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Universidad de Sta.

Isabel
GRADUATE SCHOOL
City of Naga

Case Study on
Amazon.Com

JOY CAÑEBA CHAVEZ
Ph.D. Student

Case Digest Presented to

DR. VIRGINIA C. REYES
Professor

In partial fulfillment of the requirements in

HDM 307A
MANAGEMENT INFORMATION SYSTEM

Sales and Relationships Amazon made its initial mark selling books. shops/Marketplace. Amazon became a service organization to manage the online presence of these large retailers. electronics. living. and Sotheby’s. Gear. Kozmo. Kaphan notes that “Amazon was dependent on commercial and free database systems. drugstore. Shel Kaphan. with a handful of programmers and a few thousand dollars in workstations and servers. Babies ‘R’ Us. toys. it also uses its distribution system to deliver the products. including Paul Bar-ton-Davis.com. home improvement. However. Amazon opened its Web site for sales. Some of the main events include: 1995 books. Of course. Jeff Bezos set out to change the retail world when he created Amazon. NextCard. Many of the programming tools were free software” [Collett 2002].com.com.com. March 15. By the end of 1999. and Circuit City. Amazon also established partnerships with several large retailers. Toys ‘R’ Us. as well as HTTP server software from commercial and free sources. the company has worked to expand into additional areas—striving to become a global retailer of almost anything. Pets. However. In July 1995.com. Amazon advertised heavily and became the leading celebrity of the Internet and e- commerce.com.com. 2017 CASE STUDY TITLE: AMAZON. assisted by others. Effectively. most of those firms and Web sites later died in the dot-com crash of 2000/2001. and video games [1999 annual report].com. including Target. Audible. software. Amazon’s first programmer. Using heavily discounted book prices (20 to 30 percent below common retail prices). The Circuit City arrangement was slightly different from the . Green-light. HomeGrocer.com.com (ticker: AMZN). 1999 auctions. used a collection of tools to create Web pages based on a database of 1 million book titles compiled from the Library of Congress and Books in Print databases.COM In 1994.com. Della. the company had forged partnerships with several other online stores. including Ashford. almost from the start. and many people still think of the company in terms of books. 1998 music and DVD/video.

it might be tempting to keep eve-rating separate.4 million on total online sales of $27. the Amazon portion consists of little more than an advertising link to the Expedia services [Kontzer 2001]. customers click to the various stores to find individual items. 25 percent of Amazon’s sales were for its partners. Amazon took over the Web site run by its bricks-and-mortar rival Borders. With so many diverse products. Yes. In 2000.4 million [Heun April 2001]. Amazon partnered with Expedia to offer travel services directly from the Amazon’s site. By mid-2003. one of Amazon’s major relationships took a really bad turn in 2004 when Toys ‘R’ Us sued Amazon and Amazon countersued. Borders lost $18. In 2002. the relationship ended. Customers who spent $50 or more on apparel received a $30 gift certificate for use anywhere else on Amazon [Hayes 2002]. However. the Web sales and fulfillment services amounted to 20 percent of Amazon’s sales. and relationships. The purpose of the subsidiary is to help recover some of those costs— although Bezos believes they were critically necessary expenditures [Murphy 2003]. The deals in 2001 continued with a twist when Amazon licensed its search technology to AOL.others—customers could pick up their items directly from their local stores [Haunt August 2001]. However. But. The complaint by Toys ‘R’ Us alleges that it had signed a ten-year exclusivity contract with Amazon and . In 2003. Amazon launched a subsidiary just to sell its Web-sales and fulfillment technology to other firms. run a search and you will quickly see that it identifies products from any division. In 2001. Bezos noted that Amazon spends about $200 million a year on information technology (a total of $900 million to mid- 2003). Bezos points out that most companies realize that only a small fraction of their total sales (5 to 10 percent) will come from online systems. in this case. Also in 2001. After Circuit City went under. the company is experimenting with cross sales. By 2004. Amazon perceives advantages from showing the entire site to customers as a single. Additionally. the Project Ruby test site began selling name-brand clothing and accessories. so it makes sense to have Amazon run those portions [Murphy 2003]. AOL invested $100 million in Amazon and paid an undisclosed license fee to use the search-and-personalization service on Shop@AOL [Heun July 2001]. broad entity. But.

