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Amazon, from Book Store to Global Giant

Shopping online is an activity that today is done practically all over the world. But this wouldn’t be the case if it weren’t for a company that was visionary in this regard. Yes, we’re talking about Amazon.

Amazon.com is an online retailer, maker of e-book readers, and web service provider that became the iconic example of e-commerce shortly after it was founded.

Its online presence is such that, in 2012, 1% of all Internet traffic in North America traveled in and out of Amazon.com data centers.

It is a large internet-based company that sells books, music, movies, household items, electronics, toys, and many other products, either directly or as an intermediary between other retailers, to millions of customers every day.

Its web services business includes renting storage of data and computing resources, which is called “cloud computing” over the Internet. Its considerable online presence is such that, in 2012, 1% of all Internet traffic in North America traveled in and out of Amazon.com data centers.

The company can be a market innovator in e-book readers. It’s the advertising of Kindle products has resulted in dramatic development in e-publication publishing and offers produced Amazon.com a significant disruptive force in the publication publishing market.

An always successful company

In 1994, Jeff Bezos, a former Wall Street hedge fund executive, launched Amazon.com, choosing that name primarily because it started with the first letter of the alphabet and because of its association with the vast South American jungle. Based on the research he conducted, Bezos concluded that books would be the most logical product initially to sell online. Although, Amazon.com was not the first company to do so; Computer Literacy, a Silicon Valley bookstore, began selling books from its inventory to its customers in 1991. However, Amazon.com’s promise was to deliver any book to any reader anywhere something the first page didn’t do.

Jeff Bezos in 2005
Jeff Bezos in 2005

While Amazon.com started as a bookstore, Bezos claimed that from the beginning the site was intended to be a retailer of any consumer product and a technology company whose business would be to simplify online transactions for consumers.

Amazon.com’s trading strategy was often taken with skepticism, despite its initial success. Journalists and financial analysts disparate the company by referring to it as the “Amazon bomb”. Those who hesitated said Amazon.com would eventually lose out in the market to established bookstore chains such as Borders and Barnes & Nobleonce they launched their own e-commerce sites.

Its revenue increased from $15.7 million in 1996 to $148 million in 1997, followed by $610 million in 1998.

However, Bezos dismissed the detractors because they did not understand the massive growth potential of the Internet. He argued that to be successful as an online retailer, a company needed the “Get Big Fast,” a slogan it had printed on employees’ T-shirts.

In fact, Amazon.com grew rapidly, reaching 180,000 buyer accounts found in December 1996, following its primary full-year functioning, and significantly less than a year soon after, in October 1997, it had 1,000,000 customer accounts. Its revenue increased from $15.7 million in 1996 to $148 million in 1997, followed by $610 million in 1998. The success of Amazon.com led its founder to become Time magazine’s Person of the Year in 1999.

Expansion and entry into the stock exchange (NASDAQ)

The company expanded rapidly into other areas. Its partner program, where other websites could offer merchandise for sale and Amazon.com would fill the order and pay a commission, grew from one such site in 1996 to more than 350,000 in 1999. Following Bezos’ initial strategy, the company began selling quickly, much more than books.

Music and video sales began in 1998. That same year it began international operations with the acquisition of online bookshops in the UK and Germany. In 1999, the company started to sell consumer electronics, video games, software, home improvement items, toys, and more.

To keep up that development, Amazon.com needed a lot more than personal investors to underwrite the expansion. As a result, in May 1997, less than two years after opening its virtual doors to consumers and without having made any profit, Amazon.com became a public (open-ended) company, raising $54 million on the NASDAQ market. In addition to cash, the company was able to use its high-flying stock to fund its aggressive growth and acquisition strategy.

Although offering more types of products expanded its appeal, it was the service of Amazon.com that earned it customer loyalty

Although offering more types of products expanded its appeal, it was the service of Amazon.com that earned it customer loyalty and final profitability. Their personalization tools recommended buying other products based on the customer’s purchase history and buyer data for the same items. Her publication of customer reviews fostered the formation of a “community of consumers” who helped each other find everything from the right book to the perfect clothes.

Amazon warehouse in Madrid (Spain)
Amazon warehouse in Madrid (Spain)

More than retail, a technology company

As noted above, Bezos claimed that Amazon.com was not just a retailer but a tech company. To underscore this point, in 2002 the company launched Amazon Web Services (AWS), which initially provided data on Internet traffic patterns, website popularity, and other statistics for developers and marketers.

In 2006, the company expanded its AWS portfolio with Simple Storage Service (S3) and Elastic Compute Cloud (EC2), which allows providing scalable hosting services, where companies can have servers with certain characteristics (for example 12GB of RAM) and at specific times, be able to scale them to for example 36GB of RAM, practically in real-time and allowing to charge by hours instead of months or years as it was being done.

