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9.9Amazon,Inc.
Amazonistheworld'slargestonlineretailer,sellingoverfortycategoriesof
goods,frombookstoelectronicstogroceriestojewelrytoautoparts.The
companyisalsoanecommerceandInternettechnologyplatform,afulfillmentand
logisticsplatform,asearchtechnology,anInternetadvertisingplatform,andeven
anInternetstartupincubator.In2011itsnetrevenueincreased41%to$48.08
billion.{12}

Section
Navigation
9.LearningfromOthers
9.1Introduction:Groupingby
BusinessModels
:CautionaryTales
9.2AStart

Amazonisoneofthemoreinnovativeofonlineretailers,andhasexperienced
greatsuccessandfailure,arecordreflectedinasharepricethathasoscillated
fromahighof$106in1999to$6in2001,risingto$60in2003,onlytofallto$27
in2006.InrecentyearsAmazonstockhastradedabove$150.{9}

9.3CoinsInternational
9.4FineArtCeramics
9.5HalberdEngineering
9.6IpswichSeeds
9.7SeascapeeArt
9.8WhiskyGalore
:CaseStudies

BusinessModels

9.9Amazon
9.10AndhraPradesh

Amazonhasthreedistinctbusinesses,plusaslewofnascententerprisesand
developingopportunities

9.11AppleiPod
9.12AuroraHealthCare
9.13Cisco
9.14CommerceBancorp

AmazonRetail

9.15Craigslist
9.16Dell

Startinginbooksandthenexpandingintoelectricalandothergoods,Amazon
builtanonlineretailbusinessaroundthreeaims:

9.17EarlyDotcomFailures
9.18EasyDiagnosis
9.19eBay
9.20Eneco

1.Bestprices:Amazonproductsaregenerallyofferedatadiscount,asteep
discountinthecaseofbooks.
2.Unrivaledselection:Amazonoftenhasthelargestselectionofgoodsina
particularcategory,especiallybooks(outsideS/HmarketplaceslikeAbebooks.)
3.Convenience:Amazonfocusonthecustomerandtrymakepurchasingan
enjoyableexperience,offering:

9.21Fiat
9.22GlaxoSmithKline
9.23Googleads
9.24Googleservices
9.25Intel
9.26Liquidation
9.27Lotus

a.Anattractive,easytousecustomerinterface(whichevolvedthroughmany
trials).
b.Fastandreliabledeliveryfromvast,fullyautomatedwarehouses,first
locatedinstrategicspotsintheUSbutincreasinglyworldwide.
c.Anononsensereturnspolicy.
d.Reviewsbycustomersoftheproduct.
e.Purchasesuggestionsbasedonpreviouspurchasesandwebpageviewing
(anexampleofrealtimesystems).

9.28Lulu
9.29Netflix
9.30Nespresso
9.31Netscape
9.32Nitendowii
9.33OpenTable
9.34PayPal
9.35Procter&Gamble
9.36SISDatenverarbeitung

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Amazonwasincorporatedin1994inthestateofWashingtonbyJeffBezos,went
onlinein1995,andissuedanIPOonMay15,1997.Manydevelopments,
controversiesandsetbacksattendedAmazon'seventualsuccess:{1}