Plus. senior VP and general counsel for Toys ‘R’ Us stated that “We don’t intend to pay for exclusivity we’re not getting” [Cla-burn May 2004]. In 2010. Amazon is reportedly the largest seller of e-readers with the Kindle. it is conceivable that both parties are using the courts as a means to renegotiate the base contract. Digital Content Amazon has been expanding its offerings in digital content in many ways extending com-petition against Apple. John Wieber was selling $1 million a year in refurbished computers through eBay. alleging that Toys ‘R’ Us experienced “chronic failure” to maintain sufficient stock to meet demand. Similar small merchants noted that although the fees on Amazon are hefty. so it is difficult to determine what impact the change might have on Amazon. Target ended its contract with Amazon and launched its own Web servers. However. Amazon’s initial response was that “We believe we can have multiple sellers in the toy category. By 2007. The lawsuit counters that at least one product (a Monopoly game) appears to be for sale by third-party suppliers as well as Toys ‘R’ Us. For example. Amazon has many other sellers who offer similar products. Amazon also noted in 2011 that e- books for its Kindle reader have overtaken sales of paperback books as the most popular format. Amazon was simply the largest marketplace on the Web. Small merchants accelerated a shift to Amazon’s marketplace technology. Amazon does not report sales separately for the Kindle. Although it was not the first manufacturer. and offer products that (Toys ‘R’ Us) doesn’t have” [Claburn May 2004]. David Schwartz. Amazon does not report sales separately for its partners such as Target.com. eBay shoppers only want to buy things at bargain-basement prices (Mangalindan 2005). they do not have to pay a listing fee. A month later. The court documents noted that Toys ‘R’ Us had been out of stock on 20 percent of its most popular products [Claburn June 2004]. Although the disputed sounds damaging. but also leading the way in digital books. But increased competition and eBay’s rising prices convinced him to switch to direct sales through Amazon. increase selection. Amazon countersued. The e-books had already exceeded hard-cover books .had so far paid Amazon $200 million for the right to be the exclusive supplier of toys at Amazon.

the offerings initially were relatively thin. Unfortunately. a bricks-and- mortar competitor to Amazon went under in 2011. For instance. were also struggling to develop long-term contracts with studios. The most recent challenges are based on Amazon’s “affiliate” program. including Netflix and Hulu. using a color LCD display screen with a touch interface. Amazon. but the tablet focused on audio and video. Amazon announced a deal with Fox to offer movies and TV shows owned by the studio. Amazon was also trying to expand into video streaming. other video streaming sites. but often offers discounts on older albums. By 2011. Amazon is also working to expand sales of music. The basis for the individual suits is not detailed. Amazon released its own version of a tablet computer. The obvious goal was to provide a device that encourage customers to purchase more digital content directly from Amazon [Peers 2011]. In late 2011. Netflix announced a similar deal with the DreamWorks studio. For many of these reasons. Sales Taxes Sales taxes have been a long-term issue with Amazon. The challenge is that the level of presence has never been clearly defined.com argues that it has no physical presence in most states and is therefore not required to collect taxes. a site might mention a book and then include a link to the book on . Customers who pay $79 a year to join the Prime program gain faster shipping. Supreme Court ruling). and also access to a library of digital movies and TV shows. It will take time for studios to determine strategies on streaming video services and for consumers to make choices [Woo and Kung 2011]. Borders. The Web site has relatively standard pricing on current songs. the Kindle table carried a price that was about half that of the iPad and other competitors ($200). Amazon pays a small commission to people who run Web sites and redirect traffic to the Amazon site. The company continued to sell the Kindle e-book reader. with limited ties to the movie studios. The Annual Report notes that sever-al states filed formal complaints with the company in March 2003.S. Although it lacked features available on the market-leading Applet iPad.the year before [Wu 2011]. However. At the same time. In September 2011. but the basic legal position is that any company that has a physical presence in a state (“nexus” by the terms of a U. is subject to that state’s laws and must then collect the required sales taxes and remit them to the state.

