Introduction
This recommends new strategies that will improve performance of Best Buy. The implementation will take place within 60 days of approval. Improved sales, reliability, profitability, productivity, and/or reduced costs will result from these actions, including venturing into the fresh grocery retail business. The Director of Sales, Director of Finance and the Chief Operations Officer concurs with this recommendation.
Background
Amazon is one of the biggest technology companies globally, launched in 1995 by Jeff Bezos. The company has grown from a small online website selling books to a technology giant and offers low prices, offering vast selection and convenience for users. With early success in selling books, towards the end of the 20th century, it expanded into other products such as consumer electronics, general merchandise, music, and movies. The company’s growth strategy since early 2002 was to invest heavily into newer sectors and acquire other companies; it launched Amazon Web Services in 2002. This cloud hosting service now makes up its largest revenue segment and is the biggest cloud computing services provider globally, with annual revenue of $45 Billion. It has been able to gain significant market share because of its low cost and efficiency compared to other players in the industry.
Amazon products and services launched by the company over the years include Amazon Prime, which offered free-today delivery services to loyal customers at an annual $79 subscription fee. The service now boasts 200 million members across the world. It also launched Unbox in 2006, Prime Video, Amazon Studios in 2011, Kindle in 2007 and Echo. Despite the success of many of its products, others, such as Fire Phone, did not gain significant traction and were discontinued. Products like Echo became a huge success and sold over 100 million units. Echo was a voice-activated virtual assistant that helped Amazon customers to place orders on the platform. Its significant acquisitions include Whole Foods in 2017, enabling it to enter into the grocery market that had initially proven difficult to penetrate. The grocery market was characterized by low margins and established competitors such as Walmart.
The company’s rapid entry into many industries in which it does not have the expertise could prove fatal in the future. For example, the grocery market entered through the acquisition of Whole Foods has very low margins and established players. Whole Foods was barely surviving in the industry, but with the launch of the Fire Phone, its entry into the smartphone industry led to the loss of investment worth billions of shillings. The company’s rapid expansion could lead to more depletion of its cash reserves and may not meet its short and long-term liability obligations. Amazon’s competitors include Traditional retail stores like Barnes and Noble and Best Buy and other e-commerce players like eBay. Its other product segments, such as the Amazon Prime Video, also compete with Netflix and YouTube. Its competitive advantage entails offering high-quality, convenient services at a lower cost.
Recommendation
Alternative solution for traditional retailers like Best Buy and Noble and Barnes to succeed is to try and venture into other e-commerce segments that Amazon has not ventured into appropriately. They should then offer great customer service gain and gain significant market share.
Basis for Recommendation
- Consumers prefer to buy products like electronics through e-commerce platforms like Amazon, so Best Buy’s likes are unlikely to succeed.
- Consumers still prefer to buy groceries through traditional retail stores rather than online due to their perishable nature.
