Amazon reigns supreme in the e-commerce sector with its impressive distribution network

As a member of today’s society that is being accustomed to having it needs solved with the swipe of their smart phone, e-commerce is becoming one of the most important distribution channels for organizations (Iacobucci 2013). Online retailers provide customers such as you and me with an extensive range of products available at the click of a button. These products are also available with product reviews and some e-commerce organizations even keep track of your browsing habits and offer product recommendations. The convenience and popularity of an online retail store is reflected in the growth of e-commerce sales by 16.50% in the US in 2015 (Y charts 2015).

E-commerce as a share of retail sales (2016)

 

Among these e-commerce stores, one company stands out. Yes, that’s right, Amazon have taken the online retail market by storm with their vast distribution network and quick delivery of products. When you place an order on amazon, the system searches for the closest warehouse to you that contains the product you want to purchase. Then using it’s incredible logistics, manages to ship the product to you within 2 days if you are an Amazon prime user.

Amazon USA Sortation Center (2016)

 

Amazon have destroyed their competition in the retail market in the US and the way they’re going, it will not be long before they are doing the same here in Australia as well! (Look out Coles and Woolworths!). What Amazon do better than the traditional bricks and mortar stores is that they provide so many varieties of products conveniently delivered to your doorstep with minimal effort on the users part. Of course they can only do this through their excellent distribution network and strategically placed warehouses.

 

Last week Amazon reached an agreement with Atlas Air Worldwide to lease 20 Boeing 767-300 freighters. In addition to this they also agreed to lease 20 planes from Air Transport Services Group. The operations with Atlas will begin in the later part of 2016. These deals were struck bearing in mind the number of Amazon Prime members, rumored to be around 50 million worldwide! (Cassidy 2016).

 

Traditional bricks and mortar retailer’s forays into the online retail market have not been the most flattering to say the least. They have not really eaten into Amazons market share in the US, with Amazon’s net sales boosting by 28% to $29.1 billion this quarter. In addition to this amazon has also opened it’s first traditional bricks and mortar store in the US to further improve it’s ever increasing dominance in the retail industry (Kehoe 2016).

 

However, Wal-Mart, the worlds biggest retailer has attempted to challenge Amazon in the ecommerce sector by investing $2 billion into it’s logistics and technological departments. They have been forced to this as last financial year, Walmart’s sales declined for the first time in 35 years. Other retail stores such as Target have also tried to make strides in the ecommerce sector by offering free shipment to customers who use their loyalty cards (Stevens & Nassauer 2016).

 

It will be interesting to see if Amazon can maintain it’s competitive advantage over it’s rivals in the long run. Especially when Amazon start to push the traditional powerhouses in the Australian retail market, i.e. Coles and Woolworths. Wesfarmers chief executive Richard Goyder, who oversees Coles, Kmart and Target recently said in March that Amazon will “eat all our breakfasts, lunches and dinners” unless Australian retailers become more innovative”. Thus, we can see how important it is to have a strong online presence in today’s highly competitive retail world. Amazon do not look to have their market share reducing any time soon. However, it will be fascinating to see how Coles, Woolworths et al. challenge Amazon in its distribution and logistics network where, Amazon has already proved to one of the best, if not the best in the business.
If you are interested in reading more about logistics and distribution networks, you can view the link here.

 

 

 

References

 

Iacobucci, D 2013, MM4, Mason, Ohio : South-Western ; Andover : Cengage Learning.

 

Y Charts 2016, US E-Commerce Sales as Percent of Retail Sales:

7.50% for Q4 2015, Y Charts, retrieved 14 May 2016,

< https://ycharts.com/indicators/ecommerce_sales_as_percent_retail_sales>.

 

Cassidy, W 2016, Amazon speeds up fulfillment, appears more like logistics company, JOC Events, retrieved 14 May 2016,

< http://www.joc.com/air-cargo/cargo-airlines/atlas-air/amazon-speeds-fulfillment-adding-us-planes-european-services_20160505.html&gt;.

 

Kehoe, J 2016, Traditional US retailers being crushed by Amazon, Australian Financial Review, retrieved 14 May 2016,

< http://www.afr.com/technology/traditional-us-retail-sector-is-being-crushed-by-amazon-20160511-got0ca&gt;.

 

Stevens, L & Nassuer, S 2016, Wal-Mart Takes Aim at Amazon, The Wall Street Journal, retrieved 14 May 2016,

< http://www.wsj.com/articles/wal-mart-bets-on-free-two-day-shipping-1463045580&gt;.

 

Shane de Sales

215205224

shanedesales

 

 

 

 

 

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