Question

Amazon’s Path to Becoming the Low-Cost Provider in E-Commerce How has Amazon improved value chain logistics to gain competitive advantage as the low-cost provider in E-Commerce?

Answer 1

Amazon has done an incredible job at staying ahead of its competition through consistent growth, rising sales and through offering products at unbeatable prices. According to the Illustration Capsule, Amazon’s goal is to become the global cost leader in E-commerce, and I believe it’s safe to say that the company has reached that goal. Amazon is consistently growing and has already surpassed annual sales greater than the next five largest E-retailers combined.

Amazon has been able to offer over 230 million items for sale, which is 30 more than Walmart. The main reason why Amazon has been able to achieve consistent growth and sales is due to its marketing strategy, its cost-efficient management of value chain activities, such as increasing the scale of its operations and revamping of its value chain activities, such as selling directly to its end-customer. Amazon is truly taking advantage of all components that lead to cost-reduction, higher profits, and growth. Other value chain logistics that Amazon has used to gain a competitive advantage is through the attainment of the bargaining power of its suppliers and distributors.

This gave Amazon the upper hand in price negotiation regarding revenue sharing, payment schedules, and even warehouse space. By improving its distribution to directly deliver to customers and eliminating third-party delivery services, Amazon was able to reduce the marginal cost of quick delivery, established a network of warehousing facilities, and improve the timing and cost aspect of delivery through direct order pick-up from the seller to direct delivery to the customer.

Not only is Amazon logistically far advanced and ahead of its competition, but it is also continuously improving and staying ahead with its technological advances, such as creating algorithms that customize recommendations for consumers and the “one-click” buy feature. All of these value chain activities make Amazon so extremely successful in the E-commerce industry, which keeps me on the edge wondering what else the company has in store to take the next step to set itself even further apart from its competitors.

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