Amazon.com:
Evolution of the E-Tailer
Case Study Analysis by:
Djadja Achmad Sardjana
STMB-Biztel
10/8/2009 STMB Biztel-DASMR 1

Introduction
• Online in July 1995 Amazon.com
grew to the leading Internet retailer
in the world.
• Global growth came at a price
Late 2000, analysts have question re:
Amazon’s ability to survive (See
Exhibit-1)
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Exhibit-1
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Introduction (Cont.)
• Bezos (Amazon Founder) response
on early 2001:
– First is profitability by fourth quarter
2001.
– Second is to take advantage of the
opportunity to be the first truly global
retailer.
– Third is to expand product selection.
– Fourth is to institutionalize at Amazon
the ability to continually innovate.
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Case Facts: In The Beginning
• Amazon founded by Jeff Bezos in 1994
intention of riding the Internet wave.
• Prospectus of Amazon.com’s IPO :
– Founded to capitalize on the opportunity for
online book retailing.
–An online bookseller has virtually unlimited
online shelf space
– In addition, by serving a large and global market
through centralized distribution and operations,
online booksellers have cost advantages
relative to traditional booksellers.
• Amazon.com’s was hugely successful,
selling over 3 million shares at $18 per
share.
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Case Facts: GET BIG FAST
• Since IPO, Amazon grew as a hyper-
active corporate Get Big Fast (GBF),
see Exhibit-2.
• In 1998, started selling not only book
Expansion as a customer-led evolution.
• In 1999, continued to expand its category
offerings:
1. Adding products such as electronics, toys,
software and music.
2. Introduced both co-branded auctions and
zShops Marketplaces The revenue models for
these types of businesses were fundamentally
different from Amazon’s initial model.
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Exhibit-2
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Case Facts: GET BIG FAST (Cont.)
• End of 1999, began creating the
ACN Acting as a portal for other
retailer.
• December 28. 2000, opened an
online bargain outlet store serve
as a vehicle to liquidate excess
inventory from Amazon’s stores and
zShops.
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Case Facts:
Negative Operating Cycle
• A key advantage of Amazon’s
business model Negative
operating cycle.
• Amazon generated interest on the
full sale price (cost of goods and
gross margin) for over a month.
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Core Problems:
• Amazon comparative lack of
physical infrastructure.
• No head to head competition
available.
• Dot-com business smashed.
• Sales growth declined.
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Amazon Strategic Action:
• Listen: the traditional definition
applies;
• Invent you can listen to
customers, but they don’t always
know what they want or what is
possible;
• Personalize investing heavily in
personalization technology.
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Amazon Solutions Alternatives:
• announced that it planned to start
charging publishers for recommending
selected titles in e-mail promotions to
Amazon customers.
• Amazon would also require publishers to
purchase advertising spots on its Web
pages.
• Amazon still planned to recommend
books it considered worthwhile for free
via e-mails.
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Conclusions:
• Amazon had matured far beyond
the lnitial online business concept
described in its 1995 prospectus.
• Amazon innovated and created a
new form of retail organization.
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Strategic Questions:
• What was less clear was what the
company would become in the future,
what kind of business model it should
adopt, and how such a model should be
valued?
• The question was whether the new form
was viable or whether existing firms
could imitate and incorporate some the
features of the new form to enhance their
own survival chances in the quickly
changing’ retail ecology?
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