AMAZON CASE STUDY

Amazon Case Study



Amazon Case Study

Question 1

Will Amazon's 70% or 75% or more market share of physical book sales online, plus the currently market-leading e-book reader, the Kindle, lead to a similar dominance of the e-book market as it grows? Despite the early lead of the Kindle, and the lock-ins provided by DRM, no interoperability, the largest selection of current titles, and a seamless (if closed) purchasing experience, the view from here is that it won't. Amazon's twin advantages in the physical book market are its huge customer base and its mastery of logistics. The near flawless, certainly industry-leading, logistical performance has been a key from the beginning. With an initial data offering that included books no longer in print, tied to the concept (did they invent it? ) of a “promise date” for delivery that was always met or exceeded, Amazon really solved big challenges for consumers. It is perhaps hard to recall now that, before Amazon (pre-1995), it was hard to find out anything about an obscure book. Even if the book were “in print”, there was no guarantee a bookstore would even order it for you. And if they ordered it, you wouldn't know when you'd get it (Robert, 2000, 33).

Amazon changed that very quickly, even though they didn't even hold much — if any — inventory in the early years. But they translated the actual availability of copies at wholesalers Ingram and Baker & Taylor into clear expectations for the consumer. That was one of the big factors that helped them build their enormous lead in loyal customers. And the loyal customers led to other advantages, including more reader reviews and more useful and relevant suggestions from the “recommendation engine” than other online retailers could produce (Brandt, 2011, 22).

In the past 12 months, Amazon has built a similar customer-base advantage with Kindle. But as the ebook market grows and matures, the view from here says they won't have the same success trying to grow it. In fact, we are probably at or near the high-water mark for Amazon's dominance of ebook sales.

Here's what is going to happen in the ebook market in the next 24-36 months, and none of it is good for Amazon.

There will be more dedicated e-ink readers introduced.

There will be more readers introduced to be used on smart phones and smart phones will approach the ubiquity that cell phones have now.

There will be new app stores for iPhone competitors: Android and RIM, for sure, but perhaps also verticals by device manufacturer and/or telephone service provider.

There will be increasing recognition that “retailing” (having, selling, collecting, fulfilling) the file doesn't entitle a vendor to nearly the same margin that “retailing” a physical product does. The days of retailers getting a pbook-like discount for ebook transactions are not going to last much longer (James, 2004, 31-35).

The ebook wholesalers will make it easier and easier for every site to sell ebooks in their vertical. They won't have the same need that affiliates have had to link ...