Hi Tariro, thank you for your thought provoking question! you obviously put a lot of thoughts in my post!
There’s more and more competition as eCommerce gain market share from brick-and-mortar retailers. We should never expect Amazon to have a monopoly on the business. There will be niche players. Amazon’s strength is selection, convenience, and price. Amazon will compete with other niche eCommerce site. The brick-and-mortar analogy is Wal-Mart vs specialty retailers, or department stores vs boutique stores in a shopping mall.
So, it’s important for Amazon to focus on its core strength. It’s hard to be everything to everyone. But I see Amazon invests in specialized store fronts such as grocery or industrial supplies:
But I don’t know if Amazon will do better than niche players who are more focused and who have everything to lose in this eCommerce battle. These players have specialized web interface, specialized services, and specialized supply chain. Amazon’s general competitive advantages might not be as significant in these areas. But I don’t see it as a problem for Amazon. It doesn’t hurt Wal-Mart that it can’t compete with Home Depot in home improvement products. I see Amazon as the Wal-Mart of ecommerce.
I got the 90 warehouse number from a bloomberg article
Amazon Ramps Up $13.9 Billion Warehouse Building Spree: http://www.bloomberg.com/news/articles/2013-08-20/amazon-ramps-up-13-9-billion-warehouse-building-spree
Some estimated that 45% of Amazon’s customers in the U.S. have Prime membership. So, prime revenue is about 62% of total revenue because prime members spend more than twice non-prime member. As Amazon’s average gross margin is 29%, it’s likely that sales prime members has 26% gross margin and sales to non-prime members has 34% gross margin. So, on average, each prime member brings in $348 gross profit and each non-prime member brings in $221 gross profit. In other words, prime helped Amazon improves gross profit per member by 57%
I’m not sure if tiered pricing is a good idea. Tiered pricing would help Amazon gets some more shipping revenue, and may encourage shoppers to buy more in order to get into lower tier price. But it complicates the marketing message. I don’t think Cosco has a tiered pricing for its membership.
Amazon Prime is big, but how big?: http://www.usatoday.com/story/tech/2015/02/03/amazon-prime-10-years-old-anniversary/22755509/
What Do 50 Million Amazon Prime Members Mean for the Company?: http://www.fool.com/investing/general/2014/09/22/what-do-50-million-amazon-prime-members-mean-for-t.aspx
Very interesting article Tara! I am curious to know if Didi Kuaidi is the only taxi app on Wechat? Do they have an exclusive agreement with Tencent since Tencent is their investor? On the hand, Uber has Baidu as their strategic investor so Uber can get access to map in China. Do you think it is a significant advantage over Didi Kuaidi? China is infamous for being protective of their Internet companies due to national securities reasons. How can Uber mitigate the risk of being discriminated as a foreign company in China?
Hi Kevin, fascinating read on Wechat! I see that wechat is trying to be everything for everyone. Tencent started off as a online game company for hard core game players. According to your post, it seems like tencent is now becoming more like an advertising company in order to monetize its most valuable asset Wechat. What are the challenges do you see where its most valuable asset now has little connection with its core gaming asset? I agree that you can put game in wechat as a way to monetize but doing so will annoy the non game players like me.
Hi Cathy, thank you for your great post! It would be great if you can have a competition landscape map to see where Regina is in the value channel. I still don’t understand how they design different models that appeals to customers even though they are only a B2B company? How can a manufacturing company in China knows about the customers’ preferences in the US in order to do the designs that can appeal to Victoria Secret customers in the US? Regardless, it is refreshing to hear that manufacturing companies in China can now do the innovative design part for its customers.