Amazon effect case analysis

1. AMAZON CASE ANALYSIS Group 7, B batch
INTRODUCTION
Amazon has clearly been the outstanding performer through the course of this global
pandemic and has played an essential role in providing access to the supplies and
necessities essential to daily lives. Like many retailers, it has been focused on initiatives to
find solutions to the way that COVID-19 has reshaped shopping habits, industries and
economies around the world. Amazon has had to react with incredible speed and even its
not-inconsiderable supply chain and fulfilment capabilities have been tested. Despite being
one of the best placed in terms of infrastructure and agility to respond to this
unprecedented surge arising from this unplanned event (whereas Prime day and Cyber
week were planned), much like other retailers, Amazon was still challenged by the sheer
volume of demand.
AMAZON AND ITS IMPACT ON LOCAL RETAILERS
The term "Amazon effect" refers to the impact created by the online, e-commerce or digital
marketplace on the traditional brick and mortar business model due to the change in
shopping patterns, customer expectations, and a new competitive landscape.
As more and more people across the globe are turning to online shopping, the retail
landscape continues to change rapidly. The gains for e-commerce businesses are coming
at the expense of brick-and-mortar retail stores, as an increasing number of shoppers are
heading for their screens instead of for stores. Among other factors, the Amazon effect is
cited as the primary reason for street-based stores declining sales, which have often
foreshadowed the stores' eventual closure.
The seamless online shopping experience has also impacted the behavioural expectations
of shoppers, as they now expect the same smoothness, timely response, and convenience
even for services (like at a salon) that generally cannot be offered online.
Technology-powered shopping portals also allow a comparatively better utility to
customers, like an easy repeat of standard monthly grocery orders. Use of big
data and artificial intelligence (AI)-powered systems that better monitor a customer’s
shopping pattern and behaviour on online portals are a win-win – the consumers
receive customized offers and promotions, and shopping portals benefit by
pitching products with a high likelihood of being purchased. These features are not
available to traditional retailers or are costly. High real estate costs also put the retail
stores at a disadvantage.
STRATEGIES FOR RETAIL STORES TO SURVIVE AMAZON’S EXPANSION
 Large online players are launching initiatives to loop the former into their supply
chains in an attempt to make it a win-win. Many online shopping portals like
Amazon allow online ordering with a pick-up option at a nearby retail store. Store
operators benefit by receiving a cut for their service, by supplying a few of the
ordered products from their own stores. This also helps to increase foot traffic in
their stores.

2.  Another option is to face the competitor with their strongest weapon. It’s high time
the local retailers start adapting technology to some extend as cost is not an issue
for adapting some of them. Mobile phone has penetrated everywhere in countries
like India. Even the local retailers can switch to home deliveries. Initially they can
start with phone orders and slowly shift to say an app based ordering system. In
simple words, adopt e-commerce business as another sales channel.
 Local retailer always has the familiarity, trust and logistics advantage in their local
area. Use of some technology to provide convenience to their customers will
increase their trust. Store owners can adopt of simpler e-commerce options, like
Facebook or eBay or Etsy to sell individual or small lots of items and advertise and
post items for sale locally
 Develop a social media plan and create a social media presence. The whole key is to
connect with your small business's potential customers online. Just having some
sort of online storefront promoting your products or services isn’t going to do that.
A judicious social media plan, properly executed, can give people extra reasons to
come to your store rather than shopping online.
 Use different strategies that giant ecommerce sites can’t always execute like
donating part of the proceeds on every purchase to long-standing support of a local
cause, a cool event, a customer loyalty card – something to make the customer feel
shop is integral part of their community.
 Online retailers still don’t compete with traditional grocers on price. Amazon prices
are higher than traditional retailers for most top promoted products, Use the
situation to advantage and market on those specific aspects.
 Most traditional retailers accept returned products sticking out of its original torn
packaging. While returns can be a hassle for any shopper, returning products
purchased online can often take much more effort. This is a huge advantage for
local retailers and they can use the opportunity to promote easy return options thus
attracting larger customer base.
 Retailers can use Hands-On Product Interaction to attract consumers, since for
many categories, shoppers like to touch, smell, and sometimes taste new products
before they buy despite product photos and demonstration videos, online retailers
can’t match the in-store sensory experience.
 With all of the recent security breaches, shoppers are more reluctant to release
credit card & email info to another online vendor. But being a local retail shop ,
shops can sell products on credit which helps generate loyalty among customers
and also help attract normal monthly salaried employees to local shops.
 Impulse purchases are higher in brick and mortar shops so with enough footfalls,
shops can work on profit by making small changes to layout and designs.
 Moreover with changing times local retailers has to adopt with technology and has
to use digital media more for marketing purposes and since they already have
existing client base, with little bit of push its easier to generate sales for local
kirana shops than digital shops like amazon where there is always a sense of doubt
among customers while choosing next product to click.
 While the intentions to shop local are not always reflected in shopping behaviour,
this is a clear advantage for traditional brick & mortar retailers staffed by local
workers selling local products to push products and generate sales more
organically which can never be achieved by machines in a server room and that is
one of the biggest advantage for local retail shops, to use the human element in the
best form & they can easily survive giants like amazon while coexisting with them.

3. ANALYSIS OF REVENUE AND NET INCOME
From the exhibit 1 on case study, we can clearly track the steady growth of Amazon’s
revenue from the year of its commencement (1995-2019). The growth in revenue is
tremendous in the last 5 years. It shows the steady pace in the development of income of
the Amazon group.
Exhibit number 2 displays the net income of Amazon from the year, 1997 to 2018. After a
major dip in 2000, they slowly caught up till 2010 and then we saw a sudden decline,
especially in the years 2012 and 2014. From there on, their growth till 2019 has been
exceptional. Their strategies helped them to gain an exponential growth from where they
have been in 2014.
CONCLUSION
Beyond hitting the revenue of traditional retail stores, the Amazon effect has also led to
significant changes in consumer shopping patterns. For instance, based on the convenience
they experience on online shopping portals, today's shopper expects a lot more variety
even while visiting a retail store. Amazon.com Inc. (AMZN), which debuted in 1994, has
maintained its lead in global online selling and has become the poster boy for this change,
giving the "Amazon Effect" its name. Small ecommerce businesses, if started by the
retailers, they will have to come to grips with this new reality and react to it in a way that
the customers want, whether they know it or not.