Amazon’s sales had reached $148 million for the year. because the state sales tax issue is driven by the interstate commerce clause in the U. it might create a Federal Sales tax law with some method of apportioning the money to states. In 2000. has initiated a legal challenge in the state of New York. Several states have passed laws claiming that these relationships constitute a “sales force” and open up Amazon to taxation within any state where these affiliates reside. the company had over 100 separate database instances running on a variety of servers—handling terabytes of data. one of its biggest deals was with Excel on for business-to- business integration systems. Constitution. However. The company also signed deals with SAS for data mining and analysis [Collett 2002]. Congress to create a new federal law to deal with the sales-tax issue. including analysis software from Epiphany. The company spent $200 million on new applications.000 full-time jobs.the Amazon site. negotiated a new deal signed into law in California [Letzing 2011]. even if they do not have sophisticated IT departments. and partly because the company wanted to improve security by keeping the order systems off the Web. The separation was partly due to the fact that the programmers did not have the technical ability to connect them. do not bet on any major tax laws during a Presidential election year. By early 2000. and a new DBMS from Oracle. . The big book data-base was being run on Digital Alpha servers. logistics from Manugistics. By 1997. if Congress desired. In the California deal. Amazon dropped the affiliate program in several states. and in 2011. Amazon obtained a delay in collecting taxes for at least a year. However. But. The system enables suppliers to communicate in real time.S. a simple law will not alter the underlying principles.S. Information Technology In the first years. Amazon is also asking the U. in exchange for locating a new distribution center in the state and creating at least 10. But. Applications were still custom written in house. Amazon decided to overhaul its entire system. In response. Amazon intentionally kept its Web site systems separate from its order-fulfillment system. It provides a direct connection to Amazon’s ERP system either through programming connections or through a Web browser [Konicki 2000].

As . Allgor’s analysis is simple. The new systems ran the open-source Linux operating system. The entire process is automatic. Lyn Blake. observed that “When we think about how we’re going to grow our company. preferably from the warehouse — the company had six — that is nearest the customer [Hansell. they can be shipped in a single box. determines the best way to ship the product. and availability. This system caused problems in 2001—the main issue was that the data on the merchant Web sites was being updated only once every eight hours. the supply chain system at Amazon was a critical factor in its success. Jeffrey Wilke. It would still sell these titles but order them after the customer does. the system immediately connects to the distribution centers. Dr. When a customer places an order. a vice president who previously ran Amazon’s book department and now oversees company relations with manufacturers. Already by the third quarter of 2001. Amazon should increase its holdings of best sellers and stop holding slow-selling titles. customized to Amazon’s needs. Allgor’s preliminary work focused on one of Amazon’s most vexing problems: How to keep inventory at a minimum.000-equation computer model of the company’s sprawling operation. we focus on price. but heretical to Amazon veterans. and internal applications transfer the data onto the displayed page as requested. Amazon continually works to im-prove the connections on those systems. “I worry about the customer’s perspective if we suddenly have a lot of items that are not available for quick delivery. When implemented. disagrees with this perspective. By 2004. the goal of the model was to help accomplish almost everything from scheduling Christmas overtime to rerouting trucks in a snowstorm. The merchant’s link to Amazon’s main database servers. and provides the details to the customer in under two minutes.About the same time (May 2000). selection. 2001]. while ensuring that when someone orders several products. Amazon inked a deal with HP to supply new servers and IT services [Goodridge and Nelson 2000]. Dr. Amazon was able to reduce its IT costs by 24 percent from the same quarter in 2000 [Collett 2002]. Almost the entire system was built from scratch.” Amazon’s merchant and Market Place systems are powerful tools that enable smaller stores to sell their products through Amazon’s system. All three de-pend critically on the supply chain” [Bacheldor 2004]. Senior VP of worldwide operations. Russell Allgor moved from Bayer Chemical to Amazon and built an 800.

