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About This Assignment
Stihl is a manufacturer of chain saws and other similar power tools. It has been shunning big
retail chains like Home Depot and selling primarily through small retail shops. It has been doing
well.
Recently, however, the growth and popularity of online market platforms such as the Amazon
Marketplace – where manufacturers can sell directly to consumers if they choose – has created
both opportunities and threats to manufacturers such as Stihl.
Review the attached documents and the discussion of platform business models in Rothaermel,
pp. 249-253.
Suppose that you were a strategic consultant and Stihl hired you to evaluate whether it is
worthwhile for Stihl to use the Amazon Marketplace to sell its power tools. Based on
information in the provided documents, please answer the following three questions.
1.
What are pros and cons of Stihl using the Amazon Marketplace to sell its tools?
2. Based on your analysis, what would be your recommendation to Stihl on whether to use the
Amazon Marketplace?
3. Might any changes in situation – such as increasing competition, change in product quality,
or change in its customer base – lead you to reverse your recommendation or call for a different
approach?
The paper should be no more than three single-spaced pages long (roughly one page for each
question), with the font type of Times New Roman, the font size of 12, and 1 inch page margins.
Enclosed are five documents.
1. Rothermeal, F. T. (2019). Business Strategy: Innovation, Entreneurship, and Platforms.
Strategic Management, 4th Edition. Dubuque, Iowa, McGraw-Hill Education 249-253.
2. Stock, K. (2014). Stihl Chain Saws Thrive Outside the Big Box. Bloomberg.
3. Marketplace-Pulse (2019). Marketplaces Year in Review 2018, Marketplace Pulse.
4. Danziger, P. N. (2018). Thinking of Selling on Amazon Marketplace? Here Are the Pros
and Cons. Forbes.
5. Greene, J. (2019). Amazon Tests Pop-up Feature Touting Its Lower-Priced Products.
Wall Street Journal.
DOCUMENT 1
DOCUMENT 2
DOCUMENT 3
Marketplaces Year in Review 2018
The largest online retailer in the US is not Amazon, but the Amazon Marketplace. Made up of millions of sellers it will
account for 31.3% of total e-commerce sales this year, according to market share estimates by eMarketer. It’s close to twice
as big as Amazon itself.
At $175 billion, Amazon marketplace sales will make up 68% of
Amazon Marketplace Share of US Online Retail Sales
Amazon’s $258 billion gross merchandise volume (GMV) in the US.
Marketplace sales will grow 35.6% in 2018, double the rate of Amazon
Amazon Marketplace
31.3%
direct sales’ 17.5% growth. eBay, the second largest marketplace in the
US, is ve times smaller at $35 billion in domestic sales. Next is Etsy
and Wish with roughly $2 billion in GMV each, then followed by
The Rest
52.0%
Walmart Marketplace.
Despite their size and growth rate, marketplaces are the most
overlooked player in the US e-commerce. Amazon doesn’t mention
Amazon Retail
16.7%
theirs often, retailers and brands are focused on Amazon the retailer, and shoppers don’t notice it thanks to FBA and Prime.
The Year in Review looks at the state of marketplaces and their challenges, and makes predictions on what’s to come next
year. Unless otherwise noted all metrics mentioned in this report are calculated by our technology platform. Our software
parses unstructured and semi-structured data sources and programmatically extracts the key pieces of structured data we
care about. We collect more data on e-commerce marketplaces than any organization in the world.
In short, the industry continues to spin around Amazon. Amazon is growing both in the US and internationally, as the
company struggles to make up its mind between being a retailer, a product creator, and a platform. Amazon’s ywheel is
enabled by the marketplace, FBA, and Prime. A lot of the goods sold on Amazon are sold directly from China. Competition is
trying to match Amazon’s two-day shipping, but it’s just one of the services they fail to offer to their marketplaces. eBay is
struggling to reinvent itself, Walmart is doing ok, and Jet.com is forgotten. Two newcomers in the form of Google and
Facebook are making moves. There is also Wish and Etsy, both nding their own niche and growing. Overall the power of
services built around Amazon cannot be matched by the competition, and the rise of advertising is sparking the creation of a
whole new industry – Amazon brand agencies.
