Amazon.com vs. Wal-Mart E-Commerce Presentation Team Let’s Get Ready to Rumble!!!! Eric Head Robert Distefano Dom Gaudin John Lin Darin Bodin Carmen Saleh

CEO Jeffrey Bezos Company Statistics: The Amazon Team Expertise: Bits & Bytes Market Cap:$16 Billion Stock Price:$100 1/16 Net Profits: $-138 Million (2Q ‘99) Headquarters:Seattle, Washington

CEO David Glass Company Statistics: The Wal-Mart Team Expertise: Bricks & Mortar Market Cap:$188 Billion Stock Price:$42 1/4 Net Profit:$4.43 Billion Headquarters:Bentonville, AR

HISTORIES

History of Amazon.com –July 1994: Incorporated Focus: software development Sold books in his garage with ten employees –July 1995: Virtual doors open –September 1997: Introduced personalized recommendations and one-click purchase –June 1999: Obtained 10 million registered customers

History of Amazon.com (continued) –2nd quarter 1999 Revenues $314 billion 1st quarter 1998 Revenues $87.4 million Projected sales for 1999: over $1 billion –$138 million loss in 2nd quarter 1999 Has not made a profit since company started –10.7 million registered customers 8.4 million in 1st quarter million in 1st quarter 1998

History of Amazon.com (continued) –Operates two international sites: –Other sites operated or owned include: Gear.com Drugstore.com Homegrocer.com Pets.com IMDB.com Planetall.com Livebid.com Accept.com

History of Amazon.com (continued) Mission: To be the world’s most consumer- centric company where people can find and discover anything that they want to buy online.

1962 Company founded in Rogers, Arkansas 1969 Wal-Mart Incorporated 1970 Wal-Mart Goes Public 1979 First Billion Dollar Sales Year 1993 First Billion Dollar Sales Week! History of Wal-Mart

1988 David Glass named CEO 1991 Established International Presence in Mexico 1995 Established Presence in South America 1996 Entered Asia History of Wal-Mart (continued) 1997 Largest national employer with 680,000 associates and first $100 Billion sales year!

History of Wal-Mart (continued) –Originally launched Website in 1996 –Owns six registered web addresses: samsclub.com w-mtour.com samsclubtravel.com. –Has established alliances with: Fingerhut Books-A-Million –Announced plans for an Internet megasite in 1999!!!

STRENGTHS

Amazon’s Strengths –E-commerce is its core mission and environment –Amazon.com has enjoyed a first mover advantage –Amazon has: a strong brand image vast customer database exceptional customer trust

Amazon’s Strengths –Amazon provides: 100% guaranteed secured credit card transactions Personalized product recommendations Hassle-free shopping through 1-click and 1-bid technology Risk-free return policy –Amazon’s IT and Logistics executives were formerly employed at Wal-Mart

Wal-Mart’s Strengths –A leader in almost every retail category –$137.6 billion in sales last year –$4.43 billion in net earnings –Excellent vendor alliances

Wal-Mart’s Strengths (continued) -History and image as a discount retailer -State of the art supply chain network -Culture of customer service -More than 3700 stores worldwide can be used in a “hybrid strategy”

WEAKNESSES

Amazon’s Weaknesses — Amazon has yet to achieve a profit —Customers cannot physically touch the product prior to purchasing —Lack of social interaction before purchasing —Risk-averse consumers may find buying on-line intimidating —Not every person has access to the Internet

Wal-Mart’s Weaknesses –Brand image not attractive to “upscale consumers” –High fixed costs –First Web launch was not very successful –Will a mature and successful firm be willing to make the necessary commitment?!

OPPORTUNITIES

Amazon’s Opportunities –Expand internationally –Actively pursue online auctions –Evolution of mass market from merchant-centric to consumer-centric

Amazon’s Opportunities (continued) –Create “segment fluidity” Segments within segments Typical segments –Low cost/value/high quality Embedded segments –Customer service –Product uniqueness –Social experience –Quick and easy purchase –Personalized recommendations Catch customers with high attention scarcity

Wal-Mart’s Opportunities –Exploit vendor relationships –Establish strategic alliances –Explore hybrid models to enhance customer service –Spin off wal-mart.com as a separate IPO

Wal-Mart’s Opportunities (continued) –Market aggressively using traditional and online media –Explore hybrid models to enhance customer service –Do not worry about cannibalization. Use the Internet to expand customer base

THREATS

Amazon’s Threats –The future of E-Commerce –Amazon may bite off more than it can chew(over-diversification) –Other retailers are quickly creating an on-line presence –Amazon must effectively manage its growth to minimize growing pains

Wal-Mart’s Threats –Wal-Mart is NOT the first mover. The “wait and see” strategy could be problematic –Other retailers are getting into the game (Sears, Target, Kmart, etc.) –Establishing an online brand will cost….the longer the wait, the greater the cost!!

CONCLUSION

Prediction: NO ONE WINNER! –The Hybrid Model –Segment “Fluidity” - Attention Scarcity –Bits & Bytes vs. Bricks & Mortar Analysis

Questions??