The system uses basic data mining and statistical tools to quickly run correlations and display the suggested products.” He also observed that “When we launched Instant Order Update. even it had sold out several hours ago. and $128 million for 2010. Data is passed as XML documents and automatically converted to Amazon’s format [Babcock 2003]. but the current totals were not transferred to the display pages until several hours later. But. and 2008 respectively (2010 Annual Report). One of the most successful technologies introduced by Amazon is the affinity list. the inventory quantities were altered in the main servers. In 2003. the Amazon programmers created the Instant Order Update feature that reminds customers if they have already purchased an item in their cart. we were able to measure with statistical significance that the feature slightly reduced sales. Amazon installed Exelon’s Object Store database in 2002. Good for customers? Definitely. in 2010. customers would be told that an item was in stock. Consequently. net income tax provisions were $352 million. Bezo notes that “Customers lead busy lives and cannot always remember if they’ve already purchased a particular item. reducing the update times from eight hours down to two minutes. The system functions as a cache management server. $146 million. Capital expenditures for software and Web site development are not cheap: $176 million. in the long run” [2003 annual report]. system makes recommendations based on similar items purchased by other customers. New Services . Kaphan notes that “There was always a vision to make the service as useful as possible to each user and to take advantage of the ability of the computer to help analyze a lot of data to show people things they were most likely to be interested in” [Collett 2002]. The system also remembers every purchase made by a customer. 2009. When someone purchases an item. So. To solve the problem. Good for shareowners? Yes. engineering director for the Merchants @ Group noted that “with the growth of this business. Paul Kotas. Amazon added a simple object access protocol (SOAP) gateway so that retailers could easily build automated connections to the system.customers purchased items. in comparison. we needed a zero latency solution” [Whiting 2002].

the company decided that it could leverage those low costs into a new business selling Internet-based services. By 2011. running the Linux kernel. Amazon requires huge data centers and high-speed Internet connections to run its systems.S. [Pratt 2011]. Even government agencies are adopting the benefits of storing data in these cloud services—including those run by Amazon. Internet services including Foursquare and Reddit that used the facility were . The trick was that a human was hidden under the board and moved the pieces with magnets. and you can run any software you want [Gralla 2006]. Through vast economies of scale. For example. The point is that Amazon handles all of the maintenance and other companies avoid fixed costs. The system creates virtual servers. you pay 10 cents per virtual server per hour plus bandwidth costs. Any individual can sign up and perform a task and get paid based on the amount of work completed. any company can use the company’s Web servers to deliver digital content to customers. Amazon is able to achieve incredibly low prices for data storage and bandwidth. The company offers an online data storage service called S3. the company Casting Words places audio files on the site and pays people 42 cents to transcribe one minute of audio files into text [Markoff 2006]. The company essentially serves as a Web host. Anyone can pay to store data in the DBMS. For example. the U. Amazon takes a 10 percent commission above the fee. the company had several locations providing S3 and EC2 Web services. Around 2005. Amazon’s network can handle bursts up to 1 gigabit per se-cond. The name derives from an 18-century joke where a “mechanical” chess-playing machine surprised European leaders and royalty by beating many expert players. Companies post projects on the Mturk site and offer to pay a price for piecemeal work. per data stored. Treasury Department moved is public Web sites to the Amazon cloud. Amazon’s trick is to use human power to solve problems. For a monthly fee of about 15 cents per gigabyte stored plus 15 cents per gigabyte of data transferred. with charges being levied per hour. The Amazon EC2 and S3 services suffered some problems in the summer of 2011. and per data transferred. any person or company can transfer and store data on Amazon servers [Markoff 2006]. but instead of paying fixed costs. Perhaps the most unusual service is Mturk. Through a similar service (EC2). It also offered online relational database services using either MySQL or the Oracle DBMS. A configuration error during an upgrade in the East Coast facility triggered a cascade that delayed all services in the facility.