Amazon Sellers Funnel
The Amazon marketplace size is most often described as “there are currently more than 2 million sellers on Amazon
worldwide.” The 2 million gure has become common speech. But not only is the marketplace bigger in terms of the number
of sellers, it also has better metrics to benchmark its performance.
20,000
140,000
2,500,000
Sellers with $1 million in sales
Sellers with $100,000 in sales
Sellers with products for sale
Number of sellers worldwide with more
Number of sellers worldwide with more
Number of active sellers worldwide with
than $1 million in sales a year.
than $100,000 in sales a year.
products listed for sale.
This is the Amazon marketplace funnel. Millions of sellers at the top, only tens of thousands at the bottom. There are
millions of sellers with products listed for sale, there are more than 6 million sellers in total to have ever sold on Amazon,
but the top 20,000 sellers with $1 million or more in sales represent the most important cohort.
Analyzing the current top sellers on Amazon, approximately 67% of them were also in the top one year ago; 53% of them
were also in the top two years ago; and 41% of them were also top sellers three years ago. This highlights the apparent longterm sustainability of businesses relying on the Amazon marketplace and the relatively low churn rate. Churn rate, also
known as the rate of attrition, is the percentage of sellers on a marketplace who stop selling within a given time period.
Retention of top sellers is the opposite of churn.
Top Amazon.com Marketplace Sellers Presence in the Past
100%
75%
50%
25%
0%
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More than one million US-based small and medium-sized businesses are selling on Amazon. US sellers are mostly located in
California, representing 18% of all sellers. Other common locations include New York, Florida, and Texas. These four biggest
states make up 40% of US sellers.
Amazon Sellers’ Location By State
Washington
>27,000
Montana
>2,500
Oregon
>14,000
Idaho
>5,000
Maine
>3,500
North Dakota
>1,500
Wyoming
>1,600
South Dakota
>1,700
Utah
>14,000
Colorado
>20,000
California
>175,000
Arizona
>19,000
New Mexico
>4,000
Michigan
>28,000
Iowa
>7,000
Nebraska
>4,500
Nevada
>9,000
Vermont
>2,000
New York
>81,000
Minnesota
>17,000
Ohio
>28,000
Illinois
>38,000
Kansas
>7,000
Missouri
>15,000
Oklahoma Arkansas
>6,500
>4,500
Delaware
>3,500
Virginia
>28,000
Kentucky
>8,000
Tennessee
>14,000
Pennsylvania
>35,000
North Carolina
>24,500
South Carolina
>9,000
Alabama Georgia
>8,000 >28,000
Texas
>62,000
Louisiana
>6,500
Florida
>75,000
Alaska
>1,400
Hawaii
>2,700
© Natural Earth
This breakdown showcases Amazon’s economic impact across the US. Amazon estimates that the Amazon Marketplace has
created more than 900,000 jobs.
Sellers are a unique type of business. Their business processes, capital funding, launching of new products, and inventory is
built to work speci cally on marketplaces. They understand keyword optimization much more than they do store layouts.
They are not going around their brick-and-mortar store picking products off the shelves to ful ll an online order either.
Amazon China Sellers
Top Amazon Sellers Based in China
On Amazon, 39% of the top sellers are based in China. This is based on
a combined average of the 5 European marketplaces (Spain, Italy,
France, UK, and Germany). Retailers in Europe are required to disclose
their business location as part of European Union law, this thus also
Sellers from China
39%
apply to sellers on European marketplaces. The business information
is analyzed in this report to determine what country is the seller
located in. Unfortunately this is only possible for the European
Based Elsewhere
61%
marketplaces, and the same analysis is not possible for Amazon.com.
Nonetheless China sellers share of Amazon.com marketplace is at least
that of Europe at 39% or even higher. The US marketplace generates the most sales overall, thus the interest from sellers is
highest there. In a study from 2016, Payoneer interviewed 900 Chinese sellers and found that 62% of respondents are selling
on Amazon marketplaces. Of the 62% gure, 91% sell on Amazon.com in the US.
Growing Percent of Top Amazon Sellers Based in China
60
50
40
30
20
10
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Amazon.co.uk
Amazon.de
Amazon.fr
Amazon.it
Amazon.es
In two years the number of successful sellers from China on the Amazon marketplace has doubled. 39% of the top sellers are
now based in China, up from 15% two years ago.