9.37Skype
9.38Tesco
9.39Twitter
9.40Walmart

1.Amazonaimedformarketshareanddidnotmakeaprofittill2001.{16}
2.Amazonhasfacedlawsuitsoverexclusivityofcontracts(Toys'R'Us:2004)and
sizeclaims(BarnesandNoble:1997).
3.Amazon'sauctionsite,foundedin1997,provedunsuccessful,butits
technologywaslaterincorporatedintoAmazonMarketplace.
4.AmazonPrimewaslaunchedin2005,offeringfreeshippingforaflatannual
fee.
5.InAugust2007appearedAmazonFresh,agroceryserviceofferingperishable
andnonperishablefoods.
6.AmazonMP3,launchedinSeptember2007,soldMP3downloadswithout
digitalrightsmanagement,forcingiTunestofollowsuite.
7.Amazonbeganfilmproductionin2008,producingthefilm'TheStolenChild'
with20thCenturyFox.
8.Notallgrowthwasorganic.From1998onwards,Amazonacquiredseveral
companies,notablyBookpages.co.uk(1998),Joyo.com,aChineseecommerce
website(2004)andBookSurgeaPODcompany,(2005),Mobipocket.com,an
eBooksoftwarecompany(2005)andTheBookDepository(2011).
9.Bookreviewsprovednottobesoindependent,butwhatauthors,publishers
andmarketingcompaniesshamelesslyexploitedinpromotion.
10.Kindle,Amazon'sebookreader,provedarunawaysuccess,inspiringmany
lookalikesandallowingmoreebooksthanhardbackstobesoldinJuly2010,and
booksaltogetherbyAugust2012.{13}SalesoftheKindleFire,introducedinlate
2011,captured22%ofUStabletmarket.{1415}
11.AmazonhasconductedarunningbattlewithUSstatesoversalestax,
collectingfromonlyfivein2011.

9.41Zappos
9.42Zipcar

ControlPanel

Home
SiteMap
Resources
Questions
HowtoUsetheSite
AboutUs

AmazonMarketplace
Amazonalsooffersathirdpartysellingplatform,Amazonmarketplace,that
allowsmerchantstooffergoodsandservicesthroughanonlineshoppingmall.
Amazonchargesacommissionbasedonaformulainvolvingthesalepriceofthe
item,ashippingcredit,areferralfeeof625%ofthesaleprice,avariableclosing
feeanda$0.99fixedclosingfee.Thishasnowbeenaugmentedorreplacedby
fourcomparableservices:
SellonAmazon.Merchantspay$39.99permonth,plusacommissionvaryingas
above,generallybetween15%and$1.35peritem.
AmazonWebstore.Morecompleteservice.Merchantspay$24permonthplus
2%ofsales.
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CheckoutbyAmazon.SimilartoPayPalandGoogleCheckouts,butneedsto
integratedintoshoppingcart.
FulfillmentbyAmazon.AllowsmerchantstouseAmazon'sadvancedfulfillment
technology.
TheservicesarebeingexpandedfromUSA,Canada,UKandGermanytoother
countries.Amazondoesnotreleaseinformationonthesebusinesses,either
revenuesorusagelevels.
AmazonWebServices
Amazonleveragedthetechnologyitdevelopedinretailtoofferanincreasing
numberofwebservices:{10}

ComputerRelated
AmazonElasticComputeCloud(EC2)
AmazonElasticMapReduce
AutoScaling
ContentDelivery
AmazonCloudFront
Database
AmazonSimpleDB
AmazonRelationalDatabaseService(RDS)
Deployment&Management
AWSElasticBeanstalk
AWSCloudFormation
ECommerce
AmazonFulfillmentWebService(FWS)
Messaging
AmazonSimpleQueueService(SQS)
AmazonSimpleNotificationService(SNS)
AmazonSimpleEmailService(SES)

Monitoring
AmazonCloudWatch
Networking
AmazonRoute53
AmazonVirtualPrivateCloud(VPC)
ElasticLoadBalancing
Payments&Billing
AmazonFlexiblePaymentsService(FPS)
AmazonDevPay
Storage
AmazonSimpleStorageService(S3)
AmazonElasticBlockStorage(EBS)
AWSImport/Export
Support
AWSPremiumSupportWeb
TrafficAlexaWebInformationService
AlexaTopSites
Workforce
AmazonMechanicalTurk

