The biggest in booksMany e-commerce palaces have been overhyped (and undershopped), but at least one Internet venture probably deserves the accolades and stratospheric stock price. Billed initially as "Earth's biggest book and music store," Amazon.com is the industry leader in business-to-consumer e-commerce.
Literary poster child
Since its 1995 founding, Amazon.com has been the poster child of Internet retail, its fortunes watched closely by e-commerce tea leaf readers. In addition to beating out stealthy bookseller-competitors, Amazon.com reports some of the highest visitor numbers of all commerce sites. Based in Seattle, the company initially became known for its millions of book titles, and then expanded quickly into CDs, videos, and toys. Recently, Amazon.com has launched software, home improvement items, and video games portions of its site. And not only has the company steadily added more products, but it has also new ways of selling, such as auctions and a new "store" called zShops, which allows outside vendors to sell their products. But while Amazon's revenues and products continue to grow, Amazon, like many Internet companies, also continues to lose money.
Nothing is too vast for his garage
Amazon is the brainchild of computer guru Jeff Bezos, who had already helped build one of the most successful hedge funds on Wall Street when he turned his eye to the burgeoning field of Internet retail. He founded Amazon.com to fill the gap between the immense field of book publishers and the problem of physical book stores that couldn't begin to carry every title. Bezos launched the company in his suburban Seattle garage in July 1995, offering 1.1 million book titles, compared to the 130,000 carried by average bookstores, or the 175,000 available at book superstores.
Beating the system
Amazon's online catalogue allows visitors to search for books by author, title, subject, or keyword. Dealing directly with distributors and publishers, Amazon.com offers discounts of up to 40 percent. Within a month of its opening, book lovers from every state and 66 countries had made purchases from the site. The company faced competition from book selling powerhouse Barnes & Noble in 1997, and in May of that year, the successful bricks-and-mortar retailer sued Amazon.com for its claims to have a "far greater" selection of books than Barnes & Noble. The suit was settled in October, with neither party claiming liability nor paying damages. Both companies said they would rather compete in the marketplace than in court. Amazon.com rose to the challenge. Proving itself an agile competitor, Amazon.com established exclusive deals with America Online, Excite, and Yahoo!, essentially locking up three major gateways to the Web. The site also became the premier bookseller on the Altavista Search Network and Netscape's Netcenter Marketplace.
$ shifts
Amazon went public in May 1997. In continued attempts to edge out competitors, the company started slashing prices, sending sales up and profits down. The company reported big losses in 1997, despite climbing sales and a growing customer base. Disappointing revenues continued into the following year, prompting Amazon to expand its virtual aisles to offer CDs and DVDs online. The music branch of the site offers a bevy of audio clips, reviews, detailed genre synopses, and a personalization option that distinguishes Amazon from older online music stores. Amazon's CD sales were stunningly successful - the company raked in $14 million in its first quarter of music sales.
1998 was a year of acquisitions for Amazon, which bought U.K.-based Bookpages and German Telebooks, both Internet bookselling competitors. It also gobbled up Internet Movie Database, an extensive movie information site that can only help Amazon's foray into videotape and DVD sales (The company already offers music CDs). The company's 1998 market value was $4.5 billion (twice that of Barnes & Noble), even though Amazon.com has yet to post an annual profit. Amazon will probably continue its conflicted existence until it achieves global brand recognition and automates its ordering process. This central goal to "get big fast" includes plans to step up advertising, publicity, and alliances with Internet search engines.
Scandal!
In October 1998, Wal-Mart Stores Inc. filed a suit against Amazon, alleging that it lured away employees from Wal-Mart's Information System department to steal trade secrets. Among those workers hired away from Wal-Mart were Richard Dalzell, a vice president at Wal-Mart who became Chief Information Officer at Amazon. The suit, originally filed in Arkansas, was dismissed on procedural grounds in January. Nevertheless, Wal-Mart officials immediately refiled in Seattle. Amazon then filed a countersuit accusing Wal-Mart of slander, defamation, and libel. In April 1999, Amazon and Wal-Mart finally settled their dispute. The terms of their agreement called for Amazon and Drugstore.com to reassign former Wal-Mart executives and consultants to positions that do not involve their knowledge of Wal-Mart's computer merchandising system. In addition, Amazon agreed to return informational materials from Wal-Mart that the former employees brought with them. No money was exchanged in the settlement, and Amazon maintains its innocence.
