Many of the customer-pleasing features of Amazon’s operations are not noticed, or even known, by Amazon’s customers. These fall into the categories of technology, order fulfillment, and retailing strategies. In technology, the company’s website has been, and remains, leading edge. In an effort to serve customer needs, Amazon was one of the early pioneers to develop software for collaborative filtering of customer data. Basically, the filter is used to suggest similar or related products to a customer after he or she has focused on a product or product category. For example, if a customer browses or purchases Managing for Quality and Performance Excellence, other books in quality management would then be suggested on the viewer’s Web browser. These suggestions are based on what other readers of the text had purchased, in addition to the target text. Web features and capabilities have expanded over the years, to include features such as “look inside the book” for a chapter preview, in-store pickup of orders, shipping choices, and affinity group selections .
In order fulfillment, the capabilities of its high-tech warehouses continue to drive costs
down, as mentioned earlier. For example, Amazon has a nearly perfect process for sorting multiple item orders. As it expands its offerings and adds more retail partners, Amazon’s fulfillment capabilities pay dividends to its partners, as well as adding revenues to Amazon. By reducing the time it takes to get all the items in an order into the sorting system, Amazon shipped 35 percent more units with the same number of people than it had in earlier years.4
Its retailing strategy is based more and more on partnerships with those who, in most
businesses, would be considered competitors. Amazon proclaims that it seeks “to offer Earth’s Biggest Selection and to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online.” However, at any time, its competitor partners may be offering the same item through their linked websites at a different price. For example, when a book is being viewed, the web page will also permit the viewer to go to a linking web page of a partner’s book company, where the same title used book is being sold for a lower price. Its partners include well-known retailers such as Borders Books, Walde nbooks, Waterstone, Target Stores, Lands’ End, and thousands of other lesser-known organizations, large and small. In fact, through what is called their Associates Program, Amazon.com provides a link to 900,000 websites carrying specialty items and where online auctions are taking place every day.
With millions of customers and potential customers accessing its global sites in the
United States, the United Kingdom, Germany, Japan, and Canada daily, Amazon.com’s
sophisticated technology allows it to build an in-depth and potentially valuable database of many of its customers. In 1999, Amazon.com experimented with a highly controversial feature on its website. It started featuring thousands of individual bestseller lists categorized by Zip codes, workplaces, and colleges—wherever its customers were ordering from. With a mouse click on its website, browsers could peek behind the scenes at the books that specific groups were reading, the compact discs they were listening to, and the videos they were watching. Amazon described it as ‘’fun,’’ happily announcing the feature, Purchase Circles, in a press release. Soon, however, citing customer complaints, the company began backtracking. Customers were allowed to opt out of having their data collected, as long as they were savvy enough to read the fine print and send an e-mail to the company. Companies could choose not to be included by sending a fax.5 Despite the controversy, Amazon .com still has Purchase Circles on its website.
11.3 Test your Knowledge (Question):
1. How does Amazon.com’s CRM software help it to gain market share and maintain its
competitive advantage?
2. How are operating efficiencies realized in order fulfillment activities of Amazon.com?
Will costs continue to fall, given that their warehouses are currently operating at less than 50% of capacity?
3. What are the customer privacy risks, besides the ones mentioned in the case, that
Amazon.com must guard against in order to continue to grow its business?
11.4 Instructions
Read case study and answer the questions.
Post your answer in the discussion board using the discussion link below
