Amazon has grown exponentially since it was founded in 1994 to become a leading online retainer mainly due to its effective business strategy. Let’s take a look at its remarkable journey…
Amazon is a global e-commerce leader specializing in retail, entertainment, technology, and cloud computing services.
Amazon might have started as a tiny bookseller, but today it is the most dominant e-commerce platform in the world of retail.
Almost 92% of all U.S shoppers have bought at least one item from Amazon, and the platform boasts more than 300 million customer accounts.
Let’s take a deeper look at Amazon’s history to discover how it became an ‘everything’ store that provides all kinds of consumer goods, produces award-winning shows, and provides computing services that even its rivals rely on.
Amazon started operations out of Jeff Bezos’ parents' garage in Washington as an online bookseller.
But Bezos has other plans as well. Although business analysts doubted the feasibility of Bezos’s business model, the company thrived against all odds.
This is the story of Amazon investing in long-term growth over short-term profits to become the biggest e-commerce retailer in the U.S.
One fine day, Jeff Bezos read a research article that projected yearly Web growth at 2300% so he knew that his idea of selling goods online would be a success.
So, Bezos quit his high-powered career as a vice-president of a well-known Wall Street firm and moved to Washington in 1994 to make his dream e-commerce business a reality.
First, this new venture needed a name. After trying out different names like Relentless and Cadabra (as in abracadabra), Bezos eventually decided in favor of Amazon.
The name was a perfect fit because Amazon is the biggest river in the world and Bezos was determined to turn his business into the world’s biggest online store.
Next, he needed a product to sell. So, he did some research and made a list of the five most profitable items to sell online which included computer hardware, software, movies, books, and music. He selected books because there was a huge demand in the global consumer market for all kinds of literature.
Plus, there was a huge collection of titles available in print that could be sold online at cheap prices. Hence, books were a winning product because they had all the necessary selling points: worldwide demand, a large supply, and a low per-unit cost.
Finally, Bezos needed a location for his new business. He decided Seattle was the best location due to its large hi-tech labor market and proximity to a large books distribution center.
Moreover, Washington State did not charge sales tax so he could sell books online at low prices without charging additional tax from his customers.
With everything sorted, Bezos now turned his attention to developing the most crucial element of his online venture: the Amazon website.
He worked closely with software developers to build the website and roped in friends and family to test out the site by placing mock orders.
Amazon.com finally opened for business in July 1995 and quickly became the most popular online website for books.
And guess what was Amazon’s tagline? Earth’s biggest bookstore. Yes, that’s right!
The Amazon team’s attention to detail and user-friendly website soon won them, customers, in the U.S and abroad.
Bezos’s software development team had worked round the clock to create a website with a searchable database of over one million books.
Customers just needed to enter the title of the book and the Amazon software would search through the entire database and display the titles on the customer’s screen with an option to pay using a credit card.
The books would be delivered in a few days through the post. It was a revolutionary idea.
Never before had customers had access to a site where they could buy just about any book from textbooks to novels and poetry.
Amazon was so popular that in just one month it had received orders from all 50 U.S States and 45 countries across the globe.
The company only had 11 employees back then who packaged the books manually and took turns posting them to customers.
By 1996, the company was making a net $511,000 in sales (that’s $951,964.67 today after adjusting for inflation). It was evident that Amazon needed a bigger warehouse to keep the momentum going.
So, Bezos shifted Amazon’s headquarters to a warehouse in Downtown Seattle that served as the company’s shipping and receiving area as well as its customer support office.
The new warehouse only stocked about 2000 books at a time unlike large competitors like Barnes and Nobles. Instead, Amazon worked directly with wholesalers and publishers to supply books worldwide.
The business model was simple. Customers could place an order directly through Amazon to affiliated publishers. Amazon would receive the books from the publishing houses and ship them to the customers.
Amazon also strived to make its website as user-friendly as possible. The website had a powerful search engine to quickly display available titles. Plus, the catalog was arranged topically with separate categories for award-winning titles and best sellers. It made browsing extremely easy for customers, and they could conveniently discover all the available titles in their area of interest.
The site also recommended books based on user preferences, past purchases, and reading habits. Amazon also let readers write comments and reviews on books they had read and read comments left by other users so that they could get another person’s opinion if they couldn’t decide on which book to read.
