Amazon.Com's European Distribution Strategy

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Amazon

Amazon is one of the biggest and most famous online stores in the world. It is divided into several independent organizations like Amazon Europe, Amazon US and Amazon Japan. Amazon was founded in 1995 by Jeff Bezos. At the beginning it was just a platform for selling books at soon it became the world’s biggest bookstore with up to 2,5 million different titles. Their strategy was clear and easy: hold modest inventories and rely on wholesalers. The wholesaler can fulfill the order quickly while Amazon employees pick and pack the order and ship it to the customer. In 1996 Amazon grew really quickly by expansion of their distribution center, increasing number of titles and software development. In 1998 they were not longer a bookshop any more but expanded their product lines to music and videos.

However, they had to face tough competition, especially in 1998. So remain the leader of theonline stores Amazon decided to pursue a “get big fast” strategy to increase their revenue. Therefore they added new product lines and adapted its supply chain and distribution network. One big decision was also where they should locate their distribution center and how many they should build. Amazons pick was a distribution center in Nevada, Kansas and Dallas. Soon also three more centers were added to serve the Midwest and the Southeast. The next step was to choose which product types each of the distributions centers should carry. After that they had to make a decision regarding the equipment in the new distribution centers and the technology used in their warehouses. Finally, to maintain high levels of quality and productivity in its distribution centers, Amazon developed key metrics to measure worker performance, including number of items picked per hour, free replacement rate, inventory accuracy, number of hours from order confirmation to shipment, and cost per unit shipped. Performance information was routinely shared with individual workers.

In 2000 the new Vice President of Operations Wilke started with teaching the staff to use a special method to reduce variations and defects. This approach was later also used to improve the inventory record accuracy. Moreover, Wilke hired staff to stimulate holiday season conditions and he made arrangements for additional storage capacity. On top of that Wilke also focused on inventory optimization in the fulfillment network. To have the products at the right time available will easily decrease Amazons inventory costs. There were several ideas to improve the inventory management: 1)Refine the software used to forecast customer demand

2)Establish buying rules to better allocate volumes among wholesalers 3)Integrate its supply management system with its own inventory, warehouse and transportation system 4)Implement buying rules to determine which supplier offers the best price and delivery options 5)Having “drop ship” orders which means that the product is directly shipped to the customer without going through an Amazon distribution center 6)Partner with other companies, with Amazon handling order fulfillment and the partner covers the costs for the inventory

The last two points were just idea and never realized.

Amazon entered Europe through the two countries Germany and the UK. To enter those markets Amazon acquired a leading online store in each country and the two sites were re- launched under the Amazon brand. In 2000 Amazon continued its expansion and entered France. They did not use the same strategy as in Germany and the UK, but build their site from scratch. However, there were several challenges to enter the European market. They had to be aware of the cultural differences in Europe. First, Amazon adapted their website always a little bit to the needs of the country; secondly, they needed to address the selling regulations in each country. Another very important point was the payment options. Because there were not many people in Europe using credit card they...
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