672 20. but it was never in our business plan to stay with that” [Gralla 2006].036) 7.900 2005 8.933 (149) 2. Adam Selipsky.509 902 1. we’ve spent more than one and a half billion dollars investing in technology and content. the main problems were caused by algorithms designed to copy data to multiple servers to reduce risks.835 476 1.127 (967) 9.264 35 1.152 1. vice president of product management and developer relations at Amazon Web Services observed that “"Amazon is fundamentally a technology company.192 5. Year Net Sales Net Debt (LT) Equity Employee Income s 2010 34.000 2003 5.353) 7. the company lost almost $3 billion.204 1.919 (1.480 246 12. In the process.500 2001 3. On the other hand.156 (1.166 645 896 2. the outage points out the risks involved in any centralized system.700 2007 14. it spent huge amounts of money not only building infrastructure. Amazon provides the ability to spread content and risk across multiple locations.100 1997 148 (31) 77 29 614 1996 16 (6) 0 3 1995 0. It was not until 2009 that Amazon had generated enough profits to cover all of its prior losses (ignoring interest rates and debt). But.3) 0 1 . Ironically.122 (567) 2.800 2000 2.466 266 7.762 (1.411) 2. but also buying market share.5 (0.277 (1.257 24. It took Amazon nine years to achieve profitability.600 1998 610 (125) 348 139 2.835 (227) 9.impacted by the problems for almost a week [Tibken 2011]. Amazon engineers learned a lot from the problems and the same issue is unlikely to occur again [.247 431 13.000 1999 1.282 1.800 2002 3.864 33.921 588 1.197 17.490 359 1.640 (720) 1. When Amazon started.000 2004 6. And the profits started to arrive only after the company changed its pricing model—focusing on re-tail prices for popular items and smaller discounts for all books.000 2006 10.711 190 1.561 6. with multiple facilities. We began by retailing books.700 2009 24.440) 7.300 2008 19.

those sales increased largely by selling products for other firms. Amazon estimated revenue in-creases of 28-39 percent but increased operating expenses by about 38 percent. against outbound shipping costs of $2. Those numbers add up to the $1.365 gen. That last part largely represents selling books at a loss or offering free shipping while trying to attract customers.4 billion! Amazon continues to expand aggressively. check www. but clearly the growth path is the international market. Amazon no longer discounts most of the books that it sells. you have added costs and you’re not as productive on those assets for some time.6 billion. which searches multiple Web sites for the best price. according to the 2010 Annual Report.007 Electronics + 10.881 $8. where did all of that money go? In 2003.com. it is generally more expensive to purchase books from Amazon than to buy them from your local bookstore.campusi.998 7. and from one more twist. Europe and Japan). For competitive online pricing. Notice in the table that media sales (books. More products are sold in North America. mostly in the course of the second half of last year. Amazon still runs a loss on shipping. Another source of increased sales is the international market (largely Britain. Amazon’s finance chief noted that “When you add something to the magnitude of 23 fulfillment centers. But. Net Sales 2010 North America International Media $6.9 billion debt.” [Wu 2011]. and movies) are higher in the International market than in North America. and $700 million on marketing and customer acquisition [Murphy 2003]. $300 million was spent on the fulfillment centers. Most of the improvement is due to increases in sales—which is good. for a net loss of $1. but the selection might not be as large. audio.2 billion. In fact. but what happened to the other $1 billion in net losses? Interestingly. The company’s financial position has improved since 2000. Other 828 125 Out of curiosity. In 2010. Bezos noted that $900 mil-lion went to business technology. In 2011. the company declared shipping revenue of $1. march. . Tom Szkutak.

it also uses its distributions system to deliver the products. Barnes and Noble may be employing more than 32. Amazon’s leaders clearly indicate that they are aware of the stiff competition—both from bricks-and-mortar retailers and from online rivals including small start-ups and established rivals including Apple and Google. 2. For the longer term. videos. whereasAmazon. which makes it the leading online shopping site.000 book sellers in approximately 900 stores in 49states. Babies „R‟ Us. Case Questions: 1. Effectively. and relationships.com. Auto Parts Retail.com also competes in the Apparel & Accessories Retail. Amazon also established partnerships with several large retailers. However.com and Ebay. Yes. With so many diverse products. and Book & Entertainment Retail industry. and Camera & Optical Goods Retail sectors. butAmazon. Campusi.com has been around for nine years.com has millions of people in more than 220 countries that purchase its products. computers.com. toys etc. kitchenware. and more. it has only been around for five years. including Target. Although Half. Why would customers shop at Amazon if they can find better prices elsewhere? Amazon made its initial mark selling books online. However. games. Toys „R‟ Us. toys and games. broad entity. DVDs. videos. Amazon is not only selling books but also CDs. Even better prices are found elsewhere customer would prefer to buy from Amazon because of the easiness a costumer founds on buying a product from Amazon website easy . But. Amazon became a service organization to manage the online presence of these large retailers.com competitors are primarily in the Music. Amazon. Amazon.com. Who are Amazon’s competitors? Amazon’s Competitors include Barnes and Noble. which means that more people know about the site. and Circuit City. run a search and you will quickly see that it identifies products from any division.com sells similar products as Amazon. Company expanded itself from not selling online books with good price but with selling everything online like DVDs. it might be tempting to keep everything separate. customers click to the various stores to find individual items. Video. Amazon perceives advantages from showing the entire site to customers as a single. electronics.