Customers also loved the ‘eye’ notification button that alerted them whenever new books from their favorite authors were added to the collection. Amazon also provided a gift wrapping option so that customers could gift books to friends and family.
By the end of 1996, Amazon’s sales jumped to $15.7 million ($29.2 million today after adjusting for inflation), and it expanded its book catalog to include more than 2.5 million titles.
Bezos also moved the company to a larger 93,000-square-foot warehouse in Central Seattle to keep up with high consumer demand.
In 1997, Amazon went public with an initial public offering of three million shares of common stock. The offering generated $54 million ($98.3 million after adjusting for inflation), and Bezos used the proceeds to fuel growth over the next four years.
He launched a new distribution facility in Delaware and expanded the existing Seattle center by 70%.
The new facility in Delaware gave Amazon more access to East Coast publishers and customers.
The new facility also eased the burden on the existing facility and shortened delivery times by improving the company’s stocking and shipping capabilities.
With an upgraded distribution system in place, Amazon set itself a target of 95 percent same-day shipping of in-stock orders to deliver books to customers faster than ever before.
Furthermore, Amazon’s Associate program also fueled company growth. Amazon struck partnerships with bloggers who had their own websites. The bloggers would display ads for their favorite books on their websites and visitors on these sites would be directed to Amazon.com if they wished to purchase the title.
The bloggers received a commission of 3-8% so it was a win-win situation for all parties. The program picked up steam in mid-1997 when Amazon got Yahoo Inc. and America Online Inc. to get on board. The two companies agreed to let Amazon promote its books on their websites which received the most internet visitors in the U.S.
The move gave Amazon increased visibility in the U.S e-commerce space. More bloggers continued to get on board, and by 1998 the Affiliates program had more than 60,000 individuals advertising Amazon books on their websites.
Amazon also ventured into the international market in 1998 by acquiring booksellers in Germany, and the U.K. Amazon acquired UK-based online bookseller Bookpages and the German company Telebook to gain access to customers in Europe. The acquisitions also gave existing Amazon customers access to a wider book selection.
However, Bezos had always planned on making Amazon into an ‘everything store’ so he was not going to stop at just books. In 1998, Amazon acquired the Internet Movie Database (IMD) to help it sell videos and movies. IMD was a treasure trove of information on all kinds of movies which helped Amazon create a user-friendly website where users could find all the relevant information about the movie they wanted to purchase.
In 1998, Amazon also launched its music store which had more than 125,000 music titles on offer. The interface of the new music site was built using help from professional musicians. Bezos also incorporated feedback from existing Amazon customers into the design of the new website.
The new site had many of the same helpful features as the original Amazon book website and users could search for music by song title or artist. Users could also listen to 225,000 sound clips on the new Amazon site before selecting which song title to purchase.
By 1999, Amazon had secured more than 3 million customer accounts and introduced toys and electronics into its product catalog. It also revamped its website to make it easier for customers to search for specific items.
Hence, each store was placed under a separate tab so that customers could easily navigate the website to find their desired product. The move paid off, and sales figures rose to $1.6 billion (that’s $2.8 billion after adjusting for inflation) by the end of the holiday season in 1999.
From its inception, Amazon's strategy involved long-term planning over short-term gains. The company focused on growth rather than short-term profits.
Amazon reported record sales of $1.6 billion in 1999 ($2.8 billion today after adjusting for inflation), but the company invested all that money and more into building up its logistics network. A new and upgraded warehouse improved the company’s distribution system and helped it meet growing demand in the years to come.
The company also invested in its Associate program to promote Amazon products on websites with the highest visitor traffic. It helped Amazon reach even more customers than ever before to increase its sales and long-term profitability.
Although the company spent an enormous amount on building up its capacity instead of paying attention to immediate profitability, the strategy paid off because it helped Amazon grow into a company that could handle millions of orders and achieve profitability in the long run.
The new millennium brought new challenges as well as new opportunities for Bezos’s fledging e-commerce giant.
Let’s find out how the company survived the dot.com crash and translated its awesome growth into million-dollar profits that delighted investors.
Amazon’s core business strategy also focused on strategic acquisitions that would help the company expand its core business to fuel growth over the next ten years.
Amazon kicked off the new millennium by signing lucrative deals with retailers Target and America Online Inc. The company also expanded its product selection and included items from the Borders Group, Toys "R" Us, and Circuit City Stores Inc.
