Evolution of Amazon and its Impact on Australian Retail Sector

This report discusses the evolution of Amazon from being an online book seller to the largest retailer in the world. It also explores the impact of Amazon on the Australian retail sector.

Running head: OPERATION MANAGEMENT
Operation management
Name of the student
Name of the university
Author note

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Executive summary
The aim of this report is to discuss about the evolution of Amazon from being an online book
seller to the largest retailer in the world. In addition, the relation between their supply chain
process and the concept of globalization is also being discussed. It is identified that the integrated
supply chain process of Amazon is helping them to offer larger varieties of goods to the
customers. This report also discussed about the impact on the Australian retail sector due to the
long term presence of Amazon. It is concluded that that Australian retail sector will have both
positive and negative impacts in the long term.

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Table of Contents
Introduction......................................................................................................................................3
Journey of Amazon..........................................................................................................................3
Globalization and operation management of Amazon....................................................................4
Effectiveness of the e-commerce over traditional process..............................................................6
Long term implications of Amazon in Australian retail industry....................................................7
Conclusion.......................................................................................................................................8
Reference.......................................................................................................................................10

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Introduction
In the recent time, Amazon created a huge stir in the global retail market with their online
based services. With the growing popularity of the online marketplace, the major challenge is
being faced by the brick and mortar stores in offering the convenience to the customers.
However, on the other hand, there are number of factors being faced by Amazonas well, in order
to gain the market leadership position as they are now (Rotem-Mindali and Weltevreden 2013).
Reviewing these factors will help to gain an understanding about the work process of
Amazonand the ways they are gaining competitive advantages over others.
This report will discuss about the journey of Amazon from being a book retailer to
offering almost everything in the world. In addition, the operation management process of them
will also be discussed along with the effectiveness of them in customer management. Lastly, this
report will also discuss about the implications of Amazon in the Australian retail industry.
Journey of Amazon
There are number of factors being initiated by Amazon in becoming the largest retailer in
the world. One of the major factors is offering greater reach and affordability to the customers.
This is due to the reason that at the initial stage of their operation in 1998, Amazon placed itself
as the largest book store in the earth, which denotes that they are targeting the larger market from
their very first stage. Moreover, in the initial stage of operation of amazon, internet service was
not popular as it is today and hence their presence was limited (Cao 2014). However, with the
emergence of the internet boom across the world, this online site of Amazon got the much
needed traffic and popularity, which helped them to cater to larger segments. This is further
complemented by their business strategy. As stated by Jeff Bezos, founder and CEO of Amazon,

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cost leadership will help to attract more customers even with smaller profit margin. The more
will be the number of the customers, the more will be the economies of scale, which will further
reduce the cost. Hence, Amazon is gaining profits even after the offering their products in
cheaper to the customers (Mohapatra 2013). This also helped them to penetrate in the global
markets and catering to different customer segments.
Amazon is also having the advantage of lower cost and complexities in their operation
compared to their competitors such as Walmart and Target. This is due to the reason that
Amazon is not having the requirement for physical stores in different locations rather their portal
is well available across the world. Hence, the complexities in starting the online business are also
fewer, which also contributed Amazon in gaining the extensive market share across the world
over their competitors (Huang and Benyoucef 2013). With time, customers started to expect
more conveniences in terms of their shopping experiences and these are also properly fulfilled by
amazon. They are providing the doorstep delivery of the products ordered by the customers
while in the case of traditional retailers, customers have to visit the stores. Thus, the preference
pattern of the customers also inclined towards the online services of amazon. With the level of
conveniences being gained by the customers from the book selling services of amazon, it is the
requirement of the market that Amazon started to cater to different products and services
(Balasescu 2013). Moreover, with the effective and efficient supply chain process in place,
Amazon is taking less time in delivering the products to the customers, which is only cementing
their position in the global retail scenario. All these factors are the major reasons for Amazon in
becoming the “everything store”.
Globalization and operation management of Amazon

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With the emergence of globalization in the world trade, the operation management of
Amazon also got modified and more integrated. One of the aspects of operation management of
Amazon that is heavily based on the globalization of world trade is their supply chain process.
This is due to the reason that the supply chain process of Amazon is now more integrated across
their global operations. For instance, it is possible for the customers to book a product from the
United States and getting it delivered in India. This is having advantages and value propositions
for both the customers as well as for amazon (Falk and Hagsten 2015). This is due to the reason
that with help of the integrated supply chain process, the number of suppliers got increased and
Amazon is sourcing their goods from different suppliers across the world. This is enabling them
to reduce the bargaining power of the suppliers and having more capability in determining the
price. Also the agility is getting increased in the supply chain process due to the presence of good
number of suppliers across the world. On the other hand, the customers are getting the advantage
of having larger varieties of products across different price points and more options (Ritala,
Golnam and Wegmann 2014).
This approach of the supply chain process of Amazon is based on the globalization of the
trade due to the fact that with the help of globalization, they are facing fewer issues in global
sourcing of the products. For example, Amazon is importing large number of smartphones from
China and selling it across the world and this is made possible by the concept of globalization. It
is also identified that products being imported by Amazon are also available in competitive price
points (Bharadwaj et al. 2013). This is also the contribution of globalization with removal of the
trade barriers between the countries. Hence, it can be concluded that the supply chain process of
Amazon is based on the globalization of world trade and they are truly acting global by sourcing
from various suppliers across the globe and selling in same.

