Business Model Dimension 5: Value Chain Structure
Porter's Generic Value Chain
Question 2
Compare and contrast the shopping experience at Amazon.com vs a traditional book store.
Table 2.1 Advantages and disadvantages of online shopping at Amazon.com
Table 2.2 Advantages and disadvantages of shopping in traditional book store
Advantages of shopping online at Amazon.com
Convenient
One of the common advantages of shopping online is convenience. The same applies to customers who go shopping at Amazon.com. Since Amazon.com is a virtual organisation, it will not close its store. This means that it is 24/7 available to the customers. Due to this, Amazon.com offers a great flexibility in time for the customers to browse the information and products in the Amazon.com website.
This is especially true for the customers who are working and hard to find time to visit the traditional bookstore. Furthermore, as long as there is internet access, the customers can choose to view the Amazon’s website anywhere they are. Location or time is no longer a boundary to the customers who have hectic lifestyles and packed working schedule.
Customers can take their own time
Customers can have their own sweet time to browse through and explore Amazon’s website. This is because there will be no contact personnel present and give unwanted pressure to the customers. Even after the customers viewed through the products in Amazon.com, customers can choose not to buy first and return back to the website later.
Customers can take their time to make consideration whether they wanted to purchase the product or not. This is also why there is increasing number of consumers who are purchasing through Amazon.com. Most of the consumers enjoy the process of searching and exploring Amazon.com without time pressure and limitation.
No contact personnel disturbance
Most of the time, the experience can be affected by the contact personnel that present in the physical bookstore. Customer’s emotion and mood can actually be negatively affected or positively affected by the contact personnel. In Amazon.com, there will be no contact personnel present. So, there will be no face to face interaction.
Since there is no face to face interaction, the customers will not have to face the contact personnel’s attitude. The most is that the contact personnel will be chatting online with the customer if the customer has any inquiry about products listed in Amazon.com. So, the contact personnel’s attitude does not have a chance to influence the customer’s experience.
Variety of product
One of the most impressive things about website is that it can accommodate variety types of products more than traditional bookstore. In this case, Amazon.com actually divided its products into many categories. Some of the categories are apparel, Automotive, baby, beauty, book, cell phone, electronic, gourmet food, grocery, health and personal care, home and garden, home improvement, industrial and scientific, jewellery, kindle store, magazine, movies and TV, Mp3 download, music and musical instrument. These are just the categories without going into details about each product in each category. This is definitely one of the most impressive feature that traditional bookstore cannot afford to offer.
Due to this, customers can click on the categories of products that they would like to browse through easily. This will help customers to ease their search and save them a lot of time compared to going to a few traditional stores. With wide variety of products, customers will have broader choice in choosing the products that they wanted and get the best deals.
No waiting time
The customers will only be interacting with Amazon’s website. So, whatever the customers wanted to search or buy, it will only be involving the customer themselves and the website. Customers will even pay for the product with credit card which involves online payment.
Since there will be no other customers physically present, the customers who shop online in Amazon.com no need to queue in order to make payment. If the customer has any inquiry, they no need to wait until the contact personnel are free to serve them but they can just email the contact personnel and wait for the employee to reply through internet. There is also no need for customers to ask the personnel about the location of the products because all the products have been categorized according to the types of products. For example, under the book category, there are books, kindle, textbooks, magazines and newspaper.
So, online shopping at Amazon.com reduces a lot of waiting time since there are no other customers in the waiting line and no need to wait for contact personnel’s assistant.
Easy to search
In Amazon’s website, all the products have been categorized according to the types of products. The customer only need to click on the categories and all the products in the category will appear on the screen. Furthermore, if the customer is searching for products other than the categories provided, customer can click ‘everything else’ inside the search category and all the other products other than the products that have been grouped will be listed out along with the picture of the product’s model. He can also type the product that he wanted to search then choose the category that the product is in if he knows exactly what he wanted to buy. So, the products are actually very easy to be searched in Amazon.com.
Besides, once there are new books or magazines and even Amazon’s best seller, the information will appear on the first page of Amazon’s website. The first page of the website (The homepage), will also show the discount provided for certain books or magazines to alert the customers of the promotional deals without having the need of customers to search which books, magazines or even products is having special price.
