Tesco Wikibook

Tesco Overview 2011 ITEC30011 WikiBook

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Contents Articles Tesco

1

Tesco Clubcard

25

Tesco.com

29

Electronic commerce

30

Intranet

35

Extranet

39

Long Tail

41

Amazon.com

50

References Article Sources and Contributors

67

Image Sources, Licenses and Contributors

70

Article Licenses License

72

Tesco

1

Tesco Tesco plc

Type

Public limited company

Traded as

LSE: TSCO

Industry

Retailing

Founded

1919 (East London)

Founder(s)

Jack Cohen

Headquarters

Cheshunt, Broxbourne, Hertfordshire, United Kingdom

[1]

Number of locations 5,380 stores (As at Feb 2010) (see table below) Key people

• •

David Reid (Chairman) Philip Clarke (Chief Executive)

Products

Groceries, consumer goods, financial services, telecoms [2]

Revenue

£60.93 billion (2010/11)

Operating income

£3.81 billion (2010/11)

Net income

£2.67 billion (2010/11)

[2] [2]

[3]

Employees

472,000 (2010)

Website

[4]

Tesco plc is a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom.[5] It is the third-largest retailer in the world measured by revenues (after Wal-Mart and Carrefour) and the second-largest measured by profits (after Wal-Mart).[6] [7] It has stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK (where it has a market share of around 30%), Malaysia, the Republic of Ireland and Thailand.[8] [9] [10] The company was founded by Jack Cohen in 1919 and opened its first Tesco House, the Tesco head office, in Cheshunt, store in 1929 in Burnt Oak, Edgware, Middlesex. The Tesco name first Broxbourne, Hertfordshire appeared after Cohen purchased a shipment of tea from T.E. Stockwell and combined those initials with the first two letters of his surname.[11] Originally a UK-focused grocery retailer, Tesco has diversified both geographically and into areas such as the retailing of books, clothing, electronics, furniture, petrol and software; financial services; telecoms and internet services; DVD rental; and music downloads.[12] Tesco is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Tesco

History 20th century Jack Cohen founded Tesco in 1920 when he began to sell surplus groceries from a stall at Well Street Market, Hackney, in the East End of London.[13] The Tesco brand first appeared in 1924. The name came about after Jack Cohen bought a shipment of tea from T.E. Stockwell.

He made new labels using the first three letters of the supplier's name Tesco store at Kulim, Malaysia (TES), and the first two letters of his surname (CO), forming the word [11] TESCO. The first Tesco store was opened in 1929 in Burnt Oak, Edgware, Middlesex. Tesco was floated on the London Stock Exchange in 1947 as Tesco Stores (Holdings) Limited.[13] The first self-service store opened in St Albans in 1956 (which remained operational until 2010, with a period as a Tesco Metro),[14] and the first supermarket in Maldon in 1956.[13] During the 1950s and the 1960s Tesco grew organically, and also through acquisitions, until it owned more than 800 stores. The company purchased 70 Williamsons stores (1957), 200 Harrow Stores outlets (1959), 212 Irwins stores (1960, beating Express Dairies Premier Supermarkets to the deal), 97 Charles Phillips stores (1964) and the Victor Value chain (1968) (sold to Bejam in 1986).[15] Originally specialising in food and drink, it has diversified into areas such as clothing, electronics, financial services, telecoms, home, health, car, dental and pet insurance, retailing and renting DVDs,[12] CDs, music downloads, Internet services and software.

Jack Cohen's business motto was "pile it high and sell it cheap",[16] to which he added an internal motto of "YCDBSOYA" (You Can't Do Business Sitting On Your Arse) which he used to motivate his sales force.[16] [17] In May 1987 Tesco completed its hostile takeover of the Hillards chain of 40 supermarkets in the North of England for £220 million.[18] In 1994, the company took over the supermarket chain William Low, successfully fighting off Sainsbury's for control of the Dundee-based firm, which operated 57 stores. This paved the way for Tesco to expand its presence in Scotland, which was weaker than in England. In 2006 Inverness was branded as "Tescotown",[19] [20] because well over 50p in every £1 spent on food is believed to be spent in its three Tesco stores.[21] Tesco introduced a loyalty card, branded 'Clubcard', in 1995 and later an Internet shopping service. As of November 2006 Tesco was the only food retailer to make online shopping profitable.[22] In 1996 the typeface of the logo was changed to the current version with stripe reflections underneath, whilst the corporate font used for store signage was changed from the familiar "typewriter" font that had been used since the 1970s. Terry Leahy assumed the role of Chief Executive on 21 February 1997, the appointment having been announced on 21 November 1995.[23] [24] On 21 March 1997 Tesco announced the purchase of the retail arm of Associated British Foods, which consisted of the Quinnsworth, Stewarts and Crazy Prices chains in the Republic of Ireland and Northern Ireland, plus associated businesses, for £640 million.[25] The deal was approved by the European Commission on 6 May 1997.[26] This acquisition gave it both a major presence in (and marked a return to) the Republic of Ireland and a larger presence in Northern Ireland than Sainsbury's, which had begun its move into the province in 1995.

In 1997 Tesco and Esso (part of Exxonmobil) forged a business alliance that included several petrol filling stations on lease from Esso, with Tesco operating the attached stores under the Express format. In turn Esso operates the forecourts and sells their fuel via the Tesco store. 200 Tesco/Esso stores now exist across the UK.

2

Tesco

3

21st century The company was the subject of a letter bomb campaign lasting six months from August 2000 to February 2001 as a bomber calling himself "Sally" sent letter bombs to Tesco customers and demanded Clubcards modified to withdraw money from cash machines.[27] In July 2001 Tesco became involved in internet grocery retailing in the USA when it obtained a 35% stake in GroceryWorks.[28] In 2002 Tesco purchased 13 HIT hypermarkets in Poland. It also made a major move into the UK convenience store market with its purchase of T & S Stores, owner of 870 convenience stores in the One Stop, Dillons and Day & Nite chains in the UK.[29] In October 2003 the company launched a UK telecoms division, comprising mobile and home phone services, to complement its existing Internet service provider business. In June 2003 Tesco purchased the C Two-Network in Japan.[30] It also acquired a majority stake in Turkish supermarket chain Kipa.[31] In January 2004 Tesco acquired Adminstore, owner of 45 Cullens, Europa, and Harts convenience stores, in and around London.[32] In August 2004, it also launched a broadband service. In Thailand Tesco Lotus was a joint venture of the Charoen Pokphand Group and Tesco, but facing criticism over the growth of hypermarkets CP Group sold its Tesco Lotus shares in 2003. In late 2005 Tesco acquired the 21 remaining Safeway/BP stores after Morrisons dissolved the Safeway/BP partnership.[33] In mid 2006 Tesco purchased an 80% stake in Casino's Leader Price supermarkets in Poland. They will be rebranded into small Tesco stores.[34] In 2007, Tesco took part in a joint venture with O2 to form the Tesco Mobile mobile virtual network operator.

In 2007 Tesco was placed under investigation by the UK Office of Fair Trading (OFT) for acting as part of a cartel of five supermarkets (Safeway, Tesco, Asda, Morrisons and Sainsburys) and a number of dairy companies to fix the price of milk, butter and cheese. In December 2007 Asda, Sainsburys and the former Safeway admitted that they acted covertly against the interests of consumers while publicly claiming that they were supporting 5,000 farmers recovering from the foot-and-mouth crisis. They were fined a total of £116 million. Tesco, which maintains that it was not a part of the cartel, is still under investigation by the OFT.

Corporate strategy According to Citigroup retail analyst David McCarthy, "[Tesco has] pulled off a trick that I'm not aware of any other retailer achieving.

That is to appeal to all segments of the market".[35] One plank of this strategy has been Tesco's use of its own-brand products,[36] including the upmarket "Finest", mid-range Tesco brand and low-price "Value" encompassing several product categories such as food, beverage, home, clothing, Tesco Mobile and financial services.

Beginning in 1997 when Terry Leahy took over as CEO, Tesco began marketing itself using the phrase "The Tesco Way" to describe the Potters Bar Tesco company's core purposes, values, principles, and goals[37] This phrase became the standard marketing speak for Tesco as it expanded domestically and internationally under Leahy's leadership, implying a shift by the company to focus on people, both customers and employees.[38] A core part of the Tesco expansion strategy[39] has been its innovative use of technology.[40] It was one of the first to build self-service till and use cameras to reduce queues.[41] To protect its brand image, and given its expansion plans in Thailand, Tesco has recently been employing a policy of launching defamation proceedings. In November 2007, Tesco sued a Thai academic and a former minister for civil libel and criminal defamation. Tesco is insisting that the two pay £1.6 million and £16.4 million plus two years' imprisonment respectively. They have been alleged to have misstated that Tesco's Thai market amounts to 37% of its global revenues, amongst criticism of Tesco's propensity to put small retailers out of business.[42]

Tesco

4

Tesco's main advertising slogan is "Every little helps". Its advertisements in print and on television mainly consist of product shots (or an appropriate image, such as a car when advertising petrol) against a white background, with a price or appropriate text (e.g., "Tesco Value") superimposed on a red circle. On television, voiceovers are provided by recognisable actors and presenters, such as Barbara Windsor, James Nesbitt, Jane Horrocks, Terry Wogan, Dawn French, Ray Winstone, Neil Morrissey, Martin Clunes, David Jason, David Tennant and Kathy Burke among others.

Corporate social responsibility Tesco has made a commitment to corporate social responsibility in the form of contributions of 1.87% in 2006 of its pre-tax profits to charities/local community organisations.[43] This compares favourably with Marks & Spencer's 1.51% but not well with Sainsbury's 7.02%.[44] Will Hutton, in his role as chief executive of The Work Foundation recently praised Tesco for leading the debate on corporate responsibility.[45] However Intelligent Giving has criticised the company for directing all "staff giving" support to the company's Charity of the Year.[46] In 1992, Tesco started a "computers for schools scheme", offering computers in return for schools and hospitals getting vouchers from people who shopped at Tesco. Until 2004, £92 million of equipment went to these organisations. The scheme has been also implemented in Poland.[47] Starting during the 2005/2006 football season, the company now sponsors the Tesco Cup, a football competition for young players throughout the UK. In 2009 Tesco used the phrase, “Change for Good” as advertising, Tesco in Evesham which is trade marked by Unicef for charity usage but not for commercial or retail use, which prompted the agency to say, "It is the first time in Unicef’s history that a commercial entity has purposely set out to capitalise on one of our campaigns and subsequently damage an income stream which several of our programmes for children are dependent on.” They went on to call on the public “...who have children’s welfare at heart, to consider carefully who they support when making consumer choices.”[48] [49]

Advertising Tesco have used many Television adverts over the years. In July 2007 a DVD containing adverts from 1977–2007 was given to all members of staff. Early advertising stressed cheap prices and how to keep "The cost of living in check."

In 1977 an advert was made where a till showed the prices to many items such as "baked beans 121/2p".

Tesco's most famous advert was "Checkout 82," which was made in 1982. where a till would have a receipt coming out of it with the prices on. This advert had synth pop music as the backing and people singing "Check it out, check it out"

Prunella Scales, as Dotty Turnbull arguing about Tesco prices

Adverts in the late 90s had Prunella Scales as Dotty Turnbull, arguing about Tesco prices. In 2003, adverts showed items and shopping trolleys talking about Tesco. Late 2000s adverts have included many celebrities and celebrity voice-overs such as The Spice Girls and the voice of actors James Nesbitt and Jane Horrocks.[50]

Tesco

5

UK operations Stores Tesco's UK stores are divided into six formats, differentiated by size and the range of products sold. These are shown below: Tesco Extra Tesco Extra stores are larger, mainly out-of-town hypermarkets that stock nearly all of Tesco's product ranges. Exceptions include Stafford, Hexham, Kingston upon Hull, Stevenage, Wigan, Grimsby, Bulwell, Galashiels, Slough, Eastbourne, Yeovil, Cradley Heath, and Burnley, which are in the heart of town centres. Cardiff (Western Avenue) and Cardiff (Pengam Green), Warrington and Walsall College are located in inner-city locations. The first Extra opened in 1997 in Pitsea. The 100th store opened on 29 November 2004 in Stafford. The number of these is now being increased by about 20 a year, mainly by conversions Tesco Extra, Commercial Street, Batley, West from the second category. The largest store in England by floor space Yorkshire. is Tesco Extra in Pitsea, with 125000 square feet (11600 m2) of floorspace. In 2011, a Tesco Extra will be constructed in St.Helens adjacent to the new St.Helens RLFC Stadium. The largest in Scotland is the Port Glasgow store, which opened in July 2007 with 110000 square feet (10000 m2) of floorspace. The largest in Wales is at Parc Fforestfach, Swansea, which is 112000 square feet (10400 m2) constructed in 2003. The 200th Extra store was opened in October 2010 in Bishop Auckland.

Other large stores include Bar Hill, Cleethorpes, Newcastle upon Tyne, Milton Keynes and Stockton-on-Tees, which are all in the 120000 square feet (11000 m2) range. Newer stores are usually on two floors, with the ground floor mainly for food and the first floor for clothing, electronics and entertainment. Most Tesco Extra stores have a café and as of October 2009, all stores have a Tesco Tech Support Team.

Tesco Superstores Tesco superstores are standard large supermarkets, stocking groceries and a much smaller range of non-food goods than Extra stores. The stores have always previously been branded as simply 'Tesco', but a new store in Liverpool was the first to use the format brand 'Tesco Superstore' above the door.[51] Tesco Metro Tesco Metro stores are sized between Tesco superstores and Tesco Express stores.

They are mainly located in city centres, the inner city and on the high streets of towns. The first Tesco Metro opened in Neston in 1980. Since then all Tesco branches with a high street format, including those that opened before the Covent Garden branch, have been rebranded from Tesco to Tesco Metro. The Tesco store in Devizes was the last store to finish rebranding, in September 2006. The store had not been renovated for over 20 years.

Tesco Metro, St Albans, England

Tesco

6

Tesco Express

Tesco Express, Hilperton Road, Trowbridge, Wiltshire

Tesco Express stores are neighbourhood convenience shops, stocking mainly food with an emphasis on higher-margin products (due to small store size, and the necessity to maximise revenue per square foot) alongside everyday essentials. They are found in busy city centre districts, small shopping precincts in residential areas, small towns and on Esso petrol station forecourts. The 1000th Tesco Express site opened in July 2009. Tesco have now started building Tesco Express stores with only 'Assisted-Service' tills, in which the customer scans all their own shopping and packs it, with the support of supervising staff when required.

One Stop One Stop, which includes some of the smallest stores, is the only Tesco store format in the UK that does not include the word Tesco in its name. They were part of the T&S Stores business but, unlike many that converted to Tesco Express, these kept their old name. Some have Tesco Personal Finance branded cash machines. The business has attracted some controversy, as grocery prices in these shops, often One Stop, Trowbridge, Wiltshire situated in less well-off areas can be higher than nearby Tesco branded stores, highlighted in The Times 22 March 2010: "Britain’s biggest supermarket uses its chain of 520 One Stop convenience stores—which many customers do not realise it owns—to charge up to 14 per cent more for goods than it does in Tesco-branded stores." Tesco responded to the article stating "It is a separate business within the Tesco Group, with its own supply chain and distribution network. One Stop stores offer a different range to Express stores and its operating costs are different. One Stop’s price strategy is to match its nearest competitor Cost Cutter and is frequently cheaper."[52] Tesco Homeplus History Tesco Homeplus is not Tesco's first non-food only venture in the UK. Until the late 1990s/early 2000s there were several non-food Tesco stores around the country including Scarborough and Yate. Although not in a warehouse style format, the stores were located on high streets and shopping centres, they did stock similar items to Homeplus stores. In both cases this was because another part of the shopping centre had a Tesco Superstore that stocked food items only.

In May 2005 Tesco announced a trial non-food only format near Manchester and Aberdeen,[53] and the first store opened in October 2005: A further five stores opened before it stopped being a trial, and there is now a plan to open many more stores.

Current Stores offer all of Tesco's ranges except food in warehouse-style units in retail parks. Tesco is using this format because only 20% of its customers have access to a Tesco Extra, and the company is restricted in how many of its superstores it can convert into Extras and how quickly it can do so. Large units for non-food retailing are much more readily available.

There are currently 12 Homeplus stores nationwide. The newest Homeplus store opened in Chester in July 2009.

Two more were due to open in the first half of 2009 at sites around the country. All of these were to feature the Order and Collect desk where customers can purchase and collect most items straightaway.

Tesco

7

Store facts As of 26 February 2011, at the end of its 2010/11 financial year, Tesco's UK store portfolio was as follows.[2] Format

Number

Total Total Mean Mean Percentage area (m²) area (sq ft) area (m²) area (sq ft) of space

212

1,400,885 15,079,000 6,608

71,127

41.08%

22

Tesco Superstores 470

1,297,112 13,962,000 2,760

29,706

38.04%

15

Tesco Metro

186

194,632

2,095,000

1,046

11,263

5.73%

5

Tesco Express

1,285

272,392

2,932,000

212

2,282

7.99%

155

One Stop

599

74,044

797,000

142

1,530

2.04%

8

Tesco Homeplus

13

51,468

554,000

3,790

42,615

1.53%

0

Dobbies

28

121,053

1,303,000

4,323

46,536

3.57%

3

Total

2,715

3,411,586 36,722,000 1,257

13,526

100%

208

Tesco Extra

+/Stores 2010/11

Other businesses Garden centres Tesco announced its intention to purchase Dobbies Garden Centres for £155.6 million on 8 June 2007. Dobbies operates 24 garden centres, half in Scotland and half in England.[54] The deal was confirmed as successful by the board of directors of Tesco on 17 August 2007 when the board announced that they had received 53.1% of shares (or 5,410,457 shares), which confirmed conditions set out in the offer made on 20 June 2007. Although the deal had been confirmed by Tesco the offer remained open to Dobbies shareholders until 20 August 2007.[55] Tesco raised its holding to 65% in September[56] and on 5 June 2008[57] Tesco announced that it would be compulsorily acquiring Dobbies Garden Centres plc. Dobbies continues to trade under its own brand, from its own head office in Melville, near Edinburgh.

Banking Tesco has a banking arm called Tesco Bank, formerly a 50:50 joint venture with the Royal Bank of Scotland.

Products on offer include credit cards, loans, mortgages, savings accounts and several types of insurance, including car, home, life and travel. They are promoted by leaflets in Tesco's stores and through its website. The business made a profit of £130 million for the 52 weeks to 24 February 2007, of which Tesco's share was £66 million. This move towards the financial sector diversified the Tesco brand and provides opportunities for growth outside of the retailing sector.

On 28 July 2008 Tesco announced that they were buying out the Royal Bank of Scotland's 50% stake in the company for £950 million.[58] [59] In October 2009 the name of Tesco Personal Finance was changed to Tesco Bank.

Tesco Technika Technika is a brand name for Electronic products sold exclusively through Tesco Stores. The Technika range currently includes Televisions, MP3 Docking Stations, Computer Peripherals, DVD and Blu Ray Players, DAB Radios. The range is updated on a regular basis to follow market trends.

The Technika brand is managed in-house by Tesco alongside its other brands, such as Tesco and Tesco Value.

Customer support is offered through the Tesco Electrical Helpline [60] or in-store through Tesco Tech Support [61].

Telecoms Tesco operates mobile phone, home phone and broadband businesses. These are available to residential consumers in several countries and are sold via the Tesco website and through Tesco stores. Tesco has not purchased or built a telecoms network, but instead has pursued a strategy of pairing its marketing strength with the expertise of existing telecoms operators.

MOBILE: In autumn 2003, Tesco Mobile was launched as a joint venture with O2. In November 2009 Tesco announced over 2Â million UK customers are using this service. A similar O2 based service has since been launched in Ireland and Slovakia.

ISP: In August 2004 Tesco broadband, an ADSL-based service delivered via BT phone lines, was launched in partnership with NTL. In November 2009 Tesco announced a new partnership with Cable & Wireless, and a fresh focus on this business area.

VOIP: In January 2006, Tesco Internet Phone, a Voice over Internet Protocol, VoIP, service was launched in conjunction with Freshtel of Australia. This service was shut down in 2010.

PHONE SHOPS: In November 2009 Tesco announced it now has 100 Phone Shops embedded within larger Tesco Extra stores, and stated an intention to open up to 500 such shops across the UK in the medium term. In April 2010 the first Tesco Phone shop opened in Slovakia.

