Business Brief

Dr. John Doe

MYSC_530: Strategy

Date

Executive Summary

This included brief represents a review the external competitive environment putting pressure on Amazon’s retail business. As part of this exercise, I have examined the company’s top competition in both the brick and mortar and online marketplaces. Though the below may highlight many factors and concerns this brief will focus on the activities of our competition and the factors that I believe represent the greatest opportunities or threats for the business.

Table of Contents Introduction 3 Slide 1: What does “the Playing Field” Look Like? 3 Who are the Competitors? 3 What is the Market Share and Value? 3 Key Business Characteristics 4 Competitor Strengths and Weaknesses 4 Core Customers and Buying Habits 5 Slide Two: The Competitions Engagement 5 Competitions Innovations and Break Throughs 5 New Entrants 6 Conclusion 6 Appendices 7 Appendix A: Amazon eCommerce Market Share (Molla & Del Rey, 2017) 7 Appendix B: Brick and Mortar Company Values (DesJardins, 2016) 7 Appendix C: eCommerce Company Values (YCharts.com, 2017) 7 Appendix D: “Shop Less Often” (Maxwell, 2017) 8 Appendix E: Competition S.W.O. Analysis 9 Appendix F: Amazon Flywheel 10 References 11

For this brief, we will be focusing specifically on Amazon’s retail sales segment. While Amazon operates as an online retailer, this competitive analysis will not be limited to the online market place. As such I have incorporated a combination of online and brick and mortar competitors. In addition to reviewing the latter playing field and their place in the market, we will also dive into competitions activities over the last year and examine any new entrants into the market place.

Amazon’s most active Retail industry competitors are spread across two key sales industries. As such I would identify the following as Amazon’s key competitors in the brick and mortar space. They are Best Buy, Target, and Walmart. Next, I would identify the following as our key competitors in the online marketplace Alibaba Group, eBay, Overstock.com, and Zulily. Of these competitors, only two are well equipped to fight Amazon on its turf, Walmart, and Alibaba because they have both the funds and the clientele to hold their own while they find a winning solution.

Focusing in on our biggest threat in each of the retail sectors, Alibaba and Walmart it is worth noting several key characteristics shared by both companies. Both companies have access to two key factors that make them competitively dangerous. First, both entities have significant war chests from which to experiment in the online market place. Second, both companies have access to massive marketplaces from which to experiment. In Walmart’s case, they have access to a worldwide market and thousands of brick and mortar store locations that they can leverage in a hybrid fulfillment model. In Alibaba’s

Again, addressing our competition based upon their relative segments let us review their collective strengths. For our brick and mortar competitors, their biggest strengths are tier existing distribution networks, store locations, supplier networks, and almost immediate access to resolve the instantaneous gratification reflex of the customer base. For our e-commerce counter parts, we see a variety of strengths including platform specialization, tested order fulfillment systems, existing or potential customer bases, and alternative selection.

In considering their weaknesses, both markets have a few in common. They lack cost effective fast shipping programs; they lack a comprehensive selection, their platforms are not robust enough to handle extremely elevated levels of shopping traffic. If we focus on the brick and mortar side of the competition, we see additional weaknesses. First, they have not yet determined the best way to leverage their existing foot print and resources to compete in the online market place. Next due to capital constraints and single seller platform they are unable to compete with a comprehensive selection. Third, they are unwilling to accept lower margins to propel their sales across both platforms. Finally, they have yet to hire enough external talent to drive a successful culture change towards the online market place. Reflecting on our e-commerce competition we see varying levels of weaknesses depending upon the platform. While each has a robust platform, they have targeted to narrow of a customer band segment. Next, they have failed to establish an eco-system that draws the customer to engage from multiple angles. Lastly, they have not worked hard enough to breakdown the instantaneous gratification barrier.

At our core, each one of us potentially serves the same customers regardless of market place. However, with the increased comfort with the internet and the breaking down of online shopping burdens we see escalating comfort with the quirks of online shopping. By making the shopping experience increasingly intuitive customers are better able to browse selection and find what they are searching for. This represents a significant shift in the hours of window shopping many customers used to dedicate themselves to on a weekly basis. Over the last decade, we have witnessed an interesting trend in consumer behavior. Due to our ability to ensure that our product mix is on par with the competition in the brick and mortar markets we have seen an increasing amount of what has become dubbed as ‘Amazon Showrooming.’ According to recent data, 41% of respondents admitted said that they had showroomed before (Accenture.com, 2017). Recognizing the importance of our customers having this flexibility we have taken steps to maintain control of this trend by and have been granted a patent for Physical Store Online Shopping Control (Perez, 2017).

