Toys R Us vs. Amazon. com Internet Commerce MAN223 Mary Crisp Instructor: Criddle Stevens-Henager College November 09, 2011 Abstract Topic: Answers Too In this paper, I will summarize the arguments between Toys R Us and Amazon. com. I will also summarize the rationale given by the judges for their decisions in this argument. 1. After a lengthy trial, the Court found that defendant Amazon. com had breached an agreement it had entered into with plaintiff ToysRUs. com LLC (“Toys R Us”), by permitting third parties to sell toys on Amazon’s web site.
Finding that this breach went to the substance of the parties’ agreement – which as interpreted by the Court provided that Toys R Us was to be the sole third party toy retailer on Amazon’s web site the Court granted Toys R Us request that the agreement be terminated. Notwithstanding, it is finding that such a breach had occurred, the Court did not award Toys R Us damages. The Court also rejected counterclaims asserted by Amazon, arising out of Toys R Us alleged failure to maintain levels of inventory sufficient to meet customer demand. After a lengthy trial, the Court found that defendant Amazon. om had breached an agreement it had entered into with plaintiff ToysRUs. com LLC (“Toys R Us”), by permitting third parties to sell toys on Amazon’s web site (Samson, 1997-2011). The judge found its ruling to be fare because amazon. com did not have the necessary reports that were required to be given yearly to Toys r us as part of the agreement. Therefore, after 2 years of battling on March 1, 2006 the Judge ruled against Amazon. com, gave Toys R Us the win, and settled for 51 million. AMAZON. com did not want a ten-year agreement with TRUCC.
Long-term commitment in a world where the technology is advancing almost on a daily basis is difficult to maintain. The negotiators achieved their goal and closed a clever and profitable deal. What constitutes an exclusive partnership continues to be a challenge not only for individuals who work on the partnership daily, but also for business entities it was clear that it was the negotiators who wanted this deal to work. They needed to structure the deal in such a way that both corporate boards and the executives, who set the philosophy, felt they each got what they wanted.
The negotiators needed to define certain areas of the Agreement in such a way that both sides felt that they had accomplished their goals (Samson, 1997-2011). Conclusion In conclusion, I have shown what the argument was about and why the judge made the ruling, he did. Amazon. com entered an agreement and did not hold up their end of the agreement, because it would lock them into a ten-year agreement that they would assume would eventually cost them more than it would be worth. They should have set down and re-negotiated rather than breach the agreement.
I would whole-hearted agree with the judges decision. 2. Advantages could have been that they never made Toys R Us to be the only third party to sell on there website and they could still have Toys R Us as a retailer selling on their site. Toys R Us sells more than $300 million worth of toys each year through the Amazon. com site. Amazon. com benefits from the network economic effect they obtain having toys available for sale on Amazon. com. Many small retailers purchase toys through Amazon. com and they could be still gaining a percentage of the sales.
By paying attention to every process involved in buying, promoting, selling, and shipping consumer goods, and by working to improve process continually (Gary P Schneider, 1996), Amazon. com could have become one of the highest success story in electronic commerce before now. Disadvantages are that they lost Toys R Us as a retailer on their site and they could be making more money if they had entered into a different agreement. They are also losing all the percentages from all the other small companies that purchase toys through Amazon. com.
They could have steered other marketers that were reluctant to take advantages of their website because of the battle that embroiled between them and Toys R Us. 3. I would have recommended that Amazon could not enter into an agreement with Toys R Us exclusively, but allow them to only let other outlets that sell Toys R Us toys along with Toys R Us. Because, this would allow Amazon to still honor the agreement it entered into with Toys R Us and still show a substantial profit. Amazon could be seeing the profits from the other retailers selling Toys R Us products.
Toys R Us would still see the profits from the sales of other retailers and they would not undersell Toys R Us products. They entered this agreement before they could realize the consequences and the profits that could be made. They entered it knowing what it could lead to, but did not think ahead to what the future could and would hold for an agreement. I am sure if they could do it all over again they would think a lot further into the future and what it would hold for both companies.
Unfortunately, that chance has come and gone and there are no redo, because it went so far beyond the point of return during the long and lengthy court battle. They are both doing great but a business agreement soured their ever working together ever again. 4. November 11,2011 To: Amazon. com Board member From: A loyal customer of both I am a customer of both, and I do not think it is a smart idea to fold Zappos into your website and the reasons I am stating below is why I do not think it is a smart move.
First of all Zappos has established a relationship with their customer and if you make such a change you can and will lose a substantial amount of clients. A customer centric company Zappos. com is a company known for their customer service and use of social media as a tool to communicate with customers. It is important to note that customer services is the number one priority of the company, sales is not. Zappos uses various customer interaction channels including telephone, email, Twitter, blogs, streaming video, Facebook, YouTube and others.
It has infused life into online marketing. The success of Zappos depends on two elements viz. , service, and culture. Best Customer Service the CEO of Zappos leads by example, he communicates about his passions. He is honest and transparent. He has personally invested in Social Media. Zappos used loyalty and relationship marketing as a business model for the success. The primary sources of the company’s rapid growth have been repeat customers and numerous word of mouth recommendations.
If you were to fold them into your website then you would be taking away the trust and honesty in which they have established with their clients. Such a move might not go so well with their long time clients. Zappos wants the customer, to have an outstanding shopping lost in trust and loyalty experience every time they do business with them. It is a customer centric company and all its customer and prospects are highly engaged and involved.
The company’s culture focused on making sure every interaction with the customer results in them saying, “That was the best customer service I have ever had. ” At Zappos, most of their social media initiatives are about exposing the people, who through their actions reinforce the company’s competitive advantage. The honest and transparent approach makes the company real. They are just not selling products but they are engaging customer. They are making personal and emotional connections.
We must understand that Zappos does not sell product with the help of Twittering and blogging. They just engage and measure the reaction over the social network. The company really builds relationships with customers with the help of telephone calls and the email conversations (Zappos. com Powered by Service, 2011). This itself should prove enough to you to let Zappos stay Zappos. References http://www. internetlibrary. com/cases/lib_case424. cfm (Gary P Schneider, 1996) http://www. slideshare. net/chaturvedibraj/zappos-a-social-media-culture