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On-line retailers have been commanding a higher share of Canadian retail spending every year.
The trend is largely driven by convenience (e.g., home delivery), wider assortment (due to absence of physical shelf space) and opportunities for consumers to use social media to share their opinions about their experiences with the product. Amazon.com and its Canadian web-site, Amazon.ca, are great examples of successfully capitalizing on the above trends to provide the best in class on-line shopping experience. Amazon has become the largest on-line retailer in North America, selling over 480 million products in the USA and 133 million in Canada.
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Convenience through Expedited Shipping
Among many aspects of making shopping at Amazon more convenient for consumers, the company has made a special effort to adapt its supply chain to the fastest possible delivery. For example, Amazon offers free same day or one day delivery in Toronto, Vancouver and Montreal on $25 minimum order size for members of its Prime Program and 2-day delivery on a vast majority of other products across the country. Amazon is especially efficient in processing new orders which normally takes less than 1 day. For comparison, another larger on-line retailer Costco.ca takes much longer time in processing new orders and typically offers 5-7 business day delivery. To further increase consumer convenience in product delivery, Amazon.ca has also developed a network of Deliver Pick Up location partnering with 6,200 Canada Post locations. Consumers receive emails when their package is ready for pick up and could use their smartphones to present the proof of purchase (e.g., unique bar code) along with their government issued ID at Canada Post.
Large Assortment through Advanced Supply Chain
Amazon has become a true “The Everything Store” reflecting the founder’s vision of offering maximum possible variety. Amazon has positioned itself as the store with “Earth’s biggest selection” by offering products in major consumer categories and even extending to some less traditional categories for on-line retails such as jewelry and automotive. For comparison, a typical Wal-Mart Supercenter store offers about 150,000 items vs. hundreds of millions of items available at Amazon. Managing such a large product selection has prompted Amazon to establish some innovative supply chain practices. The process is based on principles of high automation and predictive inventory management (anticipating consumer demand and procuring goods before consumer order them). At a typical Amazon warehouse, the process starts with the customer placing an order, the order is been shown red in the person whose item is ordered in the warehouse. The workers place the product in crates on a conveyor, that is going through the distribution center. Crates arrive at the central point, and bar codes of products are matched with orders and sorted automatically into one of several thousand chutes before going into a box.
Easy of Selection through Social Media Reviews
Although wide product selection at Amazon offered consumers many choices, it has also made their purchasing decision more complicated. Consumers have to navigate through a variety of options and product offerings before making final purchase. In response, Amazon has integrated social media capabilities for consumers to provide reviews and share their experiences with the product they bought at Amazon. The versatile system of Consumer Reviews allows consumers to read product reviews and has some great options for search and ranking. For example, the review system allows to sort through reviews by grade, popularity and date of posting. Moreover, the system allows users to set up an on-line discussion board with the reviewer to continue dialogue about the product. The Review system is built to also accept consumers’ pictures and videos making their reviews even more useful when considering the product on-line. These Social Media capabilities represent a competitive advantage for Amazon as increasingly larger number of consumers are spending time on-line prior to purchasing the product via Amazon. Internally, Amazon is likely leveraging information from Consumer Reviews to optimize its product portfolio, stock up with popular products and anticipate consumer trends.
Lessons for Others
Amazon’s supply chain is designed with the goals to provide consumers with more convenience, wider assortment and opportunity to share their feedback through social media tools on the company’s web-site.
The later is likely playing an increasingly important role in shaping supply chain processes at Amazon through optimizing company’s product portfolio, anticipating consumer demand and identifying new trends and ideas.
If you have concerns as to the accuracy of anything posted on this site, please send your concerns to Peter Carr, Program Director, Social Media for Business Performance.