SWOTAnalysis
Amazonisacompanyintransition,movingfromainnovativeonlineretailertoa
broadbasedwebservicessupplier.BecauseAmazonprovidesnobreakdownin
annualreports,itisnoteasytodiscerntheimpactofthischange,butingeneral:
Strengths
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1.Abrandwellrespectedforpricesandcustomerconvenience.
2.Onlinetradingcompanythathascomethroughtherecessionrelativelywell.
3.Accumulatedtechnologicalexpertiseinretailingandcustomermanagement
technology.
Weaknesses
1.Amazon'snetmarginhasbeenpositive,butnobetterthanmanybricksand
mortarretailers:3.2%in2007,3.4%in2008,3.7%in2009and3.4%in2010.
2.Amazon'sselfpublishingfacilitieswillchangethepublishingindustrybusiness
model,butthebeneficiarymaynotbeAmazon.
Opportunities
1.Amazonispoisedtoexploittheshifttocloudandotherthirdpartyservices.
2.Amazon'sKindle,whichhasmadeebooksrespectable,hasconqueredonlya
smallpartofthepublishingindustry.
Threats
1.Kindle:Amazonhasimprovedthehardwareanddroppedprices,butmanystill
regardthereaderandebooksasexpensive.Cheaperreaderswillcomefrom
ChinaandKorea,andebookpricesmaybeundercutwithGoogleetc.
agreementswithpublishers.
2.Amazonwebservicesfacecompetitionfromestablishedproviders:Dell,
MicrosoftandGoogle.
3.MerchantservicesareincompetitionwithahostofInternetPaymentService
Providerslocatedacrosstheworld.

PointstoNote

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1.Anevolvingbusinessmodel.
2.Earlyfocusonmarketshareratherthanprofitability.
3.LeverageofITretailskillsintowebservices.

Questions

1.WhataimsdidAmazonbuilditsbusinessaround?
2.WasAmazoncontinuouslysuccessful?Describesomesuccessesandfailures.
3.WhatfacilitiesdoesAmazonMarketplaceoffer?Howsuccessfulisit?
4.DescribesomeAmazonwebservicesandcommentontheirprospects.
5.ProvideasimpleSWOTanalysisforAmazon.
6.What,inanutshell,hasmadeAmazonintoamajorplayer?

SourcesandFurtherReading

1.Amazon.com,Inc.FundingUniverse.Companyhistory,lessdetailedafter1999.
2.Amazon'sBusinessPlanbyAnilKumar.Slideshare.Concentratesonwebsiteforbooks.
3.Amazon'sbusinessmodelandfuturestrategiesbyElramGavrieli.Berkeley.Briefstudyinsections.
4.Amazon'sbusinessmodelbyMichaelRappa.DigitalEnterprise.200410.Briefstudyinsections.
5.Amazon'sNewerBusinessModelbyGordonHaff.CNet.October2007.Amazon'smoveintoweb
services.

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6.AmazonandBusinessmodelinnovationbyJoshSuskewicz.Innosight.November2006.Basedon
JeffBezos'RiskyBetinBusinessWeek.November2006.
7.RequesterPays:ANewAmazonBusinessModelbyAbelAvram.Infoq.January2009.
8.Amazon.Com.Wikinvest.Extendedtreatmentofbusinessmodels,plusfinancialdata.
9.AmazonHistoricalPrice.YahooFinance.
10.UsingAmazontoGrowYourEcommerceBusiness6ToolsbyMichaelStearns.Practical
Ecommerce.July2011.
11.AmazonAnnualReports.Amazon.
12.Amazon.YahooFinance.
13.Holdthepresses!AmazonUKsellingmoreebooksthanprintedonesbyJamesRigg.Engadget.
August2012.
14.Abestsellersellsout:AmazonpullsKindleFiresalesaheadofSeptember6tabletrefreshbyMatt
Brian.NextWebAugust2012.
15.$99KindleFireHDCouldDecimateAmazon'sCompetitorsbySalvatore"Sam"Mattera.Beta.Fool.
March2013.
16.HereshowAmazonselfdestructsbyEvanHughes.Salon.July2013.

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