One E-Store to Rule Them All

Amazon.com has soared ahead of other online merchants. What the firm can’t carry in its worldwide fulfillment centers, affiliated retailers distribute for it. CEO Jeff Bezos keeps introducing new products and services to keep customers glued to the Amazon site. What drives Bezos’s decisions, and will his moves and investments pay off in the years to come?

David Strick/Redux Pictures

The Rocket Takes Off

From its modest beginning in Jeff Bezos’s garage in 1995 as an online bookstore, Amazon.com has quickly sprouted into the preeminent online retailer. Once Bezos saw that Amazon could outgrow its role as an immense book retailer, even its logo was updated to symbolize that Amazon.com sells almost anything you can think of—from A to Z. Hundreds of other companies also list their products on the Amazon Marketplace. Amazon profits from the additional exposure and sales and the brand thrives by keeping on the site customers who might otherwise shop elsewhere.

Amazon keeps changing as it grows. No one is ever sure what will come next. CEO Jeff Bezos keeps investing to make his com- pany bigger, stronger, and harder to catch. Its millions of square feet of distribution fulfillment space keep growing domestically and around the globe. The firm’s products and services are con- tinuously upgraded and expanded. Just go to the website and check multiple versions of the Kindle Fire e-book reader, Prime Instant Video TV, and a variety of cloud computer services. A New York Times article says that “within a few years, Amazon’s creative destruction of both traditional book publishing and retailing may be footnotes to the company’s larger and more secretive goal: giving anyone on the planet access to an almost unimaginable amount of computing power through its cloud services.”1

Priming the Competition

Time and time again, Amazon has squared off against retail competition. Its Amazon Prime, an annual subscription provid- ing free two-day shipping, was a big hit and has pushed other online retailers in free shipping options and promotions. In tak- ing on Apple, Amazon launched its music downloading service and then, in a move of digital one-upmanship,2 bought top-shelf audiobook vendor Audible.com. The Amazon Kindle keeps re- vamping the publishing industry. Sales of Kindle e-books now outnumber those of hardcovers.3 Contrary to other iPad com- petitors, the Kindle Fire has sold well.4 Now, there’s Fire TV to compete with Apple TV.

Apple isn’t the only company in Amazon’s sights. It com- petes with the likes of Hulu and Netflix with Amazon Prime Instant Videos, a library of streaming movies and TV shows available at no extra cost to Amazon Prime customers.5 Prime subscribers also can borrow books from the Kindle Owners’ Lending Library.6

Beyond simply finding more and more products to sell, Bezos pushes continuous innovation that creates new levels of service to complement existing products. “We have to say, ‘What kind of innovation can we layer on top of that that will be meaningful for our customers?’” he explains.7

Pressing Too Hard?

While it often feels as if Amazon can’t lose, this isn’t always the case. Some high-profile retailers have pulled their products from the Amazon Marketplace, including Target, The Gap, and Macy’s. According to Neel Grover, CEO of Buy.com—another

retailer who abandoned Amazon’s ship—“We didn’t want to give them information on products and sales that Amazon could potentially use against us.”

Despite Amazon’s success in so many new markets, some critics question whether Amazon.com, let alone the Internet, is the best place to make high-involvement purchases. Bezos is characteristically confident. “We sell a lot of high-ticket items,” he counters. “We sell diamonds that cost thousands of dollars and $8,000 plasma TVs. There doesn’t seem to be any resistance, and, in fact, those high-priced items are growing very rapidly as a percentage of our sales.”8

Looking Ahead

Amazon’s stock fluctuates in value and has a very high price- earnings ratio that financial analysts like to criticize. But Bezos believes that customer service and anticipating customers’ needs, not the stock ticker, define the Amazon experience and its success. “I think one of the things people don’t understand is we can build more shareholder value by lowering product prices than we can by trying to raise margins,” he says. “It’s a more patient approach, but we think it leads to a stronger, healthier company. It also serves customers much, much better.”9

In two decades, Amazon.com has grown from a one-man operation into the global giant of commerce. By forging alliances to ensure that he has what customers want and mak- ing astute purchases, Jeff Bezos has made Amazon the go-to brand for online shopping. With its significant investments in new media and services, does the company risk spreading itself too thin? Will customers—individual and corporate— continue to flock to Amazon, the go-to company for their every need?

Case Analysis Questions

1. Discussion In what ways does Bezos’s decisions to develop and deliver the Kindle, Kindle Fire, and Fire TV lines show systematic and intuitive thinking?

2. Discussion How do you describe the competitive risk in Amazon’s environment as other retailers, including Walmart, strengthen their online offerings?

3. Problem Solving Amazon is continuously looking for new markets to exploit. As CEO Jeff Bezos addresses the strategic opportunity of streaming video, he calls on you for advice on gaining more customers from the younger generations. Amazon’s presence and technology are well established, but Bezos sees a lot of untapped potential in this market. But what decision error and traps might cause him to make the wrong decisions regarding Amazon’s future moves in this regard, and why? What can he do to best avoid these mistakes?

4. Further Research What are the latest initiatives coming out of Amazon? How do they stack up in relation to actual or potential competition? Is Bezos making the right decisions as he guides the firm through the ever-evolving challenges of today’s cyber markets? Or, is he starting to lose touch as the company grows and his other personal interest.