Amazon's affordable prices and expanding product catalog helped the company attract customers and sales climbed to $3.1 billion in 2001 (that’s $5.2 billion today after adjusting for inflation).
For the first time in its history, Amazon posted a net profit of $5 million ($8.3 million after adjusting for inflation). It was truly remarkable how Amazon managed to make million-dollar profits during the dot.com crash of 2001 that wiped out other e-commerce businesses.
It just goes to show that Amazon’s obsession with meeting and exceeding consumer demands was paying off and helped the company survive the economic crash that bankrupted other online businesses.
Soon, Amazon rebranded itself with a new logo to celebrate its growing profitability and its official transition to an ‘everything store.’ This was the birth of the iconic smile logo that all Amazon packages proudly feature to this day.
The new logo had an arrow under the company name going from A to Z to highlight the fact that Amazon provides almost every item that customers could ever want.
In 2002, Amazon started selling clothes online from brands like The Gap and Land’s End. The company partnered with over 400 apparel brands to showcase a wide range of clothing on its website to appeal to consumers with diverse tastes.
In 2003, the company started developing its web hosting platform called Amazon Web Services (AWS) in a bid to make the company even more profitable.
AWS partnered with big retailers like Borders and Target to become one of the largest cloud hosting companies on the market.
Initially, AWS provided retailers and website developers with Internet traffic patterns and website popularity statistics.
However, in 2006, AWS launched its data storage service called the Simple Storage Service (S3) for commercial entities. Other companies could store their files in Amazon's 'cloud' without having to build their own data storage system.
Just one year after its launch, the S3 service contained more than 10 billion files and this number had reached 905 billion by 2012.
In 2003, Amazon also acquired online music retailer CD Now to give its users a wider selection of music titles.
It also expanded its product selection by including sports equipment, personal care items, and even gourmet food in the new lineup.
That same year, Amazon earned $3.9 billion in sales ($6.2 billion today after adjusting for inflation) and posted an annual profit of $35.5 million ($56.6 million to after adjusting for inflation).
In 2004, Amazon invested $75 million ($116.1 million after adjusting for inflation) to acquire the Chinese online retailer Joyo to gain access to the Chinese market. Soon, Amazon was selling all kinds of items such as books, music, and videos to Chinese consumers through the Joyo website.
In 2005, the company introduced Amazon Prime in the U.S so that customers could enjoy free two-day shipping for a small annual subscription of $79.
With Prime, customers could receive their parcels faster than ever before, and as a result, sales skyrocketed with over 100 million items sold by the end of 2005.
In 2006, Amazon acquired Wisconsin-based clothing retailer Shopbop to expand its clothing line. Customers now had access to a wide range of clothing, accessories, and handbags with free shipping in the U.S and Canada.
In 2007, Amazon released its first e-book readers in the form of the game-changing Kindle devices. The devices sparked a new wave of consumer interest in digital books and sold out in a matter of hours. Although each device cost $400, superior product quality won customers regardless of the price point.
The following year, Amazon acquired Audible.com for $300 million ($407.3 million after adjusting for inflation). It also acquired AbeBooks.com and BoxOfficeMojo.com in 2008. The next year, the company acquired Zappos an online clothing and shoe retailer for $1.2 billion ($1.6 billion after adjusting for inflation).
Why did Amazon acquire so many companies? The answer is simple.
Amazon’s strategy has always been centered on want the customer wants so it acquires companies that can help it meet various consumer demands in the long run.
Acquiring music retailers, online clothing stores, and an audiobook company helped Amazon enter different markets and transition from a third-party goods retailer to an online store that directly sold all kinds of products to its customers.
Amazon developed an aggressive acquisition strategy to gain access to new capabilities that would help it enter new markets.
The acquisition strategy was in line with Bezos’s goal of turning Amazon into an ‘everything store’.
And to create a store where customers could shop for any item Amazon acquired retail companies in the fashion industry as well as online music retailers to gain a foothold in diverse industries.
The company also increased its international footprint by acquiring companies in Asia. A good example is Joyo the Chinese e-commerce retailer that helped Amazon gain access to millions of Chinese consumers.
