1. CASE STUDY
Amazon.com
Amazon.com began a new era in July 1995 when it offered a new
proposition to the consumer: easy access to convenient ordering with
seemingly endless selection. No longer did people need to drive to a local
book store to search for and buy a book or CD. Amazon simplified the
selection process through its search engines and huge databases. This
internet advantage was undermined, however, by an advantage only a
bricks and mortar retailers like Barnes & Noble could offer: the ability for
the customer to take home the book as soon as it is paid for.
In the United States, 55% of Internet deliveries are currently made by
UPS, 32% by the Postal service and 10% by FedEx. The remaining 3% is
composed of a new type of Internet service company- the Internet
delivery firm. Entrepreneurial ventures like Web van, Kozmo.com,
Urbanfetch and Pink Dot offer same-day delivery in certain locations. By
combining the convenience of online ordering with nearly instant
gratification, they offer a superior value proposition to those firms
shipping by conventional means. Most of the Internet retailers offering
same-day delivery typically focus on a mix of two broad product
categories, impulse items such as videos, books, snacks and routine
necessities like grocery and household items. All offer delivery 24 hours a
day, 7 days a week. Although most offer free delivery, some price their
offerings to discourage small orders. The trade-off with this type of
business is speed of delivery versus variety of offerings. To achieve fast
response, the local deliverer must hold product locally, rather than in
large national distribution centers, like mass merchandisers and large
catalogue companies. The speed advantage from being local means a
decrease in variety. For example, Kozmo offered about 15,000 items in
total versus more than 10 million total items at Amazon.
Questions:
1. Are there any Internet same-day delivery firms in your city? How
successful are they?
2. Evaluate the growth potential of the Internet same-day delivery
company. Is this the type of business you would like to start? If you
were a venture capitalist, would you invest in this type of firm?
3. Who is the competition of the Internet same-day delivery firm?
Large Internet firms such as Amazon? Local bricks and mortar
retailers? National delivery operators such as UPS and the Postal
Service?
4. How might new developments in technology affect this type of
business?