Amazon.com, Inc. History

Address:
1200 12th Avenue, Suite 1200
Seattle, Washington 98114
U.S.A.

Telephone: (206) 266-1000
Fax: (206) 266-1821

Website:
Public Company
Incorporated:1997
Employees: 7,800
Sales:$3.9 billion (2002)
Stock Exchanges:NASDAQ
Ticker Symbol:AMZN
NAIC:45411 Electronic Shopping and Mail-Order Houses

Company Perspectives:

We seek to offer the Earth's Biggest Selection and to be the Earth's most customer-centric company, where customers can find and discover anything they may want to buy online.

Key Dates:

1995:
Amazon.com debuts on the Web.
1997:
The company goes public; Amazon.com becomes the first Internet retailer to secure one million customers.
1998:
Amazon.com enters the online music and video business; companies are acquired in the United Kingdom and Germany.
1999:
The firm expands into selling toys, electronics, tools, and hardware; Bezos is named Time Magazine's "Person of the Year."
2001:
Amazon.com reports its first net profit during the fourth quarter.

Company History:

Considered a pioneer in online retailing, Amazon.com, Inc. expanded during the late 1990s to offer the "Earth's Biggest Selection" of books, CDs, videos, DVDs, electronics, toys, tools, home furnishings and housewares, apparel, and kitchen gadgets. Through third-party agreements, Amazon.com also sells products from well-known retailers including Toysrus.com Inc., Target Corporation, Circuit City Stores Inc., the Borders Group, Waterstones, Expedia Inc., Hotwire, National Leisure Group Inc., and Virgin Wines. Sometimes criticized for its focus on market share over profits, Amazon.com put investor fears to rest when it secured its first net profit during the fourth quarter of 2001.

The Early 1990s: Beginnings

Throughout the 1990s, the popularity of the Internet and World Wide Web swept across the world, and personal computers in most businesses and households got hooked up in some form or another to Internet providers and Web browser software. As use of the Internet became more prevalent in society, companies began looking to the Web as a new avenue for commerce. Selling products over the Internet offered a variety of choices and opportunities. One of the pioneers of e-commerce was Jeff Bezos, founder of Amazon.com.

In 1994, Bezos left his job as vice-president of the Wall Street firm D.E. Shaw, moved to Seattle, and began to work out a business plan for what would become Amazon.com. After reading a report that projected annual Web growth at 2,300 percent, Bezos drew up a list of 20 products that could be sold on the Internet. He narrowed the list to what he felt were the five most promising: compact discs, computer hardware, computer software, videos, and books. Bezos eventually decided that his venture would sell books over the Web, due to the large worldwide market for literature, the low price that could be offered for books, and the tremendous selection of titles that were available in print. He chose Seattle as the company headquarters due to its large high-tech work force and its proximity to a large book distribution center in Oregon. Bezos then worked to raise funds for the company while also working with software developers to build the company's web site. The web site debuted in July 1995 and quickly became the number one book-related site on the Web.

In just four months of operation, Amazon.com became a very popular site on the Web, making high marks on several Internet rankings. It generated recognition as the sixth best site on Point Communications' "top ten" list, and was almost immediately placed on Yahoo's "what's cool list" and Netscape's "what's new list." The site opened with a searchable database of over one million titles. Customers could enter search information, prompting the system to sift through the company database and find the desired titles. The program then displayed information about the selection on a customer's computer screen, and gave the customer the option to order the books with a credit card and have the books shipped in a just a few days.

Unlike its large competitors, such as Barnes & Noble and Borders, Amazon.com carried only about 2,000 titles in stock in its Seattle warehouse. Most orders through Amazon.com were placed directly through wholesalers and publishers, so no warehouse was needed. Amazon.com would simply receive the books from the other sources, then ship them to the customer. At first, the company operated out of Bezos' garage, until it was clear that it was going to be a success, necessitating a move to a Seattle office, which served as the customer support, shipping, and receiving area. It was interesting that, because of the Internet, such a small venture could realize such a broad scope so quickly; within a month of launching the web site, Bezos and Amazon.com had filled orders from all 50 states and 45 other countries.

As a pioneer in the world of Internet commerce, Amazon.com strived to set the standard for web businesses. With that goal in mind, Bezos went to work on making the web site as customer friendly as possible and relating the site to all types of customers. For those people who knew what book they were looking for and just wanted quick performance and low cost, Amazon.com offered powerful search capabilities of its expanded 1.5 million-title database. The company also began offering 10 to 30 percent discounts on most titles, making the prices extremely affordable. For other customers who were just looking for something to read in a general area of interest, Amazon.com offered topic areas to browse, as well as lists of bestsellers, award winners, and titles that were recently featured in the media. Finally, for people who could not decide, Amazon.com offered a recommendation center. There a customer could find books based on his or her mood, reading habits, or preferences. The recommendation center also offered titles based on records of books the customer had purchased in the past, if they were return customers to the site.