the system immediately connects to the distribution centers.  When someone purchases an item. Why did Amazon create most of its own technology from scratch? The entire system was built from scratch because Amazon wanted to make a customized system according the needs. They also need powerful tools that enable smaller stores to sell their products through Amazon’s system. selection and availability of products. from any division. easy buying. price and etc. and provides the details to the customer in two minutes.  Good discounts on products. amazon. and a new DBMS from Oracle. If Amazon buys products from other firms and simply ships them to customers. product availability throughout the year. customer relationships etc. determines the best way to ship the product. why does it need so many of its own distribution centers? . 4.  large selection 3. The main focus was on price. even if they do not have sophisticated IT departments.  Customers can pick up their items directly from their local stores.  Effective faster and easy way to buy from amazon. The company spent $200 million on new applications. Hence. The system has a distinct feature which can be described in few steps  When a customer places an order. Some Additional Benefits:  Amazon. Amazon system makes recommendations based on similar items purchased by other customers this is the unique facility they have.com can attract more customers through advance technologies which make shopping much easier.com worked upon the delivery time of product means effective lead time so that customer gets is product on time. logistics from Manugistics. easy way of payment systems.  They wanted a system that enables suppliers to communicate in real time. good quality of products.to search products off different size. including analysis software from Epiphany.com with its effective website – faster search of products from all departments.

In 2003. one of Amazon’s major relationships took a really bad turn in 2004 when Toys ‘R’ Us sued Amazon and Amazon countersued. Babies ‘R’ Us. There is no doubt Amazon has earned all the profit and finally turned into a star by only selling the services. 5. Will other retailers buy or lease the Web software and services from Amazon? Can Amazon make enough money from selling these services? Yes. the company did finally show a profit of $35 million. And all this money finally spent on developing business technology and research and development. Amazon became a service organization to manage the online presence of many large retailers. 25 percent of Amazon’s sales were just because of its retail partners. It uses its distribution system to deliver the products. But this magical dream is expensive and inefficient. Amazon established partnerships with several large retailers. Fueled by big dreams and seemingly endless cash from investors. In 2002 sales increased by selling products for other firms. They have started from scratch and step by step reached to the heights. The issue requires a serious thought on it. To cut down the costs. But. take a quick. CASE DIGEST: . Amazon needs to cut down on warehouse expenses. Amazon became a service organization to manage the online presence of these large retailers. Toys ‘R’ Us. Amazon. login the website. There was always a vision to make the service as useful as possible to each user and to take advantage of the ability of the computer to help analyze a lot of data to show people things they were most likely to be interested in. 2004 Financial statement shows. order something and get a quick shipment from the nearest warehouse. There is no need to have 6 warehouses when one can do without any of them.com created an almost magical offering for consumers: with help of supply chain management. and Circuit City. Effectively. including Target.

and even an Internet startup incubator. Amazon is one of the more innovative of online retailers. b. especially books (outside S/H marketplaces like Abebooks. and has experienced great success and failure. offering: a. selling over forty categories of goods. c. fully automated warehouses. rising to $60 in 2003. A no-nonsense returns policy. . 2. first located in strategic spots in the US but increasingly worldwide. a record reflected in a share price that has oscillated from a high of $106 in 1999 to $6 in 2001. Amazon built an online retail business around three aims: Best prices: 1. Amazon Retail Starting in books and then expanding into electrical and other goods. Amazon is the world's largest online retailer. a search technology. from books to electronics to groceries to jewelry to auto parts. Unrivaled selection: Amazon often has the largest selection of goods in a particular category. The company is also an ecommerce and Internet technology platform.) 3. a fulfillment and logistics platform.08 billion. In recent years Amazon stock has traded above $150. an Internet advertising platform. Convenience: Amazon focus on the customer and try make purchasing an enjoyable experience. a steep discount in the case of books. only to fall to $27 in 2006. Fast and reliable delivery from vast. plus a slew of nascent enterprises and developing opportunities. An attractive. easy to use customer interface (which evolved through many trials). Amazon products are generally offered at a discount. {9} Business Models Amazon has three distinct businesses. In 2011 its net revenue increased 41% to $48.