Disadvantages of shopping online at Amazon.com
Loss retail shopping experience
It is not deniable that online shopping indeed provides convenience and there will be no other customers around that will affect the customer shopping experience. Usually, online shopping will be done at home. This means that the shopping experience will only involve the customer himself and the computer. There will be no other customers to be around, interacting with each other and play a part in contributing to customer’s experience.
Furthermore, there will be no contact personnel to provide assistant face to face to the customer to answer his inquiry. There will be less sensory stimulated because the customer cannot touch and feel the book. What the customers can do in the traditional retail bookstore cannot be experienced through online. This is what makes all the difference. Sometimes it is just because of the feeling of being physically present that matters the most.
Less sensory stimulation
Since the online shopping only involves the customer himself and the computer, there will be less sensory stimulated. This is because the customer only can see how the website is designed and the colours used but the customer cannot actually physically touch and feel the book or other products such as stationeries. When it is related to physical product, customer tends to enjoy the process of searching and touching the book.
Furthermore, the customer is not physically present to look at the environment, the colours of their wall, the book shelves, the counter’s condition, the employee’s appearance, sit on the sofas provided or even interact with other customers. All these are actually physical evidence that contributes to part of the customer’s experience. But because of online shopping, the customer will missed out all these physical evidence (tangible or intangible) and all those things that will actually stimulate and satisfied the customer’s senses.
No face to face interaction
In Amazon.com, there will be no face to face interaction between the customer and the contact personnel. All the interactions or transactions will be done online and there will be no personal contact. Initially the customer will click on the category of products that he wanted to search. Then, he will choose the product that he wants and purchase it. If the customer has questions, he will post the questions in the Amazon’s website and wait for the contact personnel to reply through the email or specified link.
If the customer has no problem with the transaction, the customer will make payment by credit card. Then a confirmation email will be in digital form which the customer can print it out if he wanted to. From the start until the end of the transaction, there will be no contact personnel having face to face interaction with the customer. All the activities involve are only being conducted through online.
No instant contact personnel’s responses
Since all the interactions and transactions will be done online, then the customer cannot expect that the email will be replied after 1 minute it has been sent out. At least, the customer should give the contact personnel one day for reply. Online shopping is different from being physically present in a traditional bookstore. In traditional bookstore, the contact personnel will have face to face interaction with the customer. So, the contact personnel can give immediate feedback or responses to the customer’s inquiry or even readily available to provide information regarding the services or products by the firm.
Since online shopping at Amazon.com does not involve face to face interaction, then the responses given by the personnel might not be immediate. But, if the customer is chatting online with the contact personnel, then the customer will receive immediate responses.
High shipping cost
It is undeniable that maybe some of the books, magazines, stationeries or other products that are being sold in Amazon.com might offer lower prices compared to traditional bookstore. But, the location to where the product which it is going to be delivered will determine whether the customer save his money or spend more.
If the book is going to be shipped to Malaysia, the product plus the shipping cost will definitely will be higher than purchasing through online bookstore (Do not forget about the currency exchange rates). But if the customer stays in the States, then there will be free shipping after the customer spends more than $ 25 in Amazon.com, but this also depends on what type and how much is the weight of the product. So if the customer is staying far away from the States, then he will probably need to bear more shipping cost which might lead to higher price to purchase through Amazon.com compared to traditional bookstore.
Hard to return the products
Since Amazon.com is operating online only, all the products that customers purchased are through online. After the customer chose the products that he wanted and paid for it with credit card, Amazon will ship the products to the customer’s location. So, same applied to the customers. If after customer received the product and realized the product is not the appropriate or in bad condition, the customer need to ship back the product to Amazon. This will be very time consuming. Then the customer needs to wait for Amazon to ship back the product again.
In Amazon’s website, the return policy is clearly written according to the return of different types of products. Different types of products and products bought from different sellers will have their own policies. And the minimum requirement of the return policy (for most of the products) is that the product must be returned 30 days after shipment. This is not a problem for customers who stay in the States because there is a physical return centre provided by Amazon but it will be a problem for customers who stay other places outside the states. (Example, Malaysia)
Advantages of shopping in traditional bookstore
Sensory stimulation
Traditional bookstore provides servicescape and all those physical products that will create part of experience to the customers especially the “touch’ sense. The lighting and the layout of the store will also provide comfort to the customers. Usually the traditional book store uses bright light in order to make the customers feel comfortable reading in the bookstore area so that they need not the strain their eyes to catch each word written in the books, articles or even magazines. The bookstore is equipped with few comfortable chairs and sofas so that that the customers can relax themselves and ‘feel’ that as if they are sitting and reading in their own extensive living room.