Other hits with customers were the little touches, such as optional gift wrapping of packages, and the "eye" notification service, which sent customers e-mails alerting them when a new book in their favorite subject or by their favorite author came into stock. The site also offered the ability for customers not only to write their comments about different books and have them published on the site, but to read other customers' comments about books they were interested in buying.

Going Public in 1997

After less than two years of operation, Amazon.com became a public company in May 1997 with an initial public offering (IPO) of three million shares of common stock. With the proceeds from the IPO, Bezos went to work on improving the already productive web site and on bettering the company's distribution capabilities.

To help broaden the company's distribution capabilities, and to ease the strain on the existing distribution center that came from such a high volume of orders, in September 1997 Bezos announced that Amazon.com would be opening an East Coast distribution center in New Castle, Delaware. There was also a 70 percent expansion of the company's Seattle center. The improvements increased the company's stocking and shipping capabilities and reduced the time it took to fill customers' orders. The Delaware site not only got Amazon.com closer to East Coast customers, but also to East Coast publishers, which decreased Amazon.com's receiving time. With the new centers in place, Bezos set a goal for the company of 95 percent same-day shipping of in-stock orders, getting orders to the customers much faster than before.

Another growth area for Amazon.com was the success of its "Associate' program. Established in July 1996, the program allowed individuals with their own web sites to choose books of interest and place ads for them on their own sites, allowing visitors to purchase those books. The customer was linked to Amazon.com, which took care of all the orders. Associates were sent reports on their sales and made a 3 to 8 percent commission from books sold on their sites. The Associates program really began to take off in mid-1997, when Amazon.com formed partnerships with Yahoo, Inc. and America Online, Inc. Both companies agreed to give Amazon.com broad promotional capabilities on their sites, two of the most visited sites on the Web. As the success continued, Amazon also struck deals with many other popular sites, including Netscape, GeoCities, Excite, and AltaVista.

As the company continued to grow in 1997, Bezos announced in October that Amazon.com would be the first Internet retailer to reach the milestone of one million customers. With customers in all 50 states and now 160 countries worldwide, what had started in a Seattle garage was now a company with $147.8 million in yearly sales.

Further Expansion in 1998

As Amazon.com ventured into 1998, the company continued to grow. By February, the Associates program had reached 30,000 members, who now earned up to 15 percent for recommending and selling books from their web sites. Four months later, the number of Associates had doubled to 60,000.

The company's customer database continued to grow as well, with cumulative customer accounts reaching 2.26 million in March, an increase of 50 percent in just three months, and of 564 percent over the previous year. In other words, it took Amazon.com 27 months to serve its first million customers and only six months to serve the second million. This feat made Amazon.com the third largest bookseller in the United States.

Financed by a $75 million credit facility secured in late 1997, Amazon.com continued to reshape its services in 1998. To its catalog of over 2.5 million titles, the company added Amazon.com Advantage, a program to help the sales of independent authors and publishers, and Amazon.com Kids, a service providing over 100,000 titles for younger children and teenagers.

Amazon.com also expanded its business through a trio of acquisitions in early 1998. Two of the companies were acquired to further expand Amazon.com's business into Europe. Bookpages, one of the largest online booksellers in the United Kingdom, gave Amazon.com access to the U.K. market. Telebook, the largest online bookseller in Germany, added its German titles to the mix. Both companies not only gave Amazon .com access to new customers in Europe, but it also gave existing Amazon.com customers access to more books from around the world. The Internet Movie Database (IMD), the third acquisition, was used to support plans for its move into online video sales. The tremendous resources and information of the IMD served as a valuable asset in the construction of a customer-friendly and informative web site for video sales.

Another big change in 1998 was the announcement of the company's decision to enter into the online music business. Bezos again wanted to make the site as useful as possible for his customers, so he appealed to them for help. Several months before officially opening its music site, Amazon.com asked its bookstore customers and members of the music profession to help design the new web site.

The music store opened in June 1998, with over 125,000 music titles available. The new site, which began operations at the same time that Amazon.com debuted a redesigned book site, offered many of the same helpful services available at the company's book site. The database was searchable by artist, song title, or label, and customers were able to listen to more than 225,000 sound clips before making their selection.

Amazon.com ended the second quarter of 1998 as strong as ever. Cumulative customer accounts broke the three million mark, and as sales figures for Amazon.com continued to rise, and more products and titles were added, the future looked bright for this pioneer in the Internet commerce marketplace. With music as a part of the company mix, and video sales on the horizon, Bezos seemed to have accomplished his goal of gathering a strong market share in the online sales arena. As Bezos told Fortune magazine in December 1996: "By the year 2000, there could be two or three big online bookstores. We need to be one of them."