Doing drugs
In the meantime, Amazon purchased a 26 percent stake in Drugstore.com and added online auctions to its list of offerings. In January 2000, Amazon announced that it was increasing its stake in drugstore.com to nearly 28 percent, and would also feature a drugstore.com "tab" on its opening page.
Bookstore? What bookstore?
In early April 1999, Amazon introduced an auction site in an effort to compete with another e-commerce giant, eBay. Later that month, Amazon announced three new acquisitions valued at a total of $650 million. It bought Exchange.com (a site for used and rare books and music), Alexa (an ad-supported navigation guide for web browsers), and Accept.com (a startup that helps small businesses run operations on the Web). These acquisitions came just as Amazon launched a free greeting card service. A few months later, Amazon moved even further away from its bookselling roots with its July plunge into toys and consumer electronics. The company's diversification efforts are evident in the changes it has made to its homepage - the bookstore has become a feature among others on a welcome page that highlights assorted products from Amazon's many separate stores. Up next? Industry analysts are intrigued by the company's registration of the domain names Amazontv.com and Amazontelevision.com. Is Internet TV broadcasting next on Bezos' list?
Up next, everything
In September of 1999 Amazon.com launched a new "store" called zShops. This section of the site allows any seller to sell any product from any location. As The Wall Street Journal says: "This lets Amazon.com add thousands of items to its site overnight, without huge start-up costs." Sellers pay a small fee to advertise their items on the site and pay Amazon a small commission of the sale price. Amazon.com processes the transactions but sellers are responsible for shipping the products. With this development, Amazon takes a step closer to its goal of offering people access to any product that they want. In November 1999, Amazon took another step in this direction by opening up "stores" that sell software, kitchen goods, home improvement items, gift ideas, and video games. And now, not only can you get almost anything you want on Amazon, but you can get some items in an hour. In March 2000, Amazon announced a three-year deal with the one-hour delivery service Kozmo.com to deliver certain book, music and toy orders in the urban areas Kozmo services. The company also invested $60 million in Kozmo.
1-Click
In October 1999 Amazon filed a suit against rival Barnesandnoble.com alleging that the book retailer had stolen Amazon's popular 1-Click technology. 1-Click enables site visitors to purchase items without re-entering any of their credit card or shipping information.
Busy Bezos
In addition to opening more new stores in November 1999, Amazon announced that it has entered into an agreement with NextCard to launch a co-branded credit card. The alliance is expected to benefit Amazon to the tune of roughly $150 million. The deal is significant in that it shows Amazon's ability and desire to cash in on its large customer base. When the deal was announced, an analyst from The Wall Street Journal noted: "It is the clearest sign yet that Amazon is willing to turn its huge user database into a money-making asset in its own right, charging outsiders for the privilege of courting Amazon's 13 million customers."
Top exec resigns
As Wall Street investors continued to worry over Amazon's creditworthiness and continued losses, Joseph Galli, the number two executive at the company, departed for a CEO and president position at VerticalNet, Inc. in July 2000. Chief executive Jeff Bezos will take on the position of president, which Galli had occupied for 13 months.
Toying around online
In August 2000 the online retailer announced a 10-year alliance with Toysrus.com Inc., the online unit of Toys "R" Us Inc., to create a co-branded toy and video-games store. Toysrus.com would buy and manage inventory, while Amazon handled site development, order fulfillment and customer service. Though the deal could create an online toy giant, the new venture would face many competitors, including eToys Inc.
Failures, triumphs
Amazon.com has recently seen some of its partnerships meet with less than resounding success; Living.com, in which the company had invested heavily, failed in August 2000. A joint partnership between Sotheby's and Amazon, mainly consisting of a cobranded site, was consigned to the dustbin of e-history in October 2000. At the same time, the company continues to expand, moving into the Japanese market in November 2000. About half of the in-the-red e-tail giant's losses now come from overseas, giving investors hope that once expansion ceases, Amazon will move more strongly towards profitability.
