In the summer of 1994, a job posting for software engineers was made on Usenet, an early forerunner of Internet forums. The firm in question intended to “pioneer commerce on the Internet.” Eligible applicants must be able to develop complicated systems “in about one-third the time most competent people think possible.” Résumés were to be addressed to Jeff Bezos of the Seattle-based firm Cadabra, the precursor to Amazon.
When Amazon began trading a year later, Bezos’ prediction that books were the ideal product for an e-commerce start-up proved correct. Within two months, Amazon, which bills itself as “the world’s largest bookshop,” was generating $20,000 each week. The firm altered its motto to “Earth’s biggest book and music store” in 1998 since it was already broadening its product offering. That year, it expanded beyond the United States, opening its first overseas locations in the United Kingdom and Germany. As internet use increased and e-commerce took off, Bezos was named Time magazine’s Person of the Year in 1999 for his success with online shopping.
One of Amazon’s initial challenges was the dotcom crash, which reduced its stock price from more than $4 (rebased for stock splits) in November 1999 to only 30 cents in September 2001. However, Amazon’s setback was just momentary. In November 2000, the business launched Amazon Marketplace, allowing third parties to sell directly to customers, a significant growth driver.
Almost three decades later, it is still difficult to comprehend Amazon’s magnitude. Consider its vast warehouse in Dartford, on the outskirts of London. It has millions of stock goods, with hundreds of thousands purchased daily – and it takes two hours from the time an order is placed for it to be chosen, packed, and sent, according to the firm. Now, visualise the same image and magnify it by 175. That is the number of “fulfilment centres,” as Amazon refers to them, that it has worldwide. Even if you believe you can envisage the never-ending trail of shipments crisscrossing the world, remember that this is only a portion of what Amazon is involved in.
July 5 is the official 30th anniversary of Amazon, the online bookshop that grew up and transformed how we buy. After only five years in operation, Amazon produced a solid $650 million in annual revenues in 1999, accounting for around 5% of total e-commerce in the United States. However, the category accounted for only 0.6% of total retail sales, according to an interactive Federal Reserve graphic based on Census Bureau information. After a quarter-century of unrelenting development, Amazon’s U.S. goods sales for the most recent year are estimated to be as high as $540 billion, with e-commerce accounting for 15.6% of the total retail market. For its first quarter of 2024, it announced a 13% increase in net sales to $143.3 billion, compared with $127.4 billion in Q1 2023.
Amazon has several subsidiaries, including Amazon Web Services (AWS); Zoox, their self-driving car company; Kuiper Systems, a satellite IoT provider; and Amazon Lab126, a computer hardware manufacturer. Its subsidiary, AWS, offers cloud computing platforms and APIs to consumers and businesses and has recorded $25 billion in revenue growth of 17% yearly. It is also a major streamer and media firm, with Amazon Prime Video, a market leader in home video systems, Ring, smart speakers, Alexa, tablets, and e-readers, Kindle. It is so vast and pervasive, impacting so many aspects of life, that people eventually take Amazon’s presence in their everyday lives for granted.
While Amazon’s company has continued to expand swiftly, it was tested during the COVID-19 epidemic. As the corporation maintained profitability, it added hundreds of thousands of new employees. This decision was challenged since many employees claimed poor health and safety precautions and sick leave regulations. Furthermore, following the surge in online shopping caused by the quarantine, e-commerce’s percentage of total retail sales fell to less than 15% in the third quarter of 2023. Over the last four years, the e-commerce segment of retail industry sales has increased by only 0.5%. Amazon has implemented new technology to address these issues and increase workplace employee safety. This included wearable devices to improve social distancing and its Distance Assistant machine learning tool.
