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The Bargaining power of suppliers Report Writing - Management Assignment Help
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TASK ONE
The bargaining power of suppliers –
For the most part of it, suppliers that pre-exist in the online retailing segment should be able to equally control the timeline and supply of products from their end however, some suppliers might not be looking forward to such deals. Offline markets have offline suppliers which charge/price accordingly. Catering to an online retailer like Amazon helps the supplier increase its demand potential and charge higher prices for the same goods. Amazon is global which means that the suppliers are global, and this advantage still gives Amazon leverage over them, but offline retailing will work only on quantity basis. Every product comes with a high and low-ball price benchmark hence even the suppliers of a homogenous product will be at cut-throat competition.
The bargaining power of buyers –
Regardless of the market capture that Amazon has obtained from its online retailing; it is almost impossible to guarantee the same/similar response at offline outlets. Majority of the consumer products are price elastic which means that the inability of Amazon to even match a 50-cent price reduction on ‘product X’ can cause a consumer to switch retail outlets. It is difficult to create a brand loyalty when it comes to a multi-brand retail market. Customers prefer deals on singular products as they mostly need it for personal use. In these situations, bulk discounting is of no relevance here; something that Amazon has a strong hold in. An offline retail store requires a physical front end presentation which includes staff, infrastructure, power etc. these fixed/semi-variable costs have to be accounted for by adding a fraction to each product sold. This can increase the price charged to the customer. (Anon., June)
Industry rivalry from existing competitors –
While Amazon remains the monopolistic e-commerce giant, it is still going to face competition in the offline retail market with the likes of Walmart, Costco, etc. As the offline retail market is heavily competitive it will difficult for any business no matter the investment the bring in; to co-exist with the multi-billion-dollar firms. Online marketspace allows Amazon to cut down many costs that they would otherwise incur. Hence Amazon can cut price tags like no other firm enabling them to make great use of economies of scale. Offline retail will need added research and market positioning for Amazon to sustain as competitors keep updated and upgrading their marketing and pricing strategies.
The threat of new entrants –
Offline retail markets are saturated with small-large sized firms with high barriers of entry as well as exit. Set-up cost is unlike the online retail market as additional costs such as inventory, infrastructure, power, salaries and wages, maintenance, etc. These when combined add to the total costs greatly. To meet these costs and sustain itself should be a challenge for most new entrants but if that is not enough the legalities, and placement will suck up more funds. New entrants like Amazon that are MNCs should manage these steps reluctantly but with ease however, their biggest challenge becomes – meeting consumer expectations equally in online and offline markets. This is important because even a small comparative advantage in either markets can create a downward shift in the other.
The threat of substitutes –
As previously mentioned, fortune 500 giants like Walmart, Costco and Best buy exist in the offline market. These brands have already created a monopolistic environment hence they have not faced substitution issues. Having said that in the case of a new entrant like Amazon it is a huge threat as there has to be great value that it comes in with or else an existing consumer would not necessarily find the need to switch their shopping to amazon offline retail stores. It will be a risk that consumers might not want to take, and existing companies will take full advantage of this substitution opportunity.
TASK TWO
Coming from a 5 trillion-dollar industry it is understood that Amazon will not face any capital involved issues when entering the offline market segment. Amazon caters to a large array of customers with signature divisions like AWS, tech, fresh, books, etc. This means that Amazon by default will have a larger offline audience to cater to. As compared to the likes of wholefoods and Best buy respectively Amazon invites far more consumers to have a look at its product. Competing with the likes of Google, Microsoft and even Apple for that matter is something alien to other offline retailing billion-dollar businesses. Moving to an offline retail environment will help Amazon reach out to those customers who are still hesitant to shop online but do not have anything against the brand for that matter. Along with that as Amazon will be creating a front end, i.e. a more service-oriented system consumers are likely to comeback as they would have established a relationship, or if not, it would invite a larger audience. Its Prime Now service offers same-day delivery of products and household goods in certain markets, while its Amazon Fresh and Amazon Restaurants divisions are trying to capture more of the market for grocery and meal delivery. Prime Pantry is the company’s strategy for getting you to buy things like paper towels and peanut butter online, while its Dash buttons help customers with one-click ordering of products like laundry detergent without ever needing to pull out their phone. Having said that, Walmart is still far ahead in terms of revenue generated from groceries and essentials, one of the biggest reasons why it is a leading retail chain with the maximum number of outlets in the US. Amazon’s future lies in finding new and ever more creative ways to offer convenience, even when that convenience takes the shape of something familiar like a corner store, a local grocery, or a pharmacy. Convenience is what built Amazon’s empire, and it is still the driving force behind everything the company does today. Its mission now is cracking convenience on an entirely new scale: selling us not what we might need in two days, but what we need right now. Amazon’s business strategy is based on one primary goal: to seamlessly link the digital and brick-and-mortar shopping experience to be part of every single purchase made. More than merely wanting to sell as much stuff as they can to the most people, Amazon strives to become so ingrained in people’s lives that they cannot imagine living without it. (Anon., 1979)
This presents challenges as well as opportunities for retailers who stay focused on current trends, embrace a customer-centric culture, and turn their data into action. A big part of Amazon’s competitive edge is the tremendous amount of data it collects on customers. While all retailers collect customer data, Amazon fervently relies on its customer data to drive marketing strategies — by continuously experimenting and optimizing until they get the formula for success exactly right. All in all it can be deduced that no market is better off than the other but for Amazon offline retailing is just another opportunity to grasp shelf space at shopping centres so that it can be in sight of the customers all the time. Whether it is a price check, product comparison or genuine purchase; Amazon is taking earning something or the other when you interact with its availabilities. The marketing strategy has been very centre driven which allows the company mission to be equally understood in all markets around the world. Offline retailing as kiosks and other means does not require warehousing spaces like other retailers which allows Amazon to invest more in marketing and promotions for both online and offline sales. However it has no retail context in it as the amazon sales started in 2010 and going upwards ever since, it hasn’t seen a loss and in the this global pandemic, the profits have risen even high
References & Bibliography –
https://www.thenfapost.com/2020/08/10/offline-strategy-amazon-easy-stores-in-all-new-avatar/
https://www.amazon.in/ref=nav_logo
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