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 groceries and from clothing to household furniture. The business is firmly established as the #1 internet retailer worldwide (though it faces increasingly strong competition from Chinese rivals operating mainly in Asia). No other company has done so much to establish the reliability and functionality of e-commerce. But Amazon also historically suffered from low profit margins, and rival companies tended to outpace it in earnings growth. That laggard performance appeared to change in 2007, helped along by the launch of the Kindle electronic reader. Huge subsequent investment in infrastructure and technology prompted another slump in profitability in the 2010s. However, the evolution of the Kindle device and its various offshoots, and the rapid evolution of the Prime membership club has seen the emergence of a new role for Amazon as an entertainment broadcaster and creator. At the same time, the group has made a renewed commitment to increasing its profit, not just its revenues, and the result has been a stellar increase in its stock valuation. It has also diversified aggressively, not least through a deal in 2017 to acquire bricks and mortar organic grocery retailer Whole Foods Market for almost $14bn.

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Adbrands Weekly Update 19th Oct 2017: As further allegations mounted up against disgraced movie producer Harvey Weinstein, the media storm prompted an outpouring of years of pent-up frustration for women who have suffered sexual harassment at the hands of other executives, not just in the entertainment industry but also fashion, politics and other fields. In many cases, women declined to name the men in question. One of the few to be identified, however, was Roy Price, a close business associate of Weinstein and head of Amazon's entertainment studio. Isa Dick Hackett, a producer on Amazon series The Man in the High Castle, went public with her accusation to trade paper the Hollywood Reporter. Hackett said Price made a series of crude and inappropriate remarks to her at a social event in July 2015. She immediately made a private complaint to Amazon over his behaviour, but no apparent action was taken. Price is also said to have ignored actress Rose McGowan's complaints against Harvey Weinstein, in connection with a movie developed by her that Amazon wanted Weinstein to co-produce. Immediately after the story was republished by the Hollywood Reporter, Price was suspended. He resigned a few days later after British actress Anna Friel went public about unwanted advances he made to her at a social event. The backlash has also prompted wider criticism of Amazon's entertainment operations. Even before Price's dismissal, several producers who have worked with the studio commented on its chaotic management style. "I'm a huge fan of the company overall, but their entertainment division is a bit of a gong show," David E Kelley, whose Big Little Lies series for HBO won a Best Drama Emmy earlier this year, told the WSJ. "They are in way over their heads."

Adbrands Weekly Update 5th Oct 2017: The European Union is getting even tougher on tax avoidance by directly targeting member states which have, in its opinion, helped multi-national companies to cheat their tax bills. It has ordered Luxembourg to recoup E250m from Amazon for unpaid tax circumvented by a sweetheart deal the tiny country offered the ecommerce giant in 2003. It also ramped up its attack on Apple, which has a similar arrangement with Ireland, commencing legal proceedings against that country for failing to implement an earlier order to reclaim E13bn in back taxes.

Adbrands Weekly Update 31st Aug 2017: Amazon wasted no time in getting to grips with its newly acquired Whole Foods Market subsidiary, following approval of that takeover by US regulators and shareholders at the end of last week. Expanding its familiar marketing strategy of cutting prices to the bone to win customer loyalty, Amazon immediately announced price cuts of as much as a third on a wide range of the organic retailer's top-selling household staples. Whole Foods has until now been notorious for its high prices. “We're determined to make healthy and organic food affordable for everyone,” said Amazon's head of worldwide consumer operations Jeff Wilke. "Everybody should be able to eat Whole Foods Market quality." The ecommerce giant is already selling Whole Foods' private label products via the Amazon website, and will fold the supermarket's existing loyalty scheme into Amazon Prime to offer "special savings and in-store benefits" for Prime members. At the same time, Amazon gets its own extensive physical retail presence. It has already begun to install Amazon lockers in larger stores for physical collection and returns of products purchased online, and began selling its Amazon Echo voice-operated home speaker in outlets of Whole Foods at less than two-thirds of list price. Separately, in an attempt to keep up with his newly energised rival, Walmart sealed a partnership with Google to allow customers to shop by voice command on Walmart's ecommerce service via the Google Express app. Both deals represent the opening of a major new chapter in the transformation of traditional retail through digital technology.

Adbrands Weekly Update 3rd Aug 2017: The recent dramatic surge in Amazon's share price - making founder CEO Jeff Bezos the world's richest man for a few hours last Thursday - was checked abruptly by disappointing 2Q numbers. These appeared to show a return to the company's longtime original strategy of minimising profits to invest in future growth, a fact that many investors had clearly forgotten as a result of a couple of quarters of bumper earnings. Net sales rose 25% to $38bn, but operating income plunged by more than half, and net income by a shock 77% to $197m. That was the company's smallest quarterly profit for almost two years and less than a third of the amount investors had been expecting. The announcement was a useful check on the market's earlier euphoria, but is unlikely to have a long-term impact.

Adbrands Weekly Update 3rd Aug 2017: Amazon is reported to have called a review of what is now its substantial global media budget, creating a major potential challenge to two networks who can ill afford further losses. Current global incumbent for traditional media is Initiative, which won the account four years ago from Mindshare. The latter's sister network MEC retained digital media in North America, and has added other markets over the past couple of years. Over the same period, Amazon's budget has more or less quadrupled to an estimated $1bn a year. As a result it is almost certainly one of Initiative's biggest global accounts, and a key client for MEC which has been nursing a series of other sizeable losses.

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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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