INDEX
1. INTRODUCTION 2. BRAND ANALYSIS 2.1 Company History 2.2 Vision and Mission 2.3 Ownership 2.4 Business Description 2.5 Business Performance 3. MARKET ANALYSIS 3.1 The Market Demand 3.2 Competitors 3.3 Distribution System 3.4 External Environment 4. STRATEGIC MARKETING 4.1 Target Customer 4.2 Brand Positioning 4.3 Brand Promise, Equity & Value 5. OPERATIONAL MARKETING 5.1 Product Management Strategies 5.2 Pricing Strategies 5.3 Distribution Strategies 6. CONCLUSION 7. REFERENCES 8. BIBLIOGRAPGHY
3 6 7 13 13 14 15
17-28 19 21 25 27
29-36 30 33 35
37-42 39 41 42
44 47 52
“There Are Two Kinds Of Retailers: Those Who Work To Figure How To Charge More, And Those That Work To Figure How To Charge Less, And We Are Going To Be The Second, Full-Stop, ” - JEFF BEZOS
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INTRODUCTION
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The report highlights the marketing strategy of Amazon in the United States by focusing on its fashion category. Amazon one of the fastest growing companies is now on the verge of conquering yet another market i.e. Fashion. Not many companies are able to be both loved and feared and Amazon has done just that. There is a sense of trust and credibility that Amazon has been able to build for itself in the market probably owing to the fact that whatever it touches turns to gold. With a market cap of $702.5 billion, Amazon has become the third most valuable company in the world making CEO & Founder Jeff Bezos the world’s richest man, not just at present, but of all time (economictimes, 2018), with a net worth of $106 billion according to Bloomberg.
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“ Your Brand Is What People Say About You When You’re Not In The Room” - JEFF BEZOS
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BRAND ANALYSIS
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2.1 Company History From the very beginning, Amazon has always been ahead of its game owing to the vision and drive of its founder. Be it the spring of 1994 as Jeff Bezos recalls in a speech at the Academy of Achievement submit, web usage was growing at an amazing speed, 2300 percent a year, a very unusual rate. Bezos saw an opportunity and Amazon was born (Anon, 2018). Books, an extremely unusual product to be sold online, the only product at the time that had no mail order catalog and most importantly a category that would give Bezos the chance to retail more options than any other product category was vetoed to be the first product category to be sold on Amazon (CorporateValley, 2018) . However, year by year as the product categories increased Amazon soon become “The Everything Store.”
Table 1: Top 10 Companies Owned by Amazon (AMZN)
YEAR 1998
BRAND IMDb.com
Serves as an online database of information related to films, TV programs and video games.
Alexa.com
1999
Collects information on people’s browsing habits online and provides analytics on those habits.
2008
Sells audiobooks, radio and TV programs, and audio versions of magazines and newspapers.
2008 2009 2012 2013 2014 2015 2017
Audible.com AbeBooks
Dedicated to tracking down rare, used and out-of-print books.
Zappos
Leading footwear and apparel website in the world
Kivia Systems (Amazon Robotics) Robotics company
Goodreads
Online community with book reviews, recommendations and discussions
Twitch.tv
live streaming video platform that focuses on video gaming, including walkthroughs of video games, broadcasts of e-sports competitions and other gaming-related events.
Annapurna Labs Chip-maker
Whole Foods Market
AMOUNT Approximately $55 million
1995
1998
2000
2002
1998
2010
2011
2014
2013
2012
2004
2000
2013
2017
2013
$250 Million in stock $300 million in cash 1.2 billion Around $775 million Not disclosed $842 million Around $370 million $13.7 billion cash
Fig 1: Countries Amazon Is Available In, And Since When. From Left To Right, Row 1 - United States, the United Kingdom and Ireland, France, Row 2 - Canada, Germany, Italy Row 3 - Spain,Netherlands, Australia Row 4 - Brazil, Japan, China Row 5 - India, Singapore, Mexico
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Table 2: Company Timeline Source: (Easter & Dave, 2017) (Stone, 2013)
1994 • •
1994
Founded by Jeff Bezos. Previously called Cadabra Relentless.com (till date if typed will redirect to amazon.com)
Starts off as an online bookstore selling books, primarily competing with local booksellers and Barnes & Noble
States intention for Drone deliveries.
