Chapter 6: Amazon

Bezos

CEO of amazon

quidsi

diaper selling company which amazon bought to decrease compeition

flash sales

ex: Woot; offering deep discounts of a limited quantity of inventory; often run for a fixed period of time or until inventory is depleted; players include guilt group, amazon's my habitat fashion, and one kings lane in home decor

liquidity problems

problems that arise when organizations cannot easily convert assets to cash; cash is considered the most liquid asset - that is the most widely accepted with a value understood by all; amazon wants to keep inventory turns high and pay suppliers later

cookie

a line of identifying text assigned and retrieved by a given web server/stored by a browser; Amazon tracks surfing behavior and buying history

A/B test

a randomized group of experiments used to collect data and compare performance among two options studied (A&B), often used in refining the design of technology products and are particularly easy to run over the internet on a firm's web site; amazon, google, and FB are among the firms that aggressively leverage hundreds of these a year in order to improve their product offerings

pillars of business

large selection, customer experience, lower prices (amazon also opens web site up to third party sellers - two sided network effect)

account payable

money owned for products and services purchased on credit - firms don't pay their suppliers right away, not uncommon for a big retailer to hold on to products for months without paying

agency pricing

once apple introduced ipad, they used this, where the publisher sets the price and re seller gets a cut, not illegal but rivals colluding prices is

cash conversion cycle (CCC)

period between distributing cash and collecting funds associated with a given operation (e.g. sales) when customers buy they pay right away, retailer wants this number to be as small as possible, otherwise unsold inventory is sitting on shelves and doesn't generate any cash; amazon a negative number because they sell goods and collect money from customers weeks before it has to pay - has additional pool of cash to use for other things

dynamic pring

pricing that shifts over time, usually based on conditions that change demand (e.g. charging more for scarce items); when rival sold out of items, amazon responded by raising prices

affiliate marketing program

world's largest marketing practice where a firm rewards partners (affiliates who bring in new business) often with a percentage of any resulting sale - finder's fee for generating sales; web site operators can recommend amazon products on their site

amazon web services (AWS)

allows anyone with a credit card to rent industrial strength computing capacity on an as needed basis; Amazon EC2; powers hundreds of businesses; even rivals use it; Services include computing capability, storage, and many operating systems, software development platforms, and enterprise-class applications;several advantages, including increased scalability, reliability, security, lower labor costs, lower hardware costs, and the ability to shift computing from large fixed-cost investments to those with variable costs. Since Amazon also uses products developed by AWS, the firm's e-commerce and Kindle operations also benefit from the effort.

advantages

amazon always sold direct to consumers, not always well, early warehousing efforts were bad - but amazon worked with vendors to get everything prepackaged, ready to ship boxes, amazon warehouses are powered by code, items are scanned when they are shipped, items that have most sales volume aren't stocked but put in mass land, slower moving items are on shelves (the same item may be stored in several different places - reduces error, increases efficiency) have pickers (with wireless devices) and have problem solvers; starting to use robotics for automation

vendor flex

amazon program to cut costs and reduce warehousing and shipping time

two-pizza team

any individual project team should be small enough that it can be fed by no more than two pizzas, this helps ideas flourish and discourages group think, and make sure that the firm doesn't become slow and less innovative

kindle and fire

atoms to bits competition addressed; more data, first of these was optimized for book reading, lowered price, then came the next version with color and touch screen; amazon doesn't look to make money fro this but with the books sold; selling their own content books (kindle singles); created games as well

collaborative filtering

classification of software that monitors trends among customers and uses this data to personalize an individual customer's experience

channel conflict

exists when a firm's potential partners see that a firm is a threat; this threat could come because it offers competing products or services via an alternative channel or because the firm works closely with especially threatening competitors - amazon has become a target because other retailers have dropped their offering, like Barnes & Noble have refused to carry titles form amazon's publishing arm, walmart and target do not carry kindle

amazon

forecasters said amazon would not make any money very early on; went a whole seven years before making a profit, started making profits once KMART (owning Borders) went bankrupt; took over book selling dominance; Bezos always looks at the long term because many firms don't; largest online retailer (beyond just books); Kindle business; AWS cloud computing; start just selling books; selling goods often gives amazon bargaining power with suppliers; prices are keep very cheap; extensive focus on the customer!: amazon prime, free shipping, loyalty programs; best at making sure there aren't as much abandoned shopping carts

firetv and firephone

the e book and tablet were followed by this, offers fast streaming form amazon; also runs other services and apps; this is a high end smartphone to do several things with just one hand; firefly button on your phone that pops up the fast acting feature even if phone is locked; firefly is a search service

marketplace

third party products are part of this, amazon doesn't own inventory of these items; sellers can warehouse and ship products themselves or they can use amazon's warehouses as part of the Fulfilled by amazon program (lets amazon handle logistics) allows amazon to build a long tail - two sided network effect( (more buyers attract more sellers and more sellers attract more buyers)

retargeting

when you look at a product, don't buy it and then see an add for it

wholesale pricing

where amazon paid publishers for titles and then sold these books at whatever price