Amazon

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Company Profile

Many years ago, when I mentioned the word "Amazon", people first thought of the Amazon River, the second longest river in the world in South America. Today, Amazon is more known as the brand image of global high-tech companies.

Amazon is an American e-commerce and cloud computing company founded on July 5, 1994, founded by Jeff Bezos and headquartered in Seattle, Washington. Amazon is the world's largest online retailer with the largest sales and market value. It is the largest online bookstore in the world. It is a diversified company that sells DVDs, Blu-rays, CDs, video downloads, MP3 downloads, audiobook downloads, software. Video games, electronics, clothing, furniture, food, toys and jewelry, as well as production and sales of electronic consumer products, such as e-book reader Kindle, tablet Fire tablets, streaming set-top box Fire TV. Not only that, but Amazon is also the world's largest provider of cloud infrastructure services (IaaS and PaaS).

Whether it's the choice of company name or the design of a company logo, Amazon has its own special meaning. Founder Jeff Bezos chose the name Amazon by looking up the dictionary, on the one hand because the word "Amazon" was exotic and different, as did Jeff Bezos expecting the Internet company he founded; on the other hand, the Amazon River Amazon is also the world's largest online store with the largest flow and largest rivers in the world. In addition, the company name starting with the English letter A has a special advantage, because Amazon often appears at the top when sorting by initials, which is similar to the name of Alibaba. Since June 19, 2000, Amazon's logo has added an arrow from A to Z, which means that the company has all the products from A to Z.

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In addition to the United States, Amazon has retail sites in the United Kingdom, Ireland, France, Canada, Germany, Italy, Spain, the Netherlands, Australia, Brazil, Japan, China, India and Mexico. Amazon also provides international shipping to certain countries and regions for the transport of certain products.

After more than ten years of development and progress, Amazon has now become a world-renowned technology company. In 2015, Amazon's market capitalization surpassed Wal-Mart and became the most valuable retailer in the United States. In February 2017, Amazon ranked third in the 2017 Global Brands Top 500 list released by Brand Finance.

 

 

development path

Since its inception, Amazon has undergone four stages of development, and each stage has achieved a qualitative leap from an online bookstore to a leading global Internet high-tech company.

The first stage: the establishment of the company (1994-1998)

Amazon.com was founded in Washington, DC in 1994. The company was inspired by the idea that founder Jeff Bezos called the "regret minimization framework", which means "sorry to minimize" and avoid the boom in the Internet. Failed to participate. Bezos originally registered the company name as "Cadabra" and changed its name to "Amazon" one year later.

In its early days, Amazon's only business was to sell online books and compete with physical booksellers. Originally, Jeff Bezos produced a list of 20 products that could be sold online, and eventually chose books because of the huge demand for books, the low cost of books and the wide variety of prints.

At first, Amazon obtained wholesale books from Ingram, which was sold to 50 states and more than 40 countries in the first two months. In two months, Amazon’s sales were as high as $20,000 per week. At that time, the largest physical bookstores might provide more than 200,000 books, but online bookstores could be several times more, because online bookstores could not have actual warehouses.

In July 1995, Amazon began its official operation and sold the first book, Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought, on Amazon.com. As early as May 15, 1997, Amazon made an initial public offering (IPO) to achieve listing on the NASDAQ.

The second stage: expanding business (1998-2004)

After selling the book for two years, Amazon re-positioned itself from the beginning to become the world's largest bookstore and transformed into an integrated online retailer. So Amazon began to extend its services beyond books, such as music, CDs, clothing and many other products. In addition to online sales, Amazon also began offering convenient services such as Free Super Savers Shipping.

At the beginning of its establishment, Amazon is expected to start making profits within four to five years. This slow growth has caused shareholders to be very dissatisfied with the company. The Internet bubble in the early 21st century caused many Internet companies to get into trouble and even went bankrupt. Amazon survived the bubble and jumped into an online sales giant. Amazon achieved its first profit in the fourth quarter of 2001: $5 million, while revenues exceeded $1 billion.

During this period, Amazon acquired the Chinese online bookstore Joyo for $75 million. Joyo became the seventh regional website for Amazon.com and later changed its name to "Amazon China."

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The third stage: involved in cloud computing (2005-2011)

Big data and cloud computing are the hottest terms in the Internet industry today. Amazon is one of the first Internet companies to enter the cloud computing field. Cloud computing is based on the addition, use, and delivery of Internet-related services, often involving the provision of dynamically scalable and often virtualized resources over the Internet. Cloud is a metaphor for the Internet and the Internet. In the past, the cloud was often used to represent the telecommunications network, and later used to represent the abstraction of the Internet and the underlying infrastructure. Cloud computing can achieve 10 trillion operations per second, with such powerful computing power to simulate nuclear explosions, predict climate change and market trends. Users access the data center through computers, laptops, mobile phones, etc., and perform calculations according to their own needs.

