Amazon.com (US)

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Internet retailer Amazon claims to offer "Earth's Biggest Selection", a mammoth range of products which now goes far beyond books and music to include anything from automobile parts to gourmet food and from clothing to household furniture. The business is firmly established as the #1 internet retailer in each of its global markets, which include the key territories in Europe and Asia as well as North America. No other company has done so much to establish the reliability and functionality of e-commerce. But Amazon has also traditionally suffered from low profit margins and an over-rated share-price, and rival companies have tended to outpace it in profit growth. That laggard performance appeared to change in 2007, helped along by the launch of the Kindle electronic reader. Subsequent investment in infrastructure and technology prompted another slump in profitability in the 2010s. However, the evolution of Kindle has seen the emergence of a new role for Amazon as an entertainment broadcaster, and the group has made a renewed commitment to increasing its profit, not just its revenues.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 8th Dec 2016: Amazon is planning to overturn traditional bricks and mortar retail with the launch of a new shopping app, Amazon Go, which will allow customers to purchase items from Amazon-branded grocery outlets without needing to visit the checkout. Just pick up and walk out, is the concept. Shoppers activate the app on their phones to enter the store; the system then uses NFC technology on scanners at the exit to identify any products shoppers have picked up in the store when they leave and automatically debits their account. A trial store is already operating in Seattle for Amazon employees, selling own-label food items and meal kits. It will be opened to ordinary customers early in the New Year.

Adbrands Weekly Update 24th Nov 2016: Amazon is testing the water for a global battle with rival streaming service Netflix by removing geographic restrictions for The Grand Tour, the new motoring show from the former presenters of BBC Top Gear. As a result, the company claimed the first episode was viewed by "millions" of Amazon Prime members in as many as 200 countries worldwide. No actual viewing figures were released, even to the Grand Tour production team. Amazon's Prime Video service is only officially available so far in a handful of countries, though the more general Prime delivery service is more widely available. The company will make The Grand Tour, and possibly other self-produced shows including The Man In The High Castle and TransParent, available to a wider audience to boost Amazon Prime subscriptions and test the waters for a wider video roll-out.

Adbrands Weekly Update 3rd Nov 2016: Amazon's 3Q results disappointed after a recent strong run. Profits were far weaker than expected as a result of renewed investment in infrastructure. In the last quarter the company opened 23 new warehouses worldwide, compared to just three in the first half of the year. It said this is designed to help it cope with the upcoming holiday rush. Although net income of $252m represented a big improvement on the year-ago period, it was far below the profit generated for the three previous quarters, taking analysts by surprise. A 29% increase in revenues (to almost $33bn) was matched by an even bigger increase in costs, while losses from international operations more than doubled to $541m. The company's forecast for the current quarter was also far worse than investors were expecting as a result of continuing investment in warehousing and faster delivery service. Consensus estimates for 4Q operating income had been $1.7bn; Amazon now says it might only break-even.

Adbrands Weekly Update 13th Oct 2016: Amazon ramped up its US operations with two new developments. The retail giant plans to open a network of convenience store outlets selling perishable food staples like milk, meat, fruit and vegetables. Customers will also be able to pick up other items they have already ordered online, or use in-store screens to make additional purchases for same-day delivery. Many of the outlets will have drive-through service, where online grocery orders will be brought direct to the car. Separately, it announced the launch of a new music service via its Amazon Echo voice-activated wireless speakers that will offer unlimited streaming for just $3.99 per month, less than half the $9.99 charged by rivals. The voice interface is designed to be extremely flexible and intuitive, allowing users merely to ask for the "new song" by a particular artist, or music from a particular period, or even just any song containing specific lyrics.

Adbrands Weekly Update 29th Sep 2016: Amazon is building its own inhouse delivery service to compete with the likes of UPS and Fedex, according to a report in the WSJ. As the company's online sales soar, delivery costs have been rising steadily, and accounted for almost 11% of revenues in 2015, or $11.5bn. In the case of Prime customers, who get free shipping in return for an annual subscription, those costs have to be absorbed by Amazon itself. The company already manages many local deliveries itself in busy metropolitan areas. Setting up its own long-distance freight service instead of sub-contracting to UPS or Fedex could save as much as $1bn a year, analysts believes. Amazon could also make its inhouse resource available to third-party retailers to defray costs.


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Background

Free for all users | see full profile for current activities: In the early 1990s, investment banker Jeff Bezos saw the possibilities of selling products to a mass market via the new and expanding internet, which seemed to offer a sales channel unfettered by the physical logistics involved in operating a retail outlet and managing inventory. He selected books as his commodity because they were comparatively fashion-free and offered a high profit margin per copy. He moved from New York to Seattle in 1994 to be near a big wholesale supplier, and launched Amazon.com the following July. 

Even in those dark days of the internet, the site took off quite quickly, and by the end of the year, Amazon was selling more than 100 books a day. Embracing the communal nature of the web, the site encouraged buyers to submit reviews of the books they had purchased. While this surprised and angered some suppliers, it greatly enhanced Amazon's relationship with its customers. By the end of 1996, sales had risen to almost $16m, before rocketing to more than $140m a year later, encouraging the company to adopt the tag "Earth's Biggest Bookstore". The company floated in 1997, and in 1998 broadened its range with the addition of CDs and videos. Also that year, responding to plans by German group Bertelsmann to establish a rival book service in Europe, Amazon acquired two smaller rivals - Bookpages in the UK and ABC Bucherdienst in Germany - which rebranded as local versions of Amazon. 

In 1999, toys, electronics, software, video games and home improvement joined the mix. That year sales raced through the billion-dollar barrier to hit $1.6bn, and Time magazine selected Bezos as its Person of the Year. The company also established outposts in France and Japan for the first time. But within just a year, Amazon was already beginning to attract detractors, who warned that the business was spreading itself too thinly. Investments in other online services such as pharmacy drugstore.com, delivery service kozmo.com and pet supplies outlet pets.com all proved write-offs. As if to cement Amazon's tarnished reputation, the group reported a massive $1.4bn loss for 2000. 

Bezos launched a major restructuring in 2001, laying off 15% of its work force. The company also muscled into the territory of rival eBay, introducing person to person transactions via its ZShops third-party stores and auction services, as well as taking over the online operations of other companies struggling with their own e-commerce service, such as Target and Toys "R" Us. Those moves soon began to deliver results, and the group delivered its first modest quarterly profit at the end of 2001, and again in 2002. A year later the company reported its first two consecutive quarters of profit at the end of the year. In 2004, it established its seventh online portal with the acquisition of China's leading internet retailer, Joyo.com.

In early 2006 it began developing a music download service to compete directly with Apple's iTunes. According to press reports, the company was considering a subscription plan model broadly similar to that offered by mobile phone operators: users would subscribe to a dedicated Amazon download service and receive a custom-made music player as part of the offer, pre-loaded with a selection of promoted tracks which can then be swapped or updated online. By mid-year it became apparent that Amazon had abandoned the music service in face of the continuing dominance of Apple, but was instead preparing to launch a video download service. This arrived in September under the name Unbox. See full profile for current activities


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