One of Amazon’s main advantages in the AI competition is its cloud computing business, AWS. AWS, the world’s largest cloud services provider, has experienced increased growth as AI technologies become more widely adopted. Similarly, Amazon’s cloud platform is a vital infrastructure for enterprises developing and implementing AI applications, ensuring the company stays a technological leader. For more than 20 years, AWS has worked to support economic growth in Europe by investing in infrastructure, jobs, and skills. More generally, Amazon has spent more than €150 billion (US$163 billion) in the EU and hired over 150,000 workers in permanent positions across the European Single Market.
In recent news, Amazon stated that research commissioned and completed by Accenture found that optimising AWS workloads may cut the carbon footprint of AI workloads by 99%, making them four times more efficient than on-site workloads that need operating hardware and software. In other important milestones, Amazon joined the area of virtual voice assistants by purchasing a Polish speech synthesiser, Ivona, and introducing Amazon Alexa with the Echo in 2014. In 2023, a new array of Echo products was introduced to provide users with more options for accessing Alexa, while sales of Alexa-enabled devices surpassed half a billion. As it expands its AI and cloud services globally, Amazon is set to dictate the future of large digital transformation endeavours.
Despite its success in certain sectors, Amazon has been less successful in others. This includes the Amazon Fire Phone, which was launched to compete with smartphones by Apple and Samsung and was discontinued after 2015; Amazon Destinations, a platform designed to assist users with booking holidays that closed in 2015; and Amazon Tap, a portable Bluetooth speaker with Alexa capabilities launched in 2016 that required users to press a button to activate the assistant and was subsequently discontinued in 2018 as the Echo and other devices were preferred for the Amazon recently cancelled its Astro for Business security bot, which was supposed to offer protection for SMEs by roaming and monitoring their facilities.
Amazon may also face increased regulatory scrutiny, including facing uncomfortable questions about what it does with our data, its environmental effect, and if it is too big. These obstacles may motivate action, such as dismantling the monopolies that evolved into behemoths in the early 20th century. The Economist predicts that anti-trust scrutiny will be intense, perhaps impeding development. A second challenge is generative artificial intelligence, in which Microsoft has taken the lead, and Amazon’s cloud computing supremacy is diminishing. In 2022, Amazon’s market share was 13 points greater than that of Microsoft; currently, it is only six points.
Alphabet and Meta are once again trying to break into e-commerce. Walmart (the biggest player in the $2 trillion US grocery sector) is expanding into online advertising and launching a Prime-like subscription service. Despite the fact that Amazon’s fourth decade will be more complicated than its third, its impressive track record of customer focus and innovation should serve it well. During the dotcom crash, naysayers called the corporation “Amazon.bomb”. When it expanded into cloud computing, sceptics jeered. To dismiss Amazon again today would be a mistake – and maybe an expensive one.
The company has a lengthy history of reinvesting in its operations and producing very modest taxable earnings compared to revenues. However, their claim that its retail platform has “razor-thin margins” and relies heavily on AWS for profit is exceedingly doubtful. Indeed, it is being directly challenged by a live antitrust action filed earlier this year by the Federal Trade Commission in the United States. It says that anti-competitive tactics in Amazon’s marketplace segment unjustly raise prices throughout the internet.
Another issue is its size: the cities where its Western consumers dwell are not designed to handle large deliveries. This makes growing economies such as India, Mexico, and Brazil significant. Another aim for Amazon in the following years is to stave off competition from Chinese rivals such as Temu and Shein. Amazon has created the spending habits of Western consumers by acting as a trusted intermediary between them and Chinese manufacturers and bolting on easy returns and lightning-fast delivery.
This presents new problems about how inventories should be planned and handled, pricing regulated, and goods designed for a constantly changing client and their desired experience. It appears that each client cohort at different shops behaves differently. Furthermore, their expectations vary depending on the store, brand, and channel. Given the changing nature of client behaviour, this is a challenge. A firm grasp of where the consumer is now and attempting to predict where they will go appears to be a smart beginning point. But, for now, as long as purchasing requires using a search bar, Amazon has it covered.
Author: Amar Chowdhury