Fuel Tesco first started selling petrol in 1974. Tesco sells 95, 97 and 99 RON (a fuel developed by Greenergy of which Tesco is a shareholder) petrol on a retail basis from forecourts at most superstore and Express locations. Tesco have recently diversified into biofuels, offering petrol-bioethanol and diesel-biodiesel blends instead of pure petrol and diesel at their petrol stations, and now offering Greenergy 100% biodiesel at many stores in the southeast of the United Kingdom.

On 28 February 2007 motorists in South East England reported that their cars were breaking down. This was due to petrol sold by Tesco Tesco petrol station in St Mellons and others being contaminated with silicon,[62] Tesco has been criticised with claims that they had been alerted to the problem as early as 12 February 2007. On 6 March, Tesco offered to pay for any damage caused by the faulty petrol, after printing full page apologies in many national newspapers.[63]

8

Tesco

9

Tech Support Tesco acquired a small I.T. support company called The PC Guys in 2008, and were able to launch Tesco Tech Support in December of that year.[64] Teams of Advisors were put into all Extra stores with the sole job role of answering technical questions on Tesco's range of electrical products. They also are responsible for advising customers on extended warranties, electrical returns and a range of payment plans on all electrical goods over a certain amount.

Tesco Tech Support logo

Film Making In 2010 Tesco started funding a small film studio intended to produce Tesco exclusive direct-to-DVD films. The first film comes out on 6 September and is called Paris Connections. It is based on a popular novel by Jackie Collins, and is an investigation thriller. Jackie Collins rewrote the novel to be more appropriate to the medium of film.[65] [66] [67] Record Label In 2010, Tesco announced that they will be forming their own record label, with notable signings since including Mick Hucknall and Nadine Coyle. Tesco records will be exclusive products to Tesco stores.

Video-on-Demand On 20 April 2011, Tesco acquired a 80% stake in Blinkbox from Eden Ventures and Nordic Venture Partners, it intends to use the company to boost its digital entertainment offering.[68] Gold Exchange In 2011, Tesco launched Tesco Gold Exchange, which is a postal gold service, offering money for gold, as well as offering clubcard points to customers via their website.[69] Tesco Tyres In 2011, Tesco launched tesco-tyres.com in association with Blackcircles.com, offering a choice of over 1,200 fitting partners across the UK as well as offering clubcard points with purchases.

Your Beauty Salon In February 2011, Tesco launched Your Beauty Salon, in Tesco stores planning to open 70 over the next year, offering services like haircuts, leg waxing, manicures and eyebrow.[70]

Tesco Clubcard Customers can collect two Clubcard points for every £1 (or one point for €1 in Ireland and Slovakia) they spend in a Tesco store, or Tesco.com, and 1 point per £2 on fuel (not in Slovakia). Customers can also collect points by paying with a Tesco Credit Card, or by using Tesco Mobile, Tesco Homephone, Tesco Broadband, selected Tesco Personal Finance products or through Clubcard partners, E.ON and Avis. Each point equates to 1p in store when redeemed or up to 3 times their value when used with clubcard deals (offers for holidays, day trips, etc.) Clubcard points (UK & IE) can also be converted to Airmiles.

Holders receive Clubcard statements 6 times a year, which often feature extra point coupons and money-off coupons.

These can be spent in-store, online or on various Clubcard deals.

Tesco Tesco was cited in a Wall Street Journal article[71] as using the intelligence from the Clubcard to thwart Wal-Mart's initiatives in the UK.

Internet operations Tesco operates a grocery homeshopping service, as well as providing consumer goods, telecommunications and financial services online.

In May 1984, in Gateshead, England, the world's first recorded online home shopper, Mrs Jane Snowball, purchased groceries from her local Tesco store in the world's first recorded online shopping transaction from the home.[72] Tesco has operated on the internet since 1994 and was the first retailer in the world to offer a robust home shopping service in 1996. Tesco.com was formally launched in 2000. It also has online operations in the Republic of Ireland and South Korea. Currently it's also considering entering Polish market. Grocery sales are available within delivery range of selected stores, goods being hand-picked within each store, in contrast to the warehouse model followed by Ocado. In 2003, tesco.com's CEO at the time, John Browett, received the Wharton Infosys Business Transformation Award for the innovative processes he used to support this online grocery service.

On 1 October 2006, Tesco announced that it will be selling six own-brand budget software packages for under ÂŁ20 each, including office and security suites, in a partnership with software firm Formjet.[73] As Formjet is exclusive distributor for Panda Software and Ability Plus Software, packages from these companies are likely to feature.

Tesco offers an internet-based DVD rental service, which is operated by LOVEFiLM and a music download service.

International operations Tesco's international expansion strategy has responded to the need to be sensitive to local expectations in other countries by entering into joint ventures with local partners, such as Samsung Group in South Korea (Samsung-Tesco Home plus), and Charoen Pokphand in Thailand (Tesco Lotus), appointing a very high proportion of local personnel to management positions. It also makes small acquisitions as part of its strategy for example, in its 2005/2006 financial year it made acquisitions in South Korea, one in Poland and one in Japan.[74] In late 2004 the amount of floorspace Tesco operated outside the United Kingdom surpassed the amount it had in its home market for the first time, although the United Kingdom still accounted for more than 75% of group revenue due to lower sales per unit area outside the UK. In September 2005 Tesco announced that it was selling its operations in Taiwan to Carrefour and purchasing Carrefour's stores in the Czech Republic and Slovakia. Both companies stated that they were concentrating their efforts in countries where they had strong market positions.

The following table shows the number of stores, total store size in area and sales for Tesco's international operations.

The store numbers and floor area figures are as at 27 February 2010. This information is taken from the 2009/10 financial broker pack [75]PDFÂ (106Â KB).

10

Tesco

11

Country

Entered

Stores

2004

105

755,766 (8,135,000)

7,198 (77,476)

17

Czech Republic

1996

158

486,626 (5,238,000)

3,080 (33,152)

22

Hungary

1994

205

667,508 (7,185,000)

3,256 (35,049)

29

Republic of Ireland

1997

130

301,099 (3,241,000)

2,316 (24,931)

11

Japan

2003

140

46,916 (505,000)

335 (3,607)

2

Malaysia

2002

39

308,903 (3,325,000)

8,129 (87,500)

7

Poland

1992

371

756,788 (8,146,000)

2,040 (21,957)

35

Slovakia

1996

97

314,291 (3,383,000)

3,240 (34,876)

16

South Korea

1999

354

1,084,736 (11,676,000)

3,064 (32,983)

49

Thailand

1998

782

1,053,786 (11,342,000)

1,348 (14,504)

119

Turkey

2003

121

594,487 (6,399,000)

4,913 (52,884)

16

United Kingdom (for comparison) 1919

2,715

3,411,586 (36,722,000)

1,257 (13,526)

205

United States

164

199,091 (2,143,000)

1,214 (13,067)

19

Total (not including UK)

2,665

6,569,997 (70,718,000)

Mean: 2,465 (26,536)

336

Total (including UK)

5,380

9,981,583 (107,440,000) Mean: 1,855 (19,970)

544

China

2007

Area (m² (sq ft))

Mean Store Area (m² (sq ft))

+/Stores 2010/11

China (Mainland China and Taiwan) Tesco entered China, in September 2004, by acquiring a 50% stake in the Hymall chain, from Ting Hsin of Taiwan.

In September 2005, Tesco sold its stores in Taiwan to Carrefour. In December 2006 it raised its stake to 90% in a £180 million deal.[76] Most of Tesco China's stores are based around Shanghai, but according to Tesco it plans to equip the business to expand more quickly and in different areas. Tesco has been increasing its own brand products into the Chinese market as well as introducing the Tesco Express format.[77]

Czech Republic Tesco opened its first store in the Czech Republic in 1996 and now has over 84 stores, with further planned.[78] Tesco opened its first stores in the Czech Republic by buying US corporation Kmart's operations in the country and converting them into Tesco stores. Tesco is also keen to expand non-food items and has already opened petrol stations and offers personal finance services in the Czech Republic.[79] There are currently three Tesco Extra stores in the Czech Republic – one in Prague and two in Plzeň.

France Tesco previously owned a French chain called Catteau between 1992 and 1997 and operated a "Vin Plus" outlet in Calais, selling wine, beer and spirits, which closed on 30 August 2010.[80]

Tesco Express, Belehradska Street, Prague, Czech Republic

Tesco

Hungary Tesco launched in Hungary in 1995 after purchasing KMart's operations in the area. It also opened its first hypermarket in Hungary in the same year. Tesco operates through 101 stores in Hungary with further openings planned.[78] Tesco offers its value, standard, healthy living and finest range in its stores. Tesco Hungary also offers a clothing line and personal finance services.[81] In August 2010 opened the first Tesco Extra in Budapest; its name is Tesco Extra Fogarasi and it is located in Zugló, Budapest.

Republic of Ireland Tesco operated in the Irish grocery market in the early eighties, however sold its operations there in March 1986.[82] Tesco re-entered the Irish market in 1997 after the purchase of Power Supermarkets Ltd. The country's newspaper of record the Irish Times in April 2011 said that "Increasingly, Ireland is being viewed as a provincial backwater by the parent company – albeit a very profitable little backwater – and all the strategic decisions are being taken in the UK.[83] It now operates from 101 stores across Ireland. Like Tesco stores in the UK, these offer a home delivery shopping service available to 80% of the Irish population as well as petrol, mobile telephone, personal finance, flower delivery service and a weight-loss programme.[84] Also available is Tesco's loyalty programme, the Clubcard.

Tesco is now the grocery market leader in the Republic of Ireland, with a reported November 2005 share of 26.3%.[85] Tesco Ireland also claims to be the largest purchaser of Irish food with an estimated €1.5 billion annually.

Tesco Ireland operates a small number of Tesco Extra hypermarkets in the Republic of Ireland, with Clarehall Extra on the Malahide Road being the first to open in 2006. Tesco's largest hypermarket store in Europe, with a floorspace of 18,500 m², opened in Naas in Co Kildare in November 2010.[86]

India Tesco has had a limited presence in India with a service centre in Bangalore, and outsourcing.[87] However, in 2008 Tesco announced their intention to invest an initial £60m ($115m) to open a wholesale cash-and-carry business based in Mumbai with the assistance of the Tata Group.[88]

Isle of Man Tesco has a large purpose built store and car park in Douglas on the Isle of Man, behind the harbour in Douglas.

There are plans to rebuild the store to almost double the floor space, including a mezzanine level and to replace the open car parking area with a two storey car park. Tesco also runs a home delivery service across the island.

Japan Tesco Japan first began operations in 2003. It was brought about by a buy-out of C Two stores for £139 million in July 2003 and later Fre'c in April 2004.[89] Tesco has adopted an approach that focuses on small corner shops that operate similarly to its Express format, rather than opening hypermarkets. It has also launched its range of software in Japan.[78]

Malaysia Tesco opened its first store in Malaysia in May 2002 with the opening of its first hypermarket in Puchong, Selangor.

Tesco Malaysia currently operates 39 Tesco and Tesco Extra stores. Total store by state in Malaysia is Selangor with 11 stores, Perak six stores, Johor five stores, Kuala Lumpur, Kedah and Penang four stores, Melaka and Negeri Sembilan two stores and Kelantan one store. Tesco partnered with local conglomerate Sime Darby Berhad, which holds 30% of the shares.[90] Tesco also acquired the Malaysian operation of the wholesaler Makro, which was rebranded Tesco Extra and provides products for local retailers. Tesco Malaysia offers a value range, own branded

12

Tesco

13

range, electronic goods, the loyalty clubcard and clothing. Tesco Malaysia's clubcard introduced Green ClubCard Points in 2007 making Tesco Malaysia to be the first Tesco international business to introduce the scheme (Green ClubCard Points).[91]

Pakistan Tesco, along with delegates from other supermarkets and retailers recently held talks with a Pakistani trade ambassador at an invites only meeting in Manchester.[92] [93] The company announced plans to open stores in wealthy suburbs of the capital city Islamabad and the second city Karachi.[94] These new stores will be wholesale cash-and-carry businesses. They will compete with Makro and Carrefour who already operate in Pakistan and have done so for many years.[95] Tesco have not yet ruled out plans to open stores in an Express format, though this format caters more towards the country's growing middle class.

Poland Tesco entered the Polish market in 1992. It currently operates from 334 stores.[78] Tesco Poland offers the value, healthy living and own branded line of products as well as regional produce, petrol, personal finance services and on-line photo processing.

A Tesco Hypermarket in Prokocim, Poland

Slovakia Tesco Slovakia opened in 1996 as part of Tesco's international expansion aims. It now operates from 97 stores and 16 service stations.[96] Tesco Slovakia has recently put great emphasis on organic products. However, Tesco Slovakia caused controversy amongst the Slovak government when it was found to have come foul of food safety laws in 2006.[97] In April 2010 the first Tesco Extra in Central Europe opened in Bratislava – Petrzalka, Slovakia as part of a pilot project for Tesco in the region, including the first self-service cash flow in Central Europe. There are currently four Tesco Extra stores in Slovakia – three in Bratislava and one in Zvolen.[98]

Tesco, Kamenné námestie, Bratislava, Slovakia

Tesco

14

South Korea Tesco launched its South Korean operations in 1999 and partnered with Samsung, currently Tesco holds 94% of the shares in the venture.[99] It operates both hypermarkets and its express format as well as a home delivery shopping service. It is the second largest retailer in South Korea, just behind Shinsegae Group.[99] On 14 May 2008, Tesco agreed to purchase 36 hypermarkets with a combination of food and non-food products from E-Land for $1.9 billion (£976 million) in its biggest single acquisition, making Tesco the second largest in the country. The majority of the E-Land stores formerly belonged to French retailer Carrefour before 2006 and most of the stores will be converted to Tesco Homeplus outlets. Tesco's South Korean discount store chain, Home Plus, currently has 66 outlets.[100] [101]

Thailand Tesco entered Thailand in 1998 and operates through 380 stores as part of a joint venture with Charoen Pokphand and named the operation Tesco Lotus. This partnership was dissolved in 2003 when Charoen Pokphand sold its shares to Tesco. Tesco Lotus sells a diverse range of products from value food products to electronics to personal finance services. The company is keen to promote its green values and has partnered with the UNEP. Tesco Lotus claims to serve 20 million customers every month and that 97% of its goods are sourced from Thailand.[102]

Turkey

Tesco-Lotus superstore in Sakon Nakon, Thailand. Shoppers have to pass through a checkpoint before entering the premises.

Tesco entered Turkey in 2003 and uses the trading name "Kipa". Tesco remains focused on building infrastructure in Turkey to complete its expansion plans and has already introduced the Tesco Express format into Turkey. There are plans to increase the rate of expansion as basic infrastructure is built.[78] The first Tesco Extra in Turkey opened in Izmir, Turkey, Tesco Kipa Extra Balçova in September 2010.

United States of America In February 2006, Tesco announced its intention to move into the United States market, opening a chain of grocery convenience stores on the West Coast (Arizona, California and Nevada) in 2007 named Fresh & Easy.[103] The company established its U.S. headquarters in El Segundo, California at 2120 Park Place. The first store opened in November 2007 with 100 more expected in the first year. They plan to open a new one every two-and-a-half days in the United States, to mimic the successful expansion of pharmacy chains such as Walgreens in the U.S. A Fresh & Easy store in Summerlin, Nevada,

The first Tesco Fresh & Easy Neighborhood Markets opened in Hemet United States (Riverside County), Anaheim (Orange County), Arcadia (Los Angeles County), West Covina (Los Angeles County) and Upland (San Bernardino County), California in 2007.

Fresh & Easy operates more than 163 stores in the United States.

Tesco

15

Financial performance Tesco is listed on the London Stock Exchange under the symbol TSCO. It also has a secondary listing on the Irish Stock Exchange with the name TESCO PLC. All figures below are for the Tesco's financial years, which run for 52 or 53 week periods to late February. Up to 27 February 2007 period end the numbers include non-UK and Ireland results for the year ended on 31 December 2006 in the accounting year. The figures in the table below include 52 weeks/12 months of turnover for both sides of the business as this provides the best comparative.

52/3 weeks ended

Turnover (£m)

Profit before tax (£m)

Profit for year (£m)

Basic earnings per share (p)

26 February 2011

67,573

3,535

2,671

33.10

27 February 2010

62,537

3,176

2,336

31.66

28 February 2009

54,300

3,128

2,166

28.92

23 February 2008

47,298

2,803

2,130

26.95

24 February 2007

46,600

2,653

1,899

22.36

25 February 2006

38,300

2,210

1,576

19.70

26 February 2005

33,974

1,962

1,366

17.44

28 February 2004

30,814

1,600

1,100

15.05

22 February 2003

26,337

1,361

946

13.54

23 February 2002

23,653

1,201

830

12.05

24 February 2001

20,988

1,054

767

11.29

26 February 2000

18,796

933

674

10.07

27 February 1999

17,158

842

606

9.14

28 February 1998

16,452

760

532

8.12

As of its 2006 year end Tesco was the fourth largest retailer in the world behind Wal-Mart, Carrefour and Home Depot. Tesco moved ahead of Home Depot during 2007, following the sale of Home Depot's professional supply division and a decline in the value of the U.S. dollar against the British Pound. METRO was only just behind and might move ahead again if the euro strengthens against the pound, but METRO's sales include many billions of wholesale turnover, and its retail turnover is much less than Tesco's.

At 24 February 2007 Tesco operated 1,988 stores in the UK with 27700000 square feet ( m2) of floorspace and 1,275 outside the UK with 4040000 square feet ( m2) of floorspace.

Despite being in a recession, Tesco made record profits for a British retailer in the year to February 2010, during which its underlying pre-tax profits increased by 10.1% to £3.4 billion. Tesco now plans to create 16,000 new jobs, of which 9,000 will be in the UK.[104]

Tesco

16

UK market share According to TNS Worldpanel, Tesco's share of the UK grocery market in the 12 weeks to 27 December 2009 was 30.5%, up 0.1% on 12 weeks to 27 December 2008 largely in line with the increase of the other four largest supermarkets.[105] These increases follow a decline in the market share of discount chains Lidl, Aldi and Netto in the same period, collectively of 0.1%.

Graph Showing UK Market Share of Tesco

Supermarket

Market Share +/- from December 2009 December 2008

Tesco

30.5%

0.1%

Asda

16.9%

0.1%

Sainsbury's

16.3%

0.2%

Morrisons

12.3%

0.5%

Tesco litigation As with any large corporation, Tesco is involved in litigation, usually from claims of personal injury from customers, claims of unfair dismissal from staff, and other commercial matters. Two notable cases were Ward v Tesco Stores Ltd, which set a precedent in so called 'trip or slip' injury claims against retailers; and Tesco Supermarkets Ltd v Nattrass, which reached the House of Lords, and became a leading case regarding the corporate liability of businesses for failures of their store managers (in a case of misleading advertising).

Criticism Tesco have been criticised for aggressively pursuing critics of the company in Thailand. Writer and former MP Jit Siratranont is facing up to two years in jail and a ÂŁ16.4Â million libel damages claim for saying that Tesco was expanding aggressively at the expense of small local retailers. Tesco served him with writs for criminal defamation and civil libel.[106] Criticism of Tesco includes allegations of stifling competition due to its undeveloped "land bank",[107] and breaching planning laws.[108] In December 2006 The Grocer magazine published a study that named Tesco as having the slowest checkouts of the six major supermarkets. Somerfield had the shortest queues with an average wait of 4 min 23 seconds. In order of least time spent at the checkout, the other major supermarkets were Waitrose, Sainsbury's, Asda, Morrisons.[109] The Grocer also named Asda as the cheapest UK supermarket (based on 33 items). Tesco was second and Sainsbury's and Morrisons joint third.[109] Tesco price check tends to differ saying out of 7134 (compared to Asda) products, (Survey carried out between 9 July 2007 and 11 July 2007) Tesco is cheaper: 1835 (compared to 1251 the previous week), Tesco is more expensive: 975 (compared to 984 the previous week) and Tesco is the same price: 4324 (compared to 4996 the previous week).[110] Tesco received criticism for bureaucratic and inflexible parking systems in its Bloomfield store in Dublin, Ireland.[111]

Tesco Tesco continues to advertise on Fox News's controversial Glenn Beck Show despite 60 major US companies, and a number of UK companies, pulling their advertisements. The cancellations were largely a consequence of Beck's accusation that Barack Obama was racist and had a "deep-seated hatred for white people". In contrast Waitrose has already ceased advertising on the show.[112]

Corporate tax structure In May 2007, it was revealed that Tesco had moved the head office of its online operations to the tax haven of Switzerland. This allows it to sell CDs, DVDs and electronic games through its web site without charging VAT.[113] The operation had previously been run from the tax haven of Jersey, but had been closed by authorities who feared damage to the Island's reputation.[113] In June 2008, the government announced that it was closing a tax loophole being used by Tesco.[114] The scheme, identified by British magazine Private Eye, utilises offshore holding companies in Luxembourg and partnership agreements to avoid a corporation tax liability of up to £50 million a year.[114] Another scheme previously identified by Private Eye involved depositing £1 billion in a Swiss partnership, and then loaning out that money to overseas Tesco stores, so that profit can be transferred indirectly through interest payments. This scheme is still in operation and is estimated to be costing the UK exchequer up to £20 million a year in corporation tax.[114] Tax expert Richard Murphy has provided an analysis of this avoidance structure.[115] Legal action against the Guardian newspaper In February 2008 a six-month investigation by The Guardian claimed that Tesco had developed a complex taxation structure involving offshore bank accounts in the tax haven of the Cayman Islands.[116] Tesco was in the process of selling its UK stores, worth an estimated £6 billion, to Cayman Island-based companies set up by Tesco. These companies then lease the stores back to Tesco. At the time, The Guardian claimed that this arrangement would enable Tesco to avoid an estimated £1 billion tax on profits from the property sales, and also avoid paying tax on continuing operation of the stores, as the rate of corporation tax in the Cayman Islands is zero. Tesco defended its tax arrangements, saying it had a legal duty to its shareholders to organise its affairs in a tax-efficient manner and pointing out that the company already pays significant amounts of tax, including VAT, excise duty and fuel duty on behalf of its customers, PAYE and national insurance contributions on behalf of its employees and corporation tax on its profits.

