Amazon.Com Case Study 3

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Case Study
Chirag P. Gandhi

During 1994, a man, Jeffrey Bezos, who after completing graduation from Princeton University was hired by D.E. Shaw, a Wall Street firm. During his occupancy there he was astonished to learn an interesting statistic on the Internet. Bezos had learned that the Internet was growing at the rate of over 2300%! Bezos was no fool; he quickly decided to venture out of D.E. Shaw to create a new company. Bezos made a list of items that he could potentially sell on the Internet in which he narrowed down to books. Bezos then moved to Seattle, WA for its proximity to high tech work force as well as being in reach of large book distributors. Not only that but because of high sales tax in larger states like New York and California, Washington seemed perfect to conduct business. Initially, Bezos and his software engineers worked in a garage with desk built out of doors and held meetings at Barnes and Nobles. During this time period Bezos worked on developing funds and working with the engineers