While our competition is certainly playing catch up, we have yet to see a distinct innovation that is more than a parity play. While Alibaba has the funds and the technology to innovate the have chosen to let Amazon lead. However, this is expected due to the company’s access to the major Chinese market in which Amazon has been unable to make significant penetration. With access to more than one billion customers, all Alibaba must do is hold their market to drive continued growth. In this sense, their willingness to let Amazon set the pace makes sense for now. Our next most able competitor with the ability to drive innovation from within its existing business is Walmart. Since their purchase of Jet.com, the company has been making aggressive inroads into the online markets place. While they have yet to make an effect dent, I believe that they represent our next biggest danger in the market place. As you will recall, earlier this year they released a new and innovative version of a fast shipping club called ‘Shipping Pass,' which offers free shipping on all orders and two-day shipping on all orders over $35. While this represents an innovative approach, the program failed to exceed the value of Prime, and we easily matched the free shipping cost threshold. The bottom line is that so far, our competition has failed to innovate in a significant way, which is in part due to our own constant pace of innovations.

As of now the most significant new entrant to the online retail market is Zulily. They have been around since 2009 and were purchased by QVC group in 2015. Make no mistake, Zulily is a threat. As a small operation, they have spent years experimenting in the apparel and housewares market. It has taken the time to build relationships and thus access to many brands and emerging designers. Their market segment is very specific to Millennial women ages 25 – 45. The company’s focus on the latter and former segments make them a clear and present danger to the Amazon business model as their target market represents the next generation of online shoppers. We must work immediately to determine our gameplan for dealing with Zuliliy in the marketplace before QVC can expand their cash reserves and set them on a supersonic growth trajectory.

Assignemnt 2: Assignment Title

Assignemnt 2: Assignment Title

References Accenture.com. (2017). Who are the Millennial shoppers? And what do they really want? Retrieved from Accenture.com: https://www.accenture.com/us-en/insight-outlook-who-are-millennial-shoppers-what-do-they-really-want-retail Bezos, J. (2017, April 12). 2016 Letter to Shareholders. Retrieved from Amazon.com: https://smile.amazon.com/p/feature/z6o9g6sysxur57t DesJardins, J. (2016, December 30). The Extraordinary Size of Amazon in One Chart. Retrieved from VisualCapitalist.com: http://www.visualcapitalist.com/extraordinary-size-amazon-one-chart/ Maxwell, J. (2017). Total Retail 2017. Retrieved from PWC.com: http://www.pwc.com/gx/en/industries/assets/total-retail-2017.pdf Molla, R., & Del Rey, J. (2017, May 15). Amazon’s epic 20-year run as a public company, explained in five charts. Retrieved from Recode.net: https://www.recode.net/2017/5/15/15610786/amazon-jeff-bezos-public-company-profit-revenue-explained-five-charts Perez, S. (2017, June 16). Amazon, now a physical retailer too, is granted an anti-showrooming patent. Retrieved from TechCrunch.com: https://techcrunch.com/2017/06/16/amazon-now-a-physical-retailer-too-is-granted-an-anti-showrooming-patent/ YCharts.com. (2017). Mulitple. Retrieved August 18, 2017, from https://ycharts.com: https://ycharts.com

Store

2006

Value

($B)

2016

Value

($B)

%

Change

Sears$27.80 $1.10 -96%

JCPenney$18.10 $2.60 -86%

Nordstrom$12.40 $8.30 -33%

Kohl's$24.20 $8.80 -64%

Macy's$24.20 $11.00 -55%

Best Buy$28.40 $13.20 -54%

Target$51.30 $40.60 -21%

Walmart$214.00 $212.40 -1%

Total$400.40 $298.00 -26%

Amazon17.5355.91934%

Store

2014 Value

($B)

2016 Value

($B)

%

Change

Alibaba$263.4 $219.5 -17%

eBay$29.9 $33.8 13%

Overstock.com$0.5 $0.4 -19%

Total$293.9 $253.8 -14%

Amazon$150.0 $355.9 137%