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The Virtual Phenomenon

April 2015

Amazon.com continues to grow and evolve as a world-class e-commerce platform. Here’s why

Amazon.com is a Fortune 500 company based in Seattle, that opened on the World Wide Web in July 1995 and today serves as a virtual hyper market for online customers and sells products ranging from books, tablets and eBooks; computers, mobiles, cameras, personal and healthcare appliances and devices, specialty foods, fashion jewelry, car, motorbikes, parts and accessories, to name a few.

Humble Beginnings

In 1994, a 29-year-old financial analyst and fund manager named Jeff Bezos was fascinated by the rapid growth of the Internet. In order to capitalize on the hot new marketing tool, he made a list of 20 products that might sell well on the Internet and found, after some intense analysis that books topped of that list. Although Bezos liked the name Abracadabra, he decided to call his online bookshop Amazon.com.

Amazon was initially started by the name Abracadabra in 1994 by Jeff Bezos and went online as amazon.com in 1995. Today, amazon is the largest online retailer on the planet. The company’s name Amazon has truly become as big as the Amazon River from which it took inspiration.

Turning Point

When he started, Bezos had no experience in the book-selling business, but he realized that books had an ideal shipping profile for online sales. He believed that many customers would be willing to buy books without inspecting them in person and that books could be impulse purchase items if properly promoted on a site. By accepting orders on its web site, Bezos believed that Amazon.com could reduce transaction costs in the sales to the customer.

He decided to locate his firm in Seattle, close to a large pool of programming talent and near one of the largest book distribution warehouses in the world. These supply factors were important because Bezos wanted to develop efficiencies that would allow Amazon.com to reduce transaction costs for its purchases as well as its sales transactions.

By paying attention to every process involved in buying, promoting, selling, and shipping consumer goods, and by working to improve process continually Bezos and Amazon.com have become the first highly visible success stories in electronic commerce.

Logistics Superiority

The ability to offer shopping convenience, ease of purchase, speed, a wide selection, discounted pricing, and reliability of order fulfillment are all tied directly to the company’s logistical competencies. By purchasing large volumes of products directly from publishers the company offers a wide selection to customers and receives great discounts from suppliers. Amazon.com aims to ship 95% of products on the day they are ordered. Direct model enables Amazon.com to shorten shipping times. The company invested also heavily in warehousing and material handling systems to achieve multifold improvement in throughput.

E-Commerce Platform

In 2000, Amazon.com began to offer its best-of-breed e-commerce platform to other retailers and to individual sellers. Today, more than two million small businesses, world-class retail brands and individual sellers increase their sales and reach new customers by leveraging the power of the Amazon.com e-commerce platform. Through programs such as Selling on Amazon, Fulfillment by Amazon, Amazon Webstore, Checkout by Amazon, Product Ads and Advantage, sellers of all shapes and sizes offer their selection to Amazon.com customers by using various components of the e-commerce platform.

Performance Metrics

The Annual Report 2014 of Amazon says that it employed approximately 117,300 full-time and part-time employees as of December 31, 2013. The Amazon Appstore now serves customers in almost 200 countries. Selection has grown to include over 200,000 apps and games from top developers around the globe – nearly tripling in size over 2012. Amazon is expanding its geographic footprint. It now has 10 Amazon Web Services around the world. Net sales increased by 20% to $88.99 billion, compared with $74.45 billion in 2013. Operating income was $178 million, compared with operating income of $745 million in 2013.

Last year, Amazon introduced Prime Now, a one-hour delivery on tens of thousands of daily essentials exclusively for Prime Members. It announced Best-Selling Books of 2014 and unveiled ‘Make an Offer’ for customers to negotiate lower Prices.

Amazon.com continues to remain a customer-centric company where consumers can find and discover virtually anything they want to buy online. By giving customers more of what they want — low prices, vast selection, and convenience — Amazon.com continues to grow and evolve as a world-class e-commerce platform.

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