The acquisitions not only helped the company gain new customers but also helped it expand its product catalog for existing customers. The convenience of buying all kinds of goods from a frying pan to fancy jewelry at the same store is what generated loyalty and motivated millions of customers to return to Amazon for their shopping needs.
In 2010, Amazon was posting quarterly results of $13 billion in net sales ($17.4 billion after adjusting for inflation).
By that time, the company had come a long way from its humble origins in Bezos’s garage. But Amazon was just getting started.
The company chalked out an ambitious plan to improve its market share in physical retail, introduce ground-breaking new technologies, and cut its operating costs to improve long-term profitability for the future.
Find out how Amazon’s product diversification plan helped the company achieve a market capitalization of $1 trillion.
In 2012, Amazon acquired a robotics company called Kiva Systems for $775 million ($986.7 million after adjusting for inflation). The company manufactured robots that could move packages of up to 700 pounds from one place to another.
Amazon leveraged the newly acquired robots at many of its warehouses to automate inventory fulfillment duties. The robots automated the storage of goods at Amazon's warehouses making the entire inventory process more efficient and error-free.
The new system helped Amazon cut its operating costs by 20% and gave it an edge over rival e-commerce companies.
Kiva was renamed Amazon Robotics in 2015. The company continues to develop new robots that are easily programmable and can function as portable transport units. The latest models can transport packages weighing almost 1300 kilograms.
Thanks to these robots, Amazon can now get packages delivered to customers faster than ever before. The robots make storage accident free and help Amazon warehouses handle the huge volume of shipments that they receive every single day.
In 2014, Amazon acquired Twitch Interactive which was a video game streaming company.
The acquisition helped Amazon improve its gaming products.The move helped the company get access to a new group of customers specifically looking for high-quality gaming equipment.
Amazon also released the wildly popular Alexa devices in 2014. The virtual assistant devices work using speech synthesizer software. The same technology is used in the Amazon Echo smart speaker and the Echo Dot.
Today, millions of homes, hotels, offices, and cars make use of Alexa devices to execute a range of tasks that make people’s daily lives easier.Users can automate their homes using Alexa and use it to remotely control the lights and thermostat. The device can also be used to order things off Amazon for home delivery.
Alexa also makes commuting more pleasurable for hundreds of office-goers. The device estimates travel time, provides news updates, and plays a user's favorite music as they drive.
In 2015, Amazon re-branded its entertainment platform to Amazon Video. The platform aired original Amazon shows and also provided access to shows produced by Nickelodeon, HBO, and Cinemax.
In 2015, the first physical Amazon bookstores opened in Seattle with people queuing around the block waiting to get a chance to explore the new stores.
In 2017, Amazon moved into the grocery sector by acquiring all 471 Whole Foods Stores in the U.S. It gave existing Amazon customers special discounts if they shopped at the newly acquired Whole Foods locations.
But the company was just getting started. In 2018, Amazon opened the Amazon Go stores which were dubbed the 'future of retail' by observers from the NY Times and CNN.
The new stores promised the ultimate convenience store experience with no lines or checkouts. Just grab your items and go Amazon told its customers.
How was the company able to create such a unique customer experience?
The answer in a nutshell is technological innovation. The Amazon Go stores are completely cashier-less and without any self-service checkout stations.
The shopping experience is completely streamlined. Customers just need to download the Amazon Go app on their smartphones and link the app to their accounts. The shelves are equipped with sensors that monitor which items are picked up.
As the customer walks out of the store with their items, the transaction is charged to the linked account. Receipts are immediately generated on the app so that customers can see how much they were charged for each item.
The Amazon Go stores helped cement Amazon's presence in the physical retail sector. The company's current market share in physical retail stands at 2.4%, and it has plans to launch more brick-and-mortar stores including a clothing store named Amazon Style.
Amazon’s entry into the physical retail sector convinced investors that the company would continue to disrupt new industries just as it had disrupted the retail and publishing sector. As a result of increased investor confidence, Amazon was able to hit the $1 trillion market capitalization mark for the first time in 2018.
The Covid-19 pandemic upended supply chains across the globe, and even Amazon with its end-to-end logistics network felt the disruption to its supply chains as customers started bulk buying supplies like hand sanitizer and cold medicine.
The company also had to rush to adapt its daily operations to keep its warehouse employees and delivery team safe without slowing down the pace of work as customers were relying on the e-commerce giant because physical stores had run out of necessary supplies.