• •
2013
Amazon Fire TV Fire Phone - Fails, discontinued a year later
1995 2015
2011 1997 1998 • • •
• •
2014
Amazon Echo - Digital home assistant device.
Amazon Fire HD Tablet, in respose to Apple’s Ipad.
One Million Customers! Issued its initial public offering of stock
Expands product categories to Music & Dvd’s
Expands product categories to Toys & Electronics. Times Person of the year. Amazon Auctions - launched in response to EBay, was a failure.
1999
Amazon Studios, to create original video content.
Amazon Go - grocery store, with currently one location in Seattle, Washington.
2010
2016
2017 2000
•
Launches Amazon Marketplace a platform allowing third party sellers to sell their products at a fixed price on the website along with the Amazon products.
• •
Kindle e-book reader lauched. Amazon Fresh - Grocery delivery service. Amazon Music - music streaming platform and online music store.
•
2007
First streaming company to get an Oscar Nomination for “Manchester by the Sea.”
2001 Makes first quaterly profit at the end of 2001, $5 Million on revenues of more than $1 Billion (Alpe, 2015). Free Super Saver Shipping for orders above $99 which soon dropped to $49, and then to $25.Led to Amazon Prime.
2002
Amazon reports it’s first full year profit (Perez, 2004).
2003
Launches Prime in order to provide faster delivery for an annual fee. Later, Movie and TV streaming as well.
2005 10
Table 3: Timeline | Amazon’s passion for fashion Source: (Armstrong, 2017)
2006
2015 Opens Europe’s largest photographic studio in London’s Shoreditch. The 46,000 sq ft venue is dedicated to improving the photography on its website. The company signs model-of-themoment Suki Waterhouse as the face of its new campaign.
Acquires online fashion retailer Shopbop
2009
2016 Amazon quietly launches eight own-brand clothing ranges in the US, including Lark & Ro, Buttoned-Down and Ella Moon.
Acquires online shoe seller Zappos for $1bn
2012
2017 • Amazon sponsors the Met Ball with Jeff Bezos serving as an honorary chairman beside Vogue editor Anna Wintour.
• • •
Amazon secures a patent for an automated on-demand clothing factory Own Fashion label - “Find”, only in Europe Prime wardrobe Echo Look
2013 In Brad Stone’s book The Everything Store: Jeff Bezos and the Age of Amazon the online founder is quoted as saying “In order to be a two-hundred-billion-dollar company, we’ve got to learn how to sell clothes and food.”
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2.2 Vission & Mission
2.3 Ownership
2.4 Business Discription
Amazon: “Our vision is to be earth’s most customercentric company; to build a place where people can come to find and discover anything they might want to buy online at the lowest possible price” (Hull, 2012). Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. In current years fashion has become a huge focus for Amazon, as it looks to become, in its own words, “the best place to buy fashion online (Fumo, 2017).”
Amazon issued its initial public offering of stock on May 15, 1997, trading under the NASDAQ stock exchange symbol AMZN, at a price of US$18.00 per share (Investopedia, 2017). Following the company’s report of $3 billion in profit in 2017 shares are valued at $1,450 per share (Anthony, 2018). For its corporate filings, Jeff Bezos, Andrew R. Jassy (CEO of Amazon Web Services, 82,727 shares as of November 2017), Jeffrey M. Blackburn (senior vice president of business development and digital entertainment 55,028 shares as of November 2017) and Tom Alberg (17,114 shares) were Amazon’s four largest individual shareholders (Anthony, 2018).
Apparel, is one of the biggest US retail categories. Fashion merchandise typically is a highly profitable category (Fumo, 2017) making it enough of a reason for Amazon to push further into the area. The company has been experimenting with private labels since 2009 under the banner of AmazonBasics, but 2017 has been the year Amazon Fashion is really beginning to strike. At the beginning of the year, Amazon quietly launched seven private label apparel brands, with most SKUs in men’s accessories, women’s dresses, and handbags. In April, it added its own lingerie line with cut-rate prices (Fumo, 2017).Not to forget Prime Wardrobe that lets customers order clothing to try on for free, only charging users for what isn’t returned. Just with its announcement shares in major American department stores like Macy’s and Nordstrom fell (BOF, 2017). Most recently, Amazon announced an extension of its Alexa-enabled Echo product line specifically designed to take outfit photos and give style feedback. Further behind the scenes, the company is investing in its own fully automated clothing factory, a shipping company (code name: Dragon Boat), a patent for an on-demand textile manufacturing system that could further the efficiency of its apparel business and physical stores (Fumo, 2017).