During this period, Amazon entered the cloud computing field with its cloud computing service platform Amazon AWS. As one of the early Internet companies involved, Amazon eventually dominated the cloud computing space and controlled most of the physical infrastructure of the Internet.

While involved in cloud computing, Amazon continues to enrich the online retail business, providing consumers with more choices. Not only that, Amazon is also very rewarding in many fields such as music, video, transportation, and hardware. In March 2006, Amazon launched Amazon Storage Services (Amazon S3), which allowed other websites or developers to store computer files on Amazon's servers. In August 2007, Amazon launched Amazon Fresh, a food quality preservation service.

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On September 25, 2007, Amazon launched Amazon Music, an online music store.

On November 19, 2007, Amazon launched the famous e-book reader Kindle. The emergence of the Kindle has changed the way people read and has revolutionized the book industry. In July 2010, Amazon announced that its e-book sales for Kindle readers exceeded the sales of physical books for the first time.

The fourth stage: streaming media service (2012-present)

After the first three stages of development, Amazon has gradually transformed into a comprehensive Internet company, whether it is Internet retail services, e-book reading services, or cloud computing services, Amazon has performed very well. Amazon, which is not satisfied with the status quo, has taken a fancy to the streaming media industry. It has provided streaming media services such as Amazon Music and Amazon Video, and is committed to better serving consumers. However, Amazon's footsteps have never stopped, and both the virtual and the real world have their footprints.

To improve the management efficiency of Amazon's warehouse, on March 19, 2012, Amazon acquired Kiva Systems for $775 million. Kiva Systems is a robotics company that can use Amazon to dispatch items in warehouses.

On November 2, 2015, Amazon opened its first physical retail store at the Seattle University Village Shopping Center. This is a physical bookstore called Amazon Books, with prices matching the prices on Amazon.com and combined with online reviews.

2015 is a milestone for Amazon. In this year, Amazon's market value surpassed the global retail giant Wal-Mart for the first time, achieving the "online" and "offline" transcendence, which is of great significance.

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Profit model

Since its inception, Amazon has been striving to be the most customer-focused company on the planet. In terms of online retail, the company serves consumers through retail websites, focusing on providing consumers with diverse and affordable products. By providing an online trading platform, sellers can sell products on their own websites and Amazon brand websites, complete orders through Amazon, and allow authors, musicians, filmmakers, app developers, and others to publish and sell their work. In addition to online retail, Amazon also produces and sells electronic devices. In the cloud computing arena, Amazon provides cloud services to developers and enterprises of all sizes through the AWS department. In addition, Amazon offers services such as advertising services and brand credit card agreements.

Amazon's revenue comes primarily from product sales and service delivery. Amazon's product sales have the following components: online retail; digital device sales (including Kindle e-readers, Fire tablets, Fire TVs, Echo, etc.); Amazon Prime member sales (including Prime Video, Prime Music, Prime Photos, and Kindle) E-books and other aspects). Amazon's service revenue includes fees (including commissions) and related shipping charges, AWS sales, certain digital content subscriptions, certain advertising services, and co-branded credit card-related revenues charged to third-party sellers.

The following picture shows the distribution of Amazon's 2015 and 2016 revenue regions:

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Starting in the first quarter of 2015, Amazon divides revenue into three parts: North America, International, and AWS. This division reflects changes in the company's assessment of business performance and how it manages its operations. Among them, the cloud computing department AWS is divided separately.

The North American segment primarily includes consumer retail and North American-centric sites such as www.amazon.com, www.amazon.ca, and www.amazon.com.mx, including export sales from these sites. Revenue from the international business segment is primarily derived from consumer goods retail and international website subscriptions, including export sales from these international websites, but does not include export sales from North American websites. The AWS department includes sales of computing, storage, databases, and other AWS services for businesses, government agencies, and academic institutions.

 

 

Industry overview

E-commerce industry

As one of the first companies to engage in e-commerce, Amazon is a big player in the global e-commerce space. The current top ten e-commerce platforms in the world include Alibaba, Amazon, eBay, Jingdong, Lotte, Apple, Suning, Xiaomi, dell and Wal-Mart. Among them, Alibaba ranked first, accounting for 26.6% of the market, followed by Amazon with a market share of 13%.

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Although Amazon has the second largest share of the global e-commerce market, Amazon is not performing well in the hottest China of e-commerce. According to market research firm iResearch China, the size of China's e-commerce market reached $378 billion in 2016, but Amazon only accounted for less than 1%. In contrast, the top two Tmall and JD.com snatched 56.6% and 24.7% respectively.

