Lentis/Amazon and the Ecommerce Evolution

Introduction

Amazon's logo since 2000

The way we shop or surf the web will never be the same. In the period of just two decades, Jeff Bezos' fledgling online bookstore grew into one of the most powerful corporations in the world, driving the evolution of e-commerce, but not without controversy.

History of Amazon

On July 16, 1995, Amazon.com delivered its first book through an online transaction. However, there was far more to Amazon than just a book delivery service. Its founder, Jeff Bezos, had a vision from the very start: he would revolutionize the use of the internet to do business. He registered “Amazon.com” in 1994, named after the south American river. The massive river not only reflected to his plans for Amazon's growth, but also prevented Bezos from being constrained to any one market through his brand.

In 1995, Bezos chose to provide online purchase and delivery of books. A year later, the company had already generated $15.7 million in revenue. However, Amazon would not be profitable until 2001, following with Bezos’s motto: “get big fast”. Amazon spent its first 6 years heavily investing in its growth. In 1998, Amazon started distributing music CDs, and in 1999 the company had expanded to toys, electronics, and tools. By then, Amazon had distributed over 200 million items to over 150 different countries.

Amazon founder Jeff Bezos in 2016

The company first saw profit in 2001. It’s share price at the time had risen to $34 from its original price of $18 in 1997. But most importantly, Amazon Web services was released. This demonstrated Bezos’s original vision for the company to be more than an online retailer, but also a tech company that would change the way we use the internet. Over the next decade, Amazon would continue to grow and expand its reach, developing hardware like the Kindle and Echo, and introducing new services like Amazon prime, prime video, and prime music

Amazon celebrated its 25-year anniversary in 2019. Its share price was above $1900, a 100x increase from when the company first went public. However, the company has faced significant controversy over the course of its growth. Amazon has been frequently called out for its poor workplace conditions for Amazon warehouse employees, such as concerns about overworking and exhaustion as well poor safety precautions during the coronavirus pandemic. At one such warehouse in Staffordshire, 115 ambulances were called to the facility within two years on account of dangerous work conditions needed to meet impossible targets. Despite these growing concerns over worker safety and ethics, Amazon continues to expand its reign over commerce and cloud resources.

Keys to Amazon's Success

Amazon has a had a remarkable ability to retain its growth mindset and pioneering success. In a recent interview at Southern Methodist University in Dallas, TX, Jeff Bezos shared what he believes to be the four pillars of Amazon's ethos.

"Customer Obsession, not Competitor Obsession"

In Bezos' opinion, a company can either be focused on outperforming the competition, or outperforming customer expectations. He believes that the customer is never satisfied, and requires constant innovation to appease.

"Eagerness to Invent"

Amazon's second pillar is an eagerness to invent. Bezos believes that in order for a company to be successful, it must be willing to take risks and be a leader. In his own words, “every time we’ve done something in a ‘me too’ fashion, we have failed.”

"Long-Term Thinking"

For these ideas, Bezos follows a “Long Term Thinking” approach. Instead of looking at 1-3 year project durations, he believes in a 5-7 year timeline from idea to implementation.

"Operational Excellence"

Bezos’ fourth and final principal is “Operation Excellence.” He describes this as holding himself and his employees to the highest standards from the initial idea creation, all the way through the final implementation.

A sticker expressing an anti-Amazon message is pictured on the back of a street sign in Seattle.

However, Amazon's critics would claim that these business principles are really just attractive pretexts that excuse brutal, extremely stressful work environments for its employees, from the shippers in its warehouse to the software developers in its offices. Additionally, critics say these facets are also used to justify Amazon's notorious hardball negotiating tactics with its suppliers to lower prices and force suppliers take on more of freight costs between warehouses.

Amazon Customer Reviews

One of Amazon's earliest and very impactful innovations was the use of customer reviews. When Bezos first built the capability for all customers to publish their opinions, both good and bad, he received significant backlash. Publishers called him and complained that poor book reviews would hurt their sales. Despite this, Bezos kept the customer reviews on his website because, in his words, "Our business wasn't the sale of a book. Our business was helping in the decision." In doing so, Bezos ushered in the popularity of customer reviews, which can now be found on nearly every retail site.

