Shopping has become extremely easy with the emergence of online retailers. Anything can be bought at just the click of a mouse. Also, this convenience comes at a lower price as these retailers do not have to spend on maintaining their stores.
Hence, the debut of online retail giants such as Amazon.com (AMZN, Financial) has given a blow to retailers such as Wal-Mart (WMT, Financial), who fail to keep their prices competitive. Moreover, Wal-Mart and other similar retailers have been suffering from the problem of “showrooming,” wherein customers try the product in its stores and then buy it online. Huge costs made it difficult for Wal-Mart to make its prices competitive with Amazon so much so that Wal-Mart has started keeping smaller stores. These stores, called Express stores, are more accessible to the customers as well as low on cost.
In fact, the online giant has not only given a tough competition to other supermarket operators but also for companies such as Barnes & Noble (BKS, Financial) who are facing problems in selling electronics and books. Barnes & Noble has been witnessing a sharp decline in footfall since people find it easier to read books online. With the emergence of e-books, people don’t even have to carry the books with them. However, Barnes & Noble has been able to find a way out and has taken initiatives to overcome it by launching Nook, an e-book reader, which can prove to be detrimental to Amazon’s Kindle sales.
Some hurdles…
Because of Amazon’s unique business model, the company was enjoying a number of benefits, the most important being the absence of sales tax. This enabled the retailer to offer lower prices and attract customers in hordes. However, with the imposition of sales tax on Amazon recently by the Government, there seems to be some respite for these retailers. This will act as a major obstacle for the online giant since this will make Amazon’s products expensive.
It seems that the retailer is unaffected by the new rule. In fact, it registered a top line growth of 23% over last year’s quarter. The total revenue stood at $19.74 billion in its latest quarter. Sales were driven by growth across all categories and regions. Also, the company provided a bright outlook for the fiscal year 2014.
What Next?
Amazon has a number of moves in place which will help the retailer overcome the drawbacks of the new sales tax ruling. It launched the new Kindle Fire some time back, which has been able to lure customers because of its lower prices. The affordable tablet is hugely ad-supported and is not restricted to the American region only.
The company is eyeing to expand its geographical footprint through its new tablets. This will create more avenues of growth for the retailer. The expansion is not limited to adding new regions and tablets, but also distribution centers. In order to provide better service and make its products delivered faster to customers, the company is adding new distribution centers.
Amazon is also trying its best to make its products better in all ways. Its efforts in enhancing the tablet include new introductions such as AutoRip, which provides MP3 versions of songs bought on Amazon, kid’s service and text to speech features. It is also offering digital library on its tablets. These inclusions might lure more people to the sizzling market of Kindle Fire.
Conclusive thoughts
Amazon’s unique business model and growing revenue shouldn’t be ignored. Also, the company provides the convenience of having a wide variety of products at consumers’ fingertips. It is also working to improve its distribution network in order to deliver the products even faster. Therefore, Amazon looks good to go with a large number of efforts to further improve its growing business.
