Amazon is a fortune 500 company based out of Seattle, Washington. Jeff Bezos
founded the company on July 5th, 1994, but it did not officially
launch until 1995. A report Bezos read claimed that the web commerce industry
would grow at two thousand three hundred percent, and this was his motivation
for starting the company. Not long after, a company was founded because of
Bezos’ inspiration and his keen eye for emerging markets. He left his job as
vice president of D. E. Shaw and Co. and never looked back. The company name,
Amazon, was chosen by Bezos after looking through the dictionary and falling in
love with the exotic nature of the word: Amazon. Amazon’s founder had huge
goals, which were finally starting to come to life. Amazon had around
thirty thousand full-time employees in the United States by 2011, and the
number grew to one hundred and eighty thousand just five years later the
company currently employs more than 380,000 people worldwide in full and
surpassed Wal-Mart as the most valuable retailer in the world by market cap in
2015. Currently it has a market cap of around five hundred and forty-six
billion dollars. The company has made its fortune off e-commerce and is one of
largest sellers over the internet. Amazon started out by selling books online
and, as time went on, people’s needs evolved beyond just buying books. They
had to add some diversity to their company, so they chose to expand their
product line by selling videotapes, CDs, books, movies and different
types of electronics just to name a few items. Jeff Bezos’s globalization
strategy allowed him to expand his business across the world, and it paid off.
Amazon has a different retail website for each country that utilizes its
services. The list of countries includes Ireland, Canada, France, Germany, the
United States, Japan, and India, to name a few.
Amazon’s successful sales model was surprisingly
sketched on the back of a napkin by founder and CEO Jeff Bezos in 2001. He
successfully laid out the foundation for a winning marketplace strategy that
they would base their entire sales’ approach on called the “Virtuous Cycle”.
This mindset has driven the company’s strategy since the very beginning.
According to Amazon’s founder, the virtuous cycle begins with providing the
customer with excellent service, which drives a large volume of online traffic.
Happy and satisfied customers attract more happy and satisfied customers,
and the cycle continues. This business model allows Amazon to make money
by leveraging the power of its name, in addition to the efforts of a third-party
seller. As Amazon grew, it lowered its cost structure by leveraging purchase,
and using fulfillment infrastructure and logistics infrastructure subsequently
lowered the cost per unit of products. The decrease in cost then allowed Amazon
to lower its prices to shoppers, continuing to satisfy the need to have the
best prices around. This low price point, combined with an increased selection,
was critical to improving and maintaining the customer experience that drives
the virtuous cycle.
began by focusing on two tiers: business-to-consumer relationships (itself to
the customers) and business-to-business relationships (itself to its
suppliers). They then moved to help provide customer-to-customer relationships
within the Amazon marketplace, acting as a go-between to facilitate
transactions between third party companies and consumers. Amazon allows anyone
to sell anything using its platform. Some other large online distributors even
use Amazon along with their own websites to sell their merchandise. Additionally,
Amazon rents out space for many of their third-party retailers. Small
businesses are able to sell their goods to a larger marketplace on a global
scale through the use of Amazon.
has also begun to employ drop shippers which has helped their company
tremendously. Drop shippers are partnered with Amazon to advertise their wares
on the Amazon website even though the drop ship company did not purchase its
own inventory through Amazon. This allows Amazon to list products from millions
of companies, and in return, Amazon maintains a markup on all products listed
that hovers around 75%. As Amazon continues to grow in size through additional
sellers and markets drop shippers will become more common as more and more
people will be looking to Amazon as a means of distributing their product to a
large number of consumers.
Amazon acquired Zappos ($1.2B), Twitch ($970M),
and Kiva Systems ($775M), they were all critical to the success of Amazon’s
plan to expand their business into new and emerging markets. However, the price
paid for these companies was insignificant in comparison to the massive $13.7
billion acquisition of Whole Foods Market, a high-end food market company with over 400 stores. Whole Foods exclusively features foods
without artificial preservatives, colors, flavors, sweeteners, and hydrogenated
fats. The deal was completed on August 28, 2017 and seems to
be very profitable for Amazon because the market for natural food stores is
soaring. This acquisition makes it clear
that Amazon’s real interest is in two things: the massive amount of consumer
data that will become available after the acquisition, and Whole Foods’ private
brand product. Amazon’s goal to be a superior brand that touches every
aspect of daily life appears to be coming to fruition.