However, Amazon was able to come out of the crisis stronger than ever before. The company encouraged all frontline workers at its warehouses to get vaccinated by initiating a bonus scheme. Workers who got their shots early were rewarded with cash prizes every week.
The company also gave priority storage services to essential pandemic supplies such as masks, sanitizers, and gloves. It allocated extra space for these items in its warehouses to get past the initial disruption in supply chains that made the company run of these supplies.
Furthermore, Amazon paid extra attention to urgent consumer needs and quickly launched a self-test coronavirus kit so that people could test themselves in the safety of their own homes.
In 2021, a team of engineers at Amazon also created a new face mask called the Amazon PerfectFit Mask which combines the strengths of an N95 with the comfort of a cloth mask. The Amazon team designed it to reduce the inhalation of water droplets that could potentially carry the coronavirus.
The crisis shone a spotlight on the adaptability and durability of the Amazon business model. Although, the pandemic may have momentarily stumped the e-commerce giant it was back on track in just a few months and making deliveries on time to millions of customers.
Amazon’s focus on product diversification finally paid off in 2018 when stocks hit the $1 trillion market cap. The company started with books and diversified into the world of fashion, audiobooks, and entertainment to reach new markets.
However, the company’s creative spirit helped it launch new products and services such as the voice-assistant Alexa which changed the way people do chores at home.
The Amazon Go stores also revolutionized how people shop with smart technology that eliminated check-out lines and cash payments.
The company’s focus on innovation and its drive to break into new markets to diversify its product offerings is the secret behind its phenomenal market capitalization.
Amazon is harnessing the power of digital to improve its marketing techniques in order to reach more customers and give them personalized recommendations.
Digital transformation is also helping the company make same-day deliveries a reality to provide customers with the ultimate shopping experience.
The key to Amazon’s success as the world’s largest e-commerce retailer is its aggressive marketing strategy.
The company has multiple marketing tools in its arsenal that have helped it get an edge over its competitors right from Amazon's inception.
Amazon pays attention to four main factors when selling merchandise online which are product, price, place, and promotion. A diverse range of product offerings is what helps keep Amazon ahead of its competition. Customers love the fact that they can buy almost any item in a single Amazon visit instead of going to multiple online stores to buy different items.
Next, the company pays attention to the price point. It uses a strategy called value pricing to assign prices to its products according to the value assigned to it by customers. So a product is worth what customers are willing to pay for it.
Finally, Amazon has a vast network of warehouses called fulfillment centers which enable speedy delivery to customers across the globe.
The company also uses different kinds of promotional strategies to advertise its products. Amazon utilizes SEO optimization to ensure that its web pages rank higher in search engines such as Google Chrome.
The company also uses a 'pay-per-click' advertising technique when promoting its products on Amazon affiliate websites.
Affiliates earn a small percentage in commission fees each time a visitor clicks on an ad on their blog and is redirected to the Amazon website. It’s a technique Amazon developed in the early 90s when e-commerce was still a relatively new industry.
Amazon also relies on user-generated content to promote its products. Customers often trust reviews written by other shoppers instead of regular ads and no one knows this better than Amazon. Hence, user-generated content such as ratings and reviews have always been an integral component of Amazon's marketing strategy.
Furthermore, Amazon uses retail data sets from its AWS subsidiary to keep up with consumer trends and shopping patterns.
The company leverages past shopping patterns to generate personalized product recommendations for returning customers. The strategy helps the company retain loyal customers because it can predict what customers need before they even know it.
Finally, Amazon runs conversion rate optimization (CRO) tests on its website to update the web design and product listings. The updates help Amazon encourage more people to check out items and purchase them.
The use of digital tools such as SEO optimization, CRO tests, and retail data sets are a good example of how digital transformation can help a company successfully market its products to customers in every corner of the globe.
Amazon plans to digitally transform its operations, especially its logistics system to reduce delivery times for customers.
The company is renowned for its two-day Prime delivery service, but it now has plans to shorten it to one day.
The team at Amazon is developing a range of technologies some of which will be deployed in 2022.
The digital transformation strategy involves
Aside from developing original technologies, the company wants to keep track of new inventions by startups that could help Amazon’s core business. Hence, Amazon plans to strike strategic partnerships with these companies by providing them with investment funds.
