Module 3, Section 3.6 Exercise - Examining e-commerce operations

For the site you visited in the last exercise (Looking at richness and reach) you should explore the site and try and answer the following questions:

1. Does this business disintermediate other businesses, i.e. does it remove the need for existing intermediaries? How?
2. How does the business hope to make money? Is it through selling products, advertising, a mixture of approaches?
3. What are the challenges for such a business? In terms of technology what is required? What about logistics, e.g. delivering the product?
4. What additional features might the site offer?

I don't think that this business necessarily disintermediates other businesses. There are many customers who shop because they enjoy the physical shopping experience of walking around the stores and choosing from attractive displays of products. However, what Amazon does do it to amalgamate the shopping ideas of several large high-street stores into one handy website. In this way, it could be said that Amazon disintermediates the need to go the the shopping centre in the first place, selling a whole range of products direct to the customer without requiring them to go to a bookshop or music store.

The business makes money through selling products, although at an attractive discount to the customer. In my opinion the postage and delivery rates are somewhat inflated, probably allowing more profit to be made. Extra services which are cheap to provide, such as gift-wrapping, are offered at a moderate price, thus making more profit for the company. It is possible that record companies, book publishers etcetera pay Amazon for publicity and mentions in recommendations lists and emails, thus increasing Amazon's profit, although this is purely speculation. Amazon also have to maintain a system to take secure credit and debit card payments.

The challenges for such a business are the logistical challenges of combining offering a huge product range with quick delivery speeds with having to store a large amount of stock and co-ordinate a world-wide delivery service daily.

Judging by the recent expansion of the product lines being carried, Amazon will only get bigger, offering a wider range of products.

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Last updated on Friday, 31-Oct-2003 09:49:27 GMT