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 6th Sep 2018: Room for one more inside! Amazon briefly joined Apple in the trillionnaires' enclosure this week. Its share price topped $2,050 on Tuesday, making it only the second US company in history to exceed a market cap of $1 trillion. That represented a 100% increase in less than a year. However, almost as if scared by its own success, the stock immediately dipped back down again below that magic level. Yesterday, the stock was trading below $2,000 a share. It's only a matter of time, though, before Amazon achieves that valuation on a permanent basis.
Adbrands Weekly Update 2nd Aug 2018: Amazon shrugged off the challenges which are facing some other technology groups (Facebook, Twitter, Netflix and others have all experienced declines in growth in recent weeks) to report quarterly profits in excess of $2bn for the first time. Earnings of $2.53bn for 2Q compared to just $157m in the year ago quarter; however, revenues of $52.9bn - up 39% year-on-year - were slightly below the level analysts were expecting. Some of the strongest growth is coming from the group's services businesses, not least the AWS cloud computing business where revenues soared by 49%. Advertising sales are also on a hot streak: revenues from the "other" division that mostly houses advertising doubled year-on-year to $2.2bn.
Adbrands Weekly Update 5th July 2018: It was only ever a matter of time. As had been anticipated for several months, Amazon moved firmly into the online pharmacy business with the acquisition of five-year-old e-tailer PillPack for a massive $1bn in cash. Amazon's offer blew rival bidder Walmart out of the water. The ecommerce giant inherits PillPack's license to sell pharmaceuticals across all 49 US states. The business is still comparatively small: annual revenues for the current year are expected to reach $100m, but the company provides a firm platform for meteoric future growth. PillPack currently specialises in pills for chronically ill patients juggling multiple simultaneous prescriptions. It mails out a month's worth of each drug at a time, presorted and bagged in "dose packets", each marked with easy-to-follow instructions including a picture of each pill and the the date it should be taken. Founder and CEO TJ Parker is expected to stay with the business. News of the deal prompted a sharp sell-off of shares in existing pharmacy giants such as Walgreens and CVS.
Adbrands Weekly Update 28th Jun 2018: Amazon and American Express are to to launch a co-branded credit card in the US specifically aimed at small business owners. The ecommerce giant already has a partnership with JPMorgan Chase for a general purpose consumer credit card, and with Synchrony Financial for a store card that can be used only for purchases on Amazon. Details of the American Express card have yet to be finalised. Separately, Amazon called upon small business entrepreneurs to help it build a national delivery network across the US. The number of US parcels being shipped by Amazon in the US has doubled since 2013 to around 1.2bn a year. Those volumes are stretching its relationship with third-party suppliers UPS, FedEx and the US Postal Service to breaking point, especially over the Christmas holidays. (President Trump's widely publicised calls upon the postal service in particular to raise its prices to Amazon aren't helping either). As a result, Amazon is inviting local entrepreneurs to launch independent delivery fleets that would operate under Amazon's livery as licensed contractors. "There's so much growth here in parcel delivery that there's more than enough for everybody," said Dave Clark, SVP, worldwide operations. "We need to build more of our own capacity. We've been learning more and more over time about what the right model is. What we narrowed down was this sort of size of business - 20 to 40 vans - is about the right size. We think that in order for it to be successful, it does need to be the owner-operator model."
Adbrands Social Media 5th Jun 2018: Amazon recently landed in Australia for the first time, sending chills through all traditional local retailers. Only three weeks ago it appointed TBWA to its local account, and the agency has just dropped a set of funny and entertaining spots to emphasise the e-tailer's vast range through different bite-sized product-related vignettes. It's a compelling proposition for Aussie consumers, especially since the spots are skewed towards low-priced everyday items, not big ticket purchases.
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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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