Put the customer first. Invent. And be patient. - Jeff Bezos
Fig 3: Amazon Business Fig 2: Amazon Ownership Summery Sourse: (NASDAQ, 2018)
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2.5 Business Performance Making profits has never been a major concern for Amazon, in fact, the company did not start making profits until much later. However, much recently the company posted a record profit of $1.9 billion during the last three months of 2017, marking the 11th straight quarter of positive net income for the company (Rey, 2018). North America continues to hold the maximum sales volumes over the years. Amazon boasts a 29 percent share of the US fashion e-commerce market and is projected to hold 16.2 percent by 2021 of the apparel market, with an estimated $62 billion in annual apparel sales, followed by TJ Maxx and Macy’s (Fumo, 2017).
Fig 4 : Amazon’s Profits Source: Amazon: Q4 2017
“ Its All About The Future” - Jeff Bezos
Table 4: Net Sales As Per Segment
* Organize operations into three segments: North America, International, and Amazon Web Services (“AWS”). * Year ending Dec 31 *$ * Amazon does not disclose figures for fashion. 16
“ In Business Whats Dangerous Is Not To Evolve” - JEFF BEZOS
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Market ANALYSIS
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3.1 Market Demand Quantitative perspective
Qualitative perspective
Amazon’s apparel sales are growing at eight times the pace of the rest of the US fashion market (Marian, 2017) which has lead to an increase in its share of the apparel market in the US. Amazon accounted for about 44 percent of all U.S. e-commerce sales last year, or about 4 percent of the country’s total retail sales figure, according to data from One Click Retail (Thomas, 2018). “Every major trend seen in 2017 can be explained by the fact that more of Amazon’s core demographic (millennial’s) are growing up: they’re increasingly owning homes, raising children, and buying more to compliment the same (Thomas, 2018). However, new data from WGSN suggests it is still not viewed as a fashion authority by consumers (O’connor, 2017) and it’s increasing dominance on online shopping transactions is expected to be triggered by an anticipated surge in e-commerce sales and the downfall of its closest competitor, eBay Inc. (Liberto, 2017). Nevertheless, Amazon accounted for 53% of all the incremental growth of online shopping, and are only growing their dominance (Dennis, 2017). At the end of December, Amazon’s private-label brands by themselves had almost $450 million in sales in 2017, with the majority of those sales stemming from AmazonBasic.”This year, Amazon’s private brands showed enough success stories to guarantee its hold in the apparel market (Thomas, 2018).
Americans spend just 3.1 percent of their household budgets on clothing, according to government data, shifting their spending on travel, technology and experiences. Like many other e - retailers Amazon competes in numerous international markets, yet the ‘Amazon Effect’ is far greater in the USA than anywhere else. Owing to the fact that — America is vastly over-served when it comes to traditional retail, with almost all retailers offering overnight service, people are increasingly happy to avoid stores altogether Thus, the ‘Amazon Effect’ has emerged, where stores are closing at a rapid rate and many retailers are failing altogether leaving vast amounts of empty retail space (Hartung, 2017). Over the last 45 years, physical mall growth outpaced US population growth, setting the offline retail industry up for a big implosion; foot traffic to malls cut by more than half over the last few years (Jade, 2017). 64% of US households now use Amazon Prime, (Hyken, 2017) which has been the main reason for the increase in the purchasing of apparel as well as other products, followed by high marks for convenience, customer service, and reviews. To sum up, fashion retail in the US in 2017 looked something like this • 28% purchase more clothes online than offline, overall department stores are most popular • Frequent shoppers want to be time efficient, seldom shoppers rather give importance to their budget • Consumers combine online and offline offers and information when they shop for clothes (The future of e-commerce: bricks and mortar) • Amazon dominates digital fashion sale: highest rates in awareness and number of clients • Item prices and additional charges are decisive when it comes to visiting and buying in online stores • Online shoppers pay slightly more attention to the supplier/store than stationary shoppers • Brands play a major role in clothes shopping, especially for online shoppers (Statista, 2018).
