Amazon.com, Inc. is an American-based multinational electronic commerce company. Headquartered in Seattle, Washington, it is America's largest online retailer.
Jeff Bezos founded Amazon.com, Inc. in 1994. It started as an online bookstore, but soon diversified to product lines of VHS, DVD, music CDs and MP3s, computer software, video games, electronics, apparel, furniture, food, toys, and so on.
Amazon.Com is a leading online retailer company, offering for sale different items such as books, music, DVDs, videos, toys, electronics, software, video games etc. Serving almost 22.5 million customers over 150 different countries.
Amazon does an excellent job in offering low prices to its customers. As with many online retailers the company reserves the lowest prices for the most popular products and assigns higher prices to less popular products.
This pricing strategy helps keep Amazon competitive in the online market.
Another way the company meets its objective of low prices is through offering free shipping. If a certain amount is spent with the company in any one purchase, the customer will receive free shipping for their order.
The most important competitors for Amazon.com are E-Bay (on-line auctions and retail sales), Barnes and Noble (books sales and other products) and CDnow (on-line music retailer).
In general, financial results for the Internet Company’s sector are like Amazon’s with some exceptions. One of the main characteristics of this sector is that almost all companies show strong revenues and increasing losses.
To understand the structure of profit and loss accounts from Dot-Com companies as Amazon.com, we just have to see the main characteristics of e-commerce.
The new economy is based in technology and marketing. The competition in Internet is mainly based on a strong technological platform able to maintain the business “on the air” and aggressive marketing promotions to create a brand name and let the Internet users to know your business.
Through extensive promoting and advertising of its products, Amazon.com, as well as any other online store, has determined its target market. Amazon.com accomplished this by segmenting the entire potential market.
The potential market is segmented according to several variables that include, demographic, geographic, situation, and psychographic.
Demographically, Amazon.com appeals to customers that have access to the Internet. Scarborough Research found that 41 percent of online shoppers are between the ages of 35 and 49, 69 percent are college educated, 65 percent are white-collar, and 58 percent have an income over $50,000.
About 55 percent men and 49 percent women using the Internet said that Amazon.com is their favorite site to make online purchases.
Another demographic factor affecting online purchases is that of income.
The situation and occasion of online shoppers also are used to segment the market.
A survey done by CBD Research and Consulting found that 30 percent of online shoppers like the ability of shopping in their own homes and that 25 percent liked the fact of being able to shop at any time of the day.
Price also was a reason why online shoppers like the Internet better, since the Internet is usually where the best prices are found.
Since 2007, Amazon has made significant progress to reduce excess packaging in its shipments to customers and has introduced additional types of recyclable packing materials to protect items while in transit.
As a result, the number of packages shipped in a wrong-sized box has decreased dramatically, significantly reducing packaging waste and transportation costs.
Amazon is a profitable organization. In 2005 profits for the three months to June dipped 32% to $52m (£29.9m) from $76m in the same period in 2004. Sales jumped 26% to $1.75bn.
Customer Relationship Management (CRM) and Information Technology (IT) support Amazon's business strategy. The company carefully records data on customer buyer behavior. This enables them to offer to an individual specific item, or bundles of items, based upon preferences demonstrated through purchases or items visited.
It was one of the original dotcoms, and over the last decade it has developed a customer base of around 30 million people.
It was an early exploiter of online technologies for e-commerce, which made it one of the first online retailers. It has built on nits early successes with books, and now has different product categories.
As Amazon adds new categories to its business, it risks damaging its brand. Amazon is the number one retailer for books. Toy-R-Us is the number one retailers for toys and games. Imagine if Toys-R-Us began to sell books.
This would confuse its consumers and endanger its brands. In the same way, many of the new categories, for example automotive, may prove to be too confusing for customers.
The company may at some point need to reconsider its strategy of offering free shipping to customers. It is a fair strategy since one could visit a more local retailer, and pay no costs. However, it is rumored that shipping costs could be up to $500m, and such a high figure would undoubtedly erode profits.
The company is now increasingly cashing in on its credentials as an online retail pioneer by selling its expertise to major store groups. For example, British retailer Marks and Spencer announced a joint venture with Amazon to sell its products and service online.
There are also opportunities for Amazon to build collaborations with the public sector. For example the company announced a deal with the British Library, London, in 2004. The benefit is that customers can search for rare or antique books.
In 2004 Amazon moved into the Chinese market, by buying china's biggest online retailer, Joyo.com. Joyo.com has many similarities to its new owner, in that it retails books, movies, toys, and music at discounted prices.
All successful Internet businesses attract competition. Since Amazon sells the same or similar products as high street retailers and other online businesses, it may become more and more difficult to differentiate the brand from its competitors.
International competitors may also intrude upon Amazon as it expands. Those domestic (US-based) rivals unable to compete with Amazon in the US, may entrench overseas and compete with them on foreign fronts. Joint ventures, strategic alliances and mergers could see Amazon losing its top position in some markets.
The products that Amazon sells tend to be bought as gifts, especially at Christmas. This means that there is an element of seasonality to the business. However, by trading in overseas markets in different cultures such seasonality may not be enduring.