Demand Elasticity Of Amazon 's Product

Amazon.com operates in the Online Retail Industry. The sector is one of the fastest growing globally and is outperforming the ordinary retail marketplace. It was created after 1995 and it was only the Internet that made it possible for such an industry not only to be established but to become one of the most flourishing sectors in the business environment. What is interesting is that Amazon.com, together with eBay is the pioneer in the field. Both companies were launched in 1995 and are still extremely successful. The creation of e-mail in 1996 had a huge impact on the development of online retail by introducing a fast and easy way to communicate with customers. For this two-year period Internet usage

Amazon understood firsthand that the competitive advantage of a company originates immediately from how distinctive the organization's resources and competencies are. Amazon is able to both engage in production at a lower cost and generate a superior product at a standard cost. This is accomplished mostly via Amazon's strategy of having a wide variety of goods and competitive pricing. Customers know they can find basic products at slashed prices or high quality goods at standard prices and this is all achieved via the enormous range of products and product brands and types available on their massive marketplace. For example, the depiction displayed in the case study which shows how growth was related directly to: lower cost structure- lower prices customer experience traffic sellers -selection and convenience. While this is a grave oversimplification of the Amazon business model, it demonstrates how many aspects of the strategy reinforced one another.

When we compare walmart.com with amazon.com. Two of the biggest names in the industry are Amazon.com and Walmart, the latter of which has moved beyond its physical stores and begun to offer a variety of merchandise online. Amazon.com is one of the most recognizable names in the online retail industry. The site’s marketplace allows customers to purchase a wide variety of items online. And with a slew of third-party merchants in its roster, Amazon.com is a formidable presence indeed. Walmart is just as widely known of course, albeit in the real world. The company is a familiar name in the

Amazon.com has successfully managed to make its customers to feel that anything they could possibly want could be found on their website. Additionally, its products are marketed at a competitive price. Another important factor is their speedy delivery with their usage of UPS and FedEx (United States) and Royal Mail (United Kingdom). The company also caters for people that prefer online shopping with extra services such as Amazon Prime - a service with a yearly payment, customers are eligible for free next day delivery. Even though Amazon.com is known to be an online seller of most things, it still excels in its original market of book selling. Evidence of such is

Both Amazon and Walmart are seeking to accomplish the same goal, to become the world’s largest retailer by providing customers with a seamless shopping experience. Both companies have their own strengths, with Amazon being the leader in the online retail space, while Walmart is the clear leader in the brick-and-mortar arena. As more online and brick-and-mortar retailers are eating into the market, both Amazon and Walmart must content with other companies as well as each other. Amazon and Walmart were both created and detonated extraordinary growth due to an innovative push unlike any other in their own respective arenas. “If either Amazon or Walmart is destined to come out on top, it must come from a massive innovation push, a willingness to

Global competition has a direct impact on Wal-Mart. Global companies offer competition for consumer business and companies within the United States and other countries who compete with Wal-Mart. The global competition for consumer business primarily takes place in the e-commerce domain that Wal-Mart dominates. Wal-Mart offers their consumers a convenient one-stop website with all the merchandise and products offered in the store, and some that are not. The exchange is significantly sped up by the convenience and availability of the internet. The internet allows transactions to take place at a faster pace than the standard face-to-face or telephone method. Target, a major competitor of Wal-Mart, also has a Website that is reached by consumers all over the world. This added competition, especially from a competitor in the same industry, forces Wal-Mart to keep their prices low while offering

Amazon’s fulfillment centers are valuable, rare, costly to imitate, and organized to captured value. Thus, they attribute to Amazon’s competitive advantage. Amazon Prime and 1-Click are also valuable to the organization. However, they can be replicated. Walmart launched a membership program to compete with Amazon’s Prime Service. With Walmart’s membership program customers receive free two-day shipping when they spend $35 or more on orders. Amazon Web Services is valuable, rare, costly to imitate and the organization has capture the value of it. Therefore, AWS has contributed to Amazon’s sustainable advantage. Amazon’s brand name and reputation have also given the company sustainable advantage. Amazon acquired enormous brand valuation in a short period of time. It is

Amazon.com is a customer centric company. They put more effort in improving their system to make the experience of customer more comfortable so that he keeps on returning to the website. Jeffery Bezos who is the founder of the Amazon.com started this company after seeing the use of internet increasing rapidly.

Many consumers go for what appears to be cheapest and most convenient. The reality is, Amazon’s increasing dominance comes with high costs. “These consequences have gone largely unnoticed thanks to Amazon’s remarkable invisibility and the way its tentacles have quietly extended their reach” (LaVecchia, 2016). It is vital that consumers are aware of this superpower that is taking over.

Price elasticity of demand enables business organizations to predict how their total revenue will be effected in the event they change the prices of their products. When a given good has inelastic price elasticity of demand i.e. Ed 1, then the percentage change in the quantity demanded is greater that the change in price. Thus, raising the prices of such commodities results to decline in the total revenue because the business may loss customers to their competitors. Nonetheless, reducing the prices of goods with elastic elasticity of demand increases the total

The threat of substitutes for Amazon is high. With the exception of its patented technology, there are quite a lot of alternatives to Amazon’s products and services. In addition to physical presence, most companies have an online store as well. Amazon’s products can be purchased all over the internet and they are just spread out among different web sites. The companies operate in brick-and-click mode providing the similar product categories and competitive prices have become the biggest threat for Amazon. However it is extremely difficult for Amazon to establish physical stores or launch price

Competition among retailers is aggressive, as the demand side of the industry is driven by consumers who expect to get the best value for their money. “Competitive advantage is anything a company has, or does better, that customers value but the competition cannot match” (Romero, 2005). Walmart has a sustainable competitive advantage over other retailers, largely due to their centralized focus of cost leadership and differentiation strategies.

Amazon’s core competencies are in its ability to effectively use and develop technology to drive site traffic and enhance the customer experience. Their distinctive use of website real estate coupled with their ability to leverage their brand and effectively use that leverage to deliver low prices and high quality products, makes them a leader in online retailing. Their partner brands and their ability to adapt and recognize deficiencies enable them to effectively cut out the middle man, or at the very least, partner with them.

Since firms facing an elastic demand can increase total revenue when they cut prices, the opposite condition exists when they try to raise prices. With many substitutes in consumption available, a price increase leads to a significant decline in consumption - the percentage change in quantity demanded exceeds the percentage change in price. Producers that raise prices when facing an elastic demand will find that total revenues decrease as the gain from charging higher prices is more than offset by a desertion of consumers to cheaper substitutes, with sales and output falling. When price

In concert with high rivalry in the industry, the ecommerce industry has seen large brick-and-mortar retailers making moves to catch up with Amazon. Amazon came to dominate the ecommerce industry through technology, innovation, a laser focus on customer experience and efficient operations. The company had a first mover advantage, but today, as traditional retailers look at growth in the ecommerce market and see it beginning to chip away at traditional retail’s share of the overall market (Exhibit 3), these companies are making moves to further increase their own sophistication. In October, Best Buy brought in former Expedia president, Scott Durschlag, to head its ecommerce business and to “boost its online transformation.” In 2011, Wal-Mart acquired Koomix, hoping to apply “artificial intelligence to commerce.” It also hired the well-regarded Silicon Valley engineer who was instrumental in the development of eBay’s infrastructure as its Chief Technological Officer. Wal-Mart and eBay both announced this fall that they