Impact on Other Businesses

Audio/Visual Media

Amazon first introduced video streaming through its Amazon Unbox service in 2006. This provided users with video-on-demand, where they could pay to download videos. In 2011, the service was shifted to focus on the expansion of amazon prime, with prime users allowed access free shows and movies. As of 2018, Amazon prime trails Netflix and Hulu as the third most popular video streaming service by subscriptions. Amazon Video’s impact is mostly through competition against other subscription services. Amazon stands out for its popular original content, as well as its ease of renting and purchasing on top of included content. While the service is limited in its availability for third party shows, its integration with Amazon Prime makes it highly accessible to users who make use of other Amazon benefits through Prime. Amazon Music is less prevalent than Amazon prime video due to its highly successful competitors, namely Spotify and Apple music.

Global Standards of Shipping

Amazon Prime, which now encompasses fields such as music and video streaming, was launched in 2005 as an improvement on shipping times. For $79/year, members would receive 2-day shipping for free on eligible items. This began a change in consumer expectations, as 2-day became more and more the norm. In an effort to meet this new consumer demand, Walmart introduced a deal where eligible items shipped 2-day for free, if the total was above $35. Similarly, in 2018, Target introduced free 2-day shipping when either buying more than $35 of eligible items, or using your Target RedCard.

On April 25, 2020, Amazon again pushed the boundaries of shipping potential. They announced that $600 million would be invested into their processing facilities to now make 1-day shipping standard for Prime members. This yet again affected their competitors. The next day, in light of this news, Target shares fell 6% and Walmart shares fell 2%, while Amazon shares rose 2.5% .

The latest development in Amazon's shipping capabilities is Amazon Prime Air. This is Amazon's drone delivery system, which has not been fully unveiled yet but has been successfully tested since 2013. Through Prime Air, customers in qualifying areas will receive their packages, up to 5 lb in weight, within 30 minutes of ordering. In August 2020, Amazon received FAA approval for their drone fleet, which is a significant step forward. They are joining UPS and Wing, the other two companies with licensed drone operations.

Cloud Computing

Amazon Web Services (AWS) Loft - NYC

Amazon Web Services has its roots in the early 2000s, back when Amazon was a struggling e-commerce company with a frenzy of growth trying to figure out how to scale their computing infrastructure to their business needs. In order to speed up application development, Amazon sought out to create a set of reusable common infrastructure services its developers could utilize to avoid having to reinvent the wheel everyday. Pretty soon, the company had a eureka when it realized that it could profit by offering this to other businesses, "cloud computing", as it would come to be known. Today, Amazon Web Services earns 33% of the cloud market, and its biggest copycat competitors, Microsoft and Google, garner just 18% and 9% of the market respectively. Cloud computing is a multi-billion dollar industry and about 45% of the world's population has accessed some form of cloud computing over the past year. Cloud data centers are projected to process 94% of business workloads by 2021, from 45% of workloads in 2018. COVID-19 has only accelerated customer-demand for cloud-based offerings, with the increase in remote work and need for easy-to-access virtual tools.

Cloud computing has allowed companies of every industry to innovate faster and cheaper than ever before. By making computing power more accessible and lowering the barriers to entry for businesses, it can be thought of as the great equalizer. Tech giants, government agencies, non-profits, and scrappy startups alike utilize cloud computing to avoid having to set up their own on-premise IT infrastructure, thereby saving the up-front capital costs of equipment. Other benefits of moving to/developing in the cloud include high speeds, always-on availability, flexible scaling of resources, unlimited storage capacity, and high security.

Conclusion

There is little doubt that the rise of Amazon has had far-reaching impacts; people all around the world interact with Amazon's products in one way or another everyday, perhaps without even realizing it. To extend our chapter, one area that can be explored is the antitrust suits. The various sections in our chapter touching on Amazon's extremely diverse business ventures leads one to ponder the question, should Amazon be broken up? What are the agendas of the various parties in the Amazon antitrust lawsuits? How would this affect consumers and businesses if the lawsuits were to succeed?