Amazon: Innovator or Destroyer? (Or Both?)

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Information about Amazon: Innovator or Destroyer? (Or Both?)
Business & Mgmt

Published on March 20, 2014

Author: CallahanCreek

Source: slideshare.net

Description

Amazon often appears to be a contradiction. Their gross revenues and market capitalization have taken off over the last five years, yet profits are meager or absent. How can a company be so lauded, yet not be delivering the profits investors expect from a vibrant, growing company? Kent Stones examines four significant investments Amazon has made since 2004, and how they have set the foundation for Amazon to become the defacto distribution system in the United States. He outlines four potential scenarios retailers will face and the type of companies that will thrive in each.

A M A Z O N I N N O VAT O R O R D E S T R O Y E R ? ( O R B O T H ? )

2003/12/31 2005/3/31 2006/6/30 2007/9/28 2008/12/31 2010/3/31 2011/6/30 2012/9/28 2013/12/30 $0 $40 $80 $120 $160 $200 $240 $280 $320 $360 $400 -2.50% -1.25% 0% 1.25% 2.50% 3.75% 5.00% A M A Z O N ’ S P E R F O R M A N C E MarketCapitalization NetProfitMargin Why the sudden decline? Yet Market Cap kept rising

“We seek to offer the Earth's Biggest Selection and to be the Earth's most customer-centric company, where customers can find and discover anything they may want to buy online.”

Amazon Timeline A m a z o n d e b u t s o n t h e w e b 1995 20132000 2005 2010 A m a z o n g o e s p u b l i c . H i t s 1 M M c u s t o m e r s A d d s m u s i c a n d v i d e o A d d s t o y s , e l e c t ro n i c s , t o o l s , h a rd w a re R e p o r t s f i r s t n e t p ro f i t F o c u s o n a d d i n g c o n t e n t a n d p ro p e r t i e s O r i g i n a l K i n d l e l a u n c h A n n o u n c e K i n d l e F i re Ta b l e t P r i m e A i r a n n o u n c e d B e g i n i n v e s t i n g i n t e c h n o l o g y ( A 9 , L a b 1 2 6 ) L a u n c h A m a z o n F re s h , g ro c e r y d e l i v e r y s e r v i c e M a j o r Wa r e h o u s e E x p a n s i o n A m a z o n P r i m e Four key investments

$0 $40 $80 $120 $160 $200 $240 $280 $320 $360 $400 2003/12/31 2005/3/31 2006/6/30 2007/9/28 2008/12/31 2010/3/31 2011/6/30 2012/9/28 2013/12/30 -2.50% -1.25% 0% 1.25% 2.50% 3.75% 5.00% M a j o r Wa r e h o u s e E x p a n s i o n B e g i n i n v e s t i n g i n t e c h n o l o g y ( A 9 , L a b 1 2 6 ) L a u n c h A m a z o n F re s h , g ro c e r y d e l i v e r y s e r v i c e A m a z o n P r i m e

Software Hardware Building a foundation

Prime

Establishing a habit

P O W E R E D B Y A C O M P L E X D ATA B A S E W I T H A S I M P L E P H I L O S O P H Y “Chaotic Storage System”

Compare Fulfillment Costs

B Y 2 0 1 5 , E S T I M AT E A C C E S S T O 5 0 % O F P O P U L AT I O N Amazon Fulfillment Centers

Automation: 80% of shipments, within 30 minutes of order

Technology + Scale + Ecosystem + Storage + Fullfillment = Defacto Distribution System

So what does all this mean?

R E TA I L E R S S H O U L D B E S C A R E D S H * T L E S S

Possible Retail Scenarios Ubiquitous Home Delivery Selective Home Delivery High Touch Environment Low Touch Environment

Possible Retail Scenarios Ubiquitous Home Delivery Selective Home Delivery High Touch Environment Low Touch Environment • Consumers want to get out • Less about product selection • More about entertainment • Don’t desire to transport goods • Delivery is reliable and inexpensive • Retail space is small and hands on

Possible Retail Scenarios Ubiquitous Home Delivery Selective Home Delivery High Touch Environment Low Touch Environment Retail as Experience

Possible Retail Scenarios Ubiquitous Home Delivery Selective Home Delivery High Touch Environment Low Touch Environment Retail as Experience • Consumers want to be efficient • More about product mixes • More about context • Don’t desire to transport goods • Delivery is reliable and inexpensive • Retail space is larger and themed

Possible Retail Scenarios Ubiquitous Home Delivery Selective Home Delivery High Touch Environment Low Touch Environment Retail as Experience Retail as Showroom

Possible Retail Scenarios Ubiquitous Home Delivery Selective Home Delivery High Touch Environment Low Touch Environment Retail as Experience Retail as Showroom • Consumers want to be efficient • All about the product options • More about efficiency and price • Have to transport many goods • Delivery is fragmented/costly • Retail space is large and stacked

Possible Retail Scenarios Ubiquitous Home Delivery Selective Home Delivery High Touch Environment Low Touch Environment Retail as Experience Retail as ShowroomRetail as Warehouse

Possible Retail Scenarios Ubiquitous Home Delivery Selective Home Delivery High Touch Environment Low Touch Environment Retail as Experience Retail as ShowroomRetail as Warehouse • Consumers want to get out • Curated product selection • More about service • Have to transport select goods • Delivery is bundled in price • Retail space is a blend

Possible Retail Scenarios Ubiquitous Home Delivery Selective Home Delivery High Touch Environment Low Touch Environment Retail as ExperienceRetail as Service Retail as ShowroomRetail as Warehouse

Possible Retail Scenarios Ubiquitous Home Delivery Selective Home Delivery High Touch Environment Low Touch Environment Retail as ExperienceRetail as Service Retail as ShowroomRetail as Warehouse

D I R E C T O R O F S T R AT E G I C P L A N N I N G C A L L A H A N C R E E K Kent Stones kstones@callahancreek.com @KentStones 913-948-1210

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