Following these revelations, several MPs called for an inquiry into Tesco's tax avoidance schemes.[117] Tesco issued a writ for libel against The Guardian five weeks later. Tesco denied that it had avoided paying £1 billion corporation tax but for legal reasons refused to answer further questions or to clarify the purpose of the tax structure they had created. Further investigations by The Guardian discovered that the tax structures were aimed at avoiding Stamp Duty Land Tax, and not corporation tax as originally thought. SDLT is leveled at 4%, and corporate tax at around 30%, so the figure of £1 billion tax avoided by Tesco has been revised to an estimated £90–£100 million.[118] According to the Guardian, "Tesco has been involved in a game of cat and mouse with HM Revenue & Customs since 2003. On three occasions when the government has closed a loophole to prevent avoidance, Tesco has taken advantage of ingenious schemes to get around it. Tesco still has 36 stores wrapped up in UK limited partnerships—with Cayman Islands registered partners—which were established in 2006 before the latest loophole was closed."[118] In September 2008, Tesco dropped the legal action after The Guardian apologised for its story, acknowledging "These damaging allegations were unfounded and should not have been published. All profits generated by this sale and leaseback arrangement were earned by UK tax-resident companies and have been or will be included in Tesco's UK tax returns. The use of Cayman Island companies in the scheme was for legitimate stamp duty savings purposes."[119] Costs were paid by the newspaper with undisclosed damages being paid to charity.[119] The Guardian's parent company, Guardian Media Group, used a similar offshore arrangement to avoid tax during its takeover of Emap.[120]

17

Tesco

Opposition to expansion Tesco's expansion has not been without criticism and, in some cases, active opposition.

• A 2006 article on the thisismoney website quoted various criticisms of the company's expansion and dominance of the UK supermarket scene.[121] • In 2007 residents in the Hall Green area of Birmingham made their opposition strongly evident when Tesco announced plans to open a store on the Robin Hood Lane, right next to a busy island in the suburb. The Local Liberal Democrat councillor actively opposed the store on the grounds that it would affect local businesses and consumer choice. Tesco received planning permission to open the store in April 2008 and residents made plans to boycott the store and continue to use local outlets. Since opening Tesco's deliveries have caused major traffic problems in the area and Birmingham City Council have announced plans to put a loading ban into force between 7:00 am and 10:00 am to relieve congestion.[122] • In 2008, opposition to a proposed expansion in Coventry was reported in the Coventry Telegraph.[123] • In 2007 residents of Cambridge organised a campaign, "No Mill Road Tesco" that aimed to prevent Tesco from opening a store on Cambridge's Mill Road. This street runs just to the south of the centre of Cambridge which is a lively, cosmopolitan area home to many independent shops, delicatessens, cafes, and curry houses.[124] In March 2008, Tesco's application was refused by the council. Tesco appealed, but lost the appeal in November 2008.[125] The planning inspector dismissed the appeal on the grounds of highway safety.[126] In mid-2008, while waiting for the appeal to be heard, Tesco applied for planning permission for an air conditioning and refrigeration plant, which was also rejected by the council.[127] Tesco eventually opened a restricted size store with no external refrigeration plant or alcohol license in August 2009.[128] • In March 2007 residents in Bournville, Birmingham fought to maintain the historic alcohol free status of the area, in winning a court battle with Tesco, to prevent it selling alcohol in its local outlet. No shops are permitted to sell alcohol in the area and there are no pubs, bars or fast-food outlets in Bournville.[129] • Plans for a large Tesco store in St Albans, Hertfordshire, attracted widespread local opposition. This led to the formation of the "Stop St Albans Tesco Group". In June 2008, St Albans Council refused planning permission for the proposed store.[130] • In 2008, Tesco faced opposition to plans to build a new store in Tonypandy, South Wales. Local business protested against the plans and Tesco was later refused planning permission by the local council.[131] Tesco later said they would appeal to the Welsh assembly, However the result of this has not emerged.

• In 2009, Tesco received planning permission to build a Tesco Express store on Hope Street, Liverpool despite there being a total of eight other Tesco stores (In Express, Metro and Superstore formats) within less than or equivalent to a mile from its proposed location.[132] This initiated a campaign in the local area[133] and a large Facebook group movement to prevent the construction going ahead.[134] Tesco withdrew the plans on 3 September 2009 due to widespread opposition and condemnation from local people.

• In April 2011, longstanding opposition to a Tesco Express store in Cheltenham Road, Stokes Croft, Bristol, evolved into a violent clash between opponents and police. The recently-opened storefront was heavily damaged, and police reported the seizure of petrol bombs.[135] Opponents have suggested that the store would damage small shops and harm the character of the area.[136] Sheringham in Norfolk, has been fighting Tesco for over 13 years. Since 1997 Tesco have had four planning permissions rejected and an appeal thrown out by the planning inspector.

However the expansion of Tesco is not opposed by everyone. Plans for a new Tesco store in Immingham, North East Lincolnshire were warmly received by the local council[137] and by members of the public.[138]

18

Tesco

19

Alumni In recent years Tesco alumni have had increasing influence on other large listed businesses. Former Tesco senior staffers include: • • • • • • • •

CEO Talk Talk plc : Dido Harding[139] CEO Halfords plc : David Wild[140] CEO Figleaves.com : Julia Reynolds[141] CEO Dixons plc : John Browett[142] Deputy Chair Carphone Warehouse: John Gildersleeve[143] CEO Carrefour France : James McCann[144] CEO Greggs plc : Ken McMeikan[145] CEO Domino's Pizza UK & IRL : Lance Batchelor[146]

Further reading • MacLaurin, Sir Ian (1999). Tiger by the Tail: A Life in Business from Tesco to Test Cricket. London: Pan Books.

ISBN 0330373714.

• Simms, Andrew (2007). Tescopoly: how one shop came out on top and why it matters. London: Constable.

ISBN 1845295110.

• Humby, Clive; Hunt, Terry & Phillips, Tim (2006). Scoring points : how Tesco continues to win customer loyalty.

London & Philadelphia: Kogan Page. ISBN 9780749447526.

• Nash, Bethany (2006). Fair-Trade and the growth of ethical consumerism within the mainstream : an investigation into the Tesco consumer. Leeds: University of Leeds. ISBN 75272130.

Gallery

Tesco in Burscough, Lancashire

Tesco supermarket, Baldock, UK

Tesco superstore in Swindon

Tesco Store at Národní Třída metro station, Prague

Czech Tesco headquarters, Prague

Tesco Brno

Tesco Mikulov, Czech Republic

Tesco Express near, Locks Heath, Hampshire, UK

Tesco

20

Tesco Express near Emirates Stadium

Tesco Store in Northallerton, North Yorkshire

Tesco Metro in Oxford, UK

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Retrieved 19 April 2011.

[3] "2010 Annual Report & Financial Statements" (http:/ / ar2010. tescoplc. com/ ~/ media/ Files/ T/ Tesco-Annual-Report-2009/ Attachments/ pdf/ tesco-annualreport. pdf). Tesco. . Retrieved 20 January 2011.

[4] http:/ / www. tesco. com [5] " Tesco.com Terms & Conditions (http:/ / www. tesco. com/ termsandconditions/ termsconditionsGeneral. htm)." Tesco. Retrieved on 20 June 2010. "The Tesco.com Site is owned and operated by Tesco Stores Limited a company registered in England and Wales whose registered office is at Tesco House, Cheshunt, Waltham Cross, Hertfordshire, EN8 9SL." [6] Potter, Mark (16 February 2011). "Tesco to outpace growth at global rivals – study" (http:/ / www. reuters. com/ article/ 2011/ 02/ 17/ tesco-igd-idUSLDE71F1LR20110217). Reuters. . Retrieved 25 February 2011.

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21

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22

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23

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24

Tesco

25

[146] Thompson, James (19 January 2011). "Domino's Pizza lines up Lance Batchelor as next chief executive" (http:/ / www. independent. co. uk/ news/ business/ news/ dominos-pizza-lines-up-lance-batchelor-as-next-chief-executive-2188629. html). The Independent (London). .

External links Official • • • •

Tesco UK (http://www.tesco.com) Tesco PLC (http://www.tescoplc.com/) Tesco.com Introduction page to Technika (http://direct.tesco.com/p/inc/specials/technika/) (http://direct.tesco.com/help/returns.aspx/) (Tesco Electrical Helpline)

Critical sites • Tescopoly.org (http://www.tescopoly.org/), Coalition of campaign groups criticizing Tesco.

Tesco Clubcard Tesco Clubcard is the loyalty card of leading British supermarket chain Tesco. The Clubcard scheme operates in the UK, Ireland, Poland and several other countries, and in the UK market in particular has been highly successful, with over 15 million members as of 2010.

History In 1993 Terry Leahy asked the Tesco Marketing team to investigate the potential of loyalty cards. In the past Tesco had run Green Shield Stamps as a promotional tool which rewarded people for visits and spend but gained no customer information. The initial team led by Grant Harrison, researched programmes across the world and developed a proposal which showed that a loyalty card could be very A new Tesco Clubcard alongside an old-style effective. The key change since the days of Green Shield Stamps was Clubcard Key fob the ability to cost effectively track individual customer behaviour using a magnetic stripe card. In 1994, the man responsible for Tesco's trials, Grant Harrison, attended a conference where Clive Humby from dunnhumby was speaking. Dunnhumby had been founded in 1989 by Clive Humby and Edwina Dunn.[1] The company, offering marketing services, had already signed clients such as Cable & Wireless and BMW. Successful trials throughout 1994 led to the Tesco board asking Harrison and Humby to present to the annual Board strategy session. The first response from the board came from Tesco's then-Chairman Lord MacLaurin, who said "What scares me about this is that you know more about my customers after three months than I know after 30 years."[2] In January 1995, Frank Riolfo, a former member of the Royal Army Medical Corps, attempted to blackmail Tesco, forcing the introduction of the previously trialed discount card. Threatening to inject AIDS-infected blood into stock, Riolfo demanded the company make loyalty cards available to customers. The cards, he specified, were to contain magnetic strips allowing them to secretly function as ATM cash withdrawal cards. Coded copies of the PIN code were published under his instruction in National newspapers. Clubcard was subsequently launched nationally with a Direct Marketing campaign by Evans Hunt Scott, Terry Hunt's advertising agency. Hundreds of customers, including Riolfo's wife, signed up to the scheme and collected a card. Riolfo and his wife then toured the country withdrawing cash until they were eventually caught on April 22, 1995[3] . Frank Riolfo pleaded guilty and was jailed for six years, after appeal[4] . Little coverage of these events remains online, although they were fictionalised by performance poet Alexander Velky as The Marketing Genius of Frank Riolfo[5] . The loyalty card scheme was not discontinued.

Tesco Clubcard David Sainsbury, then chairman of J Sainsbury plc, rejected the idea of introducing a similar scheme. However, the effect that Clubcard had on Sainsbury's sales led to the reversal of that decision, with the launch of the Sainsbury's Reward Card in June 1996.[6] After two slight amendments to the design of cards in the 1990s by Evans Hunt Scott's creative team, the scheme had a major relaunch in 2005 with all members being sent personalised cards and key fobs which could be scanned at the checkout, rather than swiped. The scheme was again relaunched in 2008 with all seven million members once again being sent new design cards and key fobs. The Tesco Clubcard scheme was introduced into the Republic of Ireland almost immediately after Tesco's acquisition of Power Supermarkets Limited (now Tesco Ireland), and operates in similar fashion. It is an extension of the UK scheme, not a separate scheme, so Irish Clubcards can be used in UK stores.

In 2007, Tesco Clubcard was first introduced in all Tesco Extra stores in Malaysia and later in all Tesco stores. In Malaysia, every two Ringgit Malaysia spent is 1 Clubcard point. After two weeks from the launch of Clubcard in all Tesco stores in Malaysia, there were over 800,000 applications.

The Tesco Clubcard scheme was introduced into Polish Tesco Stores in 2008, and SR Slovakia at the end of 2009.

As of September 2010, these markets have 1.5m and 850,000 cardholders respectively[7] . Though operating in a similar fashion to the UK scheme it is independent, so Irish and British Clubcards can not be used in Slovak stores.

In Slovakia every one euro spent is 1 Clubcard point (excluded petrol). Clubcard was launched in the Czech Republic and Hungary in August and September 2010[7] .

Benefits When shopping at Tesco or using Tesco services (such as services from Tesco Finance), Clubcard holders receive two points for every £1 (€1 in Ireland) they spend. Holders can also get double points on special offers and receive one "Green Clubcard Point" for every carrier bag they re-use (UK only), as part of Tesco's green initiative. These points are stored and built up and four times a year the holder receives a statement and vouchers to the value of points they have saved. Vouchers can be spent instore on shopping or used on Clubcard Deals where they can be worth three times their face value on selected Deals in the U.K and up to four times their face value in the R.O.I..

These can be used to obtain discounted day trips, magazines, hotel breaks, restaurant tokens and many more great offers.

As part of the Clubcard 2 launch, it was announced that, from 17 August 2009, all instore and online purchases would attract double points (2 points per £1).Reports indicate that this initiative was successful in increasing the number of active cardholders from 14 million to 15 million in the market year 2009/10.[8] Clubcard holders are also entitled to free access to the Clubcard clubs which include: wine club, baby and toddler club, healthy living club and food club. There is also a facility to save vouchers to be sent near Christmas, similar to a Christmas savings scheme.

Green Clubcard points Green Clubcard points are earned when customers re-use bags when shopping in store (one point per bag), or opt out of receiving bagged products when shopping online (one point per ten items delivered). They can also be earned by recycling a limited number of products, currently mobile phones and ink cartridges, through Tesco-branded recycling services. Once earned, Green Clubcard points are equal in value to normal points, but are listed separately on receipts and Clubcard statements...

26

Tesco Clubcard

'Double up' As part of the major Clubcard relaunch, customers were able to take Clubcard vouchers into stores and 'double them up' for a number of departments. These departments included Clothing, Cosmetics Skincare and Fragrances, Wine and Champagne, Toys, Flowers and Plants, Tesco Mobile Top-Up, Tesco Instant Travel insurance and Tesco Instant Breakdown cover. In August 2009, the Back to School range, Tesco Delivery Charge (grocery) and Tesco Opticians were added on, whilst the Flowers and Plants range was taken off. You could not double up for groceries.

Double up worked in multiples of five pounds. For example, if a customer brought in a £5 Clubcard voucher, this would double up to a £10 voucher. However, if a customer brought in a £6 Clubcard voucher, it would still double up to £10, and the remaining £1 (100 points) would go back onto the Clubcard holders account. While normal Clubcard vouchers are valid for two years, double up vouchers were valid to 3 months.

Double Up has been relaunched under a different name, The Big Clubcard Voucher Exchange. The departments are slightly different. The promotion lasts until September 5.

Services Services that take part in the Clubcard scheme: • Tesco stores • • • • • • • • • • • • •

Tesco.com TescoDiets.com TescoEntertainment.com Tesco Petrol stations Tesco Direct Tesco Bank Tesco Telecoms The Nutri Centre @ Tesco AVIS E.ON UK Marriott Hotels - Earning Points Ended 1 April 2008[9] National Tyres Nationwide Autocentres

Double Points are now available across most services, and products.

Privacy concerns Some Clubcard users have concerns about the information Tesco and dunnhumby hold and what they do with it.

Every time a Clubcard is used, a copy of the store shopped in, products purchased and price paid are stored against the Clubcard account. Applicants are asked to provide personal details such as name, address and children. Tesco have stated that this is to help them pick vouchers that are relevant to the holder and also monitor trends to help product availability.[10]

27

Tesco Clubcard

Mobile phone applications Tesco have recently launched both an iPhone, BlackBerry and a Nokia Ovi applications so points can be collected by presenting a barcode on the handset instead of a keyfob or card. This application may in future offer more functionality including point balances and possibly special offers.[11] . An unofficial Android application is also available. [12]

References [1] "About us" (http:/ / www. dunnhumby. com/ uk/ about-us-history-of-success). www.dunnhumby.com. dunnhumby Limited. 2008. . Retrieved 2008-10-12.

[2] Mesure, Susie (2003-10-10). "Loyalty card costs Tesco £1bn of profits - but is worth every penny". The Independent.

[3] "AIDS blackmail man is jailed" (http:/ / www. heraldscotland. com/ sport/ spl/ aberdeen/ aids-blackmail-man-is-jailed-1. 656568). www.heraldscotland.com. The Herald. 1995. . Retrieved 2010-09-04.

[4] "FRANK RIOLFO, R v. [1996 (http:/ / www. bailii. org/ ew/ cases/ EWCA/ Crim/ 1996/ 225. html) EWCA Crim 225 (26th April, 1996)"]. http:/ / www. bailii. org/ . 1996. . Retrieved 2010-09-19.

[5] "Alexander Velky ...Has Doubts - The Marketing Genius of Frank Riolfo" (http:/ / hasdoubts. blogspot. com/ 2011/ 01/ marketing-genius-of-frank-riolfo. html). 2011. . Retrieved 2011-03-24.

[6] Randall, Jeff (1996-06-23). "Sainsbury plays its loyalty card". Sunday Times (Times Newspapers).

[7] "CZECH REPUBLIC: Tesco to launch Clubcard programme" (http:/ / www. just-food. com/ news/ tesco-to-launch-clubcard-programme_id112325. aspx). . Retrieved 2010-09-19.

[8] http:/ / sixthsense. yougov. com/ retail-reports/ supermarkets/ loyalty-cards. aspx?target=loyalty [9] "Marriott Rewards Members can earn points with partner programmes" (http:/ / www. marriott. co. uk/ Channels/ globalSites/ rewards/ earn/ programs. mi?country=UK). www.marriott.co.uk. Marriott International Inc. 2008. . Retrieved 2010-02-08.

[10] Rory Cellan-Jones (2007-06-18). "A journey into personal privacy" (http:/ / news. bbc. co. uk/ 2/ hi/ technology/ 6763307. stm). BBC News on bbc.co.uk. . Retrieved 2008-06-09. "Privacy campaigners are convinced that big companies, from Google to Tesco, know too much about us - and are not careful enough with our data....While call centre staff don't have access to your data, details of all purchases on Clubcard are stored for up to two years."

[11] "Nick Lansley's Technology for Tesco.com Blog" (http:/ / techfortesco. blogspot. com/ 2010/ 02/ tesco-clubcard-iphone-app-launches. html). techfortesco.blogspot.com. Nick Lansley. 2010. . Retrieved 2010-02-08.

[12] "Tesco Clubcard - Android App on AppBrain" (http:/ / www. appbrain. com/ app/ tesco-clubcard/ com. clubcardapp). appbrain.com.

AppBrain. 2010. . Retrieved 2010-10-09.

External links • www.dunnhumby.com (http://www.dunnhumby.com) • www.tesco.com/clubcard (http://www.tesco.com/clubcard/clubcard/)

28

Tesco.com

29

Tesco.com Tesco.com

Frontpage, 20 February 2007.

URL

www.tesco.com

Commercial?

