Marketing Analysis Amazon vs Chapters
...lthough shrinking market that wanted to shop in the traditional way. Marketing in the beginning was not very cost efficient as we see by the number of dollars spent compared to bottom line income. Amazon did learn a valuable lesson and turned this around by piggy-backing on other web sites for advertisements. The challenge will be to continue to grow and to stay ahead of other e-commerce corporations that are blooming on the horizon. Opportunities The number of Internet users is expected to approach one billion people by 2004. For companies like AMAZON.COM that offer convenience, lower prices and an assortment of products, the opportunities will be tremendous. The website is convenient to its customers for several reasons. Internet access allows consumers to browse and purchase products 24 hours a day, 7 days a week, worldwide. Customers don’t have to battle traffic, find parking spaces and wander through store aisles to find the products they are looking for. They also don’t have to interact with sales personnel. The company also doesn’t have to incur the costs of maintaining a store. There is no rent, insurance or utilities to pay because they sell their products online. This keeps the prices of the products low. They must continue to link their advertising with heavily used internet sites. Their marketing focus should shift to the safety and security of their website. As internet users become increasing more aware of the special problems associated with on-line shopping, Amazon could use its superior reputation to draw new customers in. AMAZON.COM offers convenience, cheaper products and tremendous variety, thereby benefiting consumers greatly. Threats AMAZON.COM is not as appealing to the older generation who prefer to visit a physical location rather than a virtual store. Consumers may not trust the Internet regarding the use of credit cards and sharing personal information because of ongoing identity theft. The company must instill a sense of trust to this type of consumer in order to be successful. Increasingly publicized security problems regarding the use of the Internet will provide these consumers with another reason to shop at an actual location. There are those that enjoy the opportunity to interact with sales personnel and browse a store in person. Many consumers find store hours satisfactory and have no desire to shop 24 hours a day, 7 days a week. The internet offers convenience, but it does not offer the experience of actually inspecting a product. Newer online businesses threaten to cut into Amazon’s market share. Internet sites, such as e-Bay, offer an endless supply of products with the thrill of an auction-type atmosphere. Innovative business models designed to ‘steal’ customers from current websites will undoubtedly continue to be created. The internet provides a very cost effective way to set up and operate a business. Amazon must continually be on the lookout for these new businesses and revisit its marketing strategies accordingly. CHAPTERS Strengths Canadian based Chapters bought into the American superstore ideal of Wal-Mart and Home Depot. The company realized that they could offer book-buying consumers so much more variety than the traditional, small specialty stores. By offering huge quantities of books, magazines, music, DVD’s and videos they created a one-stop store for the consumer. They also aligned themselves with Starbucks to appeal to the yuppie generation of young, up and coming executives of the future. It also brought an ambiance with it and people flocked to the store to “sip on a Latte” while reading their favorite magazine or novel. The smaller stores soon succumbed to the mega-chain, and stores like Coles and Smithbooks were soon swallowed up. Recently Chapters recognized that they needed to be in the field of e-commerce and this expansion will serve them well as they strive to become internationally known. This will however put them into competition with Amazon.com who already are an established household name. Weaknesses Although Chapters got into the mega-store phase, they got in a little too late. After being bought out by Indigo, the chain closed a number of stores as it suddenly found itself with an abundance of them. The e-commerce section of the market was beginning to boom and Chapters was not in it. Although they have recently entered into e-commerce, they once again are entering a field where other players are already established. As a Canadian company, Chapters is little known outside of this country and needs to create a name for itself in the international community if it wants to enter its next phase. It is also limiting itself by staying mainly within the book industry when others, such as Amazon, have broadened their horizons by diversifying into other markets. Chapters is following along the lines of an Amazon-type marketing strategy and I suspect the company will survive, even if never does reach the size or volume of Amazon.com Opportunities Chapters is a bookstore which is already attracting a tremendous amount of consumers. By adding music, videos and gifts to their line of products the opportunity of attracting new market segments will rise. The