Amazon have created a virtualized value system through their accelerated ordering, delivery and payment of goods and services, while reducing operating and inventory costs associated with traditional bricks and mortar stores. They have access to global markets, economies of scale and the ability to personalize. As a virtual merchant, their products are suited to the Internet, their business models remain a source of differentiation. Amazon is a seller-controlled site whose commercial mechanism is fixed price sales.
Timmers (1998) classifies Amazon's business model as a virtual community, which "helps build customer loyalty and trust through an interplay of virtual and physical realities." (Hagel and Armstrong, 1997.) Amazon strengthens their association as a virtual store with "shopping trolley technology" (Cooke, 1997.) Shopping carts and checkouts act as reminders of physical environments. (Weick, 1995.)
Amazon's effectiveness as a virtual community is evident with their customer co-presence. ...
(Chaffey, 2004.) Amazon has warehouses to support their technical innovations. They are dependent on the publisher-to-wholesaler supply chain. Their distribution centers are placed near distribution warehouses to allow quick turn around on deliveries. (Bayers, 1999.)
Amazon's brand has enabled them to pursue differentiation strategy identified by Porter, 1985. They have an excellent reputation due to their efficient one-click purchasing system, prompt after-sales service and tight security measures. Amazon are using innovative business models such as e-mail alerts, which deliver value in ways that have not been economically viable in "traditional" physical settings. (Hamel & Sampler, 1998; Kotha, 1998.) Their distinctiveness is evident in their online value proposition "Earth's biggest selection." Their brand, accompanied by reputation and trust is difficult for competitors to imitate, making it a source of sustained competitive advantage.
Barnes and Noble previously traditional intermediaries, now conduct business using both traditional and online methods. Due to its large share of traditional consumers and physical store outlets, Barnes and Noble are able to appropriate benefits of EC innovation in a manner that Amazon cannot match.
Crucial to Amazon's competitive advantage has been their ability to build affiliate/associate networks. "Amazon has in excess of 500,000 affiliates, which have links to the Amazon site." (Chaffey, 2004.) They have entered exclusive bookseller relationships with five of the top six sites on the web: AOL, Yahoo, Netscape, GeoCities and Excite. (Rindova and Kotha, 1999.) Amazon pays commission on