Fig 5: The Decline Of tional Retail Big Box and Department Store Sales ($ Billion) Source: visualcapitalist.com
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3.2 Competitors Amazon has crushed every market it has entered making fashion no exception so much so that being “Amazoned” ( brick and mortar stores under threat from online competitors ie. Amazon.com) has been added to the business lexicon. With brands shutting down stores only to divert their efforts towards their e-commerce to sustain the Amazon effect Amazon has been able to make a considerable mark on the apparel industry with the help of its own brands and most importantly it’s Prime membership program.
Table 5: How competitors for apparel survive Amazon.
TYPE
STORE
KEY STRATEGIES •
TJ Maxx
• • •
Macy’s • JCPenney
DIRECT
Collaboration with beauty giant Sephora.
•
Walmart acquired Jet.com cater to the needs of young urban adults, so-called “metro millennia's (Amazon's target) Partnership with Google and its voice-shopping platform, direct response to the ubiquity of Amazon's Alexa. Amazon's lower free shipping threshold of $25 was put into place just a short while after Walmart instituted its free two-day shipping offer with every $35 purchase. launching four private-label apparel brands as it beefs up its clothing offerings both online and at its brick and mortar stores.
• • •
Target
• • •
INDIRECT
Luxuary websites Net - e Porter etc
Target, which also saw a 3.4% uptick in sales (Jones, 2018) in November and December, wooed shoppers with the debut of new brands such as A New Day, Goodfellow & Co., JoyLab and Who What Wear. Paid $550 million to buy online delivery company Shipt to enable delivery within hours of their being ordered online. A recent study by Forbes Deborah Weinswig suggests a sizable shopper overlap between Target and Amazon, implying that Target could lose out as Amazon grabs further apparel sales. Launched its limited-time Victoria Beckham For Target range last year, too.
•
Kohl’s didn’t fight Amazon, it embraced it in a way aimed at mutual benefit. It launched a partnership with Amazon in October that placed Amazon shops in 10 Kohl’s stores in Chicago and Los Angeles. Those locations also accept returns of products sold on Amazon.com. Kohl’s doubled down on offering its own private brands that make it a destination for shoppers who can’t find those items elsewhere.
• •
Makes it a competitor by launching its own athleisure and apparel brands. Though has an advantage as these retailers focus on one category while Amazon has a set of categories to fall back on.
•
Amazon has started to shift its fashion strategy toward offering more highend designer names such as Zac Posen and Stuart Weitzman. Luxury fashion websites are typically well merchandised and highly curreted — not things for which Amazon is necessarily known.
Kohl’s
Fast fashion & Sports retailers Gap, Zara, H&M, Nike, Foot Locker etc
By 2021, expected to claim the No. 3 spot (Peterson, 2017). Been ramping up the convenience of shopping online and offline. A customer, for instance, will be able to scan the bar code on a pair of shoes or an appliance with a Macy’s app, find out its price and availability, then make the purchase through their mobile device and have the item delivered to their homes. Named eBay executive as its president - one of the boldest signs to rapidly gain ground.
•
• Walmart
By 2021, TJ Maxx (Maxx style, Maxx savings) is expected to be the No. 2 clothing seller (Peterson, 2017) Its discounts encourage shoppers to visit bricks-and-mortar retailers despite the inconvenience.
•
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Table 6: SWOT Analysis For Amazon fashion in the U.S
STRENGTH
•
Advanced technology
•
Lack of personalisation
•
Loved by customers and feared by its competitors
•
Not easy to browse
•
Shoppers tend to buy the same item in multiple sizes
•
More own labels across all countries
•
Physical store
•
Increase in voice-enabled commerce and artificial intelligence
•
Seen as utilitarian and not fashionable
•
More sorted fashion selection with better presentation
•
Amazon Prime – Major motivator for customers to purchase apparel
Advertisements, PR events focused to create more credibility in the fashion world
•
Sustainable fashion range
•
Customer loyalty
•
•
Breadth of product reviews
•
Prime Day – Its own day for discountes generate major sales volumes
Amazon’s ability to control the production of its ownbrand fashion, from design to marketing, will help the company weather the financial storm.
