EWonder
Why Amazon.com is not just a temporary EWonder
<General> - <EBusiness>
1.
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In the Beginning..
In the beginning, there was Jeff Bezos. Bezos is a man with great intellect and ideas. He saw
potential in the market for selling books online under the Amazon.com brand and started his
own company run out of his garage.
2.
The Great Flood..
The website generated so much publicity that Amazon found it hard to cope. In just three
and a half years, Amazon.com became the USA’s third largest bookseller (both virtual and
physical) behind Barnes and Noble ($2.7 billion) and Borders($2.3 billion). By the end of
1998, sales were equivalent to about 50 book chain superstores. The number of customers
stood at 6.2 million.
3.
Exodus..
Skeptics at this point wrote off Amazon because despite all this activity on the website, huge
losses were being made ($124.55 million). These losses were due to:

Aggressive sales and marketing efforts (22% of its total revenues spent here)

Combative pricing

High costs related to fulfilling orders (all eTailer websites have high costs in this area)

Narrow profits on music and videos (a market Amazon had only just got into)
However, Amazon was now the second biggest online retailer (Dell was the biggest).. and Jeff
Bezos, the company’s founder, had only just started!!
4.
Revelations..
In 1999, Amazon started to show its colours. Here are just a few facts I have found about
Amazon.com now; I am sure there are more.

Barely a day went by without a mention in the big press (New York Times or Wall
Street Journal)

Bezos revealed his plan to be a direct seller of a wide variety of merchandise – art,
auctions, books, cds, dvds, electronics, health and beauty goods, kitchen-related
goods, lawn/patio goods, pet-related goods, software, tools, toys, videos.. and much
much more

Amazon released plans to become a Virtual Marketplace where anyone could sell
virtually anything under the Amazon brand (Z-shops)
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<General> - <EBusiness>
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Amazon released plans to invest and partner with other online enterprises and
therefore gain/profit from their successes.
Due to its huge investments earlier on, which were responsible for early losses, Amazon now:

Owns a huge stake in DrugStore.com (around 30%). Drugstore.com is committed to
paying Amazon.com $105 million over the next 3 years for advertising on Amazon’s
site

Has an auction site which challenges eBay; Incorporating LiveBid.com (a web
autction house connecting, live, real auction houses), and Sotheby’s online offering,
Amazon makes commission on each item sold via the auction site

Owns around 40% of Pets.com (the pet industry in the US is worth $23 billion and
Pets.com is probably the second most popular site in that industry)

Owns e-Niche Inc ($200 million), the company which traded on the web as
Exchange.com (music and book memorabilia)

Owns 35% of HomeGrocer.com ($42.5 million)

Owns 49% of Gear.com, a sporting goods retailer

Owns 20% of Della and James gift registry service

Owns 23% ($60 million) of Kozmo.com (delivery company, delivering snacks,
videos etc. purchased over the internet, within 60 mins of ordering)

Owns 5% in Greenlight.com, an online car buying company. In return, Greenlight is
paying $82.5 million over 5 years to Amazon for ‘virtual real estate’ on Amazon’s
pages

Living.com agreed to pay Amazon.com $145 million over 5 years for a tab on the
Amazon.com home page Amazon.com has now bought an 18% stake in Living.com

Owns Convergence ($20 million), a company which creates specialised server
software and services

Owns Accept.com ($101 million), a company which develops software to simplify
person-to-person and business-to-consumer transactions over the internet

Owns zShops, an online mall, where the customer can buy anything. Amazon gets set
fees, plus commission from all retailers who use this service

Owns Alexa, a company which makes software which tracks which sites people visit
and suggests other sites they may like to visit. Alexa came with 13 terabytes of
databases which are chock full of ‘metadata’ on the web activity of millions of people.
This information is invaluable to Amazon, whose aim is to personalise the shopping
experience of customers so that when a customer is looking to buy a product Amazon
knows exactly which product to suggest. ZBubbles is a facility allowing Amazon.com
shoppers to find the best/cheapest product of the type they are looking for

Amazon.com has an agreement with NextCard Inc – an issuer of ‘online credit cards’,
whereby Nextcard paid $85million to Amazon.com with the possibility of paying
more than $17 million more, dependent upon the number of card accounts generated.
Amazon.com responded by buying shares in NextCard ($22.5 million). Amazon has
since co-branded a credit card with NextCard – an alliance likely to make $150
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million for Amazon in the next five years. Now, for every customer Amazon attracts
it has another source of revenue via the credit card that customer might use!

Amazon.com is already wap-enabled, so that wireless technology means more sales to
Amazon, under a project called ‘Amazon anywhere’. Amazon sees wireless
technology, implemented via mobile phones and Personal Digital Assistants, as a
‘cash register in every pocket’. Those involved in auctions can be notified if an when
they are outbid for items, people in cars can order music and videos, etc.

Amazon.com was valued at $28 billion on January 8 1999

Amazon.com raised the largest convertible debt offering in US history in January
1999

$676 million in sales in the quarter to Dec 1999 ($1.64 billion in annual sales)

Amazon.com the top-ranked ecommerce site for November 22 to Dec 26 1999

5,693,000 unique visits per week on average

Amazon.com rated top shopping destination over Christmas for 42 percent of all web
shoppers (Ernst and Young)

From zero to $2.6 billion plus in sales in 4 years!

From 4 people in a renovated garage to a 160,000 sq foot renovated medical centre
and more than 7,500 employees in the US and Europe in 4 years

Brand recognised by 52% of adults in the US and is one of the most familiar brands in
the world, up there with the likes of Coca Cola and Cadburys!

It is believed that the mighty investment in advertising and mass marketing has
provided these successes, and that the losses made so far are worth it for the huge
profits which will follow later

Amazon.com has 16+ million customers.
business.
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Repeat customer orders total 72% of
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