Information Systems in the E-Commerce Industry
Rapid development of information technologies have redefined the the commerce model within the retail industry today. The emergence of E-commerce has fundamentally changed the way in which consumers purchase their goods and services. Nowadays, brick and mortar stores are turning into showrooms where people go to peruse a good that they might later buy online. To stay competitive, any major retailer will need to enter the E-commerce industry via an online platform for web-based purchases.
Any organization operating under the E-commerce industry seeks to attain competitive advantage through the acquisition of personal information about their customers and related purchasing patterns. This information is then used to manage decision making in the business to increase profitability and sustaining a competitive standing. In this regard, Amazon has been a pioneer in deriving monetary value from the way they handle their information systems.
Early Investment in IS
Amazon is most commonly known as the largest E-commerce company in the world. Although, there are some that may say that it is more of a leading computing company or information systems company with a little pick, pack and ship service (Hof, 2003). It’s current value is at $1690.17 a share and briefly hit a $1 trillion market cap in September 2018 (Salinas, 2018). Although Amazon is projected to keep rising in value, this was not always the case for the company. Amazon consistently lost money for the first several years of operations. This was in part due to Amazon CEO Jeff Bezos position that investing in future growth is more important than hitting quarterly earnings.
In the year 2000, 15% of sales revenue went to Amazon’s operational costs due to the inefficiency of their picking and packing process. Between 2001 and 2003. Amazon invested $300,000 into their information system infrastructure by purchasing software and building new distribution centers. Fast forward to today and their supply chain is one of the most efficient and sophisticated in the world (Jenkinson 2005). In fact, the company has reduced its customer service contacts per order by 50% since 1999 due to fewer distribution mistakes (Businessweek, 2003). From the years 2008 to 2011, Amazon doubled in size with 34 billion in net sales and a revenue growth of almost 40% at that time. The company’s bet on information systems technology was a risk that obviously payed off. The consistent growth of their active customer base (and associated information) allowed them to overcome major competitors such as Barnes and Noble.
All in all, Amazon has one of the most impressive information system models in e-commerce. Their early investments in IS has enabled low cost operations and high network efficiencies contributing heavily to their competitive advantage. Perhaps the most integral driving force in Amazon’s growth has been the integration of information systems Management with customer relationship management. The company uses the customer relationship management module under enterprise resources management to store personalized information and purchasing trends of its customers which is integrated with the marketing and advertising campaigns of the organization. (Demir, 2017). The recent development in the E commerce population has enhanced the interactions between the consumer and the business thus forcing Amazon to give more priority and customization to its IT to value and respect reviews of the customers as a part of their business operations (Jordon, 2008).
Customer Relations Management (CRM)
Amazon is able to keep track of returning customers online via a ‘cookie’ previously placed on their computer. The database on file of the customers’ information includes their purchase history, personal profile, personal interests, wish lists, reviews, etc. The customer profile on record is analyzed via CRM data mining in order to predict that consumer behavior in the future. The analysis provides processed information that showcases customers’ unique interests, thus enabling Amazon to send them tailored product recommendations in order to increase sales (Jenkinson 2005).
A crucial development in Amazon’s web services has been the development of elastic cloud computing. ECC serves the company’s developers working with web scale computing. It allows customers to effectively use Amazon’s computer environment by offering end users complete control over the computing actions. Amazon’s EC2 reduces the time required to obtain and boot new server instances to minutes, allowing you to quickly scale capacity, both up and down, as your computing requirements change. Amazon EC2 changes the economics of computing by allowing you to pay only for capacity that the customer actually uses. (Amazon EC2, 2018).