Yes

Type of site

Online retailer

[1]

Available language(s) English Owner

Tesco

Created by

Tesco

Launched

2000

Current status

Active

Tesco.com is an electronic commerce website operated by Tesco. As well as being the world's largest online grocery retailer, it offers a wide range of other products, including electronic goods, books, broadband and financial services.

Tesco has operated on the Internet since 1994 and started an online shopping service named 'Tesco Direct' in 1997.

Tesco.com was formally launched in 2000. It also has online operations in the Republic of Ireland and South Korea.

In 2003, tesco.com's CEO at the time, John Browett, received the Wharton Infosys Business Transformation Award for the innovative processes he used to support this online grocery service.

In 2001 Tesco.com invested in GroceryWorks, a joint venture with the American Safeway Inc. (who had long since sold-off their UK subsidiary and Tesco's former rival, Safeway plc), operating in the United States and Canada.

GroceryWorks has stepped into the void left by the collapse of Webvan, but did not expand as fast as initially expected and Tesco sold its stake to Safeway Inc in 2006.[2] Concerned with poor web response times (in 1996, broadband was virtually unknown in the UK), Tesco offered a CDROM-based off-line ordering program which would connect only to download stock lists and send orders. This was in addition to, rather than instead of, ordering via web forms, but was withdrawn in 2000.

Tesco claimed in its 2005 annual report to be able to serve 98% of the UK population from its 300 participating stores. In the financial year ended 24 February 2007 it recorded online sales up 29.2% to £1.2 billion and profit up 48.5% to £83 million, with over 250,000 orders per week. [3] Tesco launched its first home shopping catalogue in autumn 2006, as another channel for sales of its non-food ranges. This is integrated with the internet operation, with both channels being branded as "Tesco Direct".[4] Tesco launched an advertising campaign for its internet phone, marketing the service to customers by offering free calls to all other Tesco internet phone customers.

On 1 October 2006, Tesco announced that it will be selling six own-brand budget software packages for under £20 each, including office and security suites, in a partnership with software firm Formjet [5] . As Formjet is exclusive distributor for Panda Software and Ability Plus Software, packages from these companies are likely to feature.

Tesco.com In June 2007, Tesco.com became the first home delivery company in UK to provide customers the option of delivering shopping in green boxes without carrier bags in a bid to reduce the amount of carrier bags used as part of Tesco's green commitment, in return for customers going bag free they will receive green clubcard points.[6] In July 2009, Tesco became the first supermarket in the world to offer an API [7] . This feature will potentially pave the way for smart appliances such as networked fridges that can automatically order food[8] .

References [1] [2] [3] [4] [5] [6] [7] [8]

http:/ / www. tesco. com/ Tesco Interim Results 2006/07, page 4 (http:/ / www. tescocorporate. com/ images/ pr_interims06final_0. pdf) Tesco full year financial results 2006/7 (http:/ / www. tescocorporate. com/ images/ Prelim Slides 2007 - FINAL. pdf) Tesco gears up for catalogue drive in autumn (http:/ / www. retail-week. com/ multichannel/ tesco-gears-up-for-catalogue-drive-in-autumn/ 103892. article), retail-week.com, 21 July 2006.

Tesco moves into software market (http:/ / news. bbc. co. uk/ 2/ hi/ business/ 5396488. stm), BBC News, 1 October 2006 "FIRST UK HOME DELIVERY SERVICE TO GO CARRIER BAG FREE" (http:/ / www. tescocorporate. com/ page. aspx?pointerid=70D33479C1D844AE9CE464AB7938F921). Tesco. 2007-06-09. . Retrieved 2007-06-14.

Tesco offers an API for its shopping (http:/ / www. guardian. co. uk/ technology/ blog/ 2009/ jul/ 14/ tesco-api-programming-shopping) The Tesco API: A Link Between the Physical and Virtual Worlds (http:/ / zerogeography. blogspot. com/ 2009/ 07/ tesco-api-link-between-physical-and. html)

External links • Tesco UK website (http://www.tesco.com) • Tesco Ireland website (http://www.tesco.ie)

Electronic commerce Electronic commerce, commonly known as e-commerce, eCommerce or e-comm, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. It is more than just buying and selling products online. It also includes the entire online process of developing, marketing, selling, delivering, servicing and paying for products and services. The amount of trade conducted electronically has grown extraordinarily with widespread Internet usage. The use of commerce is conducted in this way, spurring and drawing on innovations in electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction's lifecycle, although it can encompass a wider range of technologies such as e-mail, mobile devices and telephones as well.

A large percentage of electronic commerce is conducted entirely electronically for virtual items such as access to premium content on a website, but most electronic commerce involves the transportation of physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all big retailers have electronic commerce presence on the World Wide Web. Electronic commerce that is conducted between businesses is referred to as business-to-business or B2B. B2B can be open to all interested parties (e.g. commodity exchange) or limited to specific, pre-qualified participants (private electronic market). Electronic commerce that is conducted between businesses and consumers, on the other hand, is referred to as business-to-consumer or B2C. This is the type of electronic commerce conducted by companies such as Amazon.com. Online shopping is a form of electronic commerce where the buyer is directly online to the seller's computer usually via the internet. There is no intermediary service. The sale and purchase transaction is completed electronically and interactively in real-time such as Amazon.com for new books. If an intermediary is present, then the sale and purchase transaction is called electronic commerce such as eBay.com.

30

Electronic commerce Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of the business transactions.

History Early development Originally, electronic commerce was identified as the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of e-commerce was the airline reservation system typified by Sabre in the USA and Travicom in the UK. From the 1990s onwards, electronic commerce would additionally include enterprise resource planning systems (ERP), data mining and data warehousing.

In 1990, Tim Berners-Lee invented the WorldWideWeb web browser and transformed an academic telecommunication network into a worldwide everyman everyday communication system called internet/www.

Commercial enterprise on the Internet was strictly prohibited by NSF until 1995.[1] Although the Internet became popular worldwide around 1994 with the adoption of Mosaic web browser, it took about five years to introduce security protocols and DSL allowing continual connection to the Internet. By the end of 2000, many European and American business companies offered their services through the World Wide Web. Since then people began to associate a word "ecommerce" with the ability of purchasing various goods through the Internet using secure protocols and electronic payment services.

Timeline • • • • • • • •

•

• •

1979: Michael Aldrich invented online shopping[2] 1981: Thomson Holidays, UK is first B2B online shopping 1982: Minitel was introduced nationwide in France by France Telecom and used for online ordering.

1984: Gateshead SIS/Tesco is first B2C online shopping and Mrs Snowball, 72, is the first online home shopper 1985: Nissan UK sells cars and finance with credit checking to customers online from dealers' lots.

1987: Swreg begins to provide software and shareware authors means to sell their products online through an electronic Merchant account.

1990: Tim Berners-Lee writes the first web browser, WorldWideWeb, using a NeXT computer.

1994: Netscape releases the Navigator browser in October under the code name Mozilla. Pizza Hut offers online ordering on its Web page. The first online bank opens. Attempts to offer flower delivery and magazine subscriptions online. Adult materials also become commercially available, as do cars and bikes. Netscape 1.0 is introduced in late 1994 SSL encryption that made transactions secure.

1995: Jeff Bezos launches Amazon.com and the first commercial-free 24 hour, internet-only radio stations, Radio HK and NetRadio start broadcasting. Dell and Cisco begin to aggressively use Internet for commercial transactions. eBay is founded by computer programmer Pierre Omidyar as AuctionWeb. 1998: Electronic postal stamps can be purchased and downloaded for printing from the Web. 1998: Alibaba Group is established in China. And it leverage China's B2B and C2C, B2C(Taobao) market by it's Authentication System.

• 1999: Business.com sold for US $7.5 million to eCompanies, which was purchased in 1997 for US $149,000. The peer-to-peer filesharing software Napster launches. ATG Stores launches to sell decorative items for the home online.

• 2000: The dot-com bust.

31

Electronic commerce

32

• 2002: eBay acquires PayPal for $1.5 billion.[3] Niche retail companies CSN Stores and NetShops are founded with the concept of selling products through several targeted domains, rather than a central portal.

• 2003: Amazon.com posts first yearly profit.

• 2007: Business.com acquired by R.H. Donnelley for $345 million.[4] • 2009: Zappos.com acquired by Amazon.com for $928 million.[5] Retail Convergence, operator of private sale website RueLaLa.com, acquired by GSI Commerce for $180 million, plus up to $170 million in earn-out payments based on performance through 2012.[6] • 2010: Groupon reportedly rejects a $6 billion offer from Google. Instead, the group buying websites plans to go ahead with an IPO in mid-2011.[7] • 2011: US eCommerce and Online Retail sales projected to reach $197 billion, an increase of 12 percent over 2010.[8] Quidsi.com, parent company of Diapers.com, acquired by Amazon.com for $500 million in cash and plus $45 million in debt and other obligations.[9]

Business applications Some common applications related to electronic commerce are the following: • Document automation in supply chain and logistics • Domestic and international payment systems • Enterprise content management • Group buying • Automated online assistants • Instant messaging • Newsgroups • Online shopping and order tracking • Online banking • Online office suites • Shopping cart software • Teleconferencing • Electronic tickets

Governmental regulation

An example of an automated online assistant on a merchandising website.

In the United States, some electronic commerce activities are regulated by the Federal Trade Commission (FTC).

These activities include the use of commercial e-mails, online advertising and consumer privacy. The CAN-SPAM Act of 2003 establishes national standards for direct marketing over e-mail. The Federal Trade Commission Act regulates all forms of advertising, including online advertising, and states that advertising must be truthful and non-deceptive.[10] Using its authority under Section 5 of the FTC Act, which prohibits unfair or deceptive practices, the FTC has brought a number of cases to enforce the promises in corporate privacy statements, including promises about the security of consumers’ personal information.[11] As result, any corporate privacy policy related to e-commerce activity may be subject to enforcement by the FTC. The Ryan Haight Online Pharmacy Consumer Protection Act of 2008, which came into law in 2008, amends the Controlled Substances Act to address online pharmacies.[12]

Electronic commerce

Forms Contemporary electronic commerce involves everything from ordering "digital" content for immediate online consumption, to ordering conventional goods and services, to "meta" services to facilitate other types of electronic commerce.

On the consumer level, electronic commerce is mostly conducted on the World Wide Web. An individual can go online to purchase anything from books or groceries, to expensive items like real estate. Another example would be online banking, i.e. online bill payments, buying stocks, transferring funds from one account to another, and initiating wire payment to another country. All of these activities can be done with a few strokes of the keyboard.

On the institutional level, big corporations and financial institutions use the internet to exchange financial data to facilitate domestic and international business. Data integrity and security are very hot and pressing issues for electronic commerce.

Global Trends in E-Retailing and Shopping Business models across the world also continue to change drastically with the advent of eCommerce and this change is not just restricted to USA. Other countries are also contributing to the growth of eCommerce. For example, the United Kingdom has the biggest e-commerce market in the world when measured by the amount spent per capita, even higher than the USA. The internet economy in UK is likely to grow by 10% between 2010 to 2015. This has led to changing dynamics for the advertising industry[13] Amongst emerging economies, China's eCommerce presence continues to expand. With 384 million internet users,China's online shopping sales rose to $36.6 billion in 2009 and one of the reasons behind the huge growth has been the improved trust level for shoppers. The Chinese retailers have been able to help consumers feel more comfortable shopping online.[14]

Impact on markets and retailers Economists have theorized that e-commerce ought to lead to intensified price competition, as it increases consumers' ability to gather information about products and prices. Research by four economists at the University of Chicago has found that the growth of online shopping has also affected industry structure in two areas that have seen significant growth in e-commerce, bookshops and travel agencies. Generally, larger firms have grown at the expense of smaller ones, as they are able to use economies of scale and offer lower prices. The lone exception to this pattern has been the very smallest category of bookseller, shops with between one and four employees, which appear to have withstood the trend.[15]

E-commerce types E-commerce types represent a range of various schemas of transactions which are distinguished according to their participants.

• • • • • • •

Business-to-Business (B2B) Business-to-Consumer (B2C) Business-to-Employee (B2E) Business-to-Government (B2G) (also known as Business to Administration or B2A) Business-to-Machines (B2M) Business-to-Manager (B2M) Consumer-to-Business (C2B)

• Consumer-to-Consumer (С2C) • Citizen-to-Government (also known as Consumer-to-Administration or C2A)

33

Electronic commerce • • • • • •

Government-to-Business (G2B) Government-to-Citizen (G2C) Government-to-Employee (G2E) Government-to-Government (G2G) Manager-to-Consumer (M2C) Peer-to-Peer (P2P)

Distribution Channels E-commerce has grown in importance as companies have adopted Pure-Click and Brick and Click channel systems.

We can distinguish between pure-click and brick and click channel system adopted by companies.

• Pure-Click companies are those that have launched a website without any previous existence as a firm. It is imperative that such companies must set up and operate their e-commerce websites very carefully. Customer service is of paramount importance. Ex: AMAZON.com • Brick and Click companies are those existing companies that have added an online site for e-commerce. Initially, Brick and Click companies were skeptical whether or not to add an online e-commerce channel for fear that selling their products might produce channel conflict with their off-line retailers, agents, or their own stores.

However, they eventually added internet to their distribution channel portfolio after seeing how much business their online competitors were generating. Ex: futurebazaar.com

Notes [1] Kevin Kelly: We Are the Web (http:/ / www. wired. com/ wired/ archive/ 13. 08/ tech. html?pg=2) Wired magazine, Issue 13.08, August 2005 [2] Tkacz, Ewaryst; Kapczynski, Adrian (2009). Internet - Technical Development and Applications (http:/ / books. google. com/ books?id=a9_NJIBC87gC& dq). Springer. pp. 255. ISBN 978-3642050183. . Retrieved 2011-03-28. "The first pilot system was installing in Tesco in the UK (first demonstrated in 1979 by Michael Aldrich)."

[3] "eBay acquires PayPal" (http:/ / investor. ebay. com/ releasedetail. cfm?ReleaseID=84142). eBay. .

[4] "Press Release" (http:/ / domainnamewire. com/ 2007/ 07/ 26/ rh-donnelley-acquires-businesscom-for-345m/ ). Domain Name Wire. .

[5] "Press Release" (http:/ / techcrunch. com/ 2009/ 07/ 22/ amazon-buys-zappos/ ). TechCrunch. .

[6] "Press Release" (http:/ / www. reuters. com/ article/ idUSBNG53538820091027/ ). Reuters. October 27, 2009. .

[7] "Press Release" (http:/ / www. msnbc. msn. com/ id/ 40499923/ ns/ business-us_business/ ). MSNBC. .

[8] "Forecast of eCommerce Sales in 2011 and Beyond" (http:/ / www. fortune3. com/ blog/ 2011/ 01/ ecommerce-sales-2011/ ). Forrester Research, Inc.. .

[9] "Press Release" (http:/ / www. marketwatch. com/ story/ amazon-buys-diaperscom-parent-in-545-mln-deal-2010-11-08/ ). MarketWatch. .

[10] "Advertising and Marketing on the Internet: Rules of the Road" (http:/ / www. ftc. gov/ bcp/ conline/ pubs/ buspubs/ ruleroad. shtm). Federal Trade Commission. .

[11] "Enforcing Privacy Promises: Section 5 of the FTC Act" (http:/ / www. ftc. gov/ privacy/ privacyinitiatives/ promises. html). Federal Trade Commission. .

[12] "H.R. 6353: Ryan Haight Online Pharmacy Consumer Protection Act of 2008" (http:/ / www. govtrack. us/ congress/ bill. xpd?bill=h110-6353& tab=summary). Govtrack. .

[13] "news" (http:/ / www. guardian. co. uk/ technology/ 2010/ oct/ 28/ net-worth-100bn-uk/ ). Guardian.co.uk. .

[14] "China's migration to eCommerce" (http:/ / www. forbes. com/ 2010/ 01/ 18/ china-internet-commerce-markets-equities-alibaba. html/ ).

Forbes.com. January 18, 2010. .

[15] "Economics focus: The click and the dead" (http:/ / www. economist. com/ node/ 16478931). The Economist: p. 78. July 3–9, 2010. .

34

Electronic commerce

References • Chaudhury, Abijit; Jean-Pierre Kuilboer (2002). e-Business and e-Commerce Infrastructure. McGraw-Hill.

ISBN 0-07-247875-6.

• Frieden, Jonathan D.; Roche, Sean Patrick (2006-12-19). "E-Commerce: Legal Issues of the Online Retailer in Virginia" (http://law.richmond.edu/jolt/v13i2/article5.pdf) (PDF). Richmond Journal of Law & Technology 13 (2) • Graham, Mark (2008). "Warped Geographies of Development: The Internet and Theories of Economic Development" (http://geospace.co.uk/files/compass.pdf) (PDF). Geography Compass 2 (3): 771. doi:10.1111/j.1749-8198.2008.00093.x • Kessler, M. (2003). More shoppers proceed to checkout online. Retrieved January 13, 2004 (http://www. usatoday.com/tech/news/2003-12-22-shoppers_x.htm) • Nissanoff, Daniel (2006). FutureShop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell and Get the Things We Really Want (Hardcover ed.). The Penguin Press. pp. 246 pages. ISBN 1-59420-077-7.

• Seybold, Pat (2001). Customers.com. Crown Business Books (Random House). ISBN 0-609-60772-3.

• Miller, Roger (2002). The Legal and E-Commerce Environment Today (Hardcover ed.). Thomson Learning. pp. 741 pages. ISBN 0-324-06188-9.

• Kotler, Philip (2009). Marketing Management. Pearson:Prentice-Hall. ISBN 978-81-317-1683-0.

External links • US Small Business Guide to E-Commerce Laws and Regulations (http://business.gov/guides/e-commerce/)

Intranet An intranet is a private computer network that uses Internet Protocol technology to securely share any part of an organization's information or network operating system within that organization. The term is used in contrast to internet, a network between organizations, and instead refers to a network within an organization. Sometimes the term refers only to the organization's internal website, but may be a more extensive part of the organization's information technology infrastructure. It may host multiple private websites and constitute an important component and focal point of internal communication and collaboration. Any of the well known Internet protocols may be found in an intranet, such as HTTP (web services), SMTP (e-mail), and FTP (file transfer protocol). Internet technologies are often deployed to provide modern interfaces to legacy information systems hosting corporate data.

An intranet can be understood as a private analog of the Internet, or as a private extension of the Internet confined to an organization. The first intranet websites and home pages began to appear in organizations in 1996-1997. Although not officially noted, the term intranet first became common-place among early adopters, such as universities and technology corporations, in 1992.

Intranets have also contrasted with extranets. While intranets are generally restricted to employees of the organization, extranets may also be accessed by customers, suppliers, or other approved parties.[1] Extranets extend a private network onto the Internet with special provisions for authentication, authorization and accounting (AAA protocol).

Intranets may provide a gateway to the Internet by means of a network gateway with a firewall, shielding the intranet from unauthorized external access. The gateway often also implements user authentication, encryption of messages, and often virtual private network (VPN) connectivity for off-site employees to access company information, computing resources and internal communication.

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Intranet

Uses Increasingly, intranets are being used to deliver tools and applications, e.g., collaboration (to facilitate working in groups and teleconferencing) or sophisticated corporate directories, sales and customer relationship management tools, project management etc., to advance productivity.

Intranets are also being used as corporate culture-change platforms. For example, large numbers of employees discussing key issues in an intranet forum application could lead to new ideas in management, productivity, quality, and other corporate issues.

In large intranets, website traffic is often similar to public website traffic and can be better understood by using web metrics software to track overall activity. User surveys also improve intranet website effectiveness. Larger businesses allow users within their intranet to access public internet through firewall servers. They have the ability to screen messages coming and going keeping security intact.

When part of an intranet is made accessible to customers and others outside the business, that part becomes part of an extranet. Businesses can send private messages through the public network, using special encryption/decryption and other security safeguards to connect one part of their intranet to another.

Intranet user-experience, editorial, and technology teams work together to produce in-house sites. Most commonly, intranets are managed by the communications, HR or CIO departments of large organizations, or some combination of these.

Because of the scope and variety of content and the number of system interfaces, intranets of many organizations are much more complex than their respective public websites. Intranets and their use are growing rapidly. According to the Intranet design annual 2007 from Nielsen Norman Group, the number of pages on participants' intranets averaged 200,000 over the years 2001 to 2003 and has grown to an average of 6 million pages over 2005–2007.[2]

Benefits • Workforce productivity: Intranets can help users to locate and view information faster and use applications relevant to their roles and responsibilities. With the help of a web browser interface, users can access data held in any database the organization wants to make available, anytime and - subject to security provisions - from anywhere within the company workstations, increasing employees' ability to perform their jobs faster, more accurately, and with confidence that they have the right information. It also helps to improve the services provided to the users.

