Online Bookselling through Amazon Essay

The popularity of online book selling by Amazon has spread rapidly since last two decades all over the world. Relevant digital growth driven by information technology has also been assisting Amazon to become one of the best online sellers of a large variety of books stored. After a long period of Internet development, which rapidly increase the number of web users due to availability of high speed internet, some new technologies have also come into existence and enabled Amazon to promote online bookselling through the web site. Hence, detailed information of books and enhanced delivery services have attracted a large proportion of people to change their consumer behaviour from the traditional way of shopping for books and made them rely more on online shopping. Amazon was the first company to take the lead in the Internet shopping because the company realised that the transformation of the consumer behaviour is unavoidable trend. Thus, the company developed new marketing strategies according to needs of consumers. Recent researches indicate that online shopping, especially in the context of books, has increased tremendously; and Internet shopping has become more popular among a large number of audiences. The paper aims to identify various factors, which drive consumers to buy books from Amazon, as well as to determine the perceived benefits from internet shopping. Besides, this paper also documents some critical factors that have influenced buyers to switch from brick and mortar stores and obtain books from Amazon.com.

Internet Shopping Development of Amazon

Several factors contribute to a rapid growth of online shopping for books through Amazon, which is primarily because of the benefits that the company offers. First of all, Amazon provides a large variety of facilities to consumers for shopping books. With the growth of information technology, consumers do not need to search for books in brick and mortar stores as the Internet assists them to search information from online sites, and it also enables them to evaluate various websites in order to find and buy books at the cheapest price. Buyers prefer to buy books from Amazon because the company helps them in availing services more effectively than other procurement channels. With the help of the different search engines, consumers save their time in assessing consumer-related information, which provides a mixture of sound, images and processed text description, thus assisting consumer learning and selecting the most suitable books that satisfy their needs.

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Although the internet shopping continues to develop rapidly, especially in the case of the book industry, there still exists a vast difference between online and traditional bookstores. For instance, traditional bookstores offer convenience in shopping and parking, which enables people to visit and read different texts and select a book of their choice, check the quality of literature in books before they buy, and the after sales service is also available to customers. However, traditional bookstores do not stock huge variety of books and their selling price is usually higher than those of online booksellers. By comparing, it can be observed that limitations for traditional bookstores serve as advantages for Amazon, whilst the weaknesses of online bookstore serve as advantages for traditional bookstores.

Somehow Amazon continues to encounter challenges arising from the external environment because internet shopping of books also reflects potential risks for the customers, such as safety of payment and after sales service. With the development of the internet technology, online payments have recently become a convenient way for purchasing products from the Internet. Internet payment expands consumption efficiency while at the same time its virtual property reduces the security. After sales service is another drawback of Amazon, which deters consumers from shopping for books from them because of location of their virtual shops worldwide. In addition, Amazon’s limited structure does not enable consumers to file complaints or replace books in case of any defects. It is not like traditional retail store where products and services give a sense of security of after sales services to consumers. Hence, customers face greater risks, especially in case of buying some highly-priced books.

Amazon.com – The Road to Market Leadership

Company Portrait

Amazon.com, a Fortune 500 company, incorporated in the year 1994 in Washington and reincorporated in 1996 in Delaware, went online in July 1995. The founder, Jeff Bezos, had an ambition to evolve Amazon.com into one of the largest customer-friendly one-stop shop on the Web.

In November 1999, Amazon.com projected market capitalization of $31.4 billion, 12 million of loyal customers, 18 million items on sale, recorded sales of $1.4 billion in 1999, and became the most trusted brand name in e-commerce business. Amazon.com has a strong ambition to become online super mall of choice for online shoppers by providing incomparable books and services. Its secret of success involves innovative techniques driven by “customer obsession” and capability to offer an enjoyable and secure online shopping experience, but its dominance is because of customer fulfilment processes that deliver results.

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A cautiously orchestrated and skilfully executed “sell all, stock few” strategy demonstrates Amazon’s success with e-tail customer requirement. Amazon business consists of Baker & Taylor and Ingram Book Group, the two largest book wholesalers in United States, and dozens of other smaller companies. In the year 1998, Amazon received 60% of its books supply through Ingram, which conducts its business operations through seven strategically located warehouses in the United States. The Amazon Company pays Ingram a wholesale price including a few percentages above the publisher’s price for its shipping services. In 1999, Amazon.com launched six self-managed new automated distribution outlets in the United States in addition to its two centres already functioning in Delaware and Seattle. The aim is to fight sharp decline in margins, for example, by sourcing books directly from publishers, reducing dependence on Ingram and other publishers, and extend its overall control over online fulfilment process to attain competitive advantage. Effective management control system enables Amazon to deliver books same or next day to its customer all over United Kingdom, as well as most of the European countries. During the holiday season in 2009, Amazon sent packages in excess of 14 million to customers, which is more than any other mail-order retailer or e-tailer in the country. The leadership of Amazon in customer fulfilment networking has proved a pivotal role in its success as the holder of the largest online shopping mall in the Web world.

