Amazon.com's Inventory Management

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Case Details:

Case Code : OPER023
Case Length : 13 Pages
Period : 2003
Organization : Amazon.com
Pub Date : 2003
Teaching Note : Available
Countries : USA, Global
Industry : Online Retailing

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"In the physical world it's the old saw: location, location, location. The three most important things for us are technology, technology, technology."

- Jeff Bezos, CEO, Amazon.com¹

"We have seen a very interesting evolution where they insisted on owning every piece of the customer experience and then moved towards an open posture where they are outsourcing more and putting their trust into others."

-Ken Cassar, e-commerce analyst, Jupiter Media Metrix on Amazon.com²

Amazon.com-The Ultimate Online Shopping Destination

Amazon.com (Amazon) was one of the first online shopping sites launched in 1995. Since its inception, it has been consistently ranked as one of the best retail sites on the Internet and is regarded as the universal model for successful Internet retailing. In March 1998, Amazon was ranked among the top 20 Internet sites in almost all the major market surveys.

According to an analyst, "When you think of web shopping, you think of Amazon first."³ The Forrester PowerRankings⁴ in 2000, ranked Amazon as the best online shopping site. Amazon owed a large part of its popularity to its excellent customer service, which was due to its exemplary inventory management.

Amazon realized that there were a lot of players in the e-tailing industry and therefore it needed to consolidate its position as one of the best online shopping sites. Accordingly, it took several measures. In order to increase its revenue, it added several new products to its site. In 1999, on an average, it added a new product on its site once in every six weeks.

It entered into strategic alliances with several companies to increase the range of products available on its site. Later, it strengthened its Customer Fulfillment Network by obtaining products directly from the distributors rather than stocking all the goods in its warehouse. Amazon was popular among its customers for shipping the goods within the estimated time, leading to satisfied customers, improved market share and repeat business. By the end of 2002, Amazon had 22.3 million registered users on its site. By 2003, Amazon became the biggest book, music and video retailer on the Internet and offered more than 4.7 million books, videos, music CDs, DVDs, computer games and other products.

Further, Amazon had the distinction of being the first e-commerce site to use collaborative filtering technology⁵. Amazon's immediate business goal was to 'get big fast' which reflected the driving force behind the company's growth.

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1] Fred Vogelstein, "Mighty Amazon", Fortune, 26 May, 2003.

2] Greg Sandoval, "How lean can Amazon get?" news.com, April 19, 2002.

3] "Amazon.com: the wild world of e-commerce," Business Week, December 14, 1998.

4] Provides the ranking of leading e-commerce sites by combining survey data from online customers and conducting shopping tests on various e-commerce sites.

5] Records actual user preferences and based on their buying patterns algorithmically, makes recommendations to like minded customers.