Growth Continues: 1999 and Beyond

As such, the company's focus on growth continued. In 1999, it launched an online auction service entitled Amazon Auctions. It also began offering toys and electronics and then divided its product offerings into individual stores on its site to make it easier for customers to shop for certain items. During the holiday season that year, the firm ordered 181 acres of holiday wrapping paper and 2,494 miles of red ribbon, a sign that Bezos expected holiday shoppers to flock to his site as they had in the two past years. Sure enough, sales climbed to $1.6 billion proving that the founder's efforts to create an online powerhouse had indeed paid off. In 1999, Bezos reached the upper echelon of the corporate world when Time magazine honored him with its prestigious "Person of the Year" award.

While Amazon.com's growth story was remarkable, Bezos' focus on market share over profits had made Wall Street uneasy and left analysts speculating whether the company would ever be able to turn a profit. Sales continued to grow as the company added new products to its site--including lawn and patio furniture and kitchen wares. The company however, continued to post net losses. To top it off, the "dot-com boom" of the late 1990s came to a crashing halt in the early years of the new millenium as many startups declared bankruptcy amid intense competition and weakening economies.

Bezos remained optimistic, even as Amazon.com's share price faltered. During 2001, the company focused on cutting costs. It laid off 1,300 employees and closed a distribution facility. The company also added price reduction to its business strategy, which had traditionally been centered on vast selection and convenience. Amazon.com inked lucrative third-party deals with such well-known retailers as Target Corporation and America Online, Inc. By now, products from Toysrus.com Inc., Circuit City Stores Inc., the Borders Group, and a host of other retailers were available on the Amazon.com site.

Amazon.com's strategy worked. In 2001, sales grew to $3.12 billion, an increase of 13 percent over the previous year. During the fourth quarter, Amazon.com reached a milestone that many had regarded as unlikely; it secured a net profit of $5 million. In 2002, the company launched its apparel store, which included clothing from retailers The Gap and Lands' End. Overall, the company reported a net loss of $149 million for the year, an improvement from the $567 million loss reported in 2001. In the fourth quarter of 2002 however, the firm secured a quarterly net profit of $3 million--the second net profit in its history.

While securing quarterly net profits was a major turning point for the young company, a July 2002 Business Week article warned, "after seven years and more than $1 billion in losses, Amazon is still a work in process." Indeed, the company's foray into providing the "Earth's Biggest Selection" had yet to prove it could provide profits on a long-term basis. Nevertheless, Bezos and his Amazon team remained confident that the firm was on the right track. With $3.9 billion in annual sales, Amazon.com had without a doubt come a long way from its start as an online book seller.

In the year 2003 Amazon.com acquired the online music retailer CD Now. This year also brought changes to their product line up as well with the introduction of gourmet food, outdoor sports equipment and health and personal care items.  Two notable announcements in 2003 include the launching of their “search inside a book function” which allowed users to quickly and easily locate information within a book, as well as their alliance with the National Basketball Association (NBA). In 2004 an alliance was formed with The Bombay Company, and  Joyo.com (a Chinese ecommerce was) acquired. 

Other interesting developments for Amazon.com in 2004 were the introduction of the toolbar within the search engine, the launching of Amazon theatre, the opening of a software development center in Scotland, the launching of the Paris Hilton jewelry line. They also reported the busiest and most profitable holiday season to date.  2005 also held many new advancements, additions and acquisitions for Amazon.com MobiPocket.com, CreateSpace.com and BookSurge were all acquired by Amazon.com in 2005. Another development for this ecommerce giant was the introduction of Amazon Prime which provides students with unlimited free express shipping at a rate of $79 a year. 

Product lines such as Amazon Wedding were launched in 2005 and the fulfillment agreement was reached with Drugstore.com. May other sales achievements were reached this year with Amazon reporting that in 2005 they had orders which totaled more than 100 million items sold. In 2006 Amazon acquired Shopbop, as clothing site based out of Wisconsin. In 2006 Amazon also launched their Print on Demand program as well as their online grocery store. Other interesting developments which occurred in 2006 are the creation of the media gateway program and the new unbox program which allows uses to digitally download high quality videos. 

In 2007 Endless.com was launched which provided a large array of handbags and designer shoes featuring free shipping on all products. The website Joyo.com was revamped in 2007 as well and would now be Joyo/Amazon which also would enhance features and provide a fresh new look for the website. The Jewelry and Watches sold would now become internationally available as well and Amazon Unbox is now available on TiVo which would provide TiVo subscribers access to thousands of new TV shows and movies. Other interesting developments in 2007 were the introduction of the very first Kindle, as well as the launching public beta version of Amazon MP3.

