1984

Amazon.com the

Hidden Empire

Three digital engines to reshape and dominate retail

Amazon.com: a digital shop around the corner…

… and a digital colossus.

Did you know: all these companies belong to Amazon…

Did you know: Amazon is also…

AmazonBasics Amazon-branded electronic products

AmazonFresh sells and delivers groceries in Seattle

AmazonStudios online socialmovie studio

Amazon WarehouseDeals offers discounts on refurbished products

Did you know: Amazon has had one of the fastest growths in the Internet’s history…
Revenues reached within first 5 years $2,8 bn

$1,5 bn

$0,4 bn

eBay

Google

Amazon

Amazon and eBay results from 1995 to 2000, Google from 1998 to 2003. Even though Zynga and Groupon appear to have an even quicker growth,they haven‟t been compared because 1- sales have not been officially disclosed 2- they haven‟t reach their fifth year

Did you know: Amazon Web Services drives these companies…

Did you know: Amazon.com is a giant…
Y/Y growth for Q1 2011 +38% Market cap $90 bn Customers 137 m

3 × growth of 2 × market cap 2 × # customers

E-commerce market

Employees 33,700
Annual revenue $34 bnInternet traffic rank 16th Retail brand 1st Paid out $1.2 bn

15 × more than
16% more than before before to buy

Source: Amazon.com, Alexa, Brandz. Market capitalization as of April 2011.

Why? A vision…
From 1994, Jeff Bezos knew he could create a retail website that would not have the limitations physical businesses encounter.

“You could build a store online that simply could not existin any other way. You could build a true superstore with exhaustive selection; and customers value selection.” Jeff Bezos

… served by great execution & innovation
Digital Engine: A digital lever providing a significant advantage
to outperform one's competitors

High fixed and variable costs No real-time metrics Slow innovation process Limited reach Limited space Slow inventory turnoverNegligible variable costs Real-time optimization A/B testing and full-size prototypes No physical frontier: worldwide market Unlimited inventory and categories Ever-improving metrics & optimization

One by one, Jeff Bezos carefully assessed the true advantages the Internet would give him, and pushed them to their boundaries

Digital engine #1

No limits
How Amazon fosters a very classicalbusiness model with the Internet’s specific advantages.

Not that disruptive of a model: “sell and deliver stuff to customers”
Amazon perfectly understood the old-economy retail cocktail: low prices, large selection, convenience/customer experience.

Low prices

Large selection

“I can't imagine that ten years from now [customers] are going to say: „I really love Amazon, but I wish theirprices were a little higher‟”
Jeff Bezos

Convenience

Jeff Bezos’ 3 big ideas

1 2 3

Digital enables limitless inventory Digital boosts customer care Digital allows high margin, lowest prices

In 15 years,
Amazon went from 1 category (books) to 16 main categories

1

LIMITLESS INVENTORY

Amazon began with books…
Competition
Market was large and fragmented. Contrary to theconcentrated music industry, no player would have the power to freeze out a new entrant.

Product
A book does not have to be accurately described: it is a universal and simple object.

Search
Search would make it easy for customers to find books among the entire database.

Book distributors were already exchanging digitalized listing.

Amazon repeatedly appears first on Google‟s resultspage.

Source: Robert Spector, Amazon.com: Get Big Fast (2002)

… and needed to get big fast
Buying power
With great size comes a better ability to negotiate volume discounts. Suppliers ignore Amazon.com at their own risk.

Brand & trust

Cost management
It is logical to amortize high fixed costs over a great number of customers. Variable costs are very low on the Internet.

Trust...