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* AMAZON.COM Winning the Online Book Wars Copyright ? 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Amazon’s Success Factors First mover advantage (mind share) Low overhead costs (60 inventory turns/yr.) Cross-Marketing: Amazon Associates Program (other web sites link book sales) Customer service (see e-mail Exhibit) Online Book Buying Experience Convenience Browsing experience Searching Editorial content Delivery Payment Marketing communications Supply Chain Management Amazon orders from wholesaler and repackages and ships. (cross-docking?) Dependent upon one wholesaler (Ingram) Considering self-distribution (buying directly from publishers) Ingram response by offering drop-shipping Traditional distribution system is designed to stock retail store shelves. Barnes and Noble Response Internet seen as a new channel to leverage existing assets and strengths. Features (online community reflective of real store) Pricing (30/20% vs 40% Amazon top 500) Alliances (Firefly collaborative filtering) Information Technology (Web farm flexibility) Amazon’s Challenges Operations (Barns Noble - 2% margins) International Expansion Brand Extension into Online Music Sales Backward integration into Self-Publishing Case Discussion Questions What innovation did A bring about in the book-selling business? How would you contrast its business design with that of its competitors Borders and Barnes and Noble (before they created their own web-sites)? What are the advantages and disadvantages of each of the designs? Further Questions Why has A not turned a profit yet? When will profitability become important for A? “Brand comes first, profits later” How can A convert its attention and sales growth into profits? What line/brand extensions should it pursue? Further Questions (cont..) How can A sustain differentiation and improve margins? What characteristics of a service make it a good (or poor) candidate for delivery on the Internet? * * *
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