• Time: Intranets allow organizations to distribute information to employees on an as-needed basis; Employees may link to relevant information at their convenience, rather than being distracted indiscriminately by electronic mail.

• Communication: Intranets can serve as powerful tools for communication within an organization, vertically and horizontally. From a communications standpoint, intranets are useful to communicate strategic initiatives that have a global reach throughout the organization. The type of information that can easily be conveyed is the purpose of the initiative and what the initiative is aiming to achieve, who is driving the initiative, results achieved to date, and who to speak to for more information. By providing this information on the intranet, staff have the opportunity to keep up-to-date with the strategic focus of the organization. Some examples of communication would be chat, email, and or blogs. A great real world example of where an intranet helped a company communicate is when Nestle had a number of food processing plants in Scandinavia. Their central support system had to deal with a number of queries every day.[3] When Nestle decided to invest in an intranet, they quickly realized the savings. McGovern says the savings from the reduction in query calls was substantially greater than the investment in the intranet.

• Web publishing allows cumbersome corporate knowledge to be maintained and easily accessed throughout the company using hypermedia and Web technologies. Examples include: employee manuals, benefits documents,

36

Intranet

• •

• •

37 company policies, business standards, newsfeeds, and even training, can be accessed using common Internet standards (Acrobat files, Flash files, CGI applications). Because each business unit can update the online copy of a document, the most recent version is usually available to employees using the intranet.

Business operations and management: Intranets are also being used as a platform for developing and deploying applications to support business operations and decisions across the internetworked enterprise.

Cost-effective: Users can view information and data via web-browser rather than maintaining physical documents such as procedure manuals, internal phone list and requisition forms. This can potentially save the business money on printing, duplicating documents, and the environment as well as document maintenance overhead. For example, Peoplesoft "derived significant cost savings by shifting HR processes to the intranet".[3] McGovern goes on to say the manual cost of enrolling in benefits was found to be USD109.48 per enrollment. "Shifting this process to the intranet reduced the cost per enrollment to $21.79; a saving of 80 percent". Another company that saved money on expense reports was Cisco. "In 1996, Cisco processed 54,000 reports and the amount of dollars processed was USD19 million".[3] Enhance collaboration: Information is easily accessible by all authorised users, which enables teamwork.

Cross-platform capability: Standards-compliant web browsers are available for Windows, Mac, and UNIX.

• Built for one audience: Many companies dictate computer specifications which, in turn, may allow Intranet developers to write applications that only have to work on one browser (no cross-browser compatibility issues).

Being able to specifically address your "viewer" is a great advantage. Since Intranets are user-specific (requiring database/network authentication prior to access), you know exactly who you are interfacing with and can personalize your Intranet based on role (job title, department) or individual ("Congratulations Jane, on your 3rd year with our company!").

• Promote common corporate culture: Every user has the ability to view the same information within the Intranet.

• Immediate updates: When dealing with the public in any capacity, laws, specifications, and parameters can change. Intranets make it possible to provide your audience with "live" changes so they are kept up-to-date, which can limit a company's liability.

• Supports a distributed computing architecture: The intranet can also be linked to a company’s management information system, for example a time keeping system.

Planning and creation Most organizations devote considerable resources into the planning and implementation of their intranet as it is of strategic importance to the organization's success. Some of the planning would include topics such as: • • • • • • • •

The purpose and goals of the intranet Persons or departments responsible for implementation and management Functional plans, information architecture, page layouts, design[4] Implementation schedules and phase-out of existing systems Defining and implementing security of the intranet How to ensure it is within legal boundaries and other constraints Level of interactivity (eg wikis, on-line forms) desired Is the input of new data and updating of existing data to be centrally controlled or devolved

These are in addition to the hardware and software decisions (like content management systems), participation issues (like good taste, harassment, confidentiality), and features to be supported.[5] Intranets are often static sites. Essentially they are a shared drive, serving up centrally stored documents alongside internal articles or communications (often one-way communication). However organisations are now starting to think of how their intranets can become a 'communication hub' for their team by using companies specialising in 'socialising' intranets.[6] The actual implementation would include steps such as:

Intranet • • • • • • • •

38 Securing senior management support and funding.[7] Business requirements analysis.

Identify users' information needs.

Installation of web server and user access network.

Installing required user applications on computers.

Creation of document framework for the content to be hosted.[8] User involvement in testing and promoting use of intranet.

Ongoing measurement and evaluation, including through benchmarking against other intranets.[9]

Another useful component in an intranet structure might be key personnel committed to maintaining the Intranet and keeping content current. For feedback on the intranet, social networking can be done through a forum for users to indicate what they want and what they do not like.

References [1] Callaghan, J (2002). Inside Intranets & Extranets: Knowledge Management AND the Struggle for Power. Palgrave Macmillan.

ISBN 0-333-98743-8.

[2] Pernice Coyne, Kara; Schwartz, Mathew; Nielsen, Jakob (2007), "Intranet Design Annual 2007", Nielsen Norman Group [3] McGovern, Gerry [4] Ward, Toby (2006-06-11). "Leading an intranet redesign" (http:/ / intranetblog. blogware. com/ blog/ _archives/ 2006/ 6/ 11/ 2025170. html).

IntranetBlog. . Retrieved 2009-04-03.

[5] LaMee, James A. (2002-04-30). "Intranets and Special Libraries: Making the most of inhouse communications" (http:/ / www. libsci. sc. edu/ bob/ class/ clis724/ SpecialLibrariesHandbook/ Int& SpecLib. html). University of South Carolina. . Retrieved 2009-04-03.

[6] Scaplehorn, geoff (2010-03-01). "Bringing the internet indoors - socialising your intranet" (http:/ / www. contentformula. com/ articles/ 2010/ bringing-the-internet-indoors-socialising-your-intranet/ ). IntranetBlog. . Retrieved 2010-03-03.

[7] Ward, Toby. "Planning: An Intranet Model for success Intranet" (http:/ / www. prescientdigital. com/ articles/ intranet-articles/ intranet-planning-an-intranet-model-for-success). . Retrieved 2009-04-03.

[8] "Intranet: Table of Contents – Macmillan Computer Sciences: Internet and Beyond" (http:/ / www. bookrags. com/ sciences/ computerscience/ intranet-csci-04. html). Bookrags.com. . Retrieved 2009-04-03.

[9] "Intranet benchmarking explained" (http:/ / www. ibforum. com/ ?cmd=CMS_Article_List_View& uuid=Services& article=8f4928b5b6f5584beda884868f3ca458). Intranet Benchmarking Forum. . Retrieved 2009-04-03.

• McGovern, Gerry (November 18, 2002). "Intranet return on investment case studies" (http://www. gerrymcgovern.com/nt/2002/nt_2002_11_18_intranet_roi.htm). Retrieved 2009-04-03.

• "Making the most of your corporate intranet" (http://www.claromentis.com/blog/2009/04/ top-10-ideas-making-the-most-of-your-corporate-intranet/). April 2, 2009. Retrieved 2009-04-02. mhr:Интравот

Extranet

Extranet An extranet is a computer network that allows controlled access from the outside, for specific business or educational purposes. An extranet can be viewed as an extension of a company's intranet that is extended to users outside the company, usually partners, vendors, and suppliers. It has also been described as a "state of mind" in which the Internet is perceived as a way to do business with a selected set of other companies (business-to-business, B2B), in isolation from all other Internet users. In contrast, business-to-consumer (B2C) models involve known servers of one or more companies, communicating with previously unknown consumer users. An extranet is like a DMZ in that it provides access to needed services for channel partners, without granting access to an organization's entire network.

Relationship to an intranet An extranet can be understood as an intranet mapped onto the public Internet or some other transmission system not accessible to the general public, but managed by more than one company's administrator(s). For example, military networks of different security levels may map onto a common military radio transmission system that never connects to the Internet. Any private network mapped onto a public one is a virtual private network (VPN), often using special security protocols.

For decades, institutions have been interconnecting to each other to create private networks for sharing information.

One of the differences that characterizes an extranet, however, is that its interconnections are over a shared network rather than through dedicated physical lines. With respect to Internet Protocol networks, RFC 4364 states "If all the sites in a VPN are owned by the same enterprise, the VPN is a corporate intranet. If the various sites in a VPN are owned by different enterprises, the VPN is an extranet. A site can be in more than one VPN; e.g., in an intranet and several extranets. We regard both intranets and extranets as VPNs. In general, when we use the term VPN we will not be distinguishing between intranets and extranets. Even if this argument is valid, the term "extranet" is still applied and can be used to eliminate the use of the above description."[1] In the quote above from RFC 4364, the term "site [1]" refers to a distinct networked environment. Two sites connected to each other across the public Internet backbone comprise a VPN. The term "site" does not mean "website." Thus, a small company in a single building can have an "intranet," but to have a VPN, they would need to provide tunneled access to that network for geographically distributed employees.

Similarly, for smaller, geographically united organizations, "extranet" is a useful term to describe selective access to intranet systems granted to suppliers, customers, or other companies. Such access does not involve tunneling, but rather simply an authentication mechanism to a web server. In this sense, an "extranet" designates the "private part" of a website, where "registered users" can navigate, enabled by authentication mechanisms on a "login page".

An extranet requires network security. These can include firewalls, server management, the issuance and use of digital certificates or similar means of user authentication, encryption of messages, and the use of virtual private networks (VPNs) that tunnel through the public network.

Many technical specifications describe methods of implementing extranets, but often never explicitly define an extranet. RFC 3547 [2] presents requirements for remote access to extranets. RFC 2709 [3] discusses extranet implementation using IPsec and advanced network address translation (NAT).

39

Extranet

Enterprise applications During the late 1990s and early 2000s, several industries started to use the term extranet to describe central repositories of shared data made accessible via the web only to authorized members of particular work groups. Some applications are offered on a Software as a Service (SaaS) basis by vendors functioning as Application service providers (ASPs).

Specially secured extranets are used to provide virtual data room services to companies in several sectors (including law and accountancy).

For example, in the construction industry, project teams may access a project extranet to share drawings and documents, make comments, issue requests for information, etc. In 2003 in the United Kingdom, several of the leading vendors formed the Network for Construction Collaboration Technology Providers (NCCTP) to promote the technologies and to establish data exchange standards between the different data systems. The same type of construction-focused technologies have also been developed in the United States, Australia and mainland Europe.[4]

Advantages • Exchange large volumes of data using Electronic Data Interchange (EDI) • Share product catalogs exclusively with trade partners • Collaborate with other companies on joint development efforts • Jointly develop and use training programs with other companies • Provide or access services provided by one company to a group of other companies, such as an online banking application managed by one company on behalf of affiliated banks

Disadvantages • Extranets can be expensive to implement and maintain within an organization (e.g., hardware, software, employee training costs), if hosted internally rather than by an application service provider.

• Security of extranets can be a concern when hosting valuable or proprietary information.

References [1] http:/ / tools. ietf. org/ html/ rfc4364#section-2 [2] Requirements for IPsec Remote Access Scenarios (http:/ / www. ietf. org/ rfc/ rfc3457. txt), RFC3547, S. Kelly & S. Ramamoorthi, January 2003 [3] Security Model with Tunnel-mode IPsec for NAT Domains (http:/ / www. isi. edu/ in-notes/ rfc2709. txt), RFC2709, P. Srisuresh, October 1999 [4] Wilkinson, Paul (2005). Construction Collaboration Technologies: The Extranet Evolution. Taylor & Francis. ISBN 0-415-35859-0.

Further reading • Callaghan, J. (2002), Inside Intranets & Extranets: Knowledge Management and the Struggle for Power, Palgrave Macmillan, ISBN 0-333-98743-8 • Stambro, Robert and Svartbo, Erik (2002), Extranet Use in Supply Chain Management (http://epubl.ltu.se/ 1404-5508/2002/003/LTU-SHU-EX-02003-SE.pdf), University of Technology • Wilkinson, Paul (2005). Collaboration Technologies: The Extranet Evolution. Taylor & Francis.

ISBN 0-415-35859-0.

• IGLOO Software(2010), Improving Marketplace Relationships with online Community & Social Software Solutions (http://www.igloosoftware.com/documents/whitepapers/whitepapermarketplacecommunitiespdf)

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Long Tail

Long Tail The Long Tail or long tail refers to the statistical property that a larger share of population rests within the tail of a probability distribution than observed under a 'normal' or Gaussian distribution. A long tail distortion will arise with the inclusion of some unusually high (or low) values which increase (decrease) the mean, skewing the distribution to the right (or left).[1] An example of a power law graph showing The term Long Tail has gained popularity in recent times as describing popularity ranking. To the right is the long tail; to the retailing strategy of selling a large number of unique items in the left are the few that dominate. Notice that the relatively small quantities – usually in addition to selling fewer popular areas of both regions match. items in large quantities. The Long Tail was popularized by Chris Anderson in an October 2004 Wired magazine article, in which he mentioned Amazon.com and Netflix as examples of businesses applying this strategy.[2] [3] Anderson elaborated the concept in his book The Long Tail: Why the Future of Business Is Selling Less of More (ISBN 1-4013-0237-8).[4]

The distribution and inventory costs of businesses successfully applying this strategy allow them to realize significant profit out of selling small volumes of hard-to-find items to many customers instead of only selling large volumes of a reduced number of popular items. The total sales of this large number of "non-hit items" is called the Long Tail.

Given enough choice, a large population of customers, and negligible stocking and distribution costs, the selection and buying pattern of the population results in the demand across products having a power law distribution or Pareto distribution.

The Long Tail concept has found some ground for application, research, and experimentation. It is a term used in online business, mass media, micro-finance (Grameen Bank, for example), user-driven innovation (Eric von Hippel), and social network mechanisms (e.g. crowdsourcing, crowdcasting, peer-to-peer), economic models, and marketing (viral marketing).

A frequency distribution with a long tail has been studied by statisticians since at least 1946.[5] The term has also been used in the finance[6] and insurance business[2] for many years (also referred to as fat tail, heavy tail or right-tail[7] ). The work of BenoĂŽt Mandelbrot in the 1950s and later has led to him being referred to as "the father of long tails".[8]

41

Long Tail

42

Statistical meaning The long tail is the name for a long-known feature of some statistical distributions (such as Zipf, power laws, Pareto distributions and general LĂŠvy distributions). The feature is also known as heavy tails, fat tails, power-law tails, or Pareto tails. In "long-tailed" distributions a high-frequency or high-amplitude population is followed by a low-frequency or low-amplitude population which gradually "tails off" asymptotically. The events at the far end of the tail have a very low probability of occurrence.

The tail becomes bigger and longer in new

As a rule of thumb, for such population distributions the majority of markets (depicted in red). In other words, whereas traditional retailers have focused on the occurrences (more than half, and where the Pareto principle applies, area to the left of the chart, online bookstores 80%) are accounted for by the first 20% of items in the distribution. derive more sales from the area to the right.

What is unusual about a long-tailed distribution is that the most frequently-occurring 20% of items represent less than 50% of occurrences; or in other words, the least-frequently-occurring 80% of items are more important as a proportion of the total population.

Power law distributions or functions characterize an important number of behaviors from nature and human endeavor. This fact has given rise to a keen scientific and social interest in such distributions, and the relationships that create them. The observation of such a distribution often points to specific kinds of mechanisms, and can often indicate a deep connection with other, seemingly unrelated systems. Examples of behaviors that exhibit long-tailed distribution are the occurrence of certain words in a given language, the income distribution of a business or the intensity of earthquakes (see: Gutenberg-Richter law).

Chris Anderson's and Clay Shirky's articles highlight special cases in which we are able to modify the underlying relationships and evaluate the impact on the frequency of events. In those cases the infrequent, low-amplitude (or low-revenue) events — the long tail, represented here by the portion of the curve to the right of the 20th percentile — can become the largest area under the line. This suggests that a variation of one mechanism (internet access) or relationship (the cost of storage) can significantly shift the frequency of occurrence of certain events in the distribution. The shift has a crucial effect in probability and in the customer demographics of businesses like mass media and online sellers.

However, the long tails characterizing distributions such as the Gutenberg-Richter law or the words-occurrence Zipf's law, and those highlighted by Anderson and Shirky are of very different, if not opposite, nature: Anderson and Shirky refer to frequency-rank relations, whereas the Gutenberg-Richter law and the Zipf's law are probability distributions. Therefore, in these latter cases "tails" correspond to large-intensity events such as large earthquakes and most popular words, who dominate the distributions. By contrast, the long tails in the frequency-rank plots highlighted by Anderson and Shirky would rather correspond to short tails in the associated probability distributions, and therefore illustrate an opposite phenomenon compared to the Gutenberg-Richter and the Zipf's laws.

Chris Anderson and Clay Shirky The phrase the Long Tail was, according to Chris Anderson, first coined by him.[9] The concept drew in part from a February 2003 essay by Clay Shirky, "Power Laws, Weblogs and Inequality",[10] which noted that a relative handful of weblogs have many links going into them but "the long tail" of millions of weblogs may have only a handful of links going into them. Beginning in a series of speeches in early 2004 and culminating with the publication of a Wired magazine article in October 2004, Anderson described the effects of the Long Tail on current and future business models. Anderson later extended it into the book The Long Tail: Why the Future of Business is Selling Less of More (2006).

Long Tail Anderson argues that products in low demand or that have a low sales volume can collectively make up a market share that rivals or exceeds the relatively few current bestsellers and blockbusters, if the store or distribution channel is large enough. Anderson cites earlier research by Erik Brynjolfsson, Yu (Jeffrey) Hu, and Michael D. Smith, that showed that a significant portion of Amazon.com's sales come from obscure books that are not available in brick-and-mortar stores. The Long Tail is a potential market and, as the examples illustrate, the distribution and sales channel opportunities created by the Internet often enable businesses to tap that market successfully.

An Amazon employee described the Long Tail as follows: "We sold more books today that didn't sell at all yesterday than we sold today of all the books that did sell yesterday."[11] Anderson has explained the term as a reference to the tail of a demand curve.[12] The term has since been rederived from an XY graph that is created when charting popularity to inventory. In the graph shown above, Amazon's book sales or Netflix's movie rentals would be represented along the vertical axis, while the book or movie ranks are along the horizontal axis. The total volume of low popularity items exceeds the volume of high popularity items.

Academic research Effects of online access In his Wired article, Chris Anderson cites earlier research,[13] by Erik Brynjolfsson, Yu (Jeffrey) Hu, and Michael D. Smith, who first used a log-linear curve on an XY graph to describe the relationship between Amazon.com sales and sales ranking. They found that a large proportion of Amazon.com's book sales come from obscure books that were not available in brick-and-mortar stores.

They then quantified the potential value of the Long Tail to consumers. In an article published in 2003, these authors showed that, while most of the discussion about the value of the Internet to consumers has revolved around lower prices, consumer benefit (a.k.a. consumer surplus) from access to increased product variety in online book stores is ten times larger than their benefit from access to lower prices online. Thus, the primary value of the internet to consumers comes from releasing new sources of value by providing access to products in the Long Tail.

The Longer Tail over time A recent studied by Erik Brynjolfsson, Yu (Jeffrey) Hu, and Michael D. Smith[14] finds that the Long Tail has grown longer over time, with niche books accounting for a larger share of total sales. Their analyses suggest that by 2008, niche books account for 36.7% of Amazon’s sales and the consumer surplus generated by niche books has increased at least fivefold from 2000 to 2008. In addition, their new methodology finds that, while the widely-used power laws are a good first approximation for the rank-sales relationship, the slope may not be constant for all book ranks, becoming progressively steeper for more obscure books.

Goodbye Pareto principle, welcome the new distribution In a 2006 working paper titled "Goodbye Pareto Principle, Hello Long Tail",[15] Erik Brynjolfsson, Yu (Jeffrey) Hu, and Duncan Simester found that, by greatly lowering search costs, information technology in general and Internet markets in particular could substantially increase the collective share of hard-to-find products, thereby creating a longer tail in the distribution of sales.

They used a theoretical model to show how a reduction in search costs will affect the concentration in product sales.

By analyzing data collected from a multi-channel retailing company, they showed empirical evidence that the Internet channel exhibits a significantly less concentrated sales distribution, when compared with traditional channels. An 80/20 rule fits the distribution of product sales in the catalog channel quite well, but in the Internet channel, this rule needs to be modified to a 72/28 rule in order to fit the distribution of product sales in that channel.

