Question

In 2013, Amazon’s CEO Jeff Bezos, on a 60 Minutes interview, introduced his company’s plans to revolutionize the way that packages are delivered to consumers. The new service is called Amazon Prime Air and it will consist of a fleet of drones that will deliver small packages directly to consumers’ doorsteps within a half-hour of making a purchase on Amazon.com. Since its inception, Amazon has had a reputation for innovation and its future plans are no different. The online retail giant began with digital media, such as books and music, and evolved to offer a huge variety of products, such as clothing, furniture, toys, electronics, and more, as consumers became increasingly comfortable with online shopping. One consumer barrier for online shopping was shipping costs, so Amazon introduced its subscription-based Amazon Prime program that included free shipping and other consumer benefits. Now, as many other online retailers have followed suit and started to offer free shipping, Amazon’s competitive advantage has eroded. With Amazon Prime Air, Amazon would again offer innovative benefits that would set it apart from its competitors. Also, being able to offer such quick delivery would allow Amazon to better compete with brick-and-mortar retailers that offer consumers more immediate gratification of possessing products at the time of purchase, rather than waiting a number of days for delivery. With Amazon Prime Air, consumers will be able to enjoy their purchases very quickly, while still enjoying the convenience and comfort of shopping in their own homes. The public’s reception of Amazon’s announcement was mixed. Many consumers were excited at the prospect of Amazon Prime Air services. However, others felt that it was simply a cheap publicity stunt to draw headlines on the day before Cyber Monday. Others who resided near Amazon fulfilment centres were concerned about the noise that a fleet of drones would cause while flying overhead 24 hours a day. Some consumers even announced plans to shoot the drones out of the sky, either because they dislike the idea of drones or because they want the packages that they would carry. Likewise, the business community had mixed perceptions. Many of Amazon’s competitors, as well as logistics companies, scoffed at the idea of Amazon Prime Air. The CEO of FedEx called the idea “almost amusing” and the CEO of eBay called it a “long term fantasy”; Groupon answered the announcement with a satirical proposal of its own innovative delivery system—a catapult. Meanwhile, Google announced its own plan, called Project Wing, to utilize drones for other purposes, including delivering disaster relief. While Amazon’s research and development speed forward, the biggest barrier to launching Amazon Prime Air is legal regulation from the Federal Aviation Administration (FAA). Amazon has joined a coalition of firms, including 3D Robotics, Parrot, and DJI Innovations, whose purpose is to advocate for the legalization of drone use for commercial purposes and educate the public on the safety and benefits of their use. The coalition has the support of Congress, as the FAA Modernization and Reform Act of 2012 mandated that the FAA open U.S. national airspace to civilian and commercial small drone traffic. However, FAA regulations have not yet been revised. In 2014, Amazon petitioned the FAA for an exemption to their rules that restrict the commercial use of drones and for permission for the company to begin to test its drones in an outdoor setting. So far, the FAA has not approved Amazon’s request. In order to continue its research and development on the drones, Amazon plans to carry on by taking its outdoor testing to India, where there is a much more lenient regulatory environment. It is imperative that the research and development continue so that once the regulations in the United States are revised to allow commercial drones, Amazon will be prepared to launch its program.

Q. If Amazon is successful with its launching of Amazon Prime Air, how could this change the information search in the consumer decision process and could it result in more online purchases? (10)

Q. What are some things that Amazon could do to aid consumers in making decisions about a product and the evaluative criteria for the product they are considering purchasing? Could this help make consumers feel more comfortable about purchasing a product online and reduce postpurchase guilt and dissonance? (10)

Answer 1

Answer:

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