MARCHING TOWARDS PROFITABILITY
BY PETER MOUA
BUS 550
THE CONTEMPORARY FIRM
SHORT History
• Founded by Jeff Bezos in 1994
Recognized web usage was growing at 2,300% a year.
He sought to find the first best product to sell online.
“Books”
• Amazon opened its online bookstore in
July 1995
• Amazon went public on May 15, 1997
sold 3 million shares at $18 per share
TRIVIA QUESTION
What was Amazon.com’s original name?
TRIVIA QUESTION
Cadabra
CUSTOMER VALUE
Focused on Customer’s online experience:
Features:
“1-Click”: Fast/Secure credit card processing
easy and rich merchandise evaluation:
pictures, descriptions, and reviews
Amazon Personalization: “build the right store for every customer”
recognize, remember, and learn
Branding: e-commerce and customer satisfaction.
FULFILLMENT
Minimum of Bricks: Minimal Inventory and rapid fulfillment
Automated interfaces for sorting and organizing orders
How it was done:
Randomly processed and stored, Hand picked, Hand packed, and
shipped.
How it is done now:
Amazon Acquired Kiva Systems for $775M
Amazon Prime
• Currently around 10 million members enrolled
• Results in about 1/3 of Amazon’s operating income
• Recently increased annual fee from $79 to $99
• Prime benefits:
– Unlimited free two-day shipping on eligible purchases (20 million items
are in the prime category)
– Unlimited streaming with Prime instant video
– Ability to borrow books from the Kindle owners’ lending library
• Vision to improve upon the physical book.
• In October 2004 a small team moved into a shared space in Palo
Alto law library and got to work as Lab126.
• The Lab126 name originated from the arrow in the Amazon logo.
• On November 19, first Kindle e-reader launched with 90,000 ebooks. 5.5 hours later, Kindle was sold out after 5.5 hours of its
announcement.
• The team has expanded to products like the Kindle Keyboard,
Kindle Touch and Kindle Paperwhite e-readers to Kindle Fire tablets.
Electronics from Lab126
2007 - Amazon Kindle E-book Reader: Reads like paper with no
glare, even in bright sunlight.
Current versions: Kindle, Paperwhite, Paperwite 3G, and DX
2011 - Kindle Fire Table Computer: Runs Fire OS 3.0 “Mojito”.
Current versions: Fire HD, HDX, HD 8.9”, Fire HDX 8.9”
2014 - Amazon Fire TV: enables television sets to access internet
programing, streaming shows from Amazon Prime, and video
games. Features voice recognition on the remote and a
gaming controller can be purchased.
Smartphone rumor: 6 camera across the face
to enable 3D images and ability to
use gestures for the OS. Projected
to release this year.
Electronics from Lab126
Patents
As of 2013, Amazon has 1,263 Patents.
Examples:
Affiliates Program: Allows owners of other Web sites to refer customers
to Amazon in exchange for a referral fee.
1-Click: allows customers to shop without entering their shipping and
billing information every time they purchase an item.
Build-a-box: cranks out custom-designed boxes for odd-shaped
shipments.
Anticipatory Shipping: Uses historical data to predict what a customer
will buy next. Amazon would pre-ship the item in advance in
anticipation that the customer will buy it.
ACQUISITIONS & INVESTMENTS
Company
Date
Company
Date
Company
Date
Bookpages
April 27, 1998 Leep Technology Inc. Dec. 1999
Animoto
May 2008
Telebook
April 27, 1998
Greenlight.com
Jan. 2000
Farbric.com
June 2008
Internet Movie Database (IMDB) April 27, 1998
GregManning
Feb. 2000
Box Office Mojo
July 2008
Sage Enterprises (Planet All)
Aug. 4, 1998
Basis Tech.
Feb. 2000
Engine Yard Inc.