The difference in the sales distribution is highly significant, even after controlling for consumer differences.

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Long Tail

Demand-side and supply-side drivers The key supply-side factor that determines whether a sales distribution has a Long Tail is the cost of inventory storage and distribution. Where inventory storage and distribution costs are insignificant, it becomes economically viable to sell relatively unpopular products; however, when storage and distribution costs are high, only the most popular products can be sold. For example, a traditional movie rental store has limited shelf space, which it pays for in the form of building overhead; to maximize its profits, it must stock only the most popular movies to ensure that no shelf space is wasted. Because Netflix stocks movies in centralized warehouses, its storage costs are far lower and its distribution costs are the same for a popular or unpopular movie. Netflix is therefore able to build a viable business stocking a far wider range of movies than a traditional movie rental store. Those economics of storage and distribution then enable the advantageous use of the Long Tail: Netflix finds that in aggregate, "unpopular" movies are rented more than popular movies.

An MIT Sloan Management Review article titled "From Niches to Riches: Anatomy of the Long Tail"[16] examined the Long Tail from both the supply side and the demand side and identifies several key drivers. On the supply side, the authors point out how e-tailers' expanded, centralized warehousing allows for more offerings, thus making it possible for them to cater to more varied tastes.[17] On the demand side, tools such as search engines, recommendation software, and sampling tools are allowing customers to find products outside their geographic area. The authors also look toward the future to discuss second-order, amplified effects of Long Tail, including the growth of markets serving smaller niches.

Networks, crowds and the Long Tail The "crowds" of customers, users and small companies that inhabit the Long Tail distribution can perform collaborative and assignment work. Some relevant forms of these new production models are: • The peer-to-peer collaboration groups that produce open-source software or create wikis such as Wikipedia.

• The crowdsourcing model, in which a company outsources work to a large group of market players using a collaborative online platform.

• The model of crowdcasting, is the process of building a network of users and then delivering challenges or tasks to be solved with the purpose of gaining insights or innovative ideas.

• Work performed by individuals in commons-like, non-market networks, described in the work of Yochai Benkler.[18] The demand-side factors that lead to the long tail can be amplified by the "networks of products" which are created by hyperlinked recommendations across products. An MIS Quarterly article by Gal Oestreicher-Singer and Arun Sundararajan shows that categories of books on Amazon.com which are more central and thus influenced more by their recommendation network have significantly more pronounced Long Tail distributions. Their data across 200 subject areas shows that a doubling of this influence leads to a 50% increase in revenues from the least popular one-fifth of books.[19] [20]

Turnover within the Long Tail The Long Tail distribution applies at a given point in time, but over time the relative popularity of the sales of the individual products will change.[21] Although the distribution of sales may appear to be similar over time, the positions of the individual items within it will vary. For example, new items constantly enter most fashion markets.

A recent fashion-based model [22] of consumer choice, which is capable of generating power law distributions of sales similar to those observed in practice,[23] takes into account turnover in the relative sales of a given set of items, as well as innovation, in the sense that entirely new items become offered for sale.

There may be an optimal inventory size, given the balance between sales and the cost of keeping up with the turnover. An analysis based on this pure fashion model[24] indicates that, even for digital retailers, the optimal

44

Long Tail inventory may in many cases be less than the millions of items that they can potentially offer. In other words, by proceeding further and further into the Long Tail, sales may become so small that the marginal cost of tracking them in rank order, even at a digital scale, might be optimised well before a million titles, and certainly before infinite titles. This model can provide further predictions into markets with long-tail distribution, such as the basis for a model for optimizing the number of each individual item ordered, given its current sales rank and the total number of different titles stocked.

Business models Competitive impact Before a Long Tail works, only the most popular products are generally offered. When the cost of inventory storage and distribution fall, a wide range of products become available. This can, in turn, have the effect of reducing demand for the most popular products. For example, Web content businesses with broad coverage, such as Yahoo! or CNET, may be threatened by the rise of smaller Web sites that focus on niches of content, and cover that content better than the larger sites.

The competitive threat from these niche sites is reduced by the cost of establishing and maintaining them and the bother required for readers to track multiple small Web sites. These factors have been transformed by easy and cheap Web site software and the spread of RSS. Similarly, mass-market distributors like Blockbuster may be threatened by distributors like Netflix, which supply the titles that Blockbuster doesn't offer because they are not already very popular.

Internet companies Some of the most successful Internet businesses have leveraged the Long Tail as part of their businesses. Examples include eBay (auctions), Yahoo! and Google (web search), Amazon (retail) and iTunes Store (music and podcasts) amongst the major companies, along with smaller Internet companies like Audible (audio books) and Netflix (video rental).

Video and multiplayer online games The adoption of video games and massively multiplayer online games such as Second Life as tools for education and training is starting to show a long-tailed pattern. It costs significantly less to modify a game than it has been to create unique training applications, such as those for training in business, commercial flight, and military missions. This has led some to envision a time in which game-based training devices or simulations will be available for thousands of different job descriptions.

Microfinance and microcredit The banking business has used internet technology to reach an ever increasing number of customers. But the most important shift in business model due to the Long Tail has come from the various forms of microfinance developed.

As opposed to e-tailers, micro-finance is a distinctly low technology business. Its aim is to offer very small credits to lower-middle to lower class and poor people, that would otherwise be ignored by the traditional banking business.

The banks that have followed this strategy of selling services to the low-frequency long tail of the sector have found out that it can be an important niche, long ignored by consumer banks.[25] The recipients of small credits tend to be very good payers of loans, despite their non-existent credit history. They are also willing to pay higher interest rates than the standard bank or credit card customer. It also is a business model that fills an important developmental role in an economy.[26]

45

Long Tail Grameen Bank in Bangladesh has successfully followed this business model. In Mexico the banks Compartamos and Banco Azteca also service this customer demographic, with an emphasis on consumer credit. Kiva.org is an organization that provides micro credits to people worldwide, using a distinct direct business model.

User-driven innovation According to the user-driven innovation model, companies can rely on users of their products and services to do a significant part of the innovation work. Users want products that are customized to their needs. They are willing to tell the manufacturer what they really want and how it should work. Companies can make use of a series of tools, such as interactive and internet based technologies, to give their users a voice and to enable them to do innovation work that is useful to the company.

Given the diminishing cost of communication and information sharing (by analogy to the low cost of storage and distribution, in the case of e-tailers), long-tailed user driven innovation will gain importance for businesses.

In following a long-tailed innovation strategy, the company is using the model to tap into a large group of users that are in the low-intensity area of the distribution. It is their collaboration and aggregated work that results in an innovation effort. Social innovation communities formed by groups of users can perform rapidly the trial and error process of innovation, share information, test and diffuse the results.

Eric von Hippel of MIT's Sloan School of Management defined the user-led innovation model in his book Democratizing Innovation.[27] Among his conclusions is the insight that as innovation becomes more user-centered the information needs to flow freely, in a more democratic way, creating a "rich intellectual commons" and "attacking a major structure of the social division of labor".

Marketing The drive to build a market and obtain revenue from the consumer demographic of the Long Tail has led businesses to implement a series of long-tail marketing techniques, most of them based on extensive use of internet technologies. Among the most representative are: • New Media Marketing: The building and managing of social networks and online or virtual communities to extend the reach of marketing to the low-frequency, low-intensity consumer in a cost effective way, often through blogs, RSS feeds and podcasts.

• Buzz Marketing: The strategic use of word of mouth and transmission of commercial information from person to person in an online or real-world environment.

• Viral Marketing: The intentional spreading of marketing messages using preexisting social networks, with an emphasis on the casual, non-intentional and low cost, commonly through YouTube videos, viral emails and standalone microsites.

• Pay Per Click and Search Engine Optimization: The marketing of websites on search engines such as Google, Yahoo and Bing by focusing on long-tail keywords which have less competition.

• Demand Side Platforms/DSPs: Similar to how Search Engine Marketing monetizes the long tail of keywords, auction-oriented buying/selling mechanisms are also viable to help monetize the long tail of ad impressions available across niche publishers in the display advertising realm. Publishers utilize these ad exchange environments, such as Right Media or AdECN, to efficiently sell display inventory that might otherwise go unsold through direct sales force operations. As a result, by January 2011 between 20-25% of all US ad spending was derived from long tail advertisers.[28]

46

Long Tail

Cultural and political impact The Long Tail has possible implications for culture and politics. Where the opportunity cost of inventory storage and distribution is high, only the most popular products are sold. But where the Long Tail works, minority tastes become available and individuals are presented a wider array of choices. The Long Tail presents opportunities for various suppliers to introduce products in the niche category. These encourage the diversification of products. These niche products open opportunities for suppliers while concomitantly satisfying the demands of many individuals — therefore lengthening the tail portion of the Long Tail. In situations where popularity is currently determined by the lowest common denominator, a Long Tail model may lead to improvement in a society's level of culture. The opportunities that arise because of the Long Tail greatly affect society's cultures because suppliers have unlimited capabilities due to infinite storage and demands that were unable to be met prior to the Long Tail become realized.

At the end of the Long Tail, the conventional profit-making business model ceases to exist; instead, people tend to come up with products for varied reasons like expression rather than monetary benefit. In this way, the Long Tail opens up a large space for authentic works of creativity.

Cultural diversity Television is a good example of this: Chris Anderson defines Long Tail TV in the context of "content that is not available through traditional distribution channels but could nevertheless find an audience."[29] Thus, the advent of services such as Television on demand, Pay-per-view and even premium cable subscription services such as HBO and Showtime open up the opportunity for niche content to reach the right audiences, in an otherwise mass medium.

These may not always attract the highest level of viewership, but their business distribution models make that of less importance. As the opportunity cost goes down, the choice of TV programs grows and greater cultural diversity rises.

Distribution of independent content Often presented as a phenomenon of interest primarily to mass market retailers and web-based businesses, the Long Tail also has implications for the producers of content, especially those whose products could not — for economic reasons — find a place in pre-Internet information distribution channels controlled by book publishers, record companies, movie studios, and television networks. Looked at from the producers' side, the Long Tail has made possible a flowering of creativity across all fields of human endeavour. One example of this is YouTube, where thousands of diverse videos — whose content, production value or lack of popularity make them inappropriate for traditional television — are easily accessible to a wide range of viewers.

Contemporary literature The intersection of viral marketing, online communities and new technologies that operate within the Long Tail of consumers and business is described in the novel by William Gibson, Pattern Recognition.

Military applications and security In military thinking, John Robb applies the Long Tail to the developments in insurgency and terrorist movements, showing how technology and networking allows the Long Tail of disgruntled groups and criminals to take on the nation state and have a chance to win.

47

Long Tail

Criticism A 2008 study by Anita Elberse, professor of business administration at Harvard Business School, calls the Long Tail theory into question, citing sales data which shows that the Web magnifies the importance of blockbuster hits.[30] On his blog, Anderson responded to the study, praising Elberse and the academic rigor with which she explores the issue but drawing a distinction between their respective interpretations of where the "head" and "tail" begin. Elberse defined head and tail using percentages, while Anderson uses absolute numbers.[31] Similar results were published

by Serguei Netessine and Tom F. Tan, who suggest that head and tail should be defined by percentages rather than absolute numbers.[32] Also in 2008, a sales analysis of an unnamed UK digital music service by economist Will Page and high-tech entrepreneur Andrew Bud found that sales exhibited a log-normal distribution rather than a power law; they reported that 80 percent of the music tracks available sold no copies at all over a one-year period. Anderson responded by stating that the study's findings are difficult to assess without access to its data.[33] [34]

Notes [1] Levine, David M.;Stephan, David; Krehbiel, Timothy C.;Berenson, Mark L. "Statistics for Managers using Microsoft Excel: 3rd Edition".

Prentice Hall, 2002, p. 124.

[2] World Wide Words article on "long tail" (http:/ / www. worldwidewords. org/ turnsofphrase/ tp-lon1. htm) [3] Anderson, Chris. "The Long Tail" (http:/ / www. wired. com/ wired/ archive/ 12. 10/ tail. html) Wired, October 2004.

[4] Interview (http:/ / www. econtalk. org/ archives/ 2006/ 08/ chris_anderson. html) with Russ Roberts [5] A search for the phrase "long tail" in the database MathSciNet yielded 81 hits, the earliest being a 1946 paper by Brown and Tukey in the Annals of Mathematical Statistics (volume 17, pages 1–12).

[6] Bessis, Jöel "Risk Management in Banking". Wiley, 1995 [7] Wang, Shaun "An Actuarial Index of Right-Tail Risk" (http:/ / www. soa. org/ library/ journals/ north-american-actuarial-journal/ 1998/ april/ naaj9804_5. pdf), North American Actuarial Journal Vol.2 No.2, 1998 [8] Obrist, Hans Ulrich "The Father of Long Tales. An interview with Benoît Mandelbrot" (http:/ / www. edge. org/ documents/ mandelbrot2010/ mandelbrot2010_index. html), www.Edge.org, 2008 [9] See The origins of "The Long Tail" (http:/ / longtail. typepad. com/ the_long_tail/ 2005/ 05/ the_origins_of_. html) [10] "Power Laws, Weblogs and Inequality" (http:/ / www. shirky. com/ writings/ powerlaw_weblog. html), by Clay Shirky. February 8, 2003.

[11] The Long Tail: Definitions: Final Round! (http:/ / longtail. typepad. com/ the_long_tail/ 2005/ 01/ definitions_fin. html#comment-3415583), comment #3 by Josh Petersen.

[12] NPR: The Long Tail (http:/ / www. npr. org/ templates/ story/ story. php?storyId=4156078) [13] Brynjolfsson, Erik; Yu (Jeffrey) Hu, and Michael D. Smith, "Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers" (http:/ / ssrn. com/ abstract=400940), Management Science, 49 (11), November 2003.

[14] Bynjolfsson, Erik; Yu (Jeffrey) Hu, and Michael D. Smith, 2010, "The Longer Tail: The Changing Shape of Amazon’s Sales Distribution Curve" (http:/ / ssrn. com/ abstract=1679991) [15] Brynjolfsson, Erik; Yu (Jeffrey) Hu, and Duncan Simester, 2006, "Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales" (http:/ / ssrn. com/ abstract=953587) [16] http:/ / ssrn. com/ abstract=918142 From Niches to Riches: Anatomy of the Long Tail [17] http:/ / www. wired. com/ wired/ archive/ 14. 07/ longtail_pr. html The Rise and Fall of the Hit [18] Benkler, The Wealth of Networks (http:/ / www. benkler. org/ ) [19] Oestreicher-Singer, Gal and Arun Sundararajan. "Recommendation Networks and the Long Tail of Electronic Commerce" (http:/ / ssrn. com/ abstract=1324064). MIS Quarterly forthcoming. .

[20] MIS Quarterly, Forthcoming Articles (http:/ / www. misq. org/ forthcoming/ ) [21] "Regular rates of popular culture change reflect random copying" (http:/ / dx. doi. org/ 10. 1016/ j. evolhumbehav. 2006. 10. 002) by R.A. Bentley, C.P. Lipo, H.A. Herzog & M.W. Hahn (2007) in Evolution and Human Behavior 28(3): 151-158.

[22] "Why are they so popular?", Roger Highfield, in The Daily Telegraph, June 16, 2004. (http:/ / www. telegraph. co. uk/ connected/ main. jhtml?xml=/ connected/ 2004/ 06/ 16/ ecfpop16. xml& sSheet=/ connected/ 2004/ 06/ 14/ ixconn. html) [23] "Random drift and culture change" (http:/ / journals. royalsociety. org/ content/ 1n1x17lp0c0q65uj) by R.A. Bentley, M.W. Hahn & S.J. Shennan (2007) in Proceedings of the Royal Society B 271: 1443-50 [24] "Shelf space strategy in long tail markets" (http:/ / arXiv. org/ abs/ 0808. 1655) by R.A. Bentley, P. Ormerod and M.E. Madsen, arXive [25] The Global Development Research Center, Microcredit and Microfinance (http:/ / www. gdrc. org/ icm/ ) [26] United Nations Capital Development Fund (http:/ / www. uncdf. org/ english/ microfinance/ ) [27] Democratizing Innovation, MIT Press (http:/ / web. mit. edu/ evhippel/ www/ democ1. htm)

48

Long Tail [28] Joe Mandese, " Long Tail Advertisers Are Back, U.S. Ad Expansion Reaches '03 Levels (http:/ / www. mediapost. com/ publications/ ?fa=Articles. showArticle& art_aid=142294& passFuseAction=PublicationsSearch. showSearchReslts& art_searched="long tail"& page_number=0/ )", 1/04/2011, "" [29] Chris Anderson, " (http:/ / www. longtail. com/ the_long_tail/ 2005/ 01/ long_tail_tv_pa_2. html)",1/17/2005"" [30] Elberse, Anita. "Should You Invest in the Long Tail?" (http:/ / hbr. harvardbusiness. org/ 2008/ 07/ should-you-invest-in-the-long-tail/ ar/ 1) Harvard Business Review, July–August 2008. (Full online article for purchase only.)

[31] Anderson, Chris. "Excellent HBR piece challenging the Long Tail" (http:/ / www. longtail. com/ the_long_tail/ 2008/ 06/ excellent-hbr-p. html). The Long Tail Blog. .

[32] "Rethinking the Long Tail Theory: How to Define 'Hits' and 'Niches'" (http:/ / knowledge. wharton. upenn. edu/ article. cfm?articleid=2338). .

[33] Orlowski, Andrew. "Chopping the Long Tail down to size" (http:/ / www. theregister. co. uk/ 2008/ 11/ 07/ long_tail_debunked/ ) The Register, 7 Nov 2008.

[34] Foster, Patrick. "Long Tail theory contradicted as study reveals 10m digital music tracks unsold" (http:/ / entertainment. timesonline. co. uk/ tol/ arts_and_entertainment/ music/ article5380304. ece) TimesOnline.com, 22 Dec 2008.

References • Anderson, Chris (2006). The Long Tail: Why the Future of Business Is Selling Less of More (http://books. google.com/books?id=O2k0K1w_bJIC&printsec=frontcover). New York: Hyperion. ISBN 1-4013-0237-8.

• The Long Tail (http://demonstrations.wolfram.com/TheLongTail/) a computer model by Fiona Maclachlan, The Wolfram Demonstrations Project

49

Amazon.com

50

Amazon.com Amazon.com, Inc.

Type

Public

Traded as

[1] NASDAQ: AMZN NASDAQ-100 Component S&P 500 Component

Founded

1994

Founder

Jeffrey P. Bezos

Headquarters

Seattle, Washington, U.S.

Area served

Worldwide

Key people

Jeffrey P. Bezos (Chairman, President & CEO)

Industry

Online shopping Cloud computing

Products

Amazon.com Zappos Amazon Studios Amazon Web Services A2Z Development A9.com Alexa Internet Audible.com Endless.com IMDb Kindle Lovefilm Woot [2]

Revenue

US$ 34.204 billion (2010)

Operating income

US$ 1.406 billion (2010)

Net income

US$ 1.152 billion (2010)

Total assets

US$ 18.797 billion (2010)

Total equity

US$ 6.864 billion (2010)

[2] [2] [2]

[2]

[2]

Employees

33,700 (2010)

Slogan

|

Website

Amazon.com

Alexa rank

[3] [4]

16 (April 2011)

Type of site

E-commerce

Advertising

Web banners Videos

Amazon.com

51 Available in

English, Japanese, German, French, Italian & Chinese

Launched

1995

Amazon.com, Inc. (NASDAQ:Â AMZN [1]) is a US-based multinational electronic commerce company.

Headquartered in Seattle, Washington, it is the largest online retailer in the United States, with nearly three times the Internet sales revenue of the runner up, Staples, Inc., as of January 2010.

Jeff Bezos founded Amazon.com, Inc. in 1994 and the site went online in 1995. The company was originally named Cadabra, Inc., but the name was changed when it was discovered that people sometimes heard the name as "Cadaver". The name Amazon.com was chosen because the Amazon River is one of the largest rivers in the world and so the name suggests large size, and also in part because it starts with "A" and therefore would show up near the beginning of alphabetical lists. Amazon.com started as an online bookstore, but soon diversified, selling DVDs, CDs, MP3 downloads, computer software, video games, electronics, apparel, furniture, food, and toys. Amazon has established separate websites in Canada, the United Kingdom, Germany, France, Italy, Japan, and China. It also provides international shipping to certain countries for some of its products.

History Amazon was founded in 1995,[5] spurred by what Bezos called "regret minimization framework", his effort to fend off regret for not staking a claim in the Internet gold rush.[6] Company lore says Bezos wrote the business plan while he and his wife drove from New York to Seattle,[7] although that account is disputed. Bezos flew from New York to Texas, where he picked up a car from a family member, and then drove from Texas to Seattle.

