Business in Action

Amazon - the e-tail phenomenon



(Example of e-commerce, economies of scale, customer relationship management)

Amazon is credited as being one of the first 'dotcom' businesses but life was never easy - many of these pioneering e-commerce businesses never made it and there are still many failures on the internet.  Amazon. however, has built up significant 'economies of scale' - its sheer size means that it can buy its stock at much lower prices than many of its competitors and once a customer database is set up it can cost the same to run whether you have a thousand customers or a millions customers - the more customers you get the less each one costs you to look after!

Amazon was originally set up as an online bookstore but has since moved into music, DVDS and even electronics products.  Each new line of products is seen as complementing what they do and if they've already got you as a customer, why not try to sell more stuff to you?  This is a part of what's known as customer relationship management.  It is much more easy and cheap for a company to retain old customers than get new ones.  And once they've got you they can build up a profile of what you buy, how much you spend and how often.  They can even recommend stuff that is similar or that other people like you may have bought!  That can seem a bit scary but can sometimes be a good service for the customer - at least they are not being bombarded with junk mail for stuff they would never buy.  Nevertheless, it is still interesting how much information companies build up on us these days.

In the meantime, Amazon moves on from strength to strength - firstly challenging bookshops like Waterstones, then record stores like HMV and then electrical retailers like Dixons.  One day will we all buy our stuff from companies like Amazon?  It depends how much you fancy a coffee in your local bookshop, physically choosing a CD, or speaking to a sales assistant about a hi-fi.  You decide.


Business Studies:  Explain three advantages Amazon has over high street stores?  How many disadvantages can you think of?

ICT:  Explain three ways in which Amazon effectively uses ICT in its business.