Furthermore, the way that the books, magazines and other products are arranged encourages customers to ‘touch’ the products. Customer can even flip through the pages and read through the book before deciding whether he wanted to purchase the book or not. Furthermore, customer can use his ‘sight’ to look at the book store’s environment such as layout, contact personnel’s appearance, the books and merchandise’s conditions and other customers’ actions and gestures. Since there is soft music in the background, the customer can utilise his ‘hear’ senses to slowly build up his mood and relax himself to enjoy the time he spend in the bookstore.
Socializing with others
In the traditional bookstore, the customer can actually meet up a lot of new friends whom has similar interests or hobbies. The customers that are physically present in the traditional bookstore basically consist of two types. The first type of customer is the one who goes in and grab a book, magazine, newspaper or other products sold in the store and just stay there for maybe half an hour. The other type is customer who stays for a few couple of hours or even the whole day reading the books in the bookstore. Customer can actually socialise with the type of customers who stay in the bookstore for a long duration. It is not unusual that both customers might have the same interest on specific topic or books.
Furthermore, contact personnel will also be physically present to provide guidance and information. So, the customer can actually ask the contact personnel’s questions or chat with her regarding the latest books or magazines that are on sale and ask for her opinion on certain books. The customer can actually gained a lot of information of the products in the store through the conversation with the contact personnel.
Instant responses
In traditional bookstore, the customer will be physically present at the store. There will also be contact personnel present to provide assistance to the customers. Due to this, whenever the customers have any questions or need assistance in searching for certain books, magazines or other products, they can directly ask the contact personnel for help. Since it involves face to face interaction, the customer will get immediate feedback from the contact personnel in the store. Customer need not to wait until a few hours or the next day to get an answer unless the inquiry cannot be answered immediately and involves critical management decision.
Source of entertainment
For most consumers, retail shopping is an enjoyable activity. This is especially true when the individual customer is accompanied by her family members or even friends. Actually the same applies to traditional bookstore shopping experience. However, even if the customer is alone, she will enjoy searching and exploring the bookstore. She can browse and flips through the books or even magazine pages. The customer senses will be stimulated and she will enjoy the feeling of being physically present. Furthermore, she can get to know more new friends in the physical bookstore. This can be a very important element which contributes to customer shopping experience. Not all experience is expected to be life altering.
Good experience can be also being created through surroundings, the physical environment and the people around the customers. Furthermore, customer can spend her leisure time reading different types of books without limitations. This is also a kind of relaxation that customers can get in bookstore. If the customer feels that she needed a break, she can actually sit on the chairs provided by the bookstore and enjoy the soft music in the background. So, shopping in traditional bookstore can also be a source of entertainment.
Easy to return products
Since there is a physical location of book store, then the customer can easily return their products if they found out that the product is not working well or defected. The only requirement is that they bring along the products that they bought from the bookstore with the receipt as a proof of purchase (within 3 to 7 days from the date of purchase). There will be no extra cost incurred in this return. Customers can either get a new product as replacement or refund the amount of money that the customer has paid for the product. The process is very simple and the customer can receive immediate action from the contact personnel.
Disadvantages of shopping in traditional bookstore
Long waiting time
When there is physical store involved, waiting time is one of the components that are not unusual to happen. The situation is worse if there are too many customers in the store at the same time. This usually happen during weekends. There will be many customers in the bookstore searching for their books, newspaper or even magazines. Since there is a huge crowd, the contact personnel cannot manage to handle too many questions from too many customers at once. So, each of the customer eventually need to wait to be served. Furthermore, the queue at the cashier will be long since there is a huge crowd and most customers are rushing to get their products paid and leave the bookstore.
For large traditional bookstore, the situation may be a bit better since there are more employees on duty and cashier counters. But for the small traditional bookstore, this might really test the customer’s patient and this might make the customer feel annoyed and dissatisfied with the service provided.