This much more optimized and efficient way of providing web hosting service is a growing trend, where there is already strong competition among other large ones such as Microsoft Azure, Google Cloud Platform, IBM Cloud, or Digital Ocean, especially in the face of StartUps with web or mobile technology.

S3 and EC2 quickly helped popularize the idea that companies and individuals did not need to own computing resources; they could rent them as needed via the internet or “in the cloud”. For example, in 2007, shortly after launch, the S3 service contained more than 10 billion objects or files; five years later, it had more than 905,000 million. AWS is even used by Amazon.com rivals, such as Netflix, which uses both S3 and EC2 for its video service.

Drone deliveries

Another of the many examples of the constant interest in innovating through technology is the initiative of wanting to make fast deliveries using drones. Even with many important challenges to be solved, it is perhaps a look to the future.

From not having inventory to being a fulfillment and logistics monster

When Bezos founded Amazon.com, the strategy was not to carry any inventory. However, to achieve greater control of deliveries, in 1997 the company began to stock in its warehouses. In 2000, the business started something that allows smaller businesses and individuals to market their products through Amazon.com, and by 2006 it again had started it has Fulfillment by Amazon assistance that managed the inventory of this business.

What is fulfillment?

It is the process used in logistics by which a company performs the necessary steps from the time it receives an order until it is shipped. That has to do with the storage, its internal organization of the products, how it proceeds when a new order is received, put in a box, labeled, delivered to the transport company, etc.

Amazon’s revolution with fulfillment

Amazon realized the importance of being as efficient as possible with this whole process to be able to dispatch products as quickly as possible. And of course, the more products you have, the more organized you have to be.

The brightest thing about Amazon is that they not only improved the process for themselves but also began to provide fulfillment services for independent companies and vendors. In this way, by handling giant quantities of daily orders they could achieve much better agreements with the carriers and at the same time, centralizing everything and implementing ingenious technology in the warehouses, they could achieve processes at a very good price compared to all the packages they could process per day.

If you have an online store, before you have your own store, analyze the fulfillment services that other companies can provide you. Amazon is the giant in all of this, but there are many more in every country.

Here’s an important lesson to learn: Faced with a big problem such as logistics and fulfillment, they managed to find a great solution. In other words, problems should not be seen as unpleasant events but as opportunities. If you manage to solve a big problem possibly your business of a major jump.

And they continued to grow…

Its growing inventory management business spurred its $775 million purchase in 2012 from Kiva Systems, a robotics company whose devices automate inventory fulfillment tasks.

Amazon Locker
Amazon Locker

However, despite having branched far beyond online retailing, most of the company’s revenue continues to come through selling products online, and that’s where much of its investment has been focused. Over the years, it has acquired or invested in many online retailers, such as shoe seller Zappos, which it bought for $847 million in 2009.

Kindle, your own e-readers

In 2007 Amazon.com began selling its own Kindle e-readers, which helped boost the e-book market. In 2011, the company introduced a related low-cost tablet, Kindle Fire, and by 2012, it was estimated that the Kindle Fire constituted 50% of the tablets sold that used Google’s Android mobile operating system.

Kindle tablet
Kindle tablet

After their first full year of book sales in 1996, book publishers praised the new service as a great way to help them clear their slow-selling book lists. However, with the introduction of the Kindle, tensions began to build between regular editors and Amazon.com. The company wanted to sell new e-books at a fixed price, well below the newly printed books sold, prompting many complaints from the publishing industry.

By 2010, the gap between book publishers and Amazon.com on the price of e-books had grown. Macmillan Books threatened to remove its e-books from Amazon.com, which it unhinged by removing all Macmillan books, both printed and electronic, from the site. Within weeks, however, Amazon.com capitulated and allowed Macmillan and other publishers to set e-book prices.

Innovation for writers

In 2009, the company introduced its first publishing line, AmazonEncore, dedicated to self-published and discontinued books. It also allows people to publish their own e-books. In 2011, its e-book ambitions led to the launch of Amazon Publishing with the intention of developing and publishing its own titles. That year Amazon.com announced that Kindle e-books sold more than all printed books.

Amazon Publishing website
Amazon Publishing website

While many book publishers continue to earn significant revenue through sales in Amazon.com, the company is no longer considered by publishers simply as another bookstore. It is now also a major competitor in its industry. In 2017, Amazon.com announced that it had agreed to buy the Whole Foods Market, Inc. supermarket chain, in a deal valued at more than 13,000 million.

Amazon logo

An important factor in the rise of Amazon is the uniqueness of its logo. People all over the world can recognize the logo on sight, and if they need to buy a gift or the latest piece of technology, the image is sure to stick in their mind. Anyone looking to create their own brand empire should pay attention to what Amazon has accomplished with its simple but effective logo.

amazon logo

When Amazon started, it was just an online bookstore. To that end, they created a logo that advertised their specialty. Below a translucent “A” were the words “Amazon.com, the largest bookstore on Earth. The whole background of this first logo was a nice water texture. The effects of water turned the entire logo into a reassuring image, surely destined to draw attention to the crowded market where Amazon was trying to make its mark. Although it is true, from the point of view of design and branding, it left something to be desired.

