amazon.com - background & business model

Background and Business Model

Amazon.com, Inc. is an American e-commerce company based in Seattle, Washington. It was one of the first major companies to sell goods over the Internet and was one of the iconic stocks of the late 1990s dot-com bubble. After the bubble burst, Amazon faced skepticism about its business model, but it made its first annual profit in 2003.

Founded by Jeff Bezos in 1994, and launched in 1995, Amazon.com began as an online bookstore, though it soon diversified its product lines, adding VHSs, DVDs, music CDs, MP3s, computer software, video games, electronics, apparel, furniture, food, toys, and more.
Amazon has established separate websites in Canada, the United Kingdom, Germany, Austria, France, China, and Japan. It ships globally on selected products.

Founded in 1994, it was spurred by what Bezos refers to as his "regret minimization framework," i.e. his effort to fend off late-in-life regret for not staking a claim in the Internet gold rush. The company began operating as an online bookstore under the name Cadabra.com (as in abracadabra). While the largest brick-and-mortar bookstores and mail-order catalogs for books might offer 200,000 titles, an online bookstore could offer many times more. Bezos renamed his company "Amazon" after the world's most voluminous river.

The company was incorporated in 1994, in the state of Washington, began service in July 1995, and was reincorporated in 1996 in Delaware. The first book ever sold by Amazon.com was Douglas Hofstadter's Fluid Concepts & Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought.

Amazon.com had its initial public offering on May 15, 1997, trading on the NASDAQ stock exchange under the symbol AMZN at an IPO price of US$18.00 per share (equivalent to US$1.50 after three stock splits during the late 1990s).

Amazon's initial business plan was unusual: the company did not expect to turn a profit for four to five years. In retrospect, the strategy was effective. Amazon grew at a steady pace in the late 1990s while many other Internet companies grew at a blindingly fast pace. Amazon's "slow" growth caused a number of its stockholders to complain, saying that the company was not reaching profitability fast enough.

When the Dot-com bubble burst and many e-companies went out of business, Amazon persevered and finally turned its first profit in the fourth quarter of 2002: a meager US$5 million, just 1¢ per share, on revenues of over US$1 billion, but it was important symbolically. The firm has since remained profitable: net income was US$35.3 million in 2003, US$588.5 million in 2004, US$359 million in 2005, and US$190 million in 2006 (including a US$662 million charge on R&D in 2006). Nevertheless, the firm's cumulative profits remain negative, since the positive performance of recent years is not yet sufficient to wipe out the losses of the past, as of 2005 the accumulated deficit stood at US$2.03 billion.

Revenue continued to grow thanks to product diversification and international presence: US$3.9 billion in 2002, US$5.3 billion in 2003, US$6.9 billion in 2004, US$8.5 billion in 2005, and US$10.7 billion in 2006. On November 21, 2005, Amazon entered the S&P 500 index, replacing the venerable AT&T after it merged with SBC Communications.

Time Magazine named Bezos its 1999 Person of the Year in recognition of the company's success in popularizing online shopping.

amazon.com - objective

Objective

Earth's most customer centric company, a place where people can come to find and discover anything they might want to buy online.

Amazon.com sells anything from books, movies and music to consumer electronics and grocery. Its corporate account program enables you to purchase everything you need quickly, easily, and conveniently.

On top of that, it allows its customers to market their products to tens of millions of Amazon.com customers around the world.

Its safe and secured transaction allows users to shop not only in a comfort and safe environment, it also increases disintermediation by allowing its customers to directly trade with other customers.

Amazon.com promises to ship its products to virtually any address in the world. However warranty issues and manufacturer restrictions prevent us from shipping certain products to all geographical locations. Consumers will be notified while placing their order if Amazon is unable to ship specific items to the address they' have selected.

If the customer has a tracking or delivery confirmation number, one can track his package by clicking the "track packages" link in Your Account. The shipping method and carrier for his package will be listed in Your Account and in your shipment confirmation e-mail. Moreover Amazon promises to ship for free if one spends USD$25 and above but it applies to U.S. delivery addresses in the 50 states only, including Alaska and Hawaii.

Furthermore, to provide confidence, Amazon guarantees purchases from Amazon Marketplace, Auctions, and Merchant sellers when payment is made via the Amazon.com website. The condition of the item you uy and its timely delivery is guaranteed under the Amazon.com A-to-Z Guarantee.

Amazon.com accepts American Express, Diners Club, Discover, JCB, MasterCard, Eurocard, Visa, Visa Check Cards, Amazon.com gift certificates, Amazon Credit Account, Webcertificates, and checks, money orders, traveler's checks, or cashier's checks denominated in U.S. dollars and drawn on a U.S. bank. Additionally, it accepts Borders Gift Cards and Waldenbooks Gift Cards as payment for qualifying orders. Its refund policy lets customers return new, unopened items sold and fulfilled by Amazon.com within 30 days of delivery for a full refund.

