The competitive rivalry in the online retail industry is extremely high as the number of market players has grown. Besides, the traditional brands also offer online sales, hence further heightening the competition. Amazon China faced fierce competition from rivals such as Alibaba, JD, Taobao, e-Bay, and others. For Amazon, the competition does not only emanate from the market giants such as Alibaba; the company also battles for the market share with other brands, small-scale retailers, and online stores targeting particular products such as apparel, electronics, auto parts.
The supplier power, as for the case of Amazon China, is low. Amazon is such an established player in the online retail industry. As such, the company has the upper hand when it comes to suppliers in the supply chain. Despite many suppliers Amazon manages, they all follow specific policies and regulations and ethical principles stipulated by the company. It is not easy for any supplier to think of forwarding integration, and the switching cost is also meager as several companies are ready and willing to supply Amazon with the necessary products.
The buyer power for Amazon China is high as the switching cost is almost zero. Online customers are well informed, and because of a growing trend in online retailing, clients have several options to switch to. However, Amazon stresses product quality and customer satisfaction primarily. The company invested heavily in warehouses to ensure timely delivery and effective management of returns and replacements to boost customer satisfaction and repeat sales.
Threat of Substitute
The threat of substitutes is high as Amazon does not specialize in any unique product. Substitution to Amazon includes several local retailers such as Walmart, other online stores of similar brands that Amazon sells, branded outlets, and many others. Many people also prefer to shop at a retail store than online hence creating a high threat of substitution to Amazon.
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The threat of New Entrant
The threat of new entrants is low as it is challenging to build an online store to the level of Amazon, which requires significant investment. Online shopping platform requires extensive investment in logistics, warehousing, marking, distribution, and other factors, making market entrant low.
SWOT analysis of Amazon China
One of Amazon China’s key strengths was its superior distribution and logistics system aided by its extensive investment in warehouses. Joyo Amazon took advantage of the company’s superior logistics and distribution systems to resolve customer complaints concerning the slow and unreliable delivery that afflicts e-commerce across China, hence gaining more competitive advantage over the rivals actualizing customer fulfilments. Amazon has significantly invested in warehouses and fulfillment centers, aided by its strong supplier power in the supply chain.
Amazon also derives its strength from its power to leverage information technology and its application of e-commerce as a scalable platform that is easier to ramp up. This has ensured that Amazon is always ahead of its competitors in the online retail store. Being the world’s largest online retailer, Amazon also derives its competitive advantage from two-pronged strategic push, including cost-leadership and focus.
Amazon China had a weak marketing strategy. Amazon focused significantly on customer experience while shopping online, investing much in logistics and distribution networks while neglecting other aspects such as marketing. Joyo Amazon spent every little on advertising and marketing during Amazon’s earlier years in China.
Amazon China also maintained its global policy of not sharing consumption data with the third-party sellers on its platforms, a weakness that Alibaba exploited to its advantage. Alibaba begins to share consumption data with third-party sellers to foster healthy competition and gained more trust.
Growing purchasing power was one ample opportunity in the Chinese market for Amazon. By 2009, Joyo Amazon and other competitors began to reap significantly the benefits of the Chinese market’s growing purchasing power and faster-growing middle class. Amazon also entered the China market as the world’s largest online retailer brand, which provided an opportunity to diversify rapidly is product portfolio by levering its power over suppliers and its robust technologies.
The competition was the most significant threat Amazon China faced from other giant online retailers such as Alibaba, e-Bay, JD, Taobao, and other local brands that also offered online sales. Alibaba finally overtook Amazon to become the largest online retailer in China.
5 Forces by Porter of Amazon India
Amazon also faced high competition from rival companies on its late entry into the Indian market in 2012. The most significant rival was Flipkart, a popular Indian e-commerce platform launched in 2007 by two of Amazon’s former staff as an online bookstore that later expanded into other product categories. Competition intensified as the Indian market evolved, and in February 2014, Paytm, one of India’s popular digital wallet, opened Paytm Mall, followed by Flipkart intensifying its market base apparel space by buying Myntra, a famous online fashion shop.
Amazon retained its strong supplier power in the Indian market, being the world’s largest online store. The company also worked intensively with the local sellers through initiatives such as Seller Flex to empower third-party sellers while simultaneously boosting Amazon’s supply chain.
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The buyer power grew with the evolution of the Indian market as many players joined the online shopping space. My 2014, Paytm was already a robust online market space, and combined with Flipkart and other small brands, the Indian online shoppers had several alternatives.
Threat of Substitute
Amazon also faced intensified threat of substitution from retail outlets, including Walmart, which acquired most of the stake at Flipkart. Other players such as Paytm also offered close substitute competition to Amazon India.
The threat of New Entrant
Despite the intense rivalry competition and the threat of substitutes, there was a low threat of market entry as a considerable amount of capital investment is needed to start an online shopping platform that matches the calibers of Amazon.