“Why buy a $40 bikini made in America when you can buy a $4 bikini directly from China? For that matter, why buy a $20 bikini
made in China but imported by a U.S. company like the Gap when you can buy a $4 bikini directly from China?”
– Alana Semuels, The Atlantic
年亚马逊全球开店卖家
More than ten thousand Chinese sellers attended the 4th annual Amazon Global Store Seller Summit (
峰会). The event was held in Ningbo, Zhejiang province on December 6-7th. Twice as many participated in the live online
broadcast. In comparison, Amazon’s only event in the US, titled Boost with FBA and held in New Orleans, LA this year,
attracted less than three thousand sellers. But comparing the size of the events is not as important as the difference in the
topics discussed. The US’ Boost with FBA focused largely on inventory management and starting-out advice, while the
China’s Global Store Seller Summit – as the name suggests – is about international expansion, product innovation, and brand
building.
Amazon’s message in China is simple: innovate on great products, expand worldwide, and build brands. And it’s working.
Amazon Marketplace Growth
New Sellers on Amazon Marketplace
This year more than 1.2 million sellers joined all Amazon marketplaces.
This equals to 3,459 new sellers every day, or 144 every hour, or more
Amazon.com.au
1.7%
than 2 every minute.
This is adding to the millions of marketplace sellers, and was mostly
contributed by Amazon.com in the US, Amazon.in in India, and
Amazon.de in Germany. Although few of them will ever become active
– many sellers end up never listing even a single product.
In India it took four years for Amazon to grow the marketplace from
zero to 200,000 sellers, but just over a year to double from 200,000 to
Amazon.com.mx
2.1%
Amazon.com
28.5%
Amazon.co.jp
4.4%
Amazon.ca
5.3%
Amazon.es
7.8%
Amazon.it
8.2%
Amazon.in
11.7%
Amazon.fr
8.6%
400,000 sellers. Amazon launched in India in June 2013 and it took the
Amazon.co.uk
9.7%
company 37 months to reach the rst milestone, 100,000 sellers, in
Amazon.de
10.8%
July 2016. It then took 11 months to double to 200,000 sellers in June
2017. Since then the marketplace growth has accelerated reaching 300,000 sellers in 8 months in February this year. Only 7
months later it reached 400,000 in September 2018.
“While Amazon and Flipkart (ex-Myntra and Jabong) were neck-and-neck in terms of GMV in FY17, Amazon has taken the
clear lead in FY18 with GMV of $7.5 billion as compared to $6.2 billion for Flipkart on a standalone basis,” according to a
report from Barclays. Walmart acquired 77% in Flipkart earlier this year paying $16 billion, valuing it at $22 billion.
Months to Reach Amazon.in Marketplace Number of Sellers
40
37 months
30
20
11 months
10
0
8 months
100,000
200,000
300,000
7 months
400,000
In Australia Amazon launch 12 months ago may not have lived up to the hype, but the company is on track to put the building
blocks in place for years to come. “It’s been a big year and we’re only getting started,” said Amazon Australia’s country
manager Rocco Braeuniger. Amazon managed to grow the assortment from 7.5 million products at launch to close to 100
million twelve months later. 20 million of which are from Amazon US available through the Global Store. The biggest driver
of the growing catalog is the marketplace, which has grown from 2,000 to 25,000 sellers in a year. 40% of sellers, or 10,000
to be exact, are based in Australia, while the rest are international sellers, mostly from China.
Amazon.com.au Marketplace Number of Sellers
25000
20000
15000
10000
5000
0
December
2017
January 2018
February
2018
March 2018
April 2018
May 2018
June 2018
July 2018
August 2018 September
2018
October
2018
November
2018
December
2018
The marketplace, FBA, and Prime are starting to spin the ywheel in Australia. As a result, in November it saw the most
visitors yet at 16.3 million, according to SimilarWeb. That’s more than in December last year, and thus this December is going
to be even bigger still. Before Amazon launched in Australia the website was attracting 4 to 5 million visitors a month, but
has steadily grown since – Amazon.com.au has doubled website traf c so far this year.
Amazon.com.au Total Visits
20 million
15 million

10 million
5 million
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Ful llment by Amazon (FBA)
Amazon’s Prime program now includes more than 100 million members worldwide. That makes it one of the largest loyalty
programs in the world, and as a result Prime members as a group are in uencing retail as a whole. Not only are other
retailers waking up to having to offer “free” two-day shipping, other marketplaces are nding their own ways to enable
unifying shipping experience.