Lastly, Amazon also has other fantastic services like Amazon MP3 downloads and Amazon EC2 (please refer to the other posting for more details) which are aimed at bringing betterment to its customers.

amazon.com - features

Features

Amazon is an example of a Business to consumer model which has steadily branched into retail sales of music CDs, videotapes and DVDs, software, consumer electronics, kitchen items, tools, lawn and garden items, toys & games, baby products, apparel, sporting goods, gourmet food, jewelry, watches, health and personal-care items, beauty products, musical instruments, industrial & scientific supplies, groceries, and more.

On May 16, 2007 Amazon announced its intention to launch its own online music store. The store launched in public beta September 25, 2007, selling downloads exclusively in MP3 format without digital rights management.

In August 2007, Amazon announced Amazon Fresh, a grocery service offering perishable and nonperishable foods. Customers can pick up orders or have them delivered to their homes. Delivery is initially restricted to residents of Mercer Island, Washington, a wealthy suburb of Seattle.

Another example of a consumer to consumer model, the company launched Amazon.com Auctions, its own Web auctions service, in March 1999. However it failed to chip away at industry pioneer eBay's juggernaut growth. Amazon Auctions was followed by the launch of a fixed-price marketplace business called zShops in September 1999, and a failed Sotheby's/Amazon partnership called sothebys.amazon.com in November. Although zShops failed to live up to its expectations, it laid the groundwork for the hugely successful Amazon Marketplace service launched in 2001 that let customers sell used books, CDs, DVDs, and other products alongside new items. Amazon Marketplace's main rival today is eBay's Half.com service.

amazon.com - characteristics, special features

Characteristics & Special Features

A popular feature of Amazon is the ability for users to submit reviews to the web page of each product. As part of their review, users must rate the product on a rating scale from one to five stars. Such rating scales provide a basic idea of the popularity and dependability of a product. The review feature is an important and highly influential function for customers and was certainly one of the main reasons for amazon.com’s success at selling books.

Search Inside the Book is a feature which makes it possible for customers to search for keywords in the full text of many books in the catalog. The feature started out with 120,000 titles (or 33 million pages of text) on October 23, 2003. There are currently about 250,000 books in the program. Amazon has cooperated with around 130 publishers to allow users to perform these searches. To avoid copyright violations, Amazon.com does not return the computer-readable text of the book but rather a picture of the page containing the found excerpt, disables printing of the pages, and puts limits on the number of pages in a book a single user can access. However, with judicious use of keywords, it is possible to read an entire book on Amazon for free. The most efficient way to do this is using the Minimal Amazon Covering Set method. Amazon is planning to launch Search Inside the Book internationally. Additionally, customers can purchase access to read the entire book online via the Amazon Upgrade program, although the selection of books eligible for this service is currently limited.

According to information in Amazon.com discussion forums, Amazon derives about 40% of its sales from affiliates, whom they call "Associates." An Associate is an independent seller or business that receives a commission for referring customers to the Amazon.com site. Associates do this by placing links on their websites to the Amazon homepage or to specific products. If a referral results in a sale, the Associate receives a commission from Amazon. Worldwide, Amazon has "over 900,000 members" in its affiliate programs. Associates can access the Amazon catalog directly on their websites by using the Amazon Web Services (AWS) XML service. Amazon was one of the first online businesses to set up an affiliate marketing program. AStore is a new affiliate product that allows Associates to embedded a subset of Amazon products within, or linked to from, another website.

According to the Internet audience measurement website Compete.com, Amazon attracts approximately 50 million U.S. consumers to its website on a monthly basis


Other products and services

Amazon Web Services

Amazon launched Amazon Web Services (AWS) in 2002. The service provides programmatic access to many features leveraged behind the scenes on its own website. AWS was rapidly adopted by what now amount to tens of thousands of software developers.

Amazon S3

In March 2006, Amazon launched an online storage service called Amazon Simple Storage Service (Amazon S3). An unlimited number of data objects, from 1 byte to 5 gigabytes in size, can be stored in S3 and distributed via HTTP or BitTorrent. The service charges monthly fees for data stored and for data transferred.

Amazon EC2

In August 2006, Amazon introduced Amazon Elastic Compute Cloud (Amazon EC2), a virtual site farm, allowing users to use the Amazon infrastructure with its high reliability to run diverse applications ranging from running simulations to web hosting.

Amazon Mechanical Turk

In November 2005, Amazon.com began testing Amazon Mechanical Turk, an application programming interface (API) allowing programs to dispatch tasks to human processors.

Amazon FPS

On August 2, 2007 Amazon launched a payment service specifically targeted at developers. Amazon FPS has facilities for developing many different charging models including micro-payments. The service also gives developers easy access to Amazon customers.

Amazon Unbox

On March 7, 2007, Amazon launched an Internet video on demand service. There has been criticism of the service due to its use of digital rights management (DRM).

Amazon MP3 Downloads

On September 25, 2007, Amazon launched a new music store (currently in beta) which sells downloadable tracks, all in the MP3 format and most recorded at 256 kilobits per second Variable bitrate (VBR). The Amazon MP3 Music Service: Terms of Use legally restrict use of the music, but Amazon does not use DRM to enforce those terms. Most songs cost US$0.89 or US$0.99, and most albums cost between US$4.95 and US$9.99. Participating record labels include EMI and Universal, as well as many independent labels. Previous to the launch of this service, Amazon made an investment in Amie Street, a similar music store with a variable pricing model based on demand.

