Amazon’s Channel Design and Partnership

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Table of Contents

Introduction
Body of text
Partner Performance Matrix
Development options
Conclusion
References

Introduction

Amazon is the company that is known all over the world today. It was created twenty years ago by Jeff Bezos in Seattle, Washington, and today became “the global leader in e-commerce” (Amazon, 2015). Since that time, the organization has greatly developed from a simple website and expanded the products it offers. Amazon has international websites; thus, it is critical for the company to maintain the worldwide network. It claims to be focused on the customers’ needs more than other organizations in the market and provides an opportunity to purchase a variety of different things including books, electronic devices, sport goods and expensive jewelry.

Amazon operates sites in “Canada, China, France, Germany, Italy, Japan, Spain and United Kingdom and maintains dozens of fulfillment centers around the world” (Amazon, 2015). The company believes that its success was achieved due to the help of innovative ideas. It is supposed that soon, the company will expand more and reach a larger amount of locations. For now, Amazon continues to improve its performance and provide its customers with everything they require to become happier. It offers “vast selection, low prices, fast and reliable delivery, and a trusted and convenient online shopping experience” (Amazon, 2016).

Body of text

As the company cooperates with many other organizations and sells their products, efficient channel design is vital for it. Amazon works with wholesalers and publishers directly. It receives their products and then delivers them to customers, working as a mediator. In this way, a business-to-consumer multichannel marketing is maintained. Such design is the most optimal one for the organizations, and it contributes to effective coordination and management greatly.

Market access plays a critical role for Amazon, as it operates in the international market. The company always carefully considered the products it offers. Thus, a lot of attention is paid to the goods and the places they are bought from. The organization works with numerous businesses from different locations that receive an opportunity to sell their products to the diverse populations with the help of Amazon. That is why tariff commitments for goods are significant for it. The organization decided to ensure good relations with the partners and reduce expenditures. It started to receive books from the publishers directly, omitting distributors.

As today the organization sells an enormous number of various products, its targeted audience is extremely diverse. There are no demographic limitations, and any person can find something to his/her liking in the online store. Amazon offers goods that belong to different producers and sells them to all people who have a card and are able to enter their websites. As a result, its channel is now seen a business-to-consumer one.

The organization believes that remains competitive and successful due to such factors as “selection, price, availability, convenience, information, discovery, brand recognition, personalized services, accessibility, customer service, reliability, speed of fulfillment, ease of use, and ability to adapt to changing conditions, as well as our customers’ overall experience and trust in transactions with us and facilitated by us on behalf of third-party sellers” (Chaffey, 2014). Thus, it can be concluded that the end-users are mainly looking for such service outputs. In other words, providing an opportunity to buy almost any product, Amazon ensures its quality, low price, quick ordering, and delivery, etc., which perfectly meets the demands of the targeted market.

Channel partner needs are also considered by the company. It is stated that some of them were willing to resell the services provided by Amazon to the clients in both private and public sectors. The company considered that it would be beneficial not only for the partners and designed a special Global Channel Reseller Program (AWS Channel Reseller Program, 2016). It offers a lot of advantages that are likely to ensure mutual support of businesses. The company underlines that its partners receive an opportunity to share prosperity, reach distinct populations and increase profits. Still, they are required to pay fees for placements. Moreover, many customers and retailers wish to sell their goods that are not included in the regular listings. Amazon created the marketplace, which gave them such an opportunity (Chaffey, 2014).

To become an Amazon’s channel partner, the organization should receive training and certification. They are intended to help one learn more about the knowledge and skills required. A future partner will realize in what way its business can be differentiated from the similar ones and how to improve the services to attract more customers. One is also encouraged to take online accreditation courses that are free. Except for that, there is an opportunity to receive a discount on the registered public classes.

Amazon has a range of policies and agreements that are to be adhered by its partners. In this way, selling policies prohibit particular products and include details on maintaining business. There are regulations on payment and reference to the third party. There is a possibility of taking a loan and receiving insurance. The anti-counterfeiting policy is underlined, and all products are to be authentic, as the company considers customer loyalty to be critical to its success. It is believed that people’s trust to the sellers determines their readiness and willingness to purchase goods with the help of Amazon (Policies and agreements, 2016).

Partner Performance Matrix

All companies evaluate their channel partner’s performance, and Amazon is not an exception. Mainly, the Partner Performance Matrix is used for these purposes. With its help, the company can determine strength and weaknesses of the partners. The results allow to decide what changes should be implemented to make the channel performance better. Except for that, Amazon measures the performance of the sellers with the customer metrics tool. Such targets are expected to be met:

“Order defect rate: < 1%
Pre-fulfilment cancel rate: < 2.5%
Late shipment rate: < 4%” (Seller Performance Measurement, 2016).

Of course, Amazon values the partners that are willing to sell their products on its websites. Still, the company is totally customer-oriented, and the satisfaction of the end-users is its priority. That is why, if the seller is not able to meet stated requirements, one loses selling privileges.

The performance is measured according to such customer metrics:

Order defect rate (negative comments from the end-users);
Pre-fulfillment cancellation rate (orders that were canceled by the seller for some reason).
Late shipment rate (the time when the order is delivered).
Refund rate (refunded orders).

Channel partners play a vital role for Amazon, as they provide the organization with the opportunity to manage its operations, sell the products that are manufactured by other companies, in particular. In this perspective, Amazon believes that its partners are obliged to deepen into the way it works, share common views on how to reach business purposes and agree on the conceptual issues. Channel partners are expected to be customer-centric organizations that can ensure the quality of the products they provide and their authenticity. They are obliged to pay a fee and have well-grounded reasons for not providing the expected products.

