBay is gaining users 50% faster in Europe than in the United States, and
gross merchandise sales are growing 135% faster. The faster it grows, the more securely will it
hold its top position in the auctioning service market.
In a very open market, where anyone can enter, the threat of substitute service is greater. An
example of which, Half.com, was mentioned before. In fact, the management of eBay believes
that fixed-priced trading as is done on Half.com has as much, or even more, potential than eBays
core auctioning service.

Challenges Faced by E-bay-

The first challenge that always confronts an online merchant is the idea of creating trust and
confidence among the users.There are still a large number of people who do not use the internet
on a regular basis, and there are, of course, a large number of people who have no interest in the
internet at all.Sometimes, they stay away from it because they are worried about confidentiality,
privacy issues, and the broad area of trust and safety.Each internet site that is going to engage in
commerce must create an environment of trust and safety that will allow the users to come back
over and over again.

This is one of the biggest challenges facing e-commerce sites right now, creating an environment
so that a novice online shopper can come to a particular site and feel comfortable shopping there
and feel satisfied that they are getting a good price and a bargain and getting the merchandise
that they want.

Future of eBay

eBay has become an online middleman for buyers and sellers in a way which traditional brick
and mortar companies cannot touch. Using the web has also brought along with it some
challenges, especially regarding trust issues between buyers and sellers.
eBay seems to have dealt adequately with those trust issues, since users don't seem to mind and
continue to use their service.

eBay is operationally sound, especially considering it is still in its buildup period and it has a
business model that scales extremely well. The management has shown that it responds quickly
and well, and has been working hard to expand the business without jeopardizing the core
business.

Even though eBay's stock may still be overvalued, the business fundamentals are solid and the
only risk is if eBay doesn't grow as fast as it has estimated.
eBay Results

eBay is so much successful today as it really allows people to often connect with some very fond
and special early childhood memories.

Another factor to consider is that people really enjoy the experience of the shopping bazaar.They
enjoy the hunt and looking around for merchandise.

The other component is that they really enjoy the competition of the bidding process.Everybody
likes to get a bargain and, in some way, shape, or form, likes to haggle a little bite over the
price.The eBay auction format allows the users to do that.

eBay’s community of confirmed registered users, has grown from around two million at the end
of 1998 to more than 94 million at the end of 2003 and to more than 135 million at December 31,
2004.

It is also useful to identify active users who contribute revenue to the business as a buyer or
seller. eBay had 56 million active users at the end of 2004who they define an as any user who
has bid, bought, or listed an item during a prior 12-month period.