Amazon Shorts

Amazon Shorts is a program launched in 2005. The program offers exclusive short form content including short stories and non-fiction pieces from best selling authors, all available for immediate download at US$0.49. As of June 2007, the program has over 1,700 pieces and is adding about 50 new pieces per week.

Amazon Prime

In February 2005, Amazon launched Amazon Prime in the continental United States. Amazon Prime subscribers pay US$79 per year and receive free 2-day shipping on all items shipped by Amazon with no minimum purchase amount. Overnight shipping for Prime members is US$3.99 per item. Prime benefits extend to four family members in the same household.
Amazon Prime became available in Japan in June 2007. Japanese customers may pay JP¥3,900 per year and receive same-day shipping on orders shipped to the Kantō region and next-day delivery to other locations.

Donations

In 2001, Amazon was one of the first online stores to begin accepting donations to the Red Cross on behalf of 9/11 victims. For several days the company dedicated its entire home page for this cause.
In 2004, Amazon launched its Presidential Candidates feature, whereby customers could donate from US$5 to US$200 to the campaigns of U.S. presidential hopefuls, resurrecting the Amazon Honor System for the purpose. The Honor System was originally launched in 2001 as a way for Amazon customers to "tip" their "favorite Web sites and to buy digital content on the Web," Amazon collecting 2.9% of the payment plus a flat fee of US$0.30. It has never been shut down, but had fallen into relative disuse.
At the end of 2004, with the catastrophic earthquake and tsunami in the Indian Ocean, Amazon set up an online donation channel to the American Red Cross using the Honor System, waiving its processing fee. As of January 3, 2005, over 162,000 individuals had donated over US$13.1 million in this way. The same week, Amazon created similar channels for the British, Canadian, French, German, and Japanese Red Cross organizations via its international sites. Over 7,000 Britons donated more than US$350,000; 900 Canadians over US$56,000; 660 French over US$23,000; 2,900 Germans over US$145,000; and 1,900 Japanese over US$66,000.

mazon reactivated its Red Cross donation channel when Hurricane Katrina struck at the end of August 2005. As of September 8, over 98,000 payments had been made totaling over US$10.7 million.

Amazon Connect

Amazon announced Amazon Connect in 2005. It enables authors to post remarks that appear at the bottom of the detail pages for each of their books and on the Amazon home page of those who have bought their books.

Amazon Vine

On August 15, 2007 Amazon launched a program called Amazon Vine, which allows the site's top product reviewers free access to prerelease products from vendors participating in the program.

Discussion boards

In August 2006, Amazon launched product wikis (later folded into Amapedia) and discussion forums for certain products. There are set guidelines that follow standard message board conventions. Discussion boards were later expanded to include deals in the Gold Box and to cover collections of items with the same user-provided tags.

Amapedia

In January 2007 Amazon launched Amapedia, a collaborative wiki for user-generated content related to "the products you like the most." Amapedia replaced Amazon's ProductWiki product, and all ProductWiki content was copied into Amapedia at launch.

amazon.com - strengths

Strengths

Firstly, it has good customer services. Its one-click service function lets customers feel a sense of immediacy when ordering online and satisfied with the improved electronic confirmations service.

Moreover, it has fast access to supply which means when customers find the products and click the order key. The data of order will be transferred to one of Amazon's servers. Then inform the employee to take the product and pack them by customer's desired.

Furthermore it is internationally recognized so anyone who wants to buy books online will first go to Amazon. Amazon uses online advertisements and referrals from their customers to inform people of their services.

Finally it provides safe and convenient shopping services. Credit card transactions can reduce the risk of being robbed or losing cash. Customers can avoid exchanging currency.

amazon.com - weaknesses

Weaknesses

As with book reviews anywhere, the buyer must beware that all reviewers have bias. Under normal circumstances, reviews give the reader at least a modest basis for evaluating whether to buy/read a given book. Because it is an open forum, the reader can benefit from the opinions of different people with different perspectives. However, the anonymity of web reviewers increases the chances of abuse in the form of self-praise, praise from friends, or malicious criticism.

This situation was confirmed in 2004 when the origin of reviews was accidentally made public on an amazon site, and some authors openly confirmed their glowing reviews of their own books (see Trivia below).

Amazon provides a badging option for reviewers, e.g., to indicate the “real name” of the reviewer (based on the credit card name) or to indicate that the reviewer is one of the “top” (most popular) reviewers. Because badging is optional, the risk of abuse remains. Some books have well over one thousand reviews (e.g. Ayn Rand’s Atlas Shrugged), but many books, especially new ones, have none. The U.S. site generally has the highest quantity of reviews, but other country sites offer the perspectives of other reviewers. A review posted on one site is not necessarily visible on another site.

Also, it faces some hardware problems. Amazon's decentralized servers often suffer from hardware failures. When this occurs, the entire system is affected and their services can stall and they can lose data.

Lastly, some may argue that waiting for a product delivery is a weakness even though the item offered is immediately shipped and 'instantly' have the item they want.