The following table shows the top four e-commerce companies in the world in 2016:

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Cloud computing

As the global cloud computing leader, Amazon AWS has a clear lead. According to market research firm Synergy Research Group, Amazon AWS cloud services account for 45% of the global IaaS (infrastructure services) open market, higher than the combined share of Microsoft, Google and IBM. AWS is also a leader in the PaaS (Platform as a Service) market, but the lead is not as good as the IaaS market. Although both Microsoft and Google's cloud computing revenues are growing at more than 100% a year, AWS is still twice as large in the IaaS market than the two companies.

 

 

Financial overview

With the rapid spread and development of e-commerce, Amazon has also benefited from it, and the company's revenue has maintained rapid growth. In 2016, Amazon's operating income reached US$135.987 billion, an increase of 27% from the previous year. According to the 2017 quarterly report, Amazon's operating income reached 35.714 billion US dollars, an increase of 22.61%.

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n terms of profit, Amazon has been losing money for nearly 20 years since its inception, and it was not until 2015 that it recorded its annual profit for the first time. In 2014, Amazon's net profit was negative of 241 million US dollars. In 2015, it turned losses into profit, achieving a net profit of 596 million US dollars. In 2016, its net profit rose to 2.371 billion US dollars, a three-fold increase. Amazon began to turn a profit, largely thanks to the AWS cloud computing business, which is gradually defeating Amazon's other businesses and becoming a major source of profit.

 

 

Advantages and prospects

Online retail

As a pioneer in global online retailing, Amazon has an innate advantage. In terms of online retail, Amazon is an all-round development. Whether it is goods, services, payment, after-sales service or logistics, Amazon has formed a very complete system. In recent years, Amazon has focused on cross-border online shopping to provide better services to consumers around the world. Based on its own logistics system, Amazon has an advantage in the development of cross-border online shopping.

Today, the global e-commerce market is still growing at double-digit scale. As the world's second largest e-commerce platform, Amazon's market size is only over 10%, and it still has great development prospects.

AWS

As the overlord in the field of cloud computing, in recent years, Amazon's cloud computing services have achieved breakthroughs and gradually become the company's pillar industry. AWS is the first player to enter the cloud computing market, and its first-mover advantage is the key to success. Amazon has gradually increased its profitability after nearly 20 years of continuous loss, and AWS is seen as the key to successful profitability.

At present, Amazon's cloud computing business customers exceed 1 million, and the industry covers hospitals, pharmaceuticals, space agencies, news, etc., with up to 2 million servers, including Capital One, National Security Agency, and Central Intelligence Agency. Many large companies are AWS customers. Deutsche Bank believes that Amazon's global cloud service AWS is growing rapidly, with a valuation of $160 billion. This makes AWS the most valuable business for Amazon, surpassing Amazon's e-commerce business. Today, AWS has grown into a $7 billion business. By 2020, the annual output value of this business is expected to reach 50 billion US dollars.

 

 

Risk and crisis

Intense competition

While Amazon's businesses are growing rapidly, they are also facing competitive pressures from more and more powerful opponents. Amazon has many competitors in different areas, including retail, e-commerce services, digital content and electronic devices, and network and infrastructure computing services. Some of the current and potential competitors have more resources, more customers or higher brand awareness, especially in Amazon's new products and services and new geographic areas, where competitors are often able to supply Businesses get better terms, adopt more aggressive pricing, and use more resources for technology, infrastructure, and marketing. Only by sustaining innovation and innovation can Amazon occupy a favorable terrain in the fierce competition.

Resource management risk

With the expansion of the business, Amazon's overall management capabilities in management, operations, finance and other resources are also more demanding. The company is rapidly expanding its global operations, including adding products, services and infrastructure. This expansion increases the complexity of the company's business and increases pressure on management, people, operations, systems, technical performance, financial resources, and internal financial controls.

Uncertainty in new business

Amazon has a leading position in e-commerce, logistics, cloud computing, etc., but the company is not limited to this. As a high-tech company, Amazon and its founders have always been praised for their foresight, but while the company continues to explore the unknown, it may face risks such as lack of experience or directional, strategic errors. In addition, as Amazon expands its products, services and technology to the international market, companies may encounter unprecedented constraints from all sides.

company information

Company Name Amazon.Com, Inc.

Time to market 1997-05-15

Official website https://www.amazon.com

management team

Chairman of the Board Jeffrey P. Bezos

CEO Jeffrey P. Bezos

Chief Financial Officer Brian T. Olsavsky

Listed exchange

NASDAQ Stock Exchange

Industry Internet and Direct Retail

Address 410 Terry Avenue North Seattle Washington 98109-5210

Max Shareholder Jeffrey P. Bezos

JULY 11, 2018

shide lim