•
Easy Returns
•
•
•
Wide catalogue of categories and products, making it much less vulnerable to the shifting trends Own photo and video studio for growing needs of product images
•
THREAT
OPPORTUNITY
WEAKNESS
Scams by third party sellers
•
Most economists expect new e-commerce tax in 2018 budget
•
European Union allows brands to block luxury goods from Amazon
•
LVMH refuses to sell its luxuary brands on Amazon
•
Rise of showrooming people tend to compare all possible options and prefer to see the garment and alater buy online for the cheapest price.
•
Comparison shopping sites like shopping.com and shopzilla.com, because they can often push prices lower than Amazon.
•
Physical stores can serve as additional centers to fill e-commerce orders more quickly. (Some companies have estimated that when shoppers come in to pick up an order, they end up spending another 25%. (Wahba, 2016).
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3.3 Distribution System Amazon’s currently distributes fashion only through e-commerce, however, it has been making a move towards brick and mortar with the opening of Amazon Go for groceries. Its distribution system consists of both direct and indirect channels, brands have the option of either selling to Amazon directly, via its wholesale model, or joining the company’s third-party marketplace as a seller. They offer programs that enable sellers to grow their businesses, sell their products on the websites and their own branded websites, and fulfill orders through them. In such transactions, they are not the seller of record and earn fixed fees, a percentage of sales, per-unit activity fees, interest, or some combination thereof. They fulfill customer orders in a number of ways, including through North America and International fulfillment and delivery networks that they operate; co-sourced and outsourced arrangements in certain countries; and digital delivery.
Fig 6: Amazon Distribution
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3.4 External Environment
Table 7: Pestel Analysis For Amazon fashion in the U.S
POLITICAL
•
•
•
ECONOMIC
Trade protectionism in the USA from the trump administration currently threatens the existence of foreign firms in the country (Diamond, 2017). While Amazon is an American firm, a considerable amount of its goods come from overseas, and thus its operations may be threatened by a possible reduction in the number of foreign imports or tariffs to foreign imports.
•
lack of any sort of national value added tax (VAT,) kept prices for most things in America among the lowest in the world.
•
Retail has produced the largest local taxes of any industry.
•
Creating job oppertunities Retail is the third largest employer in America.
President Donald Trump has beenpretty clear about his least favorite company in America: Amazon.
•
The U.S. economy continues to grow faster than most other developed economies. The strength of its currency reflects confidence in its economic future (NationalRetailFederation, 2016).
Increasing governmental efforts on cyber-security.
SOCIAL
•
•
Increasing levels of obesity affect individuals across the globe, with 711 million people across the globe being classed as overweight and increasing pressure resting on Governments to encourage physical activity and a healthy lifestyle (Bedard, 2017). It could be argued that by extending its delivery services to the extent that customers can even have their groceries delivered to their doorstep, Amazon are encouraging the non-active lifestyles that are resulting in the obesity pandemic. Increasing online buying habits.
TECHNOLOGY
•
Artificial intelligence too drive a sweeping change throughout the retail industry in the next decade, impacting both operations and customer experience (Marian, 2017).
•
Conversational commerce and chatbots will continue to evolve
•
The increased use of mobile technology and growth in digital technology both have boosted online sales. Availability of 4G and growth in digital technology has also boosted the sales of the retailers like Amazon and e-bay.
ENVIRONMENT
•
Sustainability is also a very important concern for the businesses worldwide. Even the e-retailers have to focus on several areas like packaging, waste reduction, and energy consumption to do business sustainably.
•
With increasing pressure from governments being placed on large organisations to reduce organisational emissions, the question can be asked as to how Amazon can comply to regulations about the levels of emissions, given that a large part of their business relies on logistics and delivering products on a same-day basis (Gunther, 2016).
LEGAL
•
At present, increasing pressure is placed on multinational corporations to risk assess their clients, and any politically sensitive clients or clients on terrorist watch lists should be sanctioned (Gov, 2016). Amazon is currently under federal investigation for selling goods to individuals on terrorist watchlists and violating US sanctions, showing a disregard to international law and safety (Daily Mail, 2017).
•
Amazon has further come under fire from the Federal trade commission in the U.S. for producing misleading claims about pricing discounts on around 1000 products (Bartz, 2017).