In 2008 Amazon.com purchased Audible.com for $300 million. Other 2008 acquisitions include AbeBooks.com, BoxOfficeMojo.com, Shelfari.com, Reflexive Entertainment and BookFinder.com. Additional stores were also available in 2008 through Amazon.com as well such as the Motorcycle & ATV store, the New TV Show store, and the Election 2008 store. The web services department of Amazon.com launched the release of Amazon EC2 for windows in 2008 as well and also introduced Public Data sets for AWS. Another noteworthy event which occurred in 2008 was the daily sending of SMS messages announcing the daily deals. 

In 2009 further acquisitions occurred such as Zappos (an online shoe and clothing retailer) for $1.2 billion, Lexcycle.com, and SnapTell.com. 2009 also brought a lot of other exciting advancements such as the launch of the Xbox live store, the introduction of the Kindle 2 which reached record breaking sales in November, and the introduction of the Kindle application for iOS such as the Apple iPhone and iPod, as well as the new application for Android as well. The textbook trade in program was also begun in 2009 and the inauguration store was launched. 

Amazon made numerous acquisitions in 2010 such as Woot.com, Quidsi.com, BuyVIP.com, Touchco.com and Amie Street. Other developments in 2010 include the announcement of the Amazon deals App, Amazon cloud Player,  Amazon cloud drive, Cloud player for Android and the Amazon Application store for Android. The Kindle DX with global wireless capabilities was also introduced as well as the Kindle for Mac, Blackberry and iPad. Other notable occurrences were the investment of $175 million in the deal site LivingSocial.com and the introduction of the Amazon mom program . 

By 2011 more Kindle books were sold by Amazon than traditional printed books. The app store for Android was also introduced as was the Kindle Fire and Kindle touch which quickly reached record breaking sales. Amazon also introduced a web browser for Kindle called Amazon Silk. 2011 brought great strides for Amazon.com with quarterly sales up by more then 40%  ($10 billion). Due to the growth of Kindle book sales Amazon also introduced the Kindle Owners lending library as well. 

In 2012 Amazon.com acquired Kiva Systems for $775 million and Amazon Publishing acquired Avalon Books. The sports collectibles store was launched this year as were the AWS marketplace, Amazon Supply and Kindle eBooks in Spanish. Game Circle and Game Connect were also introduced in 2012 as well as the launching of an original comedy series and children’s series which is to be available to consumers through the Amazon instant video service. 

Principal Subsidiaries: Amazon Global Resources, Inc.; Amazon.com.dedc, LLC; Fulfillco.ksdc, Inc.; Amazon.com.kydc, Inc.; Amazon.com Commerce Services, Inc.; Amazon.com Holdings, Inc.; Amazon.com International Sales, Inc.; Amazon.com LLC; Amazon.com Payments, Inc.; NV Services, Inc.; Amazon Fulfillment Services, Inc.; Amazon.com@Target.com, Inc.

Principal Competitors: Barnes & Noble Inc.; CDNow Inc.; eBay Inc.

Further Reading:

  • "Chewing the Sashimi with Jeff Bezos," Business Week, July 15, 2002.
  • Colker, David, "Amazon Delivers Profit for the Second Time," Los Angeles Times, January 24, 2003.
  • Green, Lee, "Net Profits," Spirit Magazine, March 1998, pp. 52-54, 126-28.
  • Haines, Thomas, "Amazon.com Sales Grow While Loss Widens," Seattle Times, January 23, 1998, p. C1.
  • Hansell, Saul, "Amazon's Risky Christmas," New York Times, November 28, 1999.
  • Hazleton, Lesley, "Jeff Bezos: How He Built a Billion Dollar Net Worth Before His Company Even Turned A Profit," Success, July 1998, pp. 58-60.
  • "How Amazon Cleared the Profitability Hurdle," Business Week, February 4, 2002.
  • "Jeffrey Bezos," Chain Store Age Executive, December 1997, p. 124.
  • Jeffrey, Don, "Amazon.com Eyes Retailing Music Online," Billboard, January 31, 1998, pp. 8-9.
  • Martin, Michael, "The Next Big Thing: A Bookstore," Fortune, December 9, 1996, pp. 168-70.
  • Perez, Elizabeth, "Store On Internet Is Open Book: Amazon.com Boasts More Than 1 Million Titles On The Web," Seattle Times, September 19, 1995, p. E1.
  • Rose, Cynthia, "Site-Seeing," Seattle Times, March 10, 1996.
  • Soto, Monica, "Amazon Layoffs: What's It All Mean?," Seattle Times, February 5, 2001.
  • Zito, Kelly, "Amazon CEO Tells of Life at the Top," San Francisco Chronicle, December 23, 1999, p. B1.

Source: International Directory of Company Histories, Vol. 56. St. James Press, 2004.

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