The company began as an online bookstore;[8] while the largest brick-and-mortar bookstores and mail-order catalogs for books might offer 200,000 titles, an online bookstore could offer more. Bezos named the company "Amazon" after the world's largest river. Since 2000, Amazon's logotype is an arrow leading from A to Z, representing customer satisfaction (as it forms a smile); a goal was to have every product in the alphabet.[9]

Jeff Bezos, the founder of Amazon.com

Amazon was incorporated in 1994, in the state of Washington. In July 1995, the company began service and sold its first book on amazon.com - Douglas Hofstadter's Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought.[10] In 1996, it was reincorporated in Delaware. Amazon issued its initial public offering of stock on May 15, 1997, trading under the NASDAQ stock exchange symbol AMZN, at an IPO price of US$18.00 per share ($1.50 after three stock splits in the late 1990s).

Barnes and Noble filed a lawsuit on 12 May 1997, alleging that Amazon's claim to be "The world's largest bookstore" was false. They asserted "[It] isn't a bookstore at all. It's a book broker." The suit was later settled out of court. Amazon continued to call itself "The world's largest bookstore."[11] This was followed by Walmart filing suit on 16 October 1998, alleging that Amazon had stolen trade secrets by hiring former Walmart executives. Although this suit was settled out of court, it led to work restrictions and reassignment of the former Walmart executives.[11] Amazon's initial business plan was unusual: the company did not expect a profit for four to five years. Its "slow" growth provoked stockholder complaints that the company was not reaching profitability fast enough. When the dot-com bubble burst, and many e-companies went out of business, Amazon persevered, and finally turned its first profit in the fourth quarter of 2001: $5 million or 1¢ per share, on revenues of more than $1 billion, but the modest profit was important in demonstrating the business model could be profitable. In 1999, Time magazine named Bezos

Amazon.com Person of the Year, recognizing the company's success in popularizing online shopping.

Acquisitions • 1998: Bookpages.co.uk,[12] a UK online book retailer, which became Amazon UK on October 15, 1998.[13] • 1999: Internet Movie Database (IMDb).;[14] Cambridge, Massachusetts-based PlanetAll, a reminder service; Sunnyvale-based Junglee.com, an XML-based data mining startup[15] Alexa Internet, Accept.com, and Exchange.com[16] • 2003: online music retailer CD Now. • 2004: Joyo.com, a Chinese e-commerce website.[17] • 2005: BookSurge,[18] a print on demand company, and Mobipocket.com, an eBook software company.[19] [20] CreateSpace.com (formerly CustomFlix), a Scotts Valley, California-based distributor of on-demand DVDs.[21] CreateSpace has since expanded to include on-demand books, CDs, and video.

• 2006: Shopbop, a Madison, Wisconsin-based retailer of designer clothing and accessories for women.[22] • 2007: dpreview.com, a London-based digital photography review website; Brilliance Audio, the largest independent publisher of audiobooks in the United States.[23] • 2008: Audible.com; Fabric.com;[24] Box Office Mojo;[25] AbeBooks;[26] Shelfari;[27] (including a 40% stake in LibraryThing and whole ownership of Bookfinder.com, Gojaba.com, and FillZ); Reflexive Entertainment,[28] a casual video game development company.

• 2009: Zappos,[29] an online shoe and apparel retailer[30] Lexcycle[31] • 2010: Touchco.,[32] Woot,[33] Quidsi, Buyvip, Amie Street.

• 2011: Lovefilm[34]

Investments • 2010: LivingSocial, a local deal site.[35]

Spinoffs • 2004: A9.com, a company focused on researching and building innovative technology.

• 2007: Endless.com, an e-commerce brand focusing on shoes.[36]

Merchant partnerships The website CDNOW is powered and hosted by Amazon. Until June 30, 2006, typing ToysRUs.com into a browser would similarly bring up amazon.com's Toys & Games tab; however, this relationship was terminated as the result of a lawsuit.[37] Amazon also hosted and ran the website for Borders bookstores, but this ceased in 2008.[38] Amazon.com powers and operates retail web sites for Target, Sears Canada, Benefit Cosmetics, bebe Stores, Timex, Marks & Spencer, Mothercare, and Lacoste. For a growing number of enterprise clients, currently including the UK merchants Marks & Spencer, Benefit Cosmetics' UK entity, edeals.com, and Mothercare, Amazon provides a unified multichannel platform where a customer can seamlessly interact with some people that they call the retail website, standalone in-store terminals, or phone-based customer service agents. Amazon Web Services also powers AOL's Shop@AOL.

52

Amazon.com

53

Business results Amazon's net income was $35 million in 2003, $588 million in 2004, $359 million in 2005, and $190 million (including a $662 million charge for R&D) in 2006. Retained earnings were negative $1.8 billion in 2006, negative $1.4 billion in 2007, negative $730 million in 2008, and $172 million in 2009.[39] Annual revenues, aided by product line expansion and rapid growth in international sales, grew from $3.9 billion in 2002 to $10.7 billion by 2006.

On November 21, 2005, Amazon entered the S&P 500 index, and, on December 31, 2008, the S&P 100 index. On March 26, 2010, Amazon had a higher market cap than Target Corporation, Home Depot, Costco, Barnes and Noble, and Best Buy, only lagging behind that of Walmart among American brick and mortar retailers.[40]

Locations Amazon.com has offices, fulfillment centers, customer service centers and software development centers across North America, Latin America, Europe and Asia.[41]

Headquarters The company's global headquarters are located on Seattle's South Lake Union. It has offices throughout other parts of greater Seattle, including Union Station, its former headquarters at the PacMed build in Beacon Hill, and The Columbia Center.

Amazon has announced plans to move its headquarters to the South Lake Union neighborhood of Seattle beginning in mid-2010, with full occupancy by 2011. This move will consolidate all Seattle employees onto the new 11-building campus.[42]

Software development centers

amazon.com's former headquarters in the PacMed building in Beacon Hill, Seattle.

The company employs software developers in centers across the globe.

While much of Amazon's software development is in Seattle, other locations include Slough and Edinburgh (Scotland), Dublin (Ireland), Bangalore, Chennai, and Hyderabad (India), Cape Town (South Africa), Iaşi (Romania), Shibuya, Tokyo (Japan), Beijing (China), Orange County (United States), and San Francisco (United States).

Fulfillment and warehousing Fulfillment centers are located in the following cities, often near airports. These centers also provide warehousing and order-fulfillment for third-party sellers:[43] • North America: • USA: Phoenix and Goodyear, AZ; New Castle, DE; Whitestown and Plainfield, IN; Coffeyville, KS; Campbellsville, Hebron (near Cincinnati), Lexington and Louisville, KY; Fernley and North Las Vegas, NV; Nashua, NH; Carlisle, Hazleton, Allentown, Lewisberry, PA; Chattanooga, TN; Sterling, VA; and Bellevue, WA.[44] These U.S. distribution centers have been closed: Dallas/Fort Worth, TX; Red Rock, Nevada; Chambersburg, Pennsylvania; Munster, Indiana; McDonough, Georgia; and a partially built location near Columbia, SC.[45] [46] [47] • Canada: Ontario, Mississauga - Canada Post facility • Europe:

Amazon.com

54

• England: Marston Gate, near Brogborough, Bedfordshire, Peterborough, Doncaster.

• Scotland: Gourock, Inverclyde; Glenrothes (Fife) • Wales: Crymlyn Burrows, Swansea[48] [49] near Jersey Marine[50] • France: Boigny-sur-Bionne (2000) and Saran (2007), Loiret; Montélimar, Drôme (2010) • Germany: Bad Hersfeld, Hesse; Leipzig, Saxony • Asia: • Japan: Ichikawa and Yachiyo, Chiba; Sakai and Daito, Osaka; Kawagoe, Saitama

Amazon.co.uk warehouse, Glenrothes.

• China: Guangzhou, Suzhou, Beijing

Products and services Amazon product lines include books, 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, and groceries.

The company launched amazon.com Auctions, a Web auctions service, in March 1999. However, it failed to chip away at industry pioneer eBay's large market share. amazon.com Auctions was followed by the launch of a fixed-price marketplace business, zShops, in September 1999, and the now defunct Sotheby's/Amazon partnership called amazon.com in November. Auctions and zShops evolved into Amazon Marketplace, a service launched in November 2000 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.

In August 2005,[51] Amazon began selling products under its own Third-generation Amazon Kindle private label, "Pinzon"; the trademark applications indicated that the label would be used for textiles, kitchen utensils, and other household goods.[51] In March 2007, the company applied to expand the trademark to cover a 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."[52] Coverage by the trademark grew to include items such as paints, carpets, wallpaper, hair accessories, clothing, footwear, headgear, cleaning products, and jewelry.[52] On September 2008, Amazon filed to have the name registered. USPTO has finished its review of the application, but Amazon has yet to receive an official registration for the name.

Amazon MP3, its own online music store, launched in the US on September 25, 2007, selling downloads exclusively in MP3 format without digital rights management.[53] This was the first online offering of DRM-free music from all four major record companies.[54] [55] [56] [57] In August 2007, Amazon announced AmazonFresh,[58] 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.[59] AmazonFresh also operated pick-up locations in the suburbs of Bellevue and Kirkland from

Amazon.com summer 2007 through early 2008.

In 2008 Amazon expanded into film production, producing the film The Stolen Child with 20th Century Fox.[60] Amazon's Honor System was launched in 2001 to allow customers to make donations or buy digital content, with Amazon collecting a percentage of the payment plus a fee. The service was discontinued in 2008.[61] and replaced by Amazon Payments. Amazon launched Amazon Web Services (AWS) in 2002, which provides programmatic access to latent features on its website. Amazon also created "channels" to benefit certain causes. In 2004, Amazon's "Presidential Candidates" allowed customers to donate $5–200 to the campaigns of 2004 U.S. presidential hopefuls.

Amazon has periodically reactivated a Red Cross donation channel after crises such as the 9/11, Hurricane Katrina, and the 2004 earthquake and tsunami in the Indian Ocean. By January 2005, nearly 200,000 people had donated over $15.7 million in the US.[62]

Amazon Web Services Amazon Web Services (AWS) was first launched as a public beta of Amazon Elastic Compute Cloud running Microsoft Windows Server and Microsoft SQL Server.[63] This was later expanded to several operating systems including various flavors of Linux and OpenSolaris.

In March 2006, Amazon launched an online storage service called Amazon Simple Storage Service (Amazon S3).

An unlimited number of data objects, from 1Â byte to 5Â gigabytes in size, can be stored in S3 and distributed via HTTP or BitTorrent. The service charges monthly fees for data stored and transferred. In 2006, Amazon introduced Amazon Simple Queue Service (Amazon SQS), a distributed queue messaging service, and product wikis (later folded into Amapedia) and discussion forums for certain products using guidelines that follow standard message board conventions. Also in 2006, Amazon introduced Amazon Elastic Compute Cloud (Amazon EC2), a virtual site farm, allowing users to use the Amazon infrastructure to run applications ranging from running simulations to web hosting. In 2008, Amazon improved the service adding Elastic Block Store (EBS), offering persistent storage for Amazon EC2 instances and Elastic IP addresses, static IP addresses designed for dynamic cloud computing. Amazon introduced SimpleDB, a database system, allowing users of its other infrastructure to utilize a high reliability high performance database system.

Amazon continues to refine and add services to AWS, adding such services as Scalable DNS service (Amazon Route 53), payment handling, and AWS specific APIs for their Mechanical Turk service.

Amazon Prime Amazon Prime offers free two day shipping with no minimum purchase amount for a flat annual fee, as well as discounted priority shipping rates.[64] Amazon launched the program in the continental United States in 2005, in Japan, the United Kingdom and Germany in 2007, and in France (as "Amazon Premium") in 2008. In February 2011, Amazon Prime membership was expanded to include access to 5,000 instant streaming movies and TV shows at no additional cost.[65]

55

Amazon.com

Other services Launched in 2005, Amazon Shorts offers exclusive short stories and non-fiction pieces from best-selling authors for immediate download. By June 2007, the program had over 1,700 pieces and was adding about 50 new pieces per week. In November 2005, amazon.com began testing Amazon Mechanical Turk, an application programming interface (API) allowing programs to dispatch tasks to human processors.

In 2007 Amazon launched Amapedia, a now-defunct wiki for user-generated content to replace ProductWiki, the video on demand service Amazon Unbox, and Amazon MP3, which sells downloadable MP3s.[66] Amazon's terms of use agreements restrict use of the MP3s, but Amazon does not use DRM to enforce those terms.[67] Amazon MP3 sells music from the Big 4 record labels EMI, Universal, Warner Bros. Records, and Sony BMG, as well as independents. Prior to the launch of this service, Amazon made an investment in Amie Street, a music store with a variable pricing model based on demand.[68] Also in 2007 Amazon launched Amazon Vine, which allows reviewers free access to pre-release products from vendors in return for posting a review, as well as payment service specifically targeted at developers, Amazon FPS. In November 2007, Amazon launched Amazon Kindle, an e-book reader which downloads content over "Whispernet", via the Sprint Nextel EV-DO wireless network. The screen uses E Ink technology to reduce battery consumption to provide a more legible display. As of March, 2011, the stated library numbers over 850,000 titles. In December 2007, In August 2007, Amazon launched an invitation-only beta-test for online grocery delivery. It has since rolled out in several Seattle, Washington suburbs.

In January 2008 Amazon began rolling out their MP3 service to subsidiary websites worldwide.[69] In December, 2008, Amazon MP3 was made available in the UK. In September, IMDB and amazon.com launched a Music metadata browsing site with wiki-like user contribution.[70] In November, Amazon partnered with Fisher-Price, Mattel, Microsoft and Transcend to offer products with minimal packaging to reduce environmental impact and frustration with opening "clamshell" type packaging.[58] Amazon Connect enables authors to post remarks on their book pages to customers. WebStore allows businesses to create custom e-commerce websites using Amazon technology. Sellers pay a commission of 7 percent, including credit-card processing fees and fraud protection, and a subscription fee of $59.95/month for an unlimited number of webstores and listings.

In July 2010 Amazon announced that e-book sales for its Kindle reader outnumbered sales of hardcover books for the first time ever during the second quarter of 2010. Amazon claims that during that period sold 143 e-books for every 100 hardcover books, including hardcovers for which there is no digital edition; and during late June and early July sales rose to 180 digital books for every 100 hardcovers.[71] In 2010 Amazon launched two publishing imprints, AmazonEncore[72] and AmazonCrossing.[73] AmazonEncore publishes books that were previously self-published.[74] AmazonCrossing translates foreign works into English, the first books published—the French-language novel The King of Kahel and the German-language novel The Hangman's Daughter—were released in November and December 2010, respectively.[75]

Amazon.com exclusives An Amazon.com exclusive is a product, usually a DVD, that is available exclusively on Amazon.com. Some DVDs are produced by the owner of the film/product, while others are produced by Amazon.com, itself. The DVDs produced by Amazon are made using their Createspace program, in which DVDs are created once ordered using DVD-R technology. The DVDs are then shipped about two days later after being produced. Some DVDs (such as the Jersey Shore Season 1 or The Unusuals Season 1) first release their DVD on Amazon as an Amazon.com Exclusive for a limited time before being released elsewhere.

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Website The domain amazon.com attracted at least 615 million visitors annually by 2008, twice the number of walmart.com.[76] Amazon attracts approximately 65 million customers to its U.S. website per month.[77] The company has also invested heavily on a massive amount of server capacity for its website, especially to handle the excessive traffic during the December Christmas holiday season.[78] There are different versions of the website for different countries, such as amazon.co.uk, amazon.fr, amazon.de, amazon.jp, amazon.ca. These sites vary in assortment and prices.

Reviews Amazon allows users to submit reviews to the web page of each product. Reviewers must rate the product on a rating scale from one to five stars. As with most rating scales, one star stands for the product being abysmal, five stars meaning that the item is stellar. Amazon provides an optional badging option for reviewers which indicate the real name of the reviewer (based on confirmation of a credit card account) or which indicate that the reviewer is one of the top reviewers by popularity. Customers may comment or vote on the reviews, indicating whether or not they found it helpful.

Amazon.com's customer reviews are monitored for indecency, but do permit negative comments. Robert Spector, author of the book amazon.com, describes how "when publishers and authors asked Bezos why amazon.com would publish negative reviews, he defended the practice by claiming that amazon.com was 'taking a different approach...we want to make every book available – the good, the bad, and the ugly...to let truth loose'" (Spector 132). Allegations have been made that Amazon has selectively deleted negative reviews of Scientology related items despite compliance with comments guidelines.[79] [80]

Content search "Search Inside the Book" is a feature which allows customers to search for keywords in the full text of many books in the catalog.[81] [82] The feature started with 120,000 titles (or 33 million pages of text) on October 23, 2003.[83] There are currently about 250,000 books in the program. Amazon has cooperated with around 130 publishers to allow users to perform these searches.

To avoid copyright violations, amazon.com does not return the computer-readable text of the book. Instead, it returns a picture of the matching page, disables printing, and puts limits on the number of pages in a book a single user can access. Additionally, customers can purchase online access to some of the same books via the "Amazon Upgrade" program.

Third-party sellers Amazon derives about 40 percent of its sales from affiliate marketing called "Amazon Associates" and third-party sellers who sell products on Amazon. Associates receive a commission for referring customers to Amazon by placing links on their websites to Amazon, if the referral results in a sale. Worldwide, Amazon has "over 900,000 members" in its affiliate programs.[84] Amazon reported over 1.3 million sellers sold products through Amazon's World Wide Web sites in 2007. Unlike eBay, Amazon sellers do not have to maintain separate payment accounts; all payments are handled by Amazon.

Associates can access the Amazon catalog directly on their websites by using the Amazon Web Services (AWS) XML service. A new affiliate product, aStore, allows Associates to embed a subset of Amazon products within, or linked to another website. In June 2010, Amazon Seller Product Suggestions was launched (rumored to be internally called "Project Genesis") to provide more transparency to sellers by recommending specific products to third party sellers to sell on Amazon. Products suggested are based on customers' browsing history.[85]

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Amazon.com A January 2010 survey of third-party sellers by Auctionbytes.com [86] found that Amazon was 4th overall.[87] amazon.com placed second in "Profitability". Its lowest rating, but still above average, was in "Ease of Use". Sellers felt Amazon had clearly defined rules, provided a steady stream of traffic to their listings, and put less emphasis on a community component. amazon.com came in second in the Recommended Selling Venue category.

Controversies Since its founding, in summary, the website Amazon.com has attracted criticism and controversy from multiple sources over its actions, such as its "1-Click patent" claims, anti-competitive actions, price discrimination, anti-unionization efforts, Amazon Kindle remote content removal, taking public subsidies and avoiding sales tax collection duties. Various decisions over whether to censor or publish content such as the WikiLeaks web site; LGBT book sales rank; and works containing libel, facilitating dogfight, cockfight, or pedophile activities have been controversial.

Sales and use taxes Amazon is under increasing legal and political pressure from state governments, traditional retailers and other groups because of its refusal to collect sales tax in all but 40 of the 45 states with a statewide sales tax (as of May, 2011).

Those 40 states include at least 12 where Amazon has a clear physical presence.[88] via distribution centers and wholly owned subsidiaries in states where it has no physical presence. Critics of Amazon argue that its refusal to collect sales taxes has given it an unfair advantage over traditional retailers. While customers are required to remit use tax directly to their state, few customers do so.

California Rep. Nancy Skinner pushed legislation to tax online sales that was approved in 2009 as part of the state budget. Gov. Arnold Schwarznegger vetoed the legislation.[89] On 19 January 2011 Skinner introduced similar legislation in the form of AB153. The bill requires out-of-state online sellers with affiliates in California to collect sales tax on purchases made by state residents. The affiliate provision was included to ensure that only sellers with a California nexus are taxed, as required by federal law.[90] "This legislation will close the current loophole in tax law which has allowed out-of-state companies to avoid collecting California sales and use tax," stated Skinner.[89] Skinner estimated that AB153 could produce between $250 million and $500 million per year in new revenue. She and other supporters of the bill believe that the election of Jerry Brown to the governorship and support from retailers such as Barnes & Noble will help the measure become law.[91] In 2011 Amazon threatened to terminate roughly 10,000 of its affiliates located in California if legislation pending in the state legislature to deem such affiliates as constituting a nexus that requires the collection of sales tax is passed.