Book Retailing: Barnes & Noble vs. Amazon

During the launch of Amazon, the book industry was extremely fragmented and scattered with the single largest retailer of books, Barnes & Noble projecting 12% of the total volume of book sales in the United States. Barnes & Noble operated its outlets as megastores on a covered area of 6000m2, stocking more than 185,000 titles in mall-based stores. Although they were smaller in area and selection of books was also limited, but the company provided mail-ordering service through catalogues. Barnes & Noble operated a centralized distribution and logistics base that helped leverage economies of scale in the sourcing of books directly from publishers, receiving higher discounts than other book sellers, and avoiding high mark-ups from wholesalers. The centralized system of stockholding helped in shipping books to customers within two to three days, thereby avoiding delivery delays from publishers. B&N also established an electronic system in store management that enabled exchange of accurate and timely information among its stores and efficient co-ordination between distribution facilities and wholesalers with access to the 3.0M title database.

Amazon redefined traditional book selling by adopting a radically different approach: towards online selling. Traditional book retailing has several drawbacks. The selection of books is physically restricted by the availability of limited store space. Traditional book retailers must invest in real estate, inventory, and qualified staff for each retail store, and it is not feasible to offer a customized store for each and every customer or offer customized recommendations without significantly increasing selling costs. E-commerce book retailers possess the benefits of centralized inventory management system and low occupancy costs.

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An online company can target a large and global group of the audience from a single central location, enabling extremely efficient business model. Tracking consumer purchasing behaviour enables businesses to anticipate demand in order to offer personalized services, for example, customized storefronts. Amazon has been successful in offering more than 1M titles in its database, but it maintains only 20,000 of them in its own warehouse. In contrast to B&N, Amazon.com procures its books mainly from wholesalers because the company does not stock large volumes of books even though deliveries from publishers require weeks to arrive. In contrast, book wholesalers possess the capability to ship most orders within a couple of days. In comparison to B&N’s centralized stock sourcing strategy, Amazon’s just-in-time sourcing strategy increases inventory and minimises working capital (see figure 1) to increase gross margins.

Amazon Strategy to Increase Book Sales

Amazon has the advantage of a negative operating cycle: the company receives the payment by credit cards usually within a few hours of buying, but payments to suppliers are usually done forty-five days laterfrom the date of sale. Besides, Amazon does not maintain an inventory system for many of the products it sells; instead it depends on a fast delivery from suppliers; thus, it shifts inventory risks to its suppliers. Amazon shows an operating cycle of around -20 days while the traditional book retailing operating cycle is usually around more than 80 days. Hence, Amazon generates interest on the full sale price, cost of goods and gross margin for over a month (see figure 2).

Operating Cycle of Amazon.com

Amazon’s business model includes informational elements such as a virtual storefront with physical elements of operations. The sales strategy of Amazon focuses highly on investment in
information technology with a strong emphasis on software instead of hardware; its operations are practically restricted to packing and shipping most of the time. The company’s core value propositions for purchasing books over the Internet include selection, price, convenience, and efficient customer service. Amazon’s web store works online 24 hours 7days and offer supplementary services to viewers, such as book reviews, customers’ feedback and recommendations. Amazon owns an immense database of 1.25M books in comparison to 185,000 books in the largest superstores.

Customers of Amazon can use the database search function to find even most rarely available and certain out-of-print titles, which becomes possible due to filtering by different search criteria. Amazon has also achieved popularity in competitive pricing by offering discounts equivalent to those offered by large book stores (see figure 3).

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Comparison of Book Pricing

The company has simplified online shopping for books through the simplest checkout procedure, which B&N could not realize at the time it launched own online business in 1997. By that time, Amazon was successfully taking over a strong leadership position in online book selling and controlled more than 73% of all book sales on the internet. Amazon volume of sales showed a tremendous increase of 838% from $15.7 million in 1997 to $147.8 million in 1998, while customer accounts had shown a growth of 738% from 0.18M to 1.5M during the same period.

