Customer Fulfillment in the Digital Economy Amazon.Com

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Customer Fulfillment in the Digital Economy

E-tail Customer Fulfillment Networks Pioneer
“The logistics of distribution


are the iceberg below the
waterline of online bookselling.”1

B-web type

—Jeff Bezos,
founder and CEO,

• Aggregation (e-tail) /Agora
(auctions, Zshops) hybrid model


“Ten years from now, no one
will remember whether

Consumers and business buyers

Context providers

Content providers and small online
merchants (
associates, Zshops, auctions)
Suppliers and b-web partners
(publishers; producers [OEM];
distributors e.g. Ingram Micro,
Baker & Taylor Books, and others)

Customers spent an extra
$100,000 upgrading shipping
from the West Coast to the East
Coast. All that will matter is
whether electronic commerce

gave people a good or bad
—David Risher,
senior vice president for

Commerce services

Infrastructure providers

“This [the
distribution warehouses and
CFN] is the fastest expansion of
distribution capacity in
peacetime history.”3
—Jeff Bezos,
founder and CEO,

Offering and online
merchants (
associates, Zshops, auctions) and merchants
participating in auctions and
Third party shippers (UPS & USPS)
Drop shippers such as Ingram
Technology providers such as
Oracle, Net Perceptions, and i2
Third party shippers (UPS, USPS)
The largest online e-tailer of books,
music, videos, toys, and gifts
Recently expanded service offering
to include auctions (March 1999)
and Zshops (September 1999)—an
aggregation of merchants on its
Web site
Aspires to become a one-stop shop
for merchandise on the Web

CFN value proposition

“Earth’s largest selection” of
merchandise at competitive prices,
a validated product assortment,
and consistent customer service
from “home page to home


360 Adelaide Street W, 4th Floor
Toronto, Ontario. Canada M5V 1R7
Tel 416.979.7899. Fax 416.979-7616

© 2000 Digital 4Sight Corp. Reproduction by any means, or disclosure to parties who are not employees of Digital 4Sight member organizations is prohibited. Thank you for your cooperation.


Customer Fulfillment in the Digital Economy

few barriers to entry—but one of those barriers is
customer fulfillment. In 1996–97, was
largely alone in the e-tailing business. Now the Web is
teeming with e-tailers like (which aggressively
undercuts everyone else, including,
CDNow, and There are also Web
portal-run malls, many of which are copying and
offering features (like the renowned “one-click
shopping”) that have thus far differentiated Yahoo’s online mall offers 7,000 stores
with over four million items and’s planned
debut in 2000 poses a significant threat.’s
first mover advantage, e-brand equity, and initial cost
advantages (stemming from lack of investments in
prime real estate for storefronts) are gradually eroding.
Its margins are falling, while operating expenses from
mergers and acquisitions are increasing. As of the end of
1999, expected to post approximately $600
million in losses for the year, at a time when growth in
book sales is falling (from about 800% in 1997 to a little
over 100% in 1999). On the plus side, customer
retention rates exceeded 72% in the third quarter of
1999.8 But average revenue per customer in 1998 was
$98.4, while average selling, general and administrative
(SG&A) and distribution costs per customer (excluding
cost of goods sold) were about $71.30, leading to an
average net earnings loss of around 21%.9
Founder Jeff...
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