massive amounts of data from Whole Foods shoppers, Amazon will ultimately be
able to tailor the grocery shopping experience to the individual; similar to
online data tracking. Amazon has already mastered the process of up selling
online through offering additional items that go with the items the consumer is
looking to buy. Now, with the purchase of groceries, Amazon will know when you
run out of cereal, or any other item, allowing them to present you with the
offer to buy more at exactly the right time. Amazon will also record data on
customer buyer patterns, allowing them to offer or recommend specific items based
upon customer preferences identified through prior purchases. The customer data Amazon will have the ability to
access will also allow them to build analytical models to be used to predict
what consumers will want, how much they will want, and when they will want it.
While Amazon’s purchase of Whole Foods provides them with a tremendous amount
of data, they will need to use that data to better understand their customer’s
needs and predict shopping behaviors. If they cannot do that, the data becomes
useless. If they can successfully do that, the data can be used to maximize
profit margins and minimize expenses.
September 2017, Amazon revealed that they would open a new headquarters in a
major American city. Bids for the new headquarters were to be submitted by city
councils from across the country by no later than October 19th, 2017. The
multi-billion-dollar building has been proposed to be anywhere from 500,00 to
eight million square feet, and expects to employ about 50,000 employees. In
addition to their global expansion, Amazon devotes a large portion of their
profits to philanthropic efforts. For example, in 2020 the company plans to
open a new building in Seattle to host the charity organization Mary’s Place.
As Amazon’s widespread reach extends into other markets and different areas
around the world, it’s anyone’s guess what they will do next.
Although Amazon.com has perfected the art of easy
shopping, as well as fast shipping and exceptional customer service, there have
been numerous complaints from current and former employees regarding the
treatment of warehouse employees. In 2011 it was reported that a
warehouse in Breinigsville, Pennsylvania, had inside temperatures reaching 100
degrees, which resulted in workers being dehydrated and fatigued. Managers
at the warehouse refused to keep the loading bay doors open to allow air
circulation to flow from outside the building for fear of being vandalized.
Amazon’s solution to this problem was to hire an ambulance to patrol the
warehouse, which led to many people saying the company was insensitive for not
doing more for the hardworking employees.
addition to the harsh working conditions, workers have strenuous and exhausting
job duties. For example, some workers traverse the building for almost 15 miles
a day with a cart and a handheld scanner picking up orders off of shelves
before taking the orders to the packing department for shipping.
Supervisors can even monitor their employees’ scanners to ensure that
they are meeting Amazon’s excessive standards of production. A New York Times article from August 16, 2015, explained
that the often unfair and intimidating working conditions of Amazon warehouses
extend so far as to force employees to sign lengthy contracts guaranteeing
their employment for a period of time. The article also stated that employees
frequently sign contracts preventing them for working or purchasing products
from any other company that might take away business from Amazon. Such reports
lead many people to believe that the list of unfair working conditions at the
company is almost as long as their extensive product line.
Jeff Bezos stated that he would put his employees first when it came to
business matters when he founded Amazon in 1994. As the founder of the company,
I wonder how he has let his company suffer so many PR nightmares. From a micro
perspective, it is important to instill a sense of security and confidence in
one’s employees. If employees are motivated and driven, they are more likely to
produce a superior product. Globally, Amazon does not want to be known as the
company that misuses and mishandles its employees. They need to take a look
into their human resources management and figure out a solution before anyone
else gets unjustly fired. Amazon could potentially lose millions of dollars if
customers, potential partners, and potential employees refuse to touch them.
Bezos needs to lead the company in a new direction and fix the internal
problems they are having before things get worse.
is a global powerhouse that has its strengths and weaknesses just like every
other company. Many people did not think the company would even stay afloat
after failing to become profitable after the first 4 years. Bezos proved all of
the doubters wrong and believed in his vision. I think Amazon could thrive for
years to come if it stays under the radar of any more public criticism. They
have forever changed the e-commerce business forever, but will they be able to
change their old habits and end the recent bad publicity? Despite the criticism, I think the company is too large and
convenient to fail.