Other customers’ attitudes that create a negative experience
Since it is a traditional bookstore, there will be other customers present in the store and not just an individual customer. Due to this, other customer’s action or behaviour will affect individual customer’s shopping experience. For example, if customer A is talking with his friends and customer B is reading books near customer A, B will feel distracted by the whispering sounds and their laughters. So, B will feel annoyed and cannot concentrate on reading and might leave the book store with a bad mood. The second example will be the queuing time. Each customer will have an impact to the queuing time. The more customers in the line, the longer the customer needs to wait. If the waiting time is too long, the customer will feel impatient and might just leave with unsatisfied feelings without purchasing anything from the store.
Even the information provided by the employee will be littler since there are too many customers waiting to be served. The employee cannot serve too many customers at a time, so in order to reduce the customer’s waiting time, he will tend to give brief answer and spend less time in providing assistance to each customer. As a result, the customer might have a negative feeling of not being appreciated by the service provider as a customer.
Time spent on travelling and fixed time to visit the store
The customer needs to be physically present at the traditional store in order to make purchases. Due to this, the customer needs to spend time to travel to the physical location of the store. This is an issue for the customers who are working and have a pack working schedule. They might not have so much time to travel to the bookstore and search for the books or products.
Furthermore, there is a fixed working hour for the bookstore. The customer can only visit the bookstore during working hours. The customer cannot choose to go and visit the store whenever they like. They need to adjust their time according to the working hour of the bookstore if they wanted to visit the bookstore.
Negative shopping experience caused by the contact personnel’s negative attitude
Contact personnel will be physically present in the traditional bookstore. The contact personnel can be the one who will help the customers with their inquiries and provide them with satisfying experiences. But the contact personnel can also be the one that greatly affects the customer’s shopping experience.
Well, employee is also a human being. He will have his mood swing and emotionally unstable at some time. If the personnel cannot control his emotion and mood, the customer can feel it through his expressions, actions and words. For example, an employee in a store is having a bad day. Then, out of sudden a fussy customer approached the personnel and asked a lot of questions which irritates the personnel. Then the personnel will react rudely and answer impatiently to the customer. The customer will feel angry and think that the bookstore’s management do not know how to train their employees and the bookstore’s management is a ‘rude’ management.
Finally, this will results in a negative shopping experience to the customer since she feels that she is not being respected and appreciated as a customer. So, the way a contact employee treats a customer will affect the customer’s shopping experience.
Question 3
Discuss the role of technology in the customer encounter with Amazon.com. Can an Internet service encounter such as Amazon.com be a memorable experience? How?
- Discuss the role of technology in the customer encounter with Amazon.com.
Amazon.com is the global leader in e-commerce since Jeff Bezos started Amazon.com in 1995 at Seattle, Washington. Bezos and his management team spent one year in creating Amazon.com which is based on technology-generated service encounter and technology-mediated service encounter in the customer encounter.
According to Fitzsimmons,J.A., & Fitzsimmons, M.J. (2006), the technology-generated service encounter is whereby the human service provider is replaced entirely with technology that allows the customers to operate by themselves. It is becoming more common as firms attempt to reduce the cost of providing service. Amazon.com is the first online bookstore which uses this technology to operate its business and its sales started to grow tremendously. By using this technology, Amazon.com had replaced the traditional bookstore and provides other benefits that a traditional bookstore cannot provide, for example, discussion board service, simple storage system, personalized recommendations, author’s corner, online reading group, and so on.
Amazon.com used this technology to provide convenience, time saving, and make it easy to use and understand. Amazon.com also used this technology to personalize the customer experience without using human interface. Besides, not only human dominant interface can create memorable experience to customers, machine dominant interface, such as website which is used by Amazon.com, can create memorable experience to customers too. Moreover, this technology also helps Amazon.com to serve their customers better and create loyal customers who not only visit the website, but also interact with it.
Amazon.com also based on technology-mediated service encounter in the customer encounter, which the customer and human service provider are not physically together and thus the service encounter no longer is the traditional face-to-face contact. Amazon.com interact with customers through Internet to deal with its customers, for example, send news updates to customers through e-mail, customer request through e-mail and hotline, and so on. By using this technology, Amazon.com able to respond to customers’ needs and wants without letting customers to wait for a long time.
With the advancement of the technology, technology-generated service encounter will be widely use by many other industries and use it to solve their solutions. For example, Amazon set a goal, as stated in the case, which is to be a one-stop shopping site on Internet in future.
