It isn’t easy to build a commercial giant from scratch. As for any objective of substance that you have in this life, you need work, perseverance and, it must be admitted, also a little (or a lot) of luck. A good example of this is Amazon. A company that, in just 26 years, has had enough time to become one of the world’s leading companies. A company with a history on the same level as others like Apple, Google or Microsoft. One of those companies, which begins in a dusty, abandoned garage and ends in a skyscraper.
How Amazon Started: Cadabra
Jeff Bezos, a young man fresh out of Princeton, the university he graduated from in 1986, he quickly began to make a name for himself in the business world, eventually becoming vice-president of the major Wall Street firm DE Shaw and Co. A position he left in 1994 to launch his own company from Seattle (Washington).
After reading a report on the future of the Internet that projected annual growth of web commerce of 2,300%, in the space of a garage (Seattle in 1994), Jeff Bezos decided to build his new online company. The result of this adventure was Cadabra (the embryo of Amazon).
When the company was born, it was exclusively dedicated to selling books on the Internet. “With more than three million titles for sale and available throughout the world, the books category has more articles than any other”, acknowledged the founder of the company in an interview years ago.
At the same time, in his incessant quest to improve business volume, the entrepreneur soon opted to change the name of the company. Bezos selected the name of Amazon by looking at the dictionary, he chose the name because of its association with the Amazonas river and also because it began with the first letter of the alphabet. Amazon’s slogan is From A to Z.
The beginning of Amazon
Bezos decided that this new business would sell books over the Web, due to the large worldwide demand for literature, the low price that could be offered for books, and the great selection of titles that were available in print.
Amazon.com website was launched on July 16, 1995, immediately beginning an exponential growth of the company and its presence on the web. After 30 days of Amazon.com going online and without media promotion, Amazon was selling books in all 50 US states and 45 countries
Bezos wanted to work on making the website as customer-friendly as possible and relating the site to all types of customers. The company offered discounts, affordable prices, offered topic areas to browse, books recently featured, a recommendation center, access to customer reviews… And a bunch of other customer hits!
Despite the quick takeoff, not everything could be pink. It wasn’t long before other companies started attacking the new company, like Walmart that accused Bezos’s business of having stolen his business idea.
Amazon Gets Bigger
Amazon went public offering shares on May 15, 1997, and while trading under the NASDAQ stock symbol AMZN, the company’s shares at that time were being offered at $18 per share (shares have performed modestly since, up a mere 211x).
The business plan that Amazon decided to go for in the beginning was completely unusual and unexpected. The company didn’t expect to make a profit until four or five years later, and because of this kind of “slow” growth, shareholders began to complain that the company wasn’t reaching profitability fast enough to justify its investment and even it wasn’t fit for long-term survival.
In November of 1997, Amazon opened an East Coast distribution center in New Castle, Delaware, in order to serve customers on the East Coast.
Bezos’s company continued to grow in 1998, so much so that it expanded its offering to other products, such as music, video game or movie compact. Amazon.com ended the second quarter of 1998 as strong as ever.
In the last year of the 20th century, Amazon designed a way for third-party sellers to sell used merchandise in what it called zShops (now known as the Marketplace). This program was a success during the first months since one-quarter of consumers had bought something using this service. Besides, Bezos ended the year by the big door when Time magazine honoured him with its prestigious “Person of the Year” award.
In 2000, the company took a total turnaround transforming itself into a marketplace and allowing its users to find and sell a variety of products and services online with the highest levels of quality and guarantee in the market.
Having now fully entered the 21st century, Amazon adventured to take another (huge) step in its relentless evolution. In 2002 the company continued to diversify by launching Amazon Web Services (AWS). This service is a cloud services platform that provides a variety of infrastructure services such as storage, networks, databases, application services, messaging, artificial intelligence, among others. AWS has a presence in 190 countries around the world. Its data centers are in the United States, Japan, Australia, Brazil, Europe and Singapore. Amazon’s biggest source of operating profit is its AWS program.
Amazon bought Joyo in 2004. The company used to sell books and other media products, shipping to customers nationwide. Joyo was renamed “Amazon China” when Jeff Bezos acquired the company. The acquisition deal also included control over other Chinese subsidiaries and partners owned by Joyo.com. Ecommerce is very popular in China and is one of the biggest markets for eCommerce. China is among the country’s largest exporters of commercial goods. The USA is a special country for Chinese manufacturers as the number of china-based sellers is growing on Amazon.
