Welcome to the the Ivey HBA Retail Marketing Management blog. Retail marketing is an exciting, dynamic, important, and very visible aspect of the overall field of marketing. Throughout the year, students will be posting comments regarding contemporary retailing issues. Although this is intended to be used by Bus 4411 students, industry marketing professionals are also invited to join in if they like.

Saturday, February 7, 2009

Potential of Online Retailing

By: Pavla Grigarova

Although the state of the world economy is so poor, the biggest online retailer Amazon.com, Inc is experiencing its best period and describing the last Christmas holidays as the best aseason ever. A lot of retailers are recently in serious troubles, struggling with considerable losses, whereas Amazon is enjoying its high revenues.

Amazon.com, Inc is the America’s biggest online retailer, founded in 1994, launched in 1995 as an online bookstore. However, it started to diversify its product lines very soon and today it offers a wide range of products from music, movies, computer software to furniture, food, toys etc. Nowadays serves worldwide with special websites established for Canada, United Kingdom, Germany, France, China and Japan. According to Compete.com survey Amazon was able to attract more than 615 million visitors in the year 2008, which was e.g. twice as much as walmart.com.

Unlike other companies, which complained about their revenues during the holiday season, Amazon stated a 44% growth in sold items on its busiest day over the year 2007. Concretely, its customers ordered more than 6.3 million items on December 15.[1] Among the best selling products were included Nintendo Wii game console, Samsung's 52-inch LCD HDTV and Apple Inc.'s iPod touch. The surprising results reflected also in rise of the value of Amazons shares, which increased after the announcement of the last quarter of 2008 revenues by 14 %.[2]

The situation was not always that favorable though. It took quite a long time to Amazon to get from red numbers, as it did not make a profit until 2002. It was necessary to wait for the customers to gain trust in e-commerce. Finally after years of existence, Amazon obtained reputation for good prices, broad selection and convenience.

Question is whether these results are just success of this online shopping giant or if it indicates strength in online commerce in general. Most of the analysts state that the current economy is favoring discount retailers, both online and offline. Amazon is being compared to Wal-Mart in the online world, which was one of the few traditional retailers, whose revenue has risen this holiday season over the last one. In general, figures are not very pleasant. Online sales fell 2.3 % compared with the 2007 holiday season, while retail sales overall fell 5.5 %.

If speaking about online retailers' sales as such, they tend to grow much faster than those of brick-and-mortar retailers. However the difference narrowed this year. The explanation for this is because shoppers tend to go to stores for necessities and online for more expensive purchases. And in an economic downturn, consumers buy rather the most needed goods and save on more luxury items.

[1] http://finance.yahoo.com/news/Amazon-says-2008-holiday-apf-13918688.html
[2] http://finweb.ihned.cz/c1-33658780-temer-ctvrt-miliardy-dolaru-zisku-amazon-prijemne-prekvapil

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