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Can an Internet service encounter such as Amazon.com be a memorable experience? How?
We agree that an internet service encounter like Amazon.com can create memorable experience to all users. There are many ways for Amazon.com to create memorable experience to all users such as discussion board service, personalize web-page, and many more. Using seven design elements of the customer interface approach would be the best way to show how Amazon.com can be a memorable experience to customers. Seven design elements of customer inter face consist of context, content, community, customization, communication, connection, and commerce, which will be explained in the following table.
Question 4
Will Amazon.com continue to be successful against “click-and-mortar” competitors, such as Barnes and Noble, who go online? Justify.
To better understand the situation and position of amazon.com, Amazon has to evaluate its and its competitors’ (Barnes and Nobles, MPH Bookstore, etc.) strength and weaknesses.
Amazon
Founder Jeff Bezos started the company as an online company. Leveraging the advancement of internet, Amazon able to serve its customers, without restricted geographically. The company grew steadily in the early 1990s and able to survived the Internet “bubble burst” at the mid ‘90s. This was due to the product diversification and it international presence. Amazon is not merely a virtual book store; it is an online community where consumers can create online product reviews. Therefore it provides opportunities for consumers to do a quick research on a product before purchasing them. These thirteen years of establishment has built a large community of online users which will help to retain its position over other online retailers. Besides that, due to the nature of Amazon’s business, Amazon able to provide products at lower price; minimum human resource needed, no physical shops maintenance.
According to Survuction Model, develop by Eiglier and Langeard, the presence of other customers affect another customer’s service experience. Amazon.com provides a discussion forum where users can seek more information about the products prior to their purchases. Through this role of technology, users share their question, recommendation and opinion of a particular product. When the customer starts to build a relationship with the e-community, there is a tendency that they will stay longer in this site because they gain benefits from there. According to Atherstone, et al, the added value (discussion board) enhance the shopping experience of the customers, this will encourage them to put loyalties to this particular shop. Adrian Jones, also stated that customers feel more secured when they make purchases which had already reviewed by others. The availability of online communities and discussion board also encourages the users to stay longer in the website; customers can browse or click at the recommended books or items link. In a conventional bookshop, the customers may not able to get services like individual book recommendation or variety of book review.
Amazon uses mass customization to serve better and enhances individual shopping experience. Upon customer authorization, 1-click system used by Amazon will saves the user information in a secure server. When customer log in to the website, he is entering a personalized page. Besides that, transaction history is also available for Amazon customers. Amazon utilizes this 1-click system to provide a better shopping convenience for its customers. For example, recommendations of related books are shown when customers look for specific title or author. This unique search engine may provide a more comprehensive choice for the users. The large database may also help in determining which products are popular and highly sought by customers. Amazon also gains insight on customer pattern, purchase behavior and purchase pattern. This will enable them to offer a right product at a right time for the right customer. Besides that, customers who did not log in for a specific period of time, Amazon takes the initiative to send them email, reminding them the latest products or promotions.
Amazon offers users to create their own wish-list. This wish list allows the customers friends or relative to view what gift he wishes to have. From there, they can buy the gift online and send it to him. This will save them time and hassle of looking for a correct gift for that person. This accuracy information may not available in a normal brick and mortar store.
Using the search engine, customers easily (key in keywords on the search tab) able to search for the products they required, comparing with a traditional bookstore where they have to look for books at one bookshelf to another one. Customers who purchases online does not restricted to any time, Amazon operates 24hours, 7 days a week, even on public holidays. Customers does not feel restricted to any time constraint, customers can shop whenever they want, without fear of the shop is closing for the day. Even when they are making their payment, there is no hassle like long queue time.
To better serve its customers, Amazon has also other language version of its websites. Amazon has the Spanish, French, Japanese and Chinese version for different customers in different part of the world. Unlike a typical online store which only depend on a single language which is English. This provides convenience to customers in the different corner of the world. Amazon also has customer 8 service centers around different part of the globe. Amazon ensures that customers are able to connect with the organizations regardless where they are. Furthermore, customers also can connect with the 24 hours online help centre. This shows the commitment of Amazon in providing excellence customer service for the customers. Amazon manages the high traffic in the website so that it does not create any laggings in loading the page and performing any transactions. Amazon offers variety of categories for its customers (apparel, automotive, baby, beauty, book, cell phone, electronic, gourmet food, grocery, health and personal care, home and garden, home improvement, industrial and scientific, jewelry, kindle store, magazine, movies and TV, Mp3 download, music and musical instrument.). Therefore Amazon has to work closely with its affiliates and partners. These include securing the line of supplies and also goods return policies. Amazon also constantly updates it tracking system and the shopping cart used by the customers. The information in the database has to be updated from time to time because customers want to track the location of the parcel after they have made payment.