July 2008
Junglee Corporation
Aug. 4, 1998
kozmo.com
March 2000
Elastra Corp
Aug. 2008
Drugstore.com
Feb. 1999
WineShopper.com April 1, 2000
Shelfari
Aug. 2008
Geoworks
Feb. 1999
audible.com
Jan. 2000
Reflexive Entertainment Inc. Oct. 2008
pets.com
March 29, 1999
Catalogcity.com
Nov. 2001
AbeBooks.com
Dec. 2008
LiveBid.com
April 24, 1999
Egghead.com
Dec. 2001
Justbooks
Dec. 2008
bibliofind
April 24, 1999
OurHous.com
Dec. 2001
IberLibro.com
Dec. 2008
MusicFile
April 24, 1999
CDNow
Dec. 2002
Bookfiner.com
Dec. 2008
exchange.com
April 24, 1999
joyo.com
Aug. 2004
Gojaba.com
Dec. 2008
Alexa Internet
April 26, 1999
BookSurge
Apr. 2005
FillZ
Dec. 2008
Mobipocket.com
Accept.com
April 25, 1999
Apr. 2005
LibraryThing
Dec. 2008
CustomFlix
HomeGrocer.com
May 18, 1999
June 2005
Chrislands
Dec. 2008
Shopbop.com
Gear.com
July 14, 1999
Feb. 2006
Yieldex
Feb. 2009
Tool Crib of the North
Oct. 1999
wikia Inc.
Dec. 2006
Lexcycle Inc.
Apr. 2009
Convergence Corporation
Oct. 1999
Dpreview.com
May 2007
BookTour.com
Apr. 2009
MindCorps
1999
Brilliance Audio
May 2007
Foodista
May. 2009
Della.com
Nov. 1999
Amie Street
Aug. 2007
Talk Market Inc.
Jun. 2009
Back to Basics Toys
Nov. 1999
withoutabox
Jan. 2008
Snap Tell Inc.
Jun. 2009
Ashford.com
Dec. 1999
Lovefilm.com
Apr. 2008
Zappos.com
July 1, 2009
Financials
53-week high $408.06
1st Quarter revenue grew 23% over the year to $19.74 Billion
EPS of $0.23
Financials Continue
Why the down slope?
Amazon focuses on long-term competitive advantage
Capital Expenditures in infrastructure
Innovation Spending
Therefore Amazon continues to operate with negative Operating
Income.
Spent $1.1 billion on additional
investments to support technology
infrastructure including Amazon Web
Service, and fulfillment operations.
Amazon is investing more than they
did in the past. Domestically and
internationally. Recent investments
Italy and Spain and continued in
China.
Marching Towards Profitability
Conclusion:
• Currently not profitable because they are spending more than their
profits
– Infrastructure
– Innovation
• Focuses on long-term competitive advantage
• Continue to grow at a fast pace
– New technologies
• Fire TV
• Smartphone
– International Growth
• Austria, Canada, China, France, Germany, Italy, Japan, Spain, UK
Multiple Choice Questions
1. How much did Amazon’s 2014 1st quarter revenue grow from the
previous quarter?
a.
b.
c.
d.
8%
17%
23%
31%
2. What robotic company did Amazon acquire to improve the
customer fulfillment process?
a.
b.
c.
d.
AeroViroment
Kiva Systems
iRobot
The Robot Company
3. You can play videogames on the new Amazon Fire TV.
True
False
Works Sited
1.
2.
3.
4.
5.
6.
Byers, Ann (2006), Jeff Bezos: the founder of Amazon.com, The Rosen Publishing
Group, pp. 46–47
Himelson, Jeffrey (2014), Amazon: Impatient Investors Are Giving You A Golden
Opportunity; http://seekingalpha.com/article/2178773-amazon-impatientinvestors-are-giving-you-a-golden-opportunity
Lab126 (2014), http://www.lab126.com/welcome.htm
Anders, George (2013), Amazon’s 1,263 Patents Reveal Retailing’s High-Tech
Future; http://www.forbes.com/sites/georgeanders/2013/11/14/amazons-1263patents-reveal-retailings-high-tech-future/
Lomas, Natasha (2014), Amazon Patents “Anticipatory” Shipping – to Start
Sending Stuff Before You’ve Bought It”;
http://techcrunch.com/2014/01/18/amazon-pre-ships/
Slawski, Bill (2009), Amazon Acquisitions and Investments;
http://www.seobythesea.com/2006/10/amazon-acquisitions-and-investments/