•
Human rights record is harder to discern: unlike many companies that rely on global supply chains, Amazon does not disclose its overseas suppliers or publish the results of factory audits. Domestically, it is reputed to be a brutal place to work (Gunther, 2016).
•
Identity Fraud is a growing concern (Chiquoine, 2016).
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“ The Common Question That Gets Asked In Business Is, ‘Why?’ That’s A Good Question, But An Equally Valid Question Is, Why Not?” - JEFF BEZOS
4
STRATEGIC MARKETING
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4.1 Target Customer Table 8: Amazon Fashion Target Customer Rachel - 25 years - New York - Professional Geographical Variables
• •
Global Customer Base Mainly Urban areas
Demographic Variables
• • • •
Men & Women 18 - 40 years Middle class, Upper Middle Class & High Class Students, All Professionals, Housewifes.
Psychographic Variables
• • • • • •
Mature individualistic individual Unfazed by trends Looking for deals/best price Always on the go Tech Savy Impatient - need instant gratification (Fast Deliveries)
Rachel is a 25-year-old professional living in New York. She is constantly traveling for work and is continuously on the go. Unlike her friends, she doesn't have the time to go to malls or lunches. But she loves the fast pace of her life. She is a true believer of less is more and even though the quality is important she is always on the lookout for a great deal. Gifting is a huge part of her lifestyle both for family and professionally. As she's usually traveling and misses most occasions she generally tends to send gifts. She has an inborn sense of style and occasionally flips through a magazine while waiting for a flight, however, she still isn't updated with the latest trends or fashion and is least bothered but always manages to look effortlessly stylish. Her wardrobe consists of mainly formal wear and a few dresses as she is expected to attend allot of work dinners. The short breaks she gets between flights or in the car is when she browses and does most of her shopping fast deliveries being a major necessity Amazon is her go to website for everything. She swears by it also because she doesn't have the time or patience to go to a physical store or compare between websites before making a purchase she completely trusts Amazon. On an off day, she tends to sleep in, catch up with friends, family and the movies.
Pen Potraits For Amazon’s Fashion Customer
Fig 8: Amazon Target Customer
Fig 7: Amazon & Target do well in brand affinity with Genz and Millennials in the U.S Source: WGSN
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4.2 Brand Positioning The product selection, the customer-centric approach, and the prices can be characterised as Amazons USP. The enormous selection of products is a crucial part of Amazon’s brand differentiation. While Amazon has successfully conquered and dominated every possible product category, it still is to get a firmer grip on fashion.“Nobody goes to Amazon for its beauty,” says Sucharita Mulpuru, an analyst at Forrester Research. “They go because of functionality and ease” (Siegel, 2016). Amazon has managed to position itself as more utilitarian than fashionable something it is working towards breaking out of. With CEO Jeff Bezos’s fearlessness to play the long game when conquering a new market. The company has been making its way with fashion since at least 2006 (Fumo, 2017). In subsequent years, it has worked to align itself with highly visible fashion industry events in order to gain the confidence of brands to sell their products through the website, sponsoring the Met Gala in 2012 and the 2015 launch of New York Fashion Week: Men’s which was probably aimed, in part, at boosting Amazon’s potential in menswear. As Men tend to favor the kind of convenience that Amazon offers making them an easier target (Sherman, 2015). It also sponsors two international fashion weeks, which now bear the brand’s name in their official titles: Amazon India Fashion Week and Amazon Fashion Week Tokyo (Fumo, 2017).
Fig 9: Amazon leads brand affinity in the US with 37% of women claiming to love the brand. Source: WGSN
Fig 10: Positing Map
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4.3 Brand Promise, Equity & Value Amazon’s brand promise has been the driving force of the company’s explosive growth, worldwide expansion and enduring popularity among customers from every walk of life. Their customercentric approach has always been one of their highest brand values making it the most recognizable companies in the world. In fact, when googled, a series of different links taking you to the website pop up, making the world’s largest river “Amazon” completely disappear. The colors Blue and Orange, the brown cardboard boxes have almost become synonymous with the brand. Amazon is able to maintain its image as an organization that will always care about its customers, no matter how unimaginably large it becomes and it relentlessly reinforces that promise through the experiences of its hundreds of millions of customers who buy over 3.5 billion items each year. The enormous product selection, the customer-centric approach, secure fast checkouts and the low prices sum up Amazon’s brand promise. The company is so dedicated to under-pricing its competitors that part of Bezos’ business plan was not to make any profits for the first four to five years of operation, in order to keep prices low for customers.
