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Amazon Porters Five Forces

Porters Five Forces

Threat of new entrance is significantly high in Online retail which can be seen by Amazon’s efforts in capturing the Indian Market with significantly new players like Flipkart, Snapdeal, Paytm, etc. This has resulted in Amazon changing its policies exclusively for the Indian market. Amazon Overseas model operated on paid services and free services differentiation, but in India they were forced to follow the free model due to high competition. India, a growing market, has many online retail stores with differentiation.
Bargaining Power of the Buyer is significantly very high in Amazon’s case, the buyer will shift to the other online retails if the price and service offered do not match the buyer's expectations. With the presence of price comparison website, the buyer is directly influenced by the price factors. Growing coupon code websites pose a real challenge for Amazon to offer the service to match the current trends of the market. Social trends and ethnic behavior are also the bargaining powers of the online buyer, for example, scheme in Diwali, New Year, etc. This leads to additional investment for advertisement, not only online but offline like newspaper and other traditional media.

Power of Supplier is low to medium currently in the online retail market, mainly the online retailers set the rule which has to be followed by the suppliers. There has been a periodic growth in the rate of commissions by the online retail market, but the suppliers have very little options to oppose. Suppliers have also set the online dealer association but even that could not function due to the formation of multiple associations.
Threat of substitute product has been significantly high, buyers can easily switch to other online marketplaces and even the local store. This was identified by Amazon and other online retail stores and they have started to offer free delivery and even fast delivery in major cities that is within a couple of hours.


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