In 1998, Amazon began to expand. To that end, he created a logo that advertised exactly what it offered. They also simplified the background to a white, with Amazon’s letters in gold above it. This was done to make it more pleasing to the online view and hopefully reach a wider audience.

The arrow, which points from “A” to “Z” in the Amazon logo, symbolizes how a customer can find everything they need.

In 2000, Amazon introduced the logo that most people can probably recognize. The logo was shortened to include the web address on a white background with a yellow arrow underneath. The arrow, which points from “A” to “Z” in the Amazon logo, symbolizes how a customer can find everything they need. This logo was designed to be simple and easy to understand, catering to customers who were interested in one-stop shopping.

In 2002, Amazon created its current logo. This logo takes a lot from the previous logo but adds the words “and ready” to the lower-left corner. This served to better illustrate to people that Amazon had a large selection of products and no matter what they were looking for, it was more likely that Amazon had it and that with just one click they would get it.

Marketing and business

Like some select media and technology companies, like Apple and Google, Amazon isn’t really happy selling a lot of things to a lot of people. He wants to infiltrate people’s lives to such an extent that you can’t imagine what it would be like to live without the company.

Amazon.com book distribution plant in Glenrothes, UK
Amazon.com book distribution plant in Glenrothes, UK

One of the keys to Amazon’s success, according to Colin Shaw, is that it places customer service above any other goal, including profitability.

“From paying its authors monthly to proactively lowering prices to increase their value to customers, or even investing in technology that enhances interaction, “Shaw wrote,” Amazon.com puts the customer experience at the top of its short- and long-term to-do list. It is not a mistake that Amazon.com is one of the longest-lived online entities of the new millennium. They have planned this future and built it, one satisfied customer, at a time.”

AmazonSmilefounder Ian McAllisterdescribed a kind of reverse engineering that frequently occurs at the company’s headquarters. “We try to work behind the customer’s back, rather than starting with an idea for a product and trying to screw customers into it,” he said.

Day 1 Tower in Seattle, one of Amazon's operating
Day 1 Tower in Seattle, one of Amazon’s operating

A project could begin with the writing of press releases to promote a new gadget or fantastic service that has not yet been created: “For new initiatives, a product manager usually starts by writing an internal press release announcing the final product. The target audience of the press release is the customers of such new/updated products, which may be retail customers or internal users of a tool or technology. Internal press releases focus on customer issues, how current solutions (internal or external) fail, and how the new product will replace existing solutions. If the benefits listed don’t sound very interesting or exciting to customers, then the product never really comes out.”

Amazon Go prototype
Amazon Go | Prototype

As we said earlier, Amazon’s success is not the same as its profitability. For anyone who doesn’t have an economics degree and even for some who do, Amazon’s business model seems unusual. It implies something known as “growth without profits”.

Amazon's Headquarters Building in Arizona
Amazon’s Headquarters Building in Arizona

Amazon is organized into “dozens and dozens of separate teams, each with its own internal P&L (profit and loss) and a high degree of autonomy”, says venture capitalist Benedict Evans.

“So, for example, shoes in Germany, electronics in France, or makeup in the United States are different equipment. Each of these businesses, by the way, sets its own prices. Meanwhile, all these companies are in different stages of maturity. Some are relatively old and well established. And although these mature companies are growing more slowly, they are profitable. Others are startups that develop their business and lose money as they do, just like any other new business. Some are very profitable, and some are sold at cost or as loss leaders to drive traffic and site loyalty.”

In short, Amazon is a conglomerate of microenterprises that financially support one another when needed.

Amazon.com home
Amazon.com home

Now, Amazon’s policy for customers is not always foolproof. The massive and unmistakable failure of its Fire phone line is evidence of that. But the impact of such a failure on Amazon, perhaps because of the way the company is set up and because of Jeff Bezos’ business philosophy, is different from what it could be at another company.

“Amazon’s stock hasn’t suffered much, if anything, from the Fire failure,” David Streitfeld wrote in the New York Times. “Nor is the phone likely to dominate analysts’ questions as Amazon releases its third-quarter earnings on Thursday afternoon (…) The phone is in the past, and Amazon is first and foremost a story about the future, about the glorious moment when the e-commerce giant will sell everything, whether it’s electronic or digital, to everyone. And then, the focus in the earnings report will be on Amazon’s huge investments in trying to make that moment come true.”

Amazon Book Store in Portland, Oregon
Amazon Book Store in Portland, Oregon
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