The partners are to take responsibility for defects and should refund the costs. Depending on the partnership, an organization or a person are responsible for product supply or service provision. Amazon cares not only about the employees but also about its partners. It is open to share sales methodologies and provide selling guides to let them achieve more. Channel and multi-product solution specialization programs are designed for the channel partners. When going through them, they can earn the company’s recognition, rewards, and support. Incentive programs provide a wonderful opportunity to increase revenue.

As it was mentioned, Amazon cooperates with numerous companies and delivers their products to the customers from all over the world. The company has online and physical distribution channels. Even though Amazon has several huge warehouses and provides an opportunity to choose delivery options, it encourages drop shipping. The amount of products is so big and diverse that it is not convenient to refer to one particular type of distribution. Manufacturers, sellers, and customers also benefit from such approach.

It is connected with the fact that from the very beginning, the company used only a pull system. Still, as the business developed, it turned into a push-pull one. It means that Amazon focuses not only on the customers’ demand but also on the partners’ supply. Today, the information still goes from the clients to Amazon and then to a wholesaler. However, there are products that are included in the list of goods that can be always seen on the sites.

To create them, the representatives of Amazon are to interact with their channel partners. Such activities are mainly held by a delegate who is sent by the manufacturer. The representatives deepen into the peculiarities of operations and make up an agreement. Then, on the routines basis, the companies interact to provide the customers with the required product. Amazon encourages its partners to participate in various programs and build stronger relations.

The cooperation between Amazon and its channel partners may be vague, but it is totally clear in the eyes of the law. Today legal considerations for the e-business are not as solid as those meant for the original type of commerce. That is why, the property is not well protected, and payment safety and security play a vital role (Li & Fan, 2014).

The company operates under the law and follows a particular guideline. It does not disclose the information about the customer unless there is a legal demand. The content and non-content information is highly protected. It can be provided only if there is a search warrant. The organization cooperates with Corporation Service Company that deals with all issues that occur. All international requests should be made with the help of legal assistance treaties.

The channel members tend to have similar levels of power, but Amazon has a higher one. As the company commands the operations and controls selling and purchasing processes, the front power occurs. The wholesalers and producers tend to be more dependent on Amazon than Amazon on them. Today this company is well-known and prosperous, which makes the customers refer to it when they need something more often than to direct providers.

The company’s main activity is merchandising, and the channel partners pay it to place their products. Mainly, they are initiators of cooperation, which makes them more vulnerable, especially considering the fact that Amazon works with lots of organizations. With the help of channel power, the company becomes a leader and receives a chance to bring about productive change in the channel’s operation. Communicating with both customers and wholesalers, Amazon controls the way information passes to each of them.

In some cases, it also controls the delivery of the products (Terry-Armstrong, 2013). Thus, the company has an opportunity to organize the products on the site so that they attract more clients and the customer perception improves. The organization also controls the way the goods are sold and delivered. In this way, multi-channel retailing and an ability to choose the type of delivery allow to please and attract more clients and to increase profits in this way. The company also encourages the customers to prove their feedback, which gives a chance to assess partners’ performance.

Development options

Amazon offers a wide range of products, which presupposes that it deals with numerous channel partners. Of course, from the very beginning they tend to be in similar positions but with the course of time, the situation changes. As the company is mainly focused on the customer demand, the organizations that provide more popular goods tend to receive more benefits and become more valued by Amazon. Such competition exists due to the demand side gap. There are many products available on the site, and some partners offer similar products. The fact that the customers have a wide choice seems to be advantageous, but when the variety is too large, customers may be not satisfied also.

It occurs to be too difficult to purchase something, as a person may not know how one product differs from another. Moreover, the process of purchasing and ordering becomes more time-consuming. In this way, the segment of targeted market that is willing to buy a product in no time and without long considerations is not decently served. It would be beneficial if Amazon created some limitations focusing on the things the clients would be willing to pay for. In this way, a service quality model should be implemented to meet customers’ demands. Provision should be contracted. If Amazon is not willing to reduce the number of partners, it should offer the products on different levels.

The channel partners pay Amazon for the ability to put their products on the site. Still, it seems to be not clear how some products receive more advantageous positions than others. Should the companies pay more to gain a chance to put their products on the list of those that are commonly sold on the site? Moreover, training and certification cost differently depending on the previously obtained services. To deal with the problems related to financial sphere, Amazon should treat its partners equally. In this way, there should be a particular tax for everyone for placement of one product on the site.

Those that are on the list should have another tax for the partners not to feel ill-treated. Costs for becoming a partner should not also vary. Distribution and delivery of the products are rather expensive but maintained on the daily basis. It would be more advantageous if Amazon stored only the products that are pushed by the wholesalers and publishers. All other goods can be sent to the customers directly to reduce extra spending. As a result, the market access would be more efficient, and the companies would not have any complaints regarding tariffs. Moreover, they would save money and make the business more profitable.

To maintain joint planning processes with channel partners, Amazon should make them willing to participate. It is critical to explain all benefits and underline the values when educating and training them. It is critical because the organizations are likely to have different purposes, and it might be hard to make them change their mind. The partners should base their ideas on previous experiences and examples to find out what they really need and how they can benefit. The company should also provide some recommendations to show its support. It might also be advantageous to consider what they can achieve in future due to such cooperation. A draft plan should be created to predict the outcomes. Finally, the channel chief dashboard should be implemented (Morris, 2015).

Conclusion

Thus, it can be seen that the efficient channel design determines the way, in which coordination and management are conducted and influences it positively. All members of the channel play significant role in the achievement of a mutual goal, and if one of them does not operate effectively, many problems will occur. Amazon’s channel partners depend on it, and their success cannot be reached without close cooperation.