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Effectiveness of the e-commerce over traditional process
Even though the concept of e-commerce got huge popularity in the recent time and it is
further getting amplified with the boom in the internet sector but the effectiveness of it in
comparison to the in-person shopping concept is argumentative. This is due to the reason that
there are different factors that are having influences in determining the shopping experiences of
the customers. One of the major advantages of e-commerce is the conveniences that the
customers are gaining by getting the products delivered at their home. But they are also
depriving of the touch and feel sense in the e-commerce (Zadar, Ishaque and Javaid 2014). In
this case, there are customers who prefer the touch and feel provision prior to take the buying
decision. This will also not be applicable in the case of e-commerce while the in-person shopping
process can have it. In the traditional retail shop such as Walmart, customers can have the
physical idea about the particular product and then they can initiate the buying process.
However, on the other hand it should also be noted that in the traditional retail chains
such as Walmart, customers will have limited options available in the stores while they will have
much higher options in e-commerce. For example, the smartphones available in the retail chains
are limited in terms of brands and models and not all the brands and products are available at one
time. However, in the case of e-commerce, all the smartphone brands operating in the market are
available and thus the options for the customers are more (Kremljak 2015). E-commerce is also
enabling the customers to gain the access to the products not accessible in their country. With the
help of amazon, they can have products according to their choice. This facility is not being
provided by the traditional retail chain. Moreover, in the recent time, there are number of e-
commerce retailers started 3D imaging of the products to offer the sense of practical feel for the

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customers. However, this cannot be compared with the physical feel in the traditional retail
chain.
This can be concluded that e-commerce is having more advantages over the traditional
in-person shopping concepts but lacks the touch and feel facility. This is one of the major
determining factors in the buying decision process of the customers. There are few products such
as garments, which needs this touch and feel facility prior to buying. This same is applicable for
the luxury and expensive items. It can also be also being concluded that there are number of
customer conveniences can be offered by the e-commerce sector but the in-person shopping
experience cannot be replaced (Kidane and Sharma 2016). Customers preferring to have the look
and feel about the products what they are going to buy will opt for the traditional retail chains
over the e-commerce sites. This is also one of the reasons behind the takeover of whole foods by
amazon. They are planning to increase their offline presence to target the above discussed
customer segment.
Long term implications of Amazon in Australian retail industry
Presence of Amazon in the Australian retail sector will have both negative and positive
implications. One of the major positive impacts will be the increase in the competition and
innovation in the market. This is due to the reason that the more will be the competition due to
the presence of amazon, the more will be the innovative ideas to be initiated by the other
competitors. Hence, the average innovation in the Australian retail sector will get increased and
this will further enhance their efficiencies (NIranjanamurthy et al. 2013). This should also be
noted that presence of Amazon will pose huge challenges for the existing competitors and they
will also initiate cost leadership strategies to attract more customers. Hence, the customers will

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have price competitiveness in the retail market. They will be the ultimate beneficiary from the
price wars between the retailers.
Another positive implication due to the presence of Amazon will be the gaining of access
of global products by the Australian customers. There are number of products being offered by
Amazon that are not available in the retail stores and with the presence of Amazon in Australia,
these products can be accessed by the customers. Hence, the options for the customers will get
increased in respect to a certain product line (Kaptein and Parvinen 2015). The Australian retail
market will further get inclined towards the online market due to the long term presence of
amazon. Hence, the average satisfaction and conveniences of the Australian customers will get
increased.
However, on the other hand there are few negative implications will also be faced by the
Australian retail sector due to the long term presence of amazon. One of the major negative
implications will be lack of viability for the domestic retail firms. The economies of scale
enjoyed by Amazon cannot be matched by the domestic firms in Australia and thus cannot offer
the competitive price as amazon (Panagiotelis, Smith and Danaher 2014). This will pose
challenge in terms of business viability and ultimately the domestic industry of Australia will get
affected. Long term presence of Amazon will also cause monopoly power in the market. This is
due to the reason that of Amazon will acquire the majority of the market share by their cost
competitiveness and at one point of time; there will be no close competitors for them. This will
ensure that Amazon will enjoy monopoly power in the Australian retail scenario.
Conclusion

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Thus it can be concluded that Amazon is one of those retail entities that has changed the
entire process and practices of the retail industry. They posed challenges for the well established
retail chains with their innovative approach. In this report, the journey of Amazon from a book
seller to the largest retailer in the world has been discussed. In addition, this report also identified
that the concept of e-commerce might get more popular than the in-person shopping experience
but it will not be able to replace the same as e-commerce cannot provide the touch and feel
experience. Moreover, this report concludes that presence of Amazon in the Australian retail
market will have both positive as well as negative implications in the long term.

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