3. d. 7. Purchase suggestions based on previous purchases and webpage viewing (an example of real-time systems). introduced in late 2011. Amazon MP3. Amazon has faced lawsuits over exclusivity of contracts (Toys'R'Us: 2004) and size claims (Barnes and Noble: 1997). (2005). From 1998 onwards. proved unsuccessful. Reviews by customers of the product. 2. forcing iTunes to follow suite. 8. but what authors. Amazon was incorporated in 1994 in the state of Washington by Jeff Bezos. Sales of the Kindle Fire.com. e. Amazon has conducted a running battle with US states over sales tax. 1997. Amazon aimed for market share and did not make a profit till 2001. but its technology was later incorporated into Amazon Marketplace. a grocery service offering perishable and nonperishable foods. collecting from only five in 2011. proved a runaway success. and issued an IPO on May 15. publishers and marketing companies shamelessly exploited in promotion. . a Chinese ecommerce website (2004) and Book Surge a POD company. launched in September 2007. 9.com. Mobipocket. 6. Amazon's auction site. Not all growth was organic. Joyo. Amazon Prime was launched in 2005. founded in 1997. sold MP3 downloads without digital rights management. and books altogether by August 2012. producing the film 'The Stolen Child' with 20th Century Fox. Amazon began film production in 2008. Amazon's eBook reader. offering free shipping for a flat annual fee. 10. inspiring many lookalikes and allowing more eBooks than hardbacks to be sold in July 2010. 4. Book reviews proved not to be so independent.uk (1998). notably Bookpages. controversies and setbacks attended Amazon's eventual success: 1. captured 22% of US tablet market.co. Kindle. an eBook software company (2005) and The Book Depository (2011). 5. Amazon acquired several companies. went online in 1995. In August 2007 appeared Amazon Fresh. Many developments.

Online trading company that has come through the recession relatively well. a shipping credit. Allows merchants to use Amazon's advanced fulfillment technology.35 per item. Accumulated technological expertise in retailing and customer management technology. Fulfillment by Amazon.99 per month. Weaknesses . moving from an innovative online retailer to a broad-based web services supplier. Merchants pay $24 per month plus 2% of sales. The services are being expanded from USA. Amazon charges a commission based on a formula involving the sale price of the item. This has now been augmented or replaced by four comparable services: Sell on Amazon. generally between 15% and $1.99 fixed closing fee. but needs to integrate into shopping cart. Amazon Web store. Similar to PayPal and Google Checkouts. Merchants pay $39. plus a commission varying as above. Checkout by Amazon. 3. 2. UK and Germany to other countries. a variable closing fee and a $0. it is not easy to discern the impact of this change. either revenues or usage levels. Amazon marketplace that allows merchants to offer goods and services through an online shopping mall. Canada. a referral fee of 625% of the sale price.Amazon Marketplace Amazon also offers a third party selling platform. but in general: 1. Because Amazon provides no breakdown in annual reports. Amazon does not release information on these businesses. SWOT Analysis Amazon is a company in transition. A brand well respected for prices and customer convenience. More complete service.

agreements with publishers.4 % in 2010. but many still regard the reader and eBooks as expensive.2% in 2007. but the beneficiary may not be Amazon. 2. Microsoft and Google.4 % in 2008. 1. Merchant services are in competition with a host of Internet Payment Service Providers located across the world.7 % in 2009 and 3. Kindle: Amazon has improved the hardware and dropped prices. Amazon's net margin has been positive. 3. 3. Threats 1. Cheaper readers will come from China and Korea. Amazon's Kindle. Opportunities 1. has conquered only a small part of the publishing industry. Amazon is poised to exploit the shift to cloud and other third-party services. Amazon's self-publishing facilities will change the publishing industry business model. Amazon web services face competition from established providers: Dell. but no better than many bricks and mortar retailers: 3. 2. and eBook prices may be undercut with Google etc. . 2. which has made eBooks respectable. 3.