Advertising/ E-Commerce Market - Amazon term paper 13646

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The e-commerce market continually gets bigger and bigger every year. Amazon.com is no exception to this growing market. In 1998, its sales increased by 313% from $148 million in 1997 to $610 million in 1998. The growth of such a market will continue for years to come, as long as each e-commerce site can accommodate the ever increasing traffic flow of people and rely on third parties to keep the world wide web operational. The number of cumulative customer accounts grew from 1.5 million in 1997 to 6.2 million by the end of 1998, which translates into an increase of over 300%. A major product expansion, the music store that .com created, was the leading online music retailer in the first quarter that it was operational. With the addition of the online music store came the idea for a video store and in only six weeks they became the leading online video seller. The final but largest expansion of Amazon.com came in the form of expanding globally. Germany under .de and the United Kingdom under .co.uk had fourth quarter sales in 1998 that nearly quadrupled over the third quarter (when the technology was introduced to Germany and the United Kingdom). The fourth quarter results made .de and .co.uk the leading online bookseller in the market. Another statistic worth noting is that 25% of the entire businesses sales in the fourth quarter of 1998 were derived from .de, .co.uk and video, music and gift sales on .com, which are all very new businesses. With the expansion of Amazon.com into many new markets, the employee base grew from 600 to over 2100 and distribution centers were opened in the United Kingdom and Germany. Amazon.com is definitely fortunate to benefit from a business model that is cash-favored and capital efficient where there is no need for physical stores with inventory. The company's centralized distribution model has allowed them to bring the business to a billion dollar sales rate with just $30 million in inventory and $30 million in net plant and equipment. I think with the tremendous possibilities of Internet based business, there is much more to gain from e-commerce business that hasn't even been discovered as of yet. We can bet that .com will be on top of all opportunities that will strengthen their market position and lead them into the new millennium as a continued leader in e-commerce business.

(B)

E-Bay is the world's largest trading community on the Internet, based on the number of items listed, number of users and minutes of usage per month. E-bay was the first company to bring person-to-person trading by introducing a Web-based community where buyers and sellers are brought together in an auction format to buy and sell such personal items like antiques, coins, collectables, computers, memorabilia, etc. E-bay started out with just one employee, who was the founder back in 1995, and it has since grown its employee base to 138 by fiscal year end 1998. Another staggering statistic regarding registered e-bay users increased from 340,000 in 1997 to 2.1 million by the end of 1998 that translates into a 600% increase (see figure 2). The number of simultaneous auctions being conducted through e-bay increased from nearly 200,000 in 1997 to over 1 million in 1998. Total gross merchandise sales increased from nearly $100 million to over $740 million in one year (see figure 1). Individual sellers, rather than e-bay, sell the listed items, so therefore the company has no cost of goods sold, no procurement, carrying or shipping costs and no inventory risk. E-bays rate of expense growth is primarily due to increases in personnel and expenditures for advertising and promotion. The company intends to increase its expenses substantially in areas of advertising, promotion and personnel, in an effort to maximize its potential for revenue growth. E-bay also did some expanding in 1998 when it acquired all of the outstanding shares of Jump Incorporated, which was the developer and operator of Up4Sale and was also an advertising-supported online trading service in an auction format. The purchase price was approximately $2.3 million and this purchase strengthened E-bay for its trip into the new millennium. If anyone tells you that e-commerce isn't the new wave of the future, than statistics of the industry will prove any doubter wrong. There is a prediction that 10 million new users will come online for the upcoming holiday season so increased revenues will be seen for all companies.

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Word Count: 745

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