company has been able to establish itself as a major player in the book market, but it has not yet proven that it can effectively compete in the e-commerce industry. Product expansion via the internet offers the best new opportunity for the company. Its stores are very popular and its name recognizable in Canada. If Chapters wishes to expand its horizons, it must create a name for itself at the international level. Chapters is in the process of adding a new inventory system to their stores this year. The new system allows them the ability to easily track sales and make more accurate decisions concerning stock. This will ensure that the articles the customers are looking for are in the stores which will continue to improve customer satisfaction. The company offers a relaxed shopping atmosphere and in-store events, which will satisfy their clientele. Satisfied customers are bound to return to a Chapters location instead of going to a virtual store. Threats Stores have a limited display area. Consumers that are looking for a larger variety of products are likely to go to a virtual store where they will find an almost unlimited inventory. Threats to Chapters include higher prices due to its administrative nature, the time consuming nature of shopping, limited store hours and the high costs of maintaining inventory levels. Chapters must offer their products at higher prices because they have to maintain a store, thereby incurring more expenses than a virtual store. The increasing ease with which a consumer can search for a specific product at lower prices on the internet is a cause for concern. Shopping is time consuming. As people’s lives become busier and busier, there seems to be less time to browse. It is actually getting to the point where shopping could be considered a chore rather than a pleasurable journey. As traditional working hours are becoming a thing of the past, consumers may find that virtual stores are a viable alternative. Chapters offers their products at higher prices in a time consuming atmosphere with limited availability. Therefore virtual stores may be more appealing to these consumers. Successes and Failures – Amazon.com Financial Growth Amazon has been one of those rare success stories in the e-commerce industry, incorporated in 1994, going public in 1997, servicing the dot-com bust of 1999, to become one of today’s most recognized and profitable internet companies. Amazon has grown from sales of approximately $2.8 billion in 2000 to almost $5.3 billion in 2003; at the same time its expenditures on marketing have decreased from $180 million in 2000 to $123 million in 2003. Share prices have steadily increase from it dot-com crash value of approximately $14.00 per share to a current value of almost $41.00 per share. This increase has come about as a result of very smart marketing on the company’s behalf, which has resulted in unique partnership programs and considerably high name recognition. When you say Amazon to someone most people know that you are talking about Amazon.com and not the Amazon Rain Forest. Amazons phasing in of other products in addition to their books has proven to be a great success, further increasing Amazons brand recognition and diversifying their consumer base. Another important aspect of Amazons success its it highly competitive prices for its products. This is feasible due to Amazons bulk purchasing power and the fact that it does not have the overhead of a brick and mortar business model. Innovative Strategies Amazon has employed three highly successful programs to increase their growth and name recognition within the e-commerce industry. Amazons Associates, Advantage, and Honor system have allowed Amazon to further increase their market share while at the same time reducing their marketing and advertising cost by letting other e-commerce businesses tap into the Amazon brand. This in turn gives Amazon even further exposure, resulting in a win/win situation for Amazon and its partners. The Amazon Associates program allows other web pages to link to Amazon products. When a person purchases an item through such a link the webmaster of the linking page earns 9% profit on the referral fee. This has resulted in over 900,000 web pages now linking to Amazon increase their worldwide exposure. Amazons Advantage program allows companies that wish to sell their products to use Amazons system to do so. Amazon takes a small fee on each sale while the company gets the exposure of the millions of hits per day the Amazon site receives. Amazons Honor system is a program introduced to make paying for products on Amazon much easier, but it also allowed web sites that advertised Amazon and used the Honor payment system to take advantage of the 29 million Amazon members that could possibly buy their products. Again this strategy was a win/win strategy. Amazon received free advertising and a small fee while other e-commerce business got considerable site traffic and a payment system to make it easier for potential customers to purchase their products. Amazons Future Amazons future looks very bright. They have now established themselves within the e-commerce industry and shown to investors that they can now make a pr...