The number of sellers offering products through Prime is steadily increasing. More than 90% of the top sellers now offer
Prime for at least one product, up from 70% three years ago in 2015. Furthermore, 73% of the top sellers offer Prime for
more than half of their assortment, up from 40% three years ago. Sellers choose to store inventory in FBA not because it is
more convenient or cheaper than the alternatives. They do so because it unlocks access to more shoppers on Amazon. And
thus over the years those who do got more successful than those who don’t. It’s all about that Prime checkmark.
Number of the top Amazon.com Marketplace sellers that offer Prime
100%
80%
60%
40%
20%
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At least one Prime product
50%+ Prime products
The growing Prime catalog is enabled by FBA. Launched twelve years ago on September 19th, 2006 Ful llment by Amazon
(FBA) has become a cornerstone service enabling the Amazon ywheel. FBA is an Amazon program which allows sellers to
of oad most of their warehouse operations to Amazon for a fee. Customers buying from FBA sellers get the same two-day
Prime shipping and thus sellers get preferential treatment in buy-box rotation.

“We created Ful llment by Amazon because it is good for Amazon.com customers, and therefore, great for our third-party sellers.
With membership in Amazon Prime growing every day, more and more Amazon.com customers want a great deal on shipping and
to receive their orders quickly. Ful llment by Amazon makes it possible for sellers to offer Amazon.com customers this
convenience.”
– Joe Walowski, Product Manager, Ful llment by Amazon
Joe Walowski said this during the announcement in 2006. At that time it was already clear that Prime memberships will be
one of the key pillars in the future, even though less than a million customers had signed up for one. Prime combined with
FBA has made the marketplace almost invisible to most shoppers. A decade ago Amazon made three long-term bets: Prime
memberships, ful llment consistency, and third-party sellers are going to be key. By most estimates half of the US
households have a Prime membership. The convenience of two-day shipping, and even same-day delivery has become the
norm. And the third-party marketplace has grown faster than Amazon itself because it deeply integrated into all of this.
They were the right bets to make.
Fulfillment by Amazon (FBA) Usage Among Top Sellers
80%
60%
40%
20%
0%
US
Spain
Italy
Canada
January 2017
Japan
January 2018
France
July 2018
Germany
December 2018
UK
India
Australia
Across all Amazon marketplaces the number of sellers offering Prime shipping is increasing. On February 26th Amazon
launched Ful llment by Amazon (FBA) in Australia. Ten months later 33% of sellers had already committed to using FBA for
most of their catalog.
Those who use FBA on average have less products listed than those who don’t use FBA (referred in the table below as
Ful llment by Merchant (FBM)). This is because listing products when using FBA requires sending those items to Amazon.
For example, many of the books sellers have hundreds of thousands of products listed, but are rarely using FBA because of
high storage fees.
Marketplace
FBA Seller Median Products
FBM Seller Median Products
Amazon.com
57
818
Amazon.in
37
102
Amazon.co.jp
36
472
Amazon.de
32
763
Amazon.co.uk
29
593
Amazon.fr
27
608
Amazon.it
25
508
Amazon.es
24
373
Amazon.ca
11
245
Amazon.com.au
5
19
Free Two-Day Shipping
Free two-day shipping is an inalienable right, as Christopher Mims of The Wall Street Journal put it, “alongside life, liberty
and the pursuit of happiness.” This is mostly thanks to Amazon. Amazon launched Prime in 2005 and in thirteen years since
has created a perception that two-day shipping is the standard every other retailer needs to meet too. The company offers
free two-day shipping for Prime members for 100 million products.
The truth is that achieving nationwide free two-day shipping is hard and expensive. It requires inventory planning and
mirroring, a warehouse network, and sophisticated technology to manage it. And all of that complexity needs to happen at a
price point which still allows it to be marked as “free”. Scale is essential too. None of this can be done by mom-and-pop
shops or small retailers without the help of someone who has aggregated many of them.

“In today’s world of e-commerce, two-day free shipping is table stakes.”
– Marc Lore, president and CEO of Walmart U.S. eCommerce
Walmart, the largest retailer in the country with …
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