Post on 19-Aug-2015
Amazon’s European Distribution Strategy
By:Ananda Neogi
Aditya RamachandranBhavana Gundboyina
AlagupiraisoodanAbdul Aqeeb Arshad
Shaik Abdul SalamAmit kumar Sahu
Established in the year 1998.
Started with the acquisition of bookpages.co.uk(United Kingdom) and Telebuch.de(Germany)
Amazon international comprises of Amazon Europe and Amazon Japan, 35% of total revenue.
To sustain its growth Amazon has replicated the broad array of product line structure of U.S into Europe.
It is expected that Amazon Europe would exceed Amazon U.S in terms of revenue by 2004
Facts
Amazon was founded in 1995, to enable book buying into the easiest, fastest and most enjoyable shopping experience.
It offered 2.5 million titles, but had only 2000 books in stock(5% of it orders).
Out of warehouse orders were sourced “as-needed” basis. As orders increased, Amazon opened direct account with the
publishers. Warehouse expansion and starting of new DC’s in 1996-97 Strategically positioned DC’s to reduce lead time and reduce
dependency on main supplier Ingram Major investment was done to improve their software. Expansion of product line from books to other items(cd’s, videos).
Evolution of SC and distribution in U.S
In 1998, they adopted “Get Big Fast” to increase revenue. Introduced SC strategist software to located the best possible
warehouse locations. Their next decision was regarding the variety of product to be kept
in various DC’s. Introduction of latest technology: “pick-to-light”, RFID, voice. Formation of “pick-profile”, for the fastest selling items. “Pick profile” would contain 100 items kept according to title, ASIN
and slot-location. Pick list: 1) single item
2) multi item(pre-sortation, sortation) Companies mantra “deliver at any cost”, helped Amazon sell
20million items and acquire 2.5 million first time customer.
Evolution of SC and distribution in U.S
Introduction of “six-Sigma” and “total quality Management” in 1999. Taught staff about DMAIC(Define Measure Analyze Improve and
Control). Simulate holiday season’s condition to prepare staff for high
demand situations. Improve the software to introduce “Available-to-promise” and
“cascading” Amazon started having their wholesalers “drop ship” orders. Partnering with other companies to reduce the financial risk. Eg.
ToysR’Us To reduce shipping cost, they started with “Zone Skipping”. In 2001, Amazon was able to cut their total cost by 17% and had
their first profit.
Evolution of SC and distribution in U.S
In 1998 Amazon entered the European market of UK, Germany and France.
Duplicated the “Get Big Fast” strategy. European market was as aggregation of regional market. Built 24-hours customer service(native language) Introduced free shipping in 2001 and clearance sale. Amazon offered the option of “pay by checks” to French customers
and postal order German customers. Establish relationship with hundreds of publishers and distributors,
due to lack of wholesalers Unifying marketing and branding team of Europe.
Launching Amazon in europe
Strength: Multiple expansion options They use to differentiate from its Brick and Motor
competitors. They have better supply chain and Distribution
network. Pick to light system-radio frequency technology. Key metrics to measure
Worker performanceNumber of items picked per hourFree replacement rateNumber of hours from order confirmation to shipmentCost per unit shipment
Strength: Used Six Sigma DMAIC
(Define,Measure,Analyze,Improve and Control)Used to improve inventory record accuracy
Drop ship- shipping directly to the customer. Postal injection-arranged for full truck loads
driven to major cities.
Weakness Temporary employees Split shipment(paid separate shipment cost) Delivery at all cost Using country postal service
Opportunity: Tying with Ingram’s inventory In 1998, Amazon acquired Bookpages.co.uk
(united kingdom) and telebuch.de (Germany) and relaunched as Amazon.co.uk and amazon.de
Threat: Competitors(1998)
◦ Buy.com◦ Barnesandnoble.com
Wall street began to put profit pressure on all dotcoms . The stock price began to fall.
In Europe , They faced several challenges particularly in operational and organizational choices.
Recommendations: Implement European distribution network(EDN). Centralize management office in the UK in order to
perform more operations. Create cross-docking enabled warehouses,
preferably in Southern Europe where higher demand is observed.
Make use of strategic order fulfillment to minimize lead time
Utilize strategic inventory distribution to reduce cost. By continuing free shipping for local products,
extending the use of postal injection for some high demand products.