Amazon.com

Name: Amazon.com

Led the charge in bringing electronic books into the mainstream with its Kindle e-­readers. Is facing challenges from competitors such as Sony and Barnes and Noble, which recently introduced its Nook e-reader.

Stock Symbol: AMZN
URL: www.amazon.com
Location: Seattle, WA
Telephone: (206) 266-1000
Year Founded: 1994
Number of Employees: 20,700 (as of December 31, 2008)

Executive Leadership:

CEO: Jeffrey Bezos

Bio: Bachelors in computer science and electrical engineering from Princeton. Before Amazon, Bezos was a senior vice president of D.E. Shaw & Company, an investment firm. Prior to that he was a vice president at the Bankers Trust Company.

CTO: Werner Vogels

Bio: Phd in computer sciences from Vrije Universiteit in Amsterdam. Before Amazon, Vogels was a

Research Scientist at Cornell University.

Board Members and Advisors:

Tom A. Alberg; Madrona Venture Group

Jeffrey Bezos

L. John Doerr; Kleiner Perkins Caufield & Byers

William B. Gordon; Kleiner Perkins Caufield & Byers

Alain Monié; Ingram Micro Inc.

Thomas O. Ryder; Former Chairman and CEO, Reader’s Digest Association, Inc.

John Seely Brown; Visiting Scholar and Advisor to the Provost at USC

Patricia Q. Stonesifer; Smithsonian Institution

R&D

Total R&D Spending: $1.0 Billion

R&D as a percentage of revenues: 5.4 percent

Percentage of employees engaged in R&D: N/A

Technology:

Amazon.com’s intellectual property includes service marks, copyrights, patents, domain names, trade dress, trade secrets and proprietary technologies. Based on customer shopping habits, it operates a powerful recommendation engine that suggests products that customers will probably like but otherwise would have gone unnoticed. Recently, it has begun monetizing the infrastructure it created to support its e-commerce operations by selling cloud computing services, creating a whole new market. Amazon helped bring electronic books into the mainstream by creating the Kindle line of e-readers.

Market:

Amazon.com is the online retail leader with 5.5% share of a very fragmented market. The use of search engines and price comparison websites contribute to making the market highly price sensitive, with the leading online retailers being able to reduce prices significantly as a result of their high sales volumes and economies of scale.

In 2009, online retail sales have kept increasing despite last year’s economic turmoil. By 2013, the global internet retail sector is forecast to have a value of $613.3 billion.. In the United States alone, Datamonitor forecasts online retail sales will grow 11% as consumers prioritize price over other criteria for selecting products. The projected growth in the online retail sales in the US provides Amazon.com an opportunity to capitalize on consumer demand as it derives about 53.4% of its revenues from the States.[1]

Strategy:

Amazon.com targets three segments: Consumer customers, seller customers and developer customers.

For its consumer customers, Amazon.com’s strategy is to offer low prices (and often free delivery) across its entire product range. However, customers won over through low prices can be easy to lose. Amazon.com ensures customer retention and builds loyalty through its profile building, recommendations system and more recently, community building projects, hence the recent acquisition of Shelfari, a social networking site for book lovers.

For seller customers it offers them a space on Amazon.com to sell their products, it also offers e-commerce services such as Fulfillment and Checkout by Amazon.com (logistics, payment and billing services) or Amazon Enterprise Solutions. Seller customers profit from Amazon.com’s warehousing and distribution competitive advantage, while Amazon.com takes a share of their revenues.

Finally, for its developer customers Amazon.com offers technical services and cloud computing through Amazon Web Services.

Challenges and Next Steps:

Amazon faces competition from physical-world retailers, distributors and manufacturers, besides other online e-commerce and mobile e-commerce sites, including sites that sell digital content. For the past years, WalMart.com has been the biggest competitor to Amazon. During Thanksgiving 2009, WalMart.com narrowed the gap, getting 12.4 percent of the traffic received by the top 500 U.S. retail sites, only 2.6 percentage points behind Amazon.com.

Amazon.com has an opportunity in mobile commerce. According to e-Marketer forecasts, more than 70 million US mobile phone users will access the Internet from their device in 2009. In June 2009 Amazon acquired Snaptell, a mobile app that lets users take a picture of any product and receive information on the product and buy it online. Moreover, Amazon also launched an application for the iPhone and Android-based mobile phones which allows users to shop through their smartphone. Amazon.com will probably increase its investment and resources on the mobile commerce to gain market share in a nascent field.

Finally, Amazon will keep expanding its offer of digital products through external acquisitions. Over the past years it has mainly invested in books (AbeBooks, CreateSpace and Lexcycle Inc.) and audio (Audible, Brilliance Audio). At the end of 2008 Amazon.com acquired Reflexive Entertainment and in early 2009 it began hosting casual game content for internet downloads. It is to be expected that Amazon.com will continue to invest in on-line games and video.

Compiled by Jimena Almendares