In 2022, Amazon announced plans to invest $1 billion in companies developing new technologies for the logistics and supply chain management sectors. The investments will help Amazon tap into emerging technologies that can make online shopping faster and more convenient.
An e-commerce giant like Amazon needs a fool-proof logistics network to handle the millions of shipments that Amazon warehouses receive daily.
Digital transformation is powering the way forward. The creation of new technologies such as smart drones, automated delivery vehicles, and inventory-management robots are helping Amazon streamline its inventory process and improve its delivery system to provide customers with the most convenient shopping experience in the entire world.
Amazon is also investing billions in start-ups that can help it develop newer technologies to further smooth out its logistics network. After all, customer satisfaction has always been Amazon’s top priority, and the best way to retain busy customers is to deliver their shipments on time.
Amazon’s phenomenal upward trajectory has elicited awe from investors and consumers alike.
Due to its commitment to research and innovation, Amazon has become a leader in the world of retail and cloud computing.
Let’s take a look at Amazon’s mission and values that fueled the company’s growth and helped it make a lasting impact in the lives of millions of customers.
Amazon’s mission is to become the world’s most customer-centric company. Its goal is to provide Amazon shoppers with a world-class product selection that can be delivered within 24 hours.
The company is also innovating constantly to develop devices such as Alexa to make people’s everyday lives easier.
Amazon also aims to provide the very best entertainment through multiple channels such as Prime Video, Audible, and Twitch.
Finally, Amazon’s IT service management subsidiary AWS aims to become a global provider of cloud computing services.
The firm already provides over 200 services including computing, storage, databases, analytics, networking, mobile developer tools, and enterprise applications. The goal is to make these services more accessible to startups and industries in every country across the globe.
Amazon is inspired by four guiding values::
Amazon has always focused on what the customers want instead of looking at what competitors are doing. The company starts its innovation process after identifying what the customer wants instead of creating products and then trying to sell them.
The team at Amazon also works exceptionally hard to deliver results. The company empowers its employees to take ownership of the work they do and think about long-term results instead of short-term gain.
Amazon’s growth journey offers various lessons and maxims for organizations and individuals alike.
Some of the key strategic takeaways are as follows:
Amazon’s goal is to become the most customer-centric company in the world. It aims to predict customer needs before customers even realize them.
The company has invented multiple techniques to cater to customer needs and preferences. It continually updates its web design, improves product listings, and provides users with personalized recommendations to make the entire shopping process easier.
Amazon also has the most extensive product catalog in the entire world and provides multiple shipping options to suit diverse customer needs.
Amazon never focused on quarterly profits. The Amazon strategy has always centered on re-investing in its business to boost long-term growth.
The company continuously re-invests its income to upgrade its products, produce new technologies and improve its distribution network.
Amazon's dedication to improving its infrastructure and enhancing its capabilities has allowed the company to grow beyond retail and enter new industries.
Amazon keeps an eye on rising trends in the world of retail and beyond to inform its decisions when acquiring new businesses.
The company has a history of strategic acquisitions that Amazon believes will help it grow its core business.
Each acquisition is carefully calculated from the takeover of Audible and Kiva to Whole Foods its biggest acquisition to date.
The carefully planned acquisitions have helped Amazon to disrupt industries outside of e-commerce such as publishing, inventory management, and physical retail.
Amazon encourages its employees to never stop learning. The company aims to break boundaries in the world of hi-tech and innovate beyond what is possible. Nothing is impossible as far as Amazon is concerned.
The company strives to develop the most useful technologies that can help it better serve its millions of customers.
It is through that kind of zeal and passion that services like Amazon Prime and devices like Alexa are born. Things that no one thought were possible are now a reality thanks to Amazon.
Amazon is an ‘everything’ company. It is the world's biggest e-commerce platform, an entertainment provider, a cloud-computing powerhouse, and now a provider of fresh produce. The company has managed to expand locally and globally through its commitment to innovation and its heavy focus on research and development. Millions of customers shop at Amazon every single day, and the company delivers shipments to almost every country on the globe. It also provides computing services to large enterprises, start-ups, government organizations, and NGOs around the globe. Finally, Amazon’s physical stores have changed the way we shop forever by eliminating pain points such as checkout lines. Amazon truly provides convenience like no other company on the planet.