Amazon Is the World’s Largest Company in the E-commerce Platform Markets Essay Example

resulted in its stock price doubling to $25 per share. The positive trend continued in 2004, with profits of $588 million on revenue of $6.92 billion. Despite the dot-com stock market crash and the withdrawal of venture capital funding for e-commerce companies, Amazon managed to turn its business around from a $1.4 billion annual loss to a profitable operation.

The story of Amazon.com, the top e-commerce company in the United States, mirrors the broader tale of e-commerce. Thus, we will investigate various topics covered in this book by examining Amazon's path. In 1994, Jeff Bezos, a 29-year-old senior vice president at D. E. Shaw, a Wall Street investment bank, stumbled upon data indicating that Internet usage was expanding quickly at a staggering rate of 2,300% per year.

Bezos saw a huge opportunity in that number. He left his job and researched what products he could sell effectively on the internet. He soon realized that books were a great option because physical stores couldn't stock more than a small portion of the over 3 million books in print at any given time. An online bookstore could provide a much wider selection. Additionally, Bezos believed that consumers would be less inclined to physically examine a book before purchasing it. The overall situation in the book industry, including publishing, distributing, and retailing, was also advantageous.

With more than 2,500 publishers in the United States, and the two leading retailers, Barnes and Noble and Borders, representing just 12% of overall sales, there were no dominant forces in the market. The presence of two major distributors, Ingram Books and Baker and Taylor, meant Amazon only needed to

maintain a small inventory. Bezos managed to secure several million dollars from private investors, thus enabling the opening of Amazon.com on the Web in July 1995.

Amazon offered four reasons for consumers to shop on their website. Firstly, they had a vast selection of products with 1 million titles in their database. Secondly, they prioritized convenience by introducing the patented "1-Click" express shopping technology that allowed customers to shop anytime and anywhere. Thirdly, Amazon provided competitive prices for popular books and offered significant discounts on bestsellers. Lastly, customer service was highly valued as Amazon offered support through email and telephone, along with automated order confirmation, tracking, and shipping information. In January 1996, Amazon expanded from a small 400-square-foot office to a much larger 17,000-square-foot warehouse. By the end of that year, the company acquired approximately 200,000 customers and generated $15.6 million in revenues. However, despite these achievements, Amazon incurred an overall loss of $6.24 million.

Amazon raised $50 million through its initial public offering in May 1997. The IPO documents emphasized the advantages of Amazon over traditional bookstores, such as no need for costly retail real estate investment, fewer personnel requirements, and reliance on book distributors to minimize inventory needs. In 1997, Amazon also achieved significant growth milestones like serving its one-millionth unique customer, expanding its Seattle warehouse, and constructing a second 200,000-square-foot distribution center in Delaware.

In 1997, Amazon had a revenue of $148 million but suffered losses amounting to $31 million. The next year, the company expanded its product offerings to include music CDs, videos, and DVDs with the goal of becoming the leading online platform for purchasing, discovering, and

exploring any product or service. Furthermore, Amazon launched websites in Great Britain and Germany with aspirations of becoming the internet equivalent of Wal-Mart. However, despite a substantial increase in revenue to $610 million that year, losses also grew fourfold to $125 million.

In 1999, Amazon announced its aim to become the "Earth's Biggest Store," resulting in various advancements. To support expansion and offset losses, Amazon secured over $1 billion in loans in February that year. Moreover, Amazon broadened its product range to encompass electronics, toys, home improvement products, software, and video games. To accommodate these new offerings, Amazon introduced different marketplaces like Amazon.com Auctions (similar to eBay), zShops (for small retailers), and sothebys.amazon.com (in partnership with Sotheby's). Simultaneously, warehouse capacity and distribution capabilities expanded through the construction of eight additional facilities spanning approximately 4 million square feet.

In 1999, Amazon experienced substantial growth with its revenue reaching $1.6 billion, which was over twice the earnings of the previous year. However, the company also incurred losses amounting to $720 million during that period. Despite these challenges, both Amazon and its founder Bezos were still considered successful by the end of 1999; however, there were signs suggesting possible future obstacles.

Wall Street analysts, who were previously willing to ignore ongoing losses as long as Amazon was growing and attracting customers, started to doubt if the company would ever achieve profitability. They observed that as Amazon increased its number of warehouses and employees (reaching 9,000 by the end of 2000), it deviated from its original idea of functioning as a "virtual" retailer with minimal inventory, a small workforce, and significant cost savings compared to traditional

bookstores.

In 2000, Amazon experienced a significant drop in its stock price compared to the previous year, losing favor with Wall Street. By January 2001, Amazon faced the challenge of presenting its 2000 financial results positively. Despite generating $2.7 billion in revenues and suffering a massive loss of $1.4 billion, Amazon's fourth-quarter loss was slightly better than what analysts had projected. Additionally, for the first time, Amazon established a profitability target and pledged to achieve a "pro forma operating profit" by the end of the fourth quarter in 2001.

Amazon's suggested profit calculation method, which did not follow generally accepted accounting principles, was criticized by critics. Additionally, they noticed a decline in growth within Amazon's main sectors (books, music, and video) and narrow profit margins in rapidly expanding categories such as consumer electronics. In 2001 and 2002, Bezos and other leaders implemented a strategy to enhance profitability by reducing prices, offering free shipping, leveraging Amazon's infrastructure investments and consumer brands, and significantly reducing operational expenses.

Amazon aimed to achieve what analysts deemed impossible by evolving and leveraging its current business model. The strategy involved increasing business revenues by offering customers the lowest possible prices for a wide variety of products, providing free shipping for orders over $25, and introducing multiple sources of revenue.