Amazon Prime: Difficult to Copy Amazon's Prime service has been the foundation of tremendous success for Amazon since 2008. Competitors have had a difficult time providing a comparable service, and customers have flocked to the site because of the unique product offering Prime provides. Resources must be difficult to imitate for a company to realize sustainable competitive advantage. This case discusses how Amazon’s Prime service has enhanced company value and proven to be a difficult resource for competitors to copy. Read the case below and answer the questions that follow. Amazon Prime, introduced in 2005, is a free-shipping service that guarantees delivery of most products within two days for an annual fee of $139. According to Bloomberg Businessweek, it may be the most ingenious and effective customer loyalty program in all of e-commerce, if not retail in general. It converts casual shoppers into Amazon addicts who gorge on the gratification of having purchases reliably appear a few days after they order. CNBC observed that Prime remains one of the biggest growth levers for Amazon’s core business. Members spend considerably more on Amazon than non-Prime customers while shopping more often. Amazon Prime has 200 million subscribers globally with 157.4 million of those users in the United States alone. This generates $25 billion in membership fees and the average member spends $1,400 annually. Nonmembers spend around $600 per year. Prime offers a bundle of services, but the free faster shipping is the primary reason for the service’s popularity. U.S. Internet users between the ages of 18–34 are the largest users of the service with 81 percent having a membership. Thirty-five- to 54-year-olds have a penetration rate of 68 percent, and 60 percent of those over 55 have an account. Analysts predict that, by 2025, 168.3 million memberships will be active in the United States. Amazon Prime has proven to be extremely hard for rivals to copy. Why? It enables Amazon to exploit its wide selection, low prices, network of third-party merchants, and finely tuned distribution system. All that while also keying off that faintly irrational human need to maximize the benefits of a club that you have already paid to join. Yet Amazon’s success also leads to increased pressure from both public and private entities. For a long time, Amazon was able to avoid collecting local sales taxes because Amazon did not have a local sales presence in many states. This temporary advantage has been obviated by most jurisdictions passing laws requiring Amazon to collect and remit the relevant sales tax. Managing this process is on the challenging aspects of selling a good online. In the United States, Amazon controls 45 percent of the e-commerce market, up from 34 percent in 2016 with no expectations that this growth will abate. Walmart is Amazon’s nearest competitor, but Amazon’s sales online are $62 billion, and Walmart’s are $14 billion. Walmart remains a vital and urgent competitor because their strategy is buoyed by grocery sales. Amazon has not been able to displace Walmart as the number one grocer in the world. While Amazon figures out how to adapt to the grocery business grocers have rushed into home delivery compelled by COVID-19. Online grocery sales are forecast to be 9.5 percent of total U.S. grocery sales—a $1.2 trillion dollar industry. Postpandemic, click-and-collect (order online and pick-up at store) is preferable to home delivery. Home delivery of grocery is expected to decrease with more consumers preferring to shop or pick-up in person. Suburban consumers have a delivery adoption rate 80 percent lower as compared to urban consumers. Retailers have not been resting on their laurels and have pursued alternate solutions to combat Amazon vigorously. Prime will continue to offer Amazon advantages in some aspects of the online marketplace. Which of the following statements is true about postpandemic shoppers and their preference to click and collect? Multiple Choice The case states that their preference is expected to impact retail generally. The case states that they will shop at Walmart over Amazon because Walmart has more physical locations. None of the answers are correct. The case states that their preference is strongest among those over the age of 55.
Amazon Prime: Difficult to Copy
Amazon's Prime service has been the foundation of tremendous success for Amazon since 2008. Competitors have had a difficult time providing a comparable service, and customers have flocked to the site because of the unique product offering Prime provides.
Resources must be difficult to imitate for a company to realize sustainable competitive advantage. This case discusses how Amazon’s Prime service has enhanced company value and proven to be a difficult resource for competitors to copy.
Read the case below and answer the questions that follow.
Amazon Prime, introduced in 2005, is a free-shipping service that guarantees delivery of most products within two days for an annual fee of $139. According to Bloomberg Businessweek, it may be the most ingenious and effective customer loyalty program in all of e-commerce, if not retail in general. It converts casual shoppers into Amazon addicts who gorge on the gratification of having purchases reliably appear a few days after they order. CNBC observed that Prime remains one of the biggest growth levers for Amazon’s core business. Members spend considerably more on Amazon than non-Prime customers while shopping more often.
Amazon Prime has 200 million subscribers globally with 157.4 million of those users in the United States alone. This generates $25 billion in membership fees and the average member spends $1,400 annually. Nonmembers spend around $600 per year. Prime offers a bundle of services, but the free faster shipping is the primary reason for the service’s popularity. U.S. Internet users between the ages of 18–34 are the largest users of the service with 81 percent having a membership. Thirty-five- to 54-year-olds have a penetration rate of 68 percent, and 60 percent of those over 55 have an account. Analysts predict that, by 2025, 168.3 million memberships will be active in the United States.
Amazon Prime has proven to be extremely hard for rivals to copy. Why? It enables Amazon to exploit its wide selection, low prices, network of third-party merchants, and finely tuned distribution system. All that while also keying off that faintly irrational human need to maximize the benefits of a club that you have already paid to join. Yet Amazon’s success also leads to increased pressure from both public and private entities. For a long time, Amazon was able to avoid collecting local sales taxes because Amazon did not have a local sales presence in many states. This temporary advantage has been obviated by most jurisdictions passing laws requiring Amazon to collect and remit the relevant sales tax. Managing this process is on the challenging aspects of selling a good online.
In the United States, Amazon controls 45 percent of the e-commerce market, up from 34 percent in 2016 with no expectations that this growth will abate. Walmart is Amazon’s nearest competitor, but Amazon’s sales online are $62 billion, and Walmart’s are $14 billion. Walmart remains a vital and urgent competitor because their strategy is buoyed by grocery sales. Amazon has not been able to displace Walmart as the number one grocer in the world. While Amazon figures out how to adapt to the grocery business grocers have rushed into home delivery compelled by COVID-19.
Online grocery sales are forecast to be 9.5 percent of total U.S. grocery sales—a $1.2 trillion dollar industry. Postpandemic, click-and-collect (order online and pick-up at store) is preferable to home delivery. Home delivery of grocery is expected to decrease with more consumers preferring to shop or pick-up in person. Suburban consumers have a delivery adoption rate 80 percent lower as compared to urban consumers. Retailers have not been resting on their laurels and have pursued alternate solutions to combat Amazon vigorously. Prime will continue to offer Amazon advantages in some aspects of the online marketplace.
Which of the following statements is true about postpandemic shoppers and their preference to click and collect?
-
The case states that their preference is expected to impact retail generally.
-
The case states that they will shop at Walmart over Amazon because Walmart has more physical locations.
-
None of the answers are correct.
-
The case states that their preference is strongest among those over the age of 55.
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