Shopping in Amazon may not be as rich experience as shopping in a traditional store. Shopping online get less stimulation (emotional, physical stimulation) compared with shopping in a traditional store. It may also lack of retail excitement, such as bargaining and interacting with other customers in the shop. Amazon customers may also faced difficulties in returning damaged or faulty purchase back to Amazon. Customers have to return back to products through postage, which will cost them and it may takes few days for Amazon to receive it then deliver again to the customers. Although there is customer service centre in few countries, but customer who insist of meeting the customer service representative still have to travel there.
Barnes and Noble
Traditional bookstore provides a richer stimulation for customers who patron the shop. Physical products (books) will create part of experience to the customers especially the “touch’ sense. Customers can touch the books, flips through the pages read thru before they decide to purchase it. This able to stimulates them and contribute to part of their customer experience at there. Lighting and layout also contribute to customer experience in Barnes and Noble. The comfortable lighting, sofas at the reading area are life extensive living rooms to customers, where customer can feel relax while reading their books. This creates an emotional bonding with customers at there. Customers also can interact with each another; they share ideas and opinions. Playing soft music, stimulate the “hearing” of customers, Barnes and noble able to create a relax mood and environment, creating a comfortable reading environment for his customers.
In Barnes and Noble, customers and contact personnel are physically present in the store. When a customer has enquiries, he can meet one of the personnel present there and seek for their assistance. The personnel are able to provide him instant answers and feedback. Customer need not to wait for hours to get reply from the customer service representative. This creates a positive perception towards the provided service quality. Customers also able to return defect goods back to Barnes and Noble. They can solve the problem on the spot. (Provided that the customer must fulfilled the term and conditions for returning the goods)
Customers who buys from Barnes and Noble has a lower perceived risk, they can physically examine the goods before they make payment. Instead of buying a plastic sealed book, customer would prefer to flip through the pages and evaluate the printed materials before they make payment. Besides that, Barnes and Noble may not able to offers lower price to his customers because of high cost for their books. Barnes and Nobles have to maintain its physical stores around the states, this includes total cost likes utilities, building rental, and building maintenance cost.
However, there are also weaknesses for brick and mortar shops like Barnes and Noble. The physical presence of other customers in the shop may jeopardize the customer experience there. For example, long queue time and crowded store. The sofas seats maybe limited, when there large crowd, the customers may find it difficult to find a comfortable seat. If the customer is rushing to make payment, the long queue may make him feel disturbed and dissatisfied with the service quality. Customers have to travel to the store to make purchases; furthermore they are only able to visit the store only a certain time. Customers who have busy schedule may not able to drop by the shop to look for books.
Comparison of Amazon.com vs Barnes and Nobles
From the analysis above, the strengths and weaknesses of both stores (virtual and typical traditional store) are presented in the following table:-
Summary for Question 4
Amazon.com is able to sustain its market while competitors like Barnes and Noble goes online. Amazon.com has strong brand equity. The large users in amazon.com will serves as the large base for customer references. Customers can get reviews from the large crowd of users. Amazon is able to maintain this relationship through customers and customer interactions and personalized WebPages. Besides that, Amazon.com is able to provide mass customization (personalized page and search result) where the physical store cannot. Barnes and Noble are unable to perform the personalized service for each and every individual customer because it will involve very high cost to do so.
Besides that, Amazon.com operating efficiencies allows them to save cost and offers lower price goods to customers; Barnes and Noble has a higher cost to maintain. For the mean time, Amazon has a large database which allows them to data mine for customers buying behavior and purchase trends, this also allows them to formulate a better strategy to address the demand from customers. Amazon business models enable them to offers discounted pricing, fast, ease of purchase and wide selections of goods. Along with the strong brand equity and operating efficiencies, Amazon are able to retain its position as market leader in the virtual space.