In 2005 it launched the popular Amazon Prime service, which allows products sold by the company, as well as those of some third parties, to be shipped completely free of charge in a period never exceeding 48 hours. However, it is usually done in one day!
When Amazon launched its Fulfillment By Amazon (FBA) service in 2006, it was a groundbreaking program. FBA is a program that allows sellers to sell items on the Amazon platform, with the advantage of being able to store them in their warehouses and also Amazon is responsible for sending them to customers, handling all refunds, returns and providing an excellent service to the client, rather than dealing with the entire process themselves. Thus began an ascending pyramid of growth for Amazon.
Third-party sellers are part of the core of Amazon, and they are one of the most important sources of income, along with AWS, of Amazon. More than 50% of all Amazon sales come from third-party sellers.
Despite the rapid diversification of the company, there were still many projects that Bezos hadn’t had time to touch on. He began to acquire companies and start new projects such as Joyo (the largest online seller of books and electronics in the Chinese market), Audible (audiobooks company), Zappos (shoe shopping site), IMDB, Good Reads, Kiva Systems (robotics company), Twitch (social video game streaming site), Whole Foods, and The Washington Post among others.
And to put the last icing on the cake, Amazon has developed its own innovations such as Kindle, Echo, Alexa, Fire Tablets, Fire TV…
The success of this company has really been to think of people as customers and not as consumers, always thinking about the quality and what customers really want. The long-term vision didn’t create great confidence at first, but today it’s the key to success. Amazon has evolved the world of e-commerce, the ability for customers to rate products, wish lists, the ease of one-click purchase, and flexibility in returns.
However, this great success story is a life lesson and inspiration for all and teaches us once again that, as stated by Bezos… “At the end of our lives, we are the result of the choices we have made throughout it”.
The success of the largest companies of our time, which tend to belong to the technology sector, is usually explained by their capacity for innovation, by their high inventiveness and by risking when others didn’t.
During 2020 the pandemic hit the global economy hard, the increase in the value of Amazon shares increased the fortune of its founder and CEO, Jeff Bezos, in value from January 1st, 2020 to October 31st, 2020.
Amazon is one of the most profitable companies in the world; in fact, it has more revenue than many states. The world is in the hands of transnational companies: according to the income level of the 100 largest economies in the world, 69 are companies and the rest are States, thus far surpassing the power and influence of most countries in the world.
There’s a common and unfriendly strategy in its continual growth plan: offshoring. The transnationals move their production to countries with fragile social and labour protection systems and with no environmental legislation. And in addition, they use tax havens to avoid paying taxes generating losses of one billion dollars a year. The result: an unprecedented concentration of wealth, inequality, systematic human rights violations, and destruction of ecosystems. Despite the seriousness of the human rights violations and environmental crimes of many transnational companies, there is no international agreement that holds them accountable. When the law doesn’t work the same for everyone, there’re always players who benefit.
In 2014, the Binding Treaty was launched, a process that obliges transnationals to respect human rights and the environment. Transnational corporations systematically prioritize profit over the environment and human rights. They are very well protected and can very rarely be held responsible for the violations they commit, which is why a legally binding treaty is necessary that allows victims access to justice and makes companies have to assume responsibility for their violations.
Starting with books, Amazon has spread its tentacles to other business areas ranging from the sale of all kinds of products to cloud services. Further, attention to the consumer has taken Amazon to the top and to become a giant that few can stand up to.
In the last fifty years, in full effervescence of capitalist idealism, we have witnessed the creation of multiple empires that have ended up dominating the world in their sectors. Empires that, on their way to growth, have ruthlessly devastated wherever they have passed. And the case of Amazon is no different. From its beginning, in the mid-1990s, Amazon has been involved in numerous controversies. The business model of this company has been criticized by the booksellers and publishers sector; in its logistics centers, according to some of its workers, they work under not very favourable conditions; and also, an investigation has been initiated on the fiscal practices of Amazon. These are just a few examples that show that growth does come at a price after all. Amazon has become a true giant that is on its way to dominating the world of eCommerce globally (if it doesn’t already).