Abstract
The development of Amazon so far is mainly due to Jeff Bezos's leadership. By sticking to a customer-focused policy and starting an online bookstore, he changed how retailers handle a wide range of books and everything, breaking Pareto's law and achieving a long tail. What's more, he politely responded to customer demands and devised a Fly Wheel strategy. By providing an effective product lineup at a low cost, Amazon has accelerated the virtuous cycle of increasing the ability to attract customers and has grown sales exponentially. On the other hand, Amazon invested the profits it earned in technology development and conducted research and development of cutting-edge digital technology. In addition, Amazon has been active in business models such as 1-click, FBA, Amazon Prime, and Marketplace. As a platformer, it has expanded its business to its own B2C and the B2B area for other companies' platforms.
TopBackground
Countless books and articles have been written on Amazon. Their primary focus is on transforming store sales to Internet shopping and its impact on consumers and society. In recent years, there has been a growing number of articles that view Amazon as an IT company. However, it is believed that this change is inevitable or consistent. In order to increase profit and sales volume, Amazon has been increasing its contact with consumers and gathering more information. Either the digital or the analog part, or both, have been the bottlenecks. In order to solve these bottlenecks that have emerged, Amazon has made significant improvements to the analog side of its business by effectively using digital technology. Outstanding digital technology and its effective use have solidified Amazon's high-profit margins and stable position. This chapter aims to illustrate the transition between analog and digital through the case of Amazon.
Goods flow from producers to consumers through distributors. Distribution plays an integral role as part of the supply chain. Producers and consumers are connected through distributors who may or may not have physical stores. In recent years, the Internet has developed, and this connection method has changed significantly. Consumers can now order online and shop without going to a physical store. In this way, distribution innovation is progressing, and business models and people's lifestyles have changed.
It was customary for people to only shop at physical stores in the old days. Now that we have entered an era in which physical and online stores coexist due to the spread of the Internet, people have begun to consider multiple options when shopping. They select an online shopping site such as Amazon when they want to shop quickly and efficiently, and they choose a traditional brick and mortar store when they wish to enjoy hands-on shopping with an up-close experience as in real life. With the development of cloud computing and drones, innovation occurs in various fields of life and business. In addition, more and more distributors are moving to platforms that handle both the Internet and the real world simultaneously.
This chapter explains distribution innovation by analyzing Amazon (Amazon.com), which has significantly influenced the distribution part of the supply chain. On that basis, Amazon's competitive advantage will be clarified, as we also consider the future direction of distribution innovation.
Key Terms in this Chapter
Last One Mile: A term initially used in the telecommunications industry to mean the last section of providing telecommunications connections to end-users and businesses. It is also called the “last mile” and is mainly used in the logistics and transportation industries for customers.
Amazon S3 (Amazon Simple Storage Service): An object storage service offering industry-leading scalability, data availability, security, and performance. Customers of all sizes and industries can store and protect any amount of data for virtually any use case, such as data lakes, cloud-native applications, and mobile apps. With cost-effective storage classes and easy-to-use management features, customers can optimize costs, organize data, and configure fine-tuned access controls to meet specific business, organizational, and compliance requirements.
IaaS (Infrastructure as a Service): A service that provides computing resources such as CPU, memory, storage, and network. It allows significant retailers to customize their platforms. Users can select and use the resource configuration and build any application on IaaS.
Click and Mortar: A business model with both online and offline operations. Brick and mortar indicates old-style transactions at physical stores. On the other hand, click and mortar indicates new-style transactions on the web.
Ecosystem: A self-expandable network of organizations composed of suppliers, distributors, customers, competitors, government agencies, and others, and engaged in mutual competition and cooperation. Within the ecosystem, members are flexible and adaptable and are affected by others.
Amazon Marketplace: An e-commerce platform owned and operated by Amazon.com. Along with regular Amazon sales, third-party sellers can sell new or used items at fixed prices online. The Amazon Marketplace gives sellers access to Amazon's customer base and allows Amazon to expand its on-site sales without additional inventory investment.
FBA (Fulfillment by Amazon): A fulfillment service Amazon offers to third-party sellers on the Amazon site. Amazon stores their stock at Amazon fulfillment centers. When customers order these products, Amazon fulfills these orders quickly and efficiently by picking, packing, and shipping. Amazon provides customer service on behalf of third-party sellers.
1-Click: A technology that enables the online purchase of products with a single click. The 1-Click purchase requires the user to enter payment information in advance. Amazon.com filed a 1-Click patent application in 1997, and it is used on the company's website worldwide.
AWS: A cloud computing service provided by Amazon.com since 2006. Amazon provides a wide variety of infrastructures, not limited to web services. It gathers and sends large amounts of data to external data centers via the Internet and uses various ICT resources such as networks, server processing, storage, computing, databases, applications, and AI on demand.