Fig 11: Amazon’s logo evolving with its changing brand promise and value. From the Earth’s biggest bookstore to finding all possible products in all possible categories from “ A “ to “ z “ Source: http://starlogos.com.br
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“ Life’s too short to hang out with people who aren’t resourceful.” - JEFF BEZOS
5
Operational MARKETING
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5.1 Product Management Perhaps no other company in history has sold so many different products (354 million) while competing against so many other companies (hundreds) (Coren, 2017). Amazon began its fashion offering with denim, recruiting companies like Levi’s and Hudson Jeans. Dresses, another big category seller, are presented as a dedicated shop-in-shop, with product pages featuring on-model photos and videos. And, as the Amazon Fashion brand has developed, the company has brought mid-priced labels like Lacoste, Rachel Zoe and Theory into the fold and is now aiming at higher-end brands (Sherman, 2015). Even though every possible product category from socks to wedding gowns can be found on Amazon, it is still to establish itself as a fashion retailer, applying the 80/20 rule, 80% of Amazon’ fashion sales are derived from basics i.e. socks, trainers etc notably in menswear (Fumo, 2017). However, it is projected to soon dominate the fashion industry and continues to gobble up market share which is projected to reach 20% in 2020 and its apparel sales will increase 30 percent in 2017 to $28 billion, according to a report by Cowen & Co. (Fernandez, 2017).
Fig 12: Amazon Best Selling Own Brand Product
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5.2 Pricing Stratergies
5.3 Distribution Stratergies
As per the findings by Jim Collins in his book Good to Great, Amazon’s general pricing strategy is based on the concept of the flywheel: Lower prices led to more customer visits. More customers increased the volume of sales and attracted more commission-paying third-party sellers to the site. That allows Amazon to get more out of fixed costs like the fulfillment centers and the servers needed to run the website. This greater efficiency then enabled it to lower prices further. Feed any part of this flywheel and it should accelerate the loop (Stone, 2013). Amazon tends to raise and lower its prices, constantly evaluating price elasticity until it lands on a value that maximizes sales. Amazon has built its entire business on figuring out price elasticity at scale. A recent study by Boomerang Commerce found that Amazon changed the prices of its products 9.2 times on average, compared to Macy’s and Kohl’s adjusting prices 2.1 times and 1.5 times, respectively (Siegel, 2016). However, with Amazons growing interests to penetrate and conquer the fashion market these values are being slightly retuned. Further, Amazon recently Lent $1 Billion to Merchants to expand their inventory or discount items on Amazon in order to boost Sales on its Marketplace(Reuters, 2017).
Amazon follows an intensive distribution strategy i.e it is open to the widest range of different retailers. This could be due to the fact that it working towards building out its fashion platform, and is persuading brands to join on the wholesale side. The model is similar to any retail partnership: Brands sell their merchandise on Amazon, and then Amazon distributes orders, dictates inventory and sets pricing, giving Amazon allot of control. Given that it’s primarily focused on looking out for its own margins and moving as much volume as possible. For a fashion brand hoping to protect its image, that’s a big risk. In such cases, Amazon provides another alternative — selling as a third-party brand on Amazon’s massive marketplace — giving brands high visibility. Nike, has recently signed on as an Amazon wholesale partner in order to fight back against unlicensed sellers (Milnes, 2017). Amazon further implemented the push strategy by recently lending $1 Billion to Merchants to Boost Sales on its Marketplace. Sellers used the money to expand their inventory or discount items on Amazon (Reuters, 2017).
Fig 13: Flywheel Effect
Fig 14: Amazon Fullfilment Area Source: KCRW.com
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Amazon follows a differentiated Marketing strategy i.e it retails different products for different customer segments and has something to fulfill everyone’s needs. With its strong brand equity and value combined with its latest efforts in the fashion segment, Amazon is all set to dominate the segment not only in the U.S but worldwide.
6
CONCLUSION
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“Your margin is my opportunity.” - JEFF BEZOS
7
REFERENCES
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