California affiliates would no longer receive commissions on referrals to Amazon.[92] As of March 2011 four bills are pending in the state legislature would define the use of associates located in California for sales referrals as activity subject to taxation by California. In a letter addressed to California's Board of Equalization, the agency responsible for collecting sales taxes, Amazon called such legislation "unconstitutional" and said it would terminate its California affiliates if passed. "If any of these new tax collection schemes were adopted, Amazon would be compelled to end its advertising relationships with well over 10,000 California-based participants in the Amazon 'Associates Program,'" wrote Paul Misener, Amazon's Vice President for Global Public Policy. Responding to Amazon, Nancy Skinner said, "This is really about e-fairness. It's really to be fair and show our California Business that we're not hanging them out to dry.".[93] According to the American Independent Business Alliance, the corporation has operations in at least seven California cities and should be forced to collect sales tax regardless of its threats.[88]

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Amazon.com Missouri Two legislators in Missouri have proposed joining the Streamlined Sales Tax Project to ensure that the state collects sales tax on goods shipped from online retailers located out-of-state. Currently Missourians are required to remit use tax for purchases made online but the state government has no practical method to force compliance. Legislative staff report that taxing online sales should significantly increase revenue. Rep. Margo McNeil cited a University of Tennessee study saying that Missouri stands to lose $187 million in 2011 by not taxing online sales. McNeil also said the streamlined sales tax is a good way to end the unfair advantages enjoyed by online retailers over traditional businesses. "The tax is a step in trying to even the playing field because right now we have a lot of people who are going in and using the stores as a showroom and then going home and buying on the Internet ...," McNeil said.[94] New York In 2008, New York State passed a law that would force online retailers to collect sales taxes on shipments to state residents.[95] Shortly after the law was signed, amazon.com filed a complaint in the New York Supreme Court objecting to the law.[95] The complaint wasn't based on whether in-state customers should pay tax, but upon the long-standing practice of it being the responsibility of the customer to report the sales tax (known as use tax in this case) and not that of the out-of-state businesses.[95] The lawsuit was tossed out of court in January 2009, when New York State Supreme Court Justice Eileen Bransten stated "there is no basis upon which Amazon can prevail."[96] Texas In 2010, Texas sent a demand letter for $269 million in sales taxes that the state argues should have been collected and remitted for sales to Texas customers. This dollar amount covers uncollected taxes from December 2005 to December 2009 and also includes penalties and interest. Texas authorities began an investigation of Amazon's tax status after a May 2008 report by The Dallas Morning News questioned why Amazon does not collect sales tax from Texas customers despite maintaining a distribution center in Irving near the Dallas/Fort Worth International Airport.

Amazon argues that this distribution center, owned by Amazon.com KYDC LLC, located at the same address as Amazon's corporate headquarters in Seattle, is a legally separate entity and thus does not establish a physical presence in Texas that would require Amazon to collect sales taxes.[97] Amazon has decided to close a distribution center located in Irving in order to avoid future attempts by Texas to force the collection of sales taxes. 119 workers will lose their jobs when the facility closes.[98] Texas Comptroller Susan Combs faced skeptical questions and criticism from members of the Texas Senate Finance Committee 16 February 2011 over her attempts to collect back sales tax from Amazon.com. Combs replied by saying that all businesses must obey the law "It is our belief that this is a very, very clear issue about nexus. As I say, this started probably because of catalog sales 47 years ago in 1963," said Combs. Combs also cited a Texas law to back up her argument that Amazon is required to collect sales taxes: "A retailer is engaged in business in this state if the retailer: 1.) maintains, occupies, or uses in this state permanently, temporarily, directly, indirectly or through a subsidiary or agent, however named, an office, place of distribution, sales or sample room or place, warehouse, storage place, or any other place of business.”[99] The Dallas Morning News published an editorial supporting Combs' efforts to collect sales tax from Amazon.com on 17 February 2011. The paper wrote, "It defies logic that a book bought online can elude sales tax while the same book bought in a bookstore can’t. A sales transaction is a sales transaction, and if one is taxed, why shouldn’t the other be taxed as well?"[100] In March 2010 State Rep. Linda Harper-Brown filed House Bill 2719. House Bill 2719 would allow Amazon to avoid Texas sales tax by amending the state tax code to exempt companies or individuals from being classified as retailers or being ordered to provide state agencies with information on purchases made in Texas. if they make use of "only a fulfillment center...or computer server." House Bill 2719 is stands in sharp contrast to House Bill 2403, introduced by Rep. John Otto. House Bill 2403 would close loopholes in the Texas tax code that support Amazon's claim of being exempt from collecting sales tax. [101]

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Amazon.com Tennessee Amazon attempted to avoid being required to collect Tennessee sales tax during negotiations with economic development officials to build two warehouses outside of Chattanooga. Amazon argues that its warehouses are not directly affiliated with the company and thus do not create a nexus that would require the collection of sales taxes.

Tennessee revenue officials will not reveal any specific information on a deal with Amazon as they claim doing so would violate state confidentiality laws.[102] Colorado In response to HB 10-1193 passed in 2010 Amazon.com terminated its relationship with all affiliates located in Colorado. The bill originally sought to tax sales to Colorado residents by online retailers with Colorado affiliates.

The bill was amended to remove all reference to affiliates in order to discourage Amazon from cutting ties with them. The final bill required large online retailers to either remit tax on sales to Colorado residents or provide information on Colorado customers to the state. In spite of this move Amazon still decided to terminate its Colorado affiliates.[103] Illinois Illinois has passed legislation to tax online sales made to consumers located in the state. In March 2011 Gov. Pat Quinn signed the "Main Street Fairness Act," which targets online retailers with Illinois affiliates. Quinn said the act would help create fair competition and generate more revenue for the state. Illinois estimates that it loses $153 million in sales taxes every year due to the fact that out-of-state retailers do not remit sales tax on purchases made by Illinois residents. Some online retailers have responded to this legislation and similar efforts in other states by threatening income tax revenues collected from their online affiliates. Amazon, along with Overstock.com, has threatened to terminate affiliates in states that demand that sales tax be collected by online retailers, including Illinois. Wal-Mart responded by inviting online businesses based in Illinois to join its affiliate network.[104] Affiliates Amazon is often able to overcome these threats by cutting ties with local partners or leaving the state in question.

Amazon severed its relationships with affiliates in Colorado due to efforts by the state government to collect sales tax on internet purchases. Amazon has threatened similar action against affiliates in Illinois over the same issue.[105]

Kindle content removal In July 2009, The New York Times reported that amazon.com deleted all customer copies of certain books published

by MobileReference,[106] including the books Nineteen Eighty-Four and Animal Farm from users' Kindles. This action was taken with neither prior notification nor specific permission of individual users. Customers did receive a refund of the purchase price and, later, an offer of an Amazon gift certificate or a check for $30. The ebooks were initially published by MobileReference on Mobipocket for sale in Australia only—due to those works having fallen into public domain in Australia—however, when the ebooks were automatically uploaded to Amazon by MobiPocket, the territory restriction was not honored, and the book was allowed to be sold in territories such as the United States where the copyright term had not expired.

Sale of Wikipedia's material as books German-speaking press and the blogosphere have criticized Amazon for selling tens of thousands of print on demand books which reproduced Wikipedia articles.[107] [108] [109] [110] These books are produced by an American company named Books LLC and by three Mauritian subsidiaries of the German publisher VDM: Alphascript Publishing, Betascript Publishing and Fastbook Publishing. Amazon did not acknowledge this issue raised on blogs and some customers that have asked the company to withdraw all these titles from its catalog.[108] The collaboration between amazon.com and VDM Publishing was started in 2007.[111]

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Pedophile guide On November 10, 2010, a controversy arose over the sale by Amazon of an e-book by Phillip R. Greaves entitled The Pedophile's Guide to Love and Pleasure: a Child-lover's Code of Conduct.[112] Readers threatened to boycott Amazon over its selling of the book, which was described by critics as a "pedophile guide". Amazon initially defended the sale of the book, saying that the site "believes it is censorship not to sell certain books simply because we or others believe their message is objectionable"[113] and that the site "supported the right of every individual to make their own purchasing decisions". However, the site later removed the book.[114] The San Francisco Chronicle wrote that Amazon "defended the book, then removed it, then reinstated it, and then removed it again".[113] Christopher Finan, the president of the American Booksellers Association for Free Expression, argued that Amazon has the right to sell the book as it is not child pornography or legally obscene since it does not have pictures. On the other hand, Enough is Enough, a child safety organization, issued a statement saying that the book should be removed and that it "lends the impression that child abuse is normal".[115] People for the Ethical Treatment of Animals, citing the removal of The Pedophile's Guide from Amazon, urged the website to also remove books on dog fighting from its catalogue.[116] Greaves was arrested on December 20, 2010 at his Pueblo, CO home on a felony warrant issued by the Polk County Sheriff's Office in Lakeland, FL. Internet Crime Detectives ordered a signed hard copy version of Greaves' book and had it shipped to the agency's jurisdiction. According to Sheriff Grady Judd, upon receipt of the book, Greaves violated local laws prohibiting the distribution of "obscene material depicting minors engaged in harmful conduct," a third degree felony.[117]

WikiLeaks hosting On December 1, 2010, Amazon stopped hosting the website associated with the whistle-blowing organization WikiLeaks. Amazon did not initially comment on whether it forced the site to leave.[118] The New York Times reported: "Senator Joseph I. Lieberman, independent of Connecticut, said Amazon had stopped hosting the WikiLeaks site on Wednesday after being contacted by the staff of the Homeland Security and Governmental Affairs Committee."[119] In a later press release issued by Amazon.com, they denied that they had terminated wikileaks.org due to either "a government inquiry" or "massive DDOS attacks". They claimed that it was due to "a violation of [Amazon's] terms of service", because wikileaks.org was "securing and storing large quantities of data that isn't rightfully theirs, and publishing this data without ensuring it won’t injure others" [120] Amazon's action demonstrated, in the eyes of Wikileaks founder Julian Assange, that Amazon (a USA based company) was in a jurisdiction that "suffered a free speech deficit".[121] Amazon's action led to a public letter from Daniel Ellsberg, famous for leaking the Pentagon Papers during the Vietnam war. Ellsberg stated that he was "disgusted by Amazon’s cowardice and servility", likening it to "China’s control of information and deterrence of whistle-blowing", and he called for a "broad" and "immediate" boycott of Amazon.[122]

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Entrepreneurship by former employees A number of companies have been started and founded by former Amazon.com employees.[123] • • • • • • • • • • • • • •

BankBazaar.com was founded by Arjun Shetty, a former senior product manager at amazon.com Evri was led by Neil Roseman, a former VP at amazon.com Findory was founded by Greg Linden Flipkart was founded by Sachin Bansal and Binny Bansal, former Amazon India employees.[124] Foodista was founded by Barnaby Dorfman Hulu is led by Jason Kilar, a former SVP at amazon.com Jambool/SocialGold was co-founded by former amazon.com engineers Vikas Gupta and Reza Hussein Medio Systems was founded by Brian Lent, a former Director of Information Technology at amazon.com Quora was co-founded by ex-amazon.com (and Facebook) engineer Charlie Cheever TeachStreet was founded by Dave Schappell, an early amazon.com product manager The Book Depository was founded by Andrew Crawford, former Amazon.co.uk employee.

TrackSimple was founded by Jon Ingalls and Ajit Banerjee Trusera was founded by Keith Schorsch, an early Amazonian Pelago was co-founded by Jeff Holden, a former SVP at amazon.com and Darren Vengroff, a former Principal Engineer

• Wikinvest was founded by Michael Shea • Yellowleg.com was founded by Aashish Gupta, former Amazon.com and Amazon India employee.

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Further reading • Robert Spector (2000). amazon.com - Get Big Fast : Inside the Revolutionary Business Model That Changed the World. Harper Collins Publishers. ISBN 0-06-662041-4.

• Mike Daisey (2002). 21 Dog Years. Free Press. ISBN 0-7432-2580-5.

• Mara Friedman (2004). amazon.com for Dummies. Wiley Publishing. ISBN 0-7645-5840-4.

• James Marcus (2004). Amazonia: Five Years at the Epicenter of the Dot.Com Juggernaut. W.W. Norton.

ISBN 1-56584-870-5.

• "A conversation with Werner Vogels" (http://www.bloggerautofollow.com/modules.php?name=Content& pa=showpage&pid=388), ACM Queue, May 2006

External links • Official website (http://http://www.amazon.com/) • Official mobile site (http://www.amazon.com/gp/aw/) • Christine Frey & John Cook (2004-01-28). "How Amazon.com survived, thrived and turned a profit" (http:// www.seattlepi.com/business/158315_amazon28.html). seattlepi.com.

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Image Sources, Licenses and Contributors

Image Sources, Licenses and Contributors Image:Tescologo.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tescologo.svg License: unknown Contributors: File:Increase2.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Increase2.svg License: unknown Contributors: Sarang File:TescoHouseCheshunt.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:TescoHouseCheshunt.jpg License: Creative Commons Attribution-Sharealike 2.0 Contributors: Gordon Joly from London, UK File:Tescokulim1.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tescokulim1.jpg License: unknown Contributors: File:Tesco - Potters Bar - geograph.org.uk - 239291.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco_-_Potters_Bar_-_geograph.org.uk_-_239291.jpg License: unknown Contributors: Sevela.p File:Tesco's store Evesham - geograph.org.uk - 5736.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco's_store_Evesham_-_geograph.org.uk_-_5736.jpg License: unknown Contributors: Pit-yacker, Sevela.p File:Dotty Turnbull .png Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Dotty_Turnbull_.png License: unknown Contributors: File:Tesco, Batley.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco,_Batley.jpg License: Creative Commons Attribution-Sharealike 3.0 Contributors: User:Mtaylor848 Image:20040801-008-tesco.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:20040801-008-tesco.jpg License: Creative Commons Zero Contributors: User:Ghouston File:TescoExpress.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:TescoExpress.jpg License: Creative Commons Attribution-Sharealike 3.0 Contributors: User:Rodhullandemu File:TescoOneStop.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:TescoOneStop.jpg License: Creative Commons Attribution-Sharealike 3.0 Contributors: User:Rodhullandemu File:Steady.PNG Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Steady.PNG License: Public Domain Contributors: User:Dodoïste File:Tesco Petrol Station, St Mellons - geograph.org.uk - 92048.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco_Petrol_Station,_St_Mellons_-_geograph.org.uk_-_92048.jpg License: unknown Contributors: Mtaylor848 Image:TescoTechLogo 03.png Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:TescoTechLogo_03.png License: unknown Contributors: File:Flag of the Czech Republic.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_the_Czech_Republic.svg License: Public Domain Contributors: special commission (of code): SVG version by cs:-xfi-. Colors according to Appendix No. 3 of czech legal Act 3/1993. cs:Zirland.

File:Flag of Hungary.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_Hungary.svg License: Public Domain Contributors: User:SKopp File:Flag of Ireland.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_Ireland.svg License: Public Domain Contributors: User:SKopp File:Flag of Japan.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_Japan.svg License: Public Domain Contributors: Various File:Decrease2.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Decrease2.svg License: Public Domain Contributors: User:Sarang File:Flag of Malaysia.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_Malaysia.svg License: Public Domain Contributors: User:SKopp File:Flag of Poland.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_Poland.svg License: Public Domain Contributors: User:Mareklug, User:Wanted File:Flag of Slovakia.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_Slovakia.svg License: Public Domain Contributors: User:SKopp File:Flag of South Korea.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_South_Korea.svg License: Public Domain Contributors: Various File:Flag of Thailand.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_Thailand.svg License: Public Domain Contributors: Andy Dingley, Chaddy, Duduziq, Emerentia, Fry1989, Gabbe, Gurch, Homo lupus, Juiced lemon, Klemen Kocjancic, Mattes, Neq00, Paul 012, Rugby471, Sahapon-krit hellokitty, TOR, Teetaweepo, Xiengyod, Zscout370, Δ, 24 anonymous edits File:Flag of Turkey.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_Turkey.svg License: Public Domain Contributors: User:Dbenbenn File:Flag of the United Kingdom.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_the_United_Kingdom.svg License: Public Domain Contributors: User:Zscout370 File:Flag of the United States.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Flag_of_the_United_States.svg License: Public Domain Contributors: User:Dbenbenn, User:Indolences, User:Jacobolus, User:Technion, User:Zscout370 File:Tesco express prague - belehradska street.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco_express_prague_-_belehradska_street.jpg License: Creative Commons Attribution-Sharealike 3.0 Contributors: User:Kucmel007 Image:POL Prokocim Tesco.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:POL_Prokocim_Tesco.jpg License: Public Domain Contributors: Users Vindicator, Paulka on pl.wikipedia File:Tesco Kamenné námestie.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco_Kamenné_námestie.jpg License: Public Domain Contributors: Wizzard File:Tesco-Lotus.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco-Lotus.jpg License: Public Domain Contributors: User:Matttes Image:Fresh & Easy Las Vegas, Sun City Summerlin.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Fresh_&_Easy_Las_Vegas,_Sun_City_Summerlin.jpg License: Public Domain Contributors: Uforik at en.wikipedia Image:Tesco Market Share.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco_Market_Share.jpg License: Creative Commons Attribution-Sharealike 2.5 Contributors: User:Drunkenmonkey. Original uploader was Drunkenmonkey at en.wikipedia File:Tesco, Burscough.JPG Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco,_Burscough.JPG License: Public Domain Contributors: User:Small-town hero File:Baldock Tesco.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Baldock_Tesco.jpg License: Creative Commons Attribution-Sharealike 3.0 Contributors: User:Traveler100 File:Tesco's Superstore, Swindon - geograph.org.uk - 118815.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco's_Superstore,_Swindon_-_geograph.org.uk_-_118815.jpg License: unknown Contributors: Sevela.p File:Praha, Národní třída, Tesco.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Praha,_Národní_třída,_Tesco.jpg License: Creative Commons Attribution-Sharealike 2.5 Contributors: User:Aktron File:Tesco headquarters Czech.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco_headquarters_Czech.jpg License: Creative Commons Attribution-Sharealike 3.0 Contributors: User:Kucmel007 File:Tesco in Brno.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco_in_Brno.jpg License: Creative Commons Attribution-Sharealike 3.0 Contributors: User:Sevela.p File:Tesco Mikulov.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco_Mikulov.jpg License: Public Domain Contributors: Original uploader was KRAX at cs.wikipedia File:Tesco Express - geograph.org.uk - 230620.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco_Express_-_geograph.org.uk_-_230620.jpg License: unknown Contributors: Sevela.p File:TescoexpressArsenal.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:TescoexpressArsenal.jpg License: Creative Commons Attribution-Sharealike 3.0 Contributors: User:Peter Suranyi File:Northallerton Tesco.JPG Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Northallerton_Tesco.JPG License: Creative Commons Attribution-Sharealike 3.0 Contributors: User:Chrisloader File:Tesco Metro Oxford.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tesco_Metro_Oxford.jpg License: Creative Commons Attribution-Sharealike 3.0 Contributors: User:Chrisloader Image:Tescoclubcard.JPG Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tescoclubcard.JPG License: unknown Contributors: Image:Tescodotcom.JPG Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Tescodotcom.JPG License: unknown Contributors: -

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Image Sources, Licenses and Contributors File:Automated online assistant.png Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Automated_online_assistant.png License: Attribution Contributors: User:Mikael Häggström Image:Long tail.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Long_tail.svg License: Public Domain Contributors: User:Husky File:Longtail.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Longtail.svg License: Public Domain Contributors: User:Pbroks13 File:Amazon.com-Logo.svg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Amazon.com-Logo.svg License: Trademarked Contributors: Original uploader was Afrank99 at de.wikipedia Image:Jeff Bezos 2005.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Jeff_Bezos_2005.jpg License: Creative Commons Attribution 2.0 Contributors: Ardfern, Edward, FlickreviewR, John Vandenberg, MBisanz, Schreibvieh Image:Seattle-PacMed-2571.JPG Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Seattle-PacMed-2571.JPG License: Creative Commons Attribution-Sharealike 2.5 Contributors: User:Vmenkov Image:Amazon warehouse Glenrothes.jpg Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Amazon_warehouse_Glenrothes.jpg License: Public Domain Contributors: Original uploader was Mcwesty at en.wikipedia Image:Amazon Kindle 3.JPG Source: https://secure.wikimedia.org/wikipedia/en/w/index.php?title=File:Amazon_Kindle_3.JPG License: GNU Free Documentation License Contributors: NotFromUtrecht, Petrus Adamus

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License

License Creative Commons Attribution-Share Alike 3.0 Unported http:/ / creativecommons. org/ licenses/ by-sa/ 3. 0/

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