Problem $1$: Amazon $-$ Online Sales

Amazon sells books, music, and many other items over the Internet and is one of the pioneers of online consumer sales. Amazon, based in Seattle, Washington, started by filling all orders using books purchased from a distributor in response to customer orders. As it grew, the company added warehouses, allowing it to react more quickly to customer orders. In $2009,$ Amazon had about $20$ warehouses in the United States and another $30$ in the rest of the world. It uses the U$.$S$.$ Postal Service and other package carriers such as UPS and FedEx to send products to customers. Outbound shipping$-$related costs at Amazon in $2009$ were almost $$2$ billion.

With the Kindle, Amazon has worked hard to increase sales of digital books. As of $2009,$ Amazon offered more than $460,000$ books in digital form. The company has also added a significant amount of audio and video content for sale in digital form.

Amazon has continued to expand the set of products that it sells online. Besides books and music, Amazon has added many product cateq, ories such as toys, apparel, electronics, jewelry, and shoes. In $2009,$ one of its largest acquisitions was Zappos, a leader in online shoe sales. This acquisition added a lot of product variety. According to the Amazon annual report, this required creating $121,000$ product descriptions and uploading more than $2\mathrm{.}2$ million images to the Web site! In $2010,$ another interesting acquisition by Amazon was

diapers.com. Unlike Zappos, this acquisition added little variety but considerable shipping volumes.

Several questions arise concerning how Amazon is structured and the product categories it continues to add:

What advantages does selling books via the Internet provide over a traditional bookstore? Are there any disadvantages to selling via the Internet?

Should Amazon stock every product it sells?

What advantage can bricks$-$and$-$mortar players derive from setting up an online channel? How should they use the two channels to gain maximum advantage?

What advantages$/$disadvantages does the online channel enjoy in the sale of shoes $/$diapers relative to a retail store?