Aims and Objectives

The objectives of current case study are:

  1. To find out the factors that encourages consumers to buy books from Amazon.
  2. To find out whether consumers are satisfied with the quality of books offered by Amazon.
  3. To find out whether consumers compare features of books such as prices, content, bibliography with its competitors before arriving at final decision.

Data Collection and Analysis

The researcher adopted quantitative technique and conducted a short research by posting a questionnaire to frequent online buyers of books from UK and China to analyse the popularity Amazon book service. The number of emails sent to UK respondents stood at 78, and 12,740 emails were posted to China. Many emails did not receive a response because such email addresses were invalid and also no longer were in use or were ignored. As such, only 826 respondents sent duly filled questionnaire, which included 47 from the UK and 779 from China that were valid for research before proceeding to analysis.

Brief Analysis of Amazon Online Book Selling

The next process chooses appropriate responses wherein respondents have been asked to answer the following questions regarding shopping for books from Amazon. Within this research chose 41 out of 47 questionnaires from United Kingdom and 585 out of 779 questionnaires from China were chosen for analysis.

What kind of goods do you purchase from Amazon.com?

This question holds significance for Amazon.com as it might assist them to analyse Customer needs in order to design future marketing strategies. The books listed are the most preferred on the Internet and books are the most popular products on Internet shopping in the United Kingdom that scores highest 40% and hotel/travel booking 24% respectively, followed by software (13%) and CD/Video (11%). The comparison of shopping for books with other products is also necessary to demonstrate a clear picture of increasing demand for books from Amazon.com. The three types of products such as books, followed by computer accessories and CD/Video are more popular with UK respondents whereas Chinese respondents score 34% with respect to buying books, followed by CD/Video and Computer accessories from Amazon.com as shown in Figures 4 and 5 below.

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Reasons for shopping on Amazon.com?

The purpose of this question is to examine what encourages customers to purchase books from Amazon.com, and what factors motivate them or arouses their needs. As seen in both Figures 6 and 7, most of the respondents agreed that shopping for books from Amazon saves their money and time since they can find a large database of books from various famous authors. Besides, they can find bestseller lists of famous authors that include wide range of bibliography with several features, quick registration for personalized services, read and post reviews, engage in promotions, and check order status online. The customers appreciate prime components of Amazon’s Website such as browsing, searching, content previews, personalization and recommendation, one-click technology, secure in payments by credit card, availability of books, and commitment.
Only few respondents felt that the Internet shopping from Amazon offer convenient, simpler, easier and efficient shopping environment. It also shows that customers demand high quality books from Amazon.com to fulfil their needs.

Which books have attracted popularity and best-selling since last year?

The researcher selected a sample of 45 latest books in disciplines such as science, fiction, mystery and thrillers, biographical, romance, religion, history, and literature from Amazon and asked respondents for their reviews and feedback. The 28 books shown in Table 1 received maximum scoring and favourable votes and secured the highest percentage of favourable votes on top among the buyers from the UK and China.

The next section compromises of two questions:

Do you use the Internet to search for product information before purchasing, (whether from Amazon or any other store)?

Do you compare prices of Amazon with other websites prior to making your purchase decision?

The first two questions are primarily to find out how many respondents prefer the Internet for searching information, and how it assists them prior to placing their order with Amazon. From the results, almost all of respondents stated that they prefer to search information before buying books that satisfy their requirements from Amazon. Approximately 95% of them indicated their preference to compare prices from various websites. Nearly 35% of respondents from the United Kingdom are more concerned about the author’s name and content offered by Amazon. However, more than 55% of respondents from China gave preference to lower prices as the main reason to shop from Amazon.com.

Summary of the Case Study

The fast development of World Wide Web (WWW) and information technologies in the past decade has led to an enormous growth of E-Commerce all over the world. The example of Amazon success in a short period endorse this statement as the number of customers purchasing books from Amazon consistently grows, whereas traditional stores face declining sales. This feature of the Internet in the business world has opened another important marketing channel for many firms. The findings of current research suggest that Amazon has to improve the quality of services to attract customers and at the same time offer better products or services that fit the customer’s needs. This study has analysed the factors that help consumers to shop for books from Amazon and examines its strategy leading to competitive advantage in the online book industry. To a large extent Amazon has been successful in impacting brick and mortar stores by offering quality books of latest renowned authors around the World various topics, thus providing customers with a wide range of options to select from and buy books of various authors for their research, studies, and entertainment. Yet, consumers are not satisfied with the level of information provided on the Amazon website since abstract and bibliography are insufficient to evaluate the contents of the books and not all books are available for preview.