Reference no: EM133224025

Assignment:

Are Department Stores a Good Next Move for Amazon? Abstract Amazon recently announced that it will be piloting brick-and-mortar department stores as an extension of its efforts to open more physical retail locations such as book and grocery stores. The announcement coincides with the company surpassing Walmart as the largest retail chain outside of China after it reported incredible growth in online sales throughout the COVID-19 pandemic. But it also coincides with a time of decline for department stores, with major companies filing for bankruptcy in the last year. Source: Photo by Aaron Ontiveroz/The Denver Post via Getty Images The Issue Tech giant Amazon recently announced that it will be experimenting with large brick-and-mortar department stores to extend its reach, particularly in sales of clothing, household items, and electronics.

These establishments would be a step up from the company's foray into physical bookstores, grocery stores, and cashier-less convenience stores in recent years. MRK 108 Final Assessment Page 2 of 3 Version B Amazon shares have fallen more than 1% during 2021, giving it a market value of USD 1.59 trillion, yet it still managed to eclipse Walmart to become the largest retail seller outside of China. Experts in the industry expected this handoff to happen a few years down the line, but the COVID-19 pandemic caused a surging demand in online shopping; an estimated USD 610 billion was spent on Amazon over the 12 months ending June 2021, compared to USD 566 billion in sales reported by Walmart for the 12 months ending July 2021. Although Amazon may be dominating Walmart in sales online, some wonder if they will be able to match them with these new brick-and-mortar locations. Walmart has a vast logistics network that operates with such precision and efficiency that it crushes their competitors-they are big, and they know how to make that work for them. Shopping online is still growing faster than in physical stores, even though it only accounts for about a seventh of U.S. retail sales.

In online sales, Amazon captures roughly 41 cents of every dollar spent in the United States, while Walmart takes just 7 cents. Why Is It News? The first Amazon department stores are expected to open in California and Ohio, taking up roughly 30,000 sq. ft-only about a third the size of a traditional department store. The announcement hit stocks of big-box rivals, with shares in Target, Bed Bath & Beyond, and Best Buy falling by 1.5% and Walmart shares falling by 1%. Brick-and-mortar locations come with higher fixed costs but can also attract more customers because they can actually view the products and try on clothes. Amazon's department store, if successful, could put even more pressure on an already struggling retail sector-J. C. Penney, Lord & Taylor, and Neiman Marcus all filed for bankruptcy last year. Walmart was an untouchable leader for so many years because of its ruthless efficiency and power.

It perfected the big-box model, squeezing every possible penny out of its costs and driving down prices. On the other hand, Amazon's online marketplace model greatly increases the assortment of available MRK 108 Final Assessment Page 3 of 3 Version B items. It is more profitable but produces less revenue and makes it harder to determine Amazon's true influence in the retail industry, as the company only captures and reports its fees, not the total money that flows through the business. Facing antitrust pressure, Jeff Bezos, founder of Amazon, testified in Congress last year that the company was competing against established chains like Target, Costco, and Walmart, which he claimed was twice the size of Amazon.

For the first time, Bezos shared Amazon's gross merchandise value-USD 277 billion in 2019-but it only included products sold directly by Amazon's retail business, not third-party sellers who account for roughly 60% of the Amazon marketplace. With great success comes greater scrutiny. Amazon has been under fire for its treatment of warehouse workers and delivery drivers, while many local and national economies are questioning whether its toll on other businesses is worth the convenience factor-many of the same complaints Walmart faced during its biggest periods of expansion over a decade ago. If they are successful, Amazon's new brick-and-mortar locations could replace the department stores Amazon has been putting out of business in recent years; alternatively, these new department stores will suffer from the consumer's preference for e-commerce that Amazon helped to boost in the first place.

1. The Amazon's brick-and mortar department stores idea is incredibly competitive, especially with Walmart. Amazon physical store idea will mostly carry items like clothing, households, and electronics. What pricing strategy did amazon likely follow when they decided to launch the product department stores. Explain your answer.

2. Define push and pull strategies with 2 pros and 2 cons for each strategy. Explain to Amazon how Amazone could use each of the strategies to expand its new experiment of large brick and-mortar- department stores. Support your answer with relevant examples.

3. Amazon is discussing about using the different distributors for brick and mortr-department stores. Explain the 3 possible distribution channels they might be using. Describe the major difference between a wholesaler and a broker.

4. Amazon followed the new product/service development process. Please list the steps and identify the step Amazon is at currently. Explain your reasoning.

5. Amazon might be using different promotion mix to reach out their target customers. List three (3) basic goals of promotion for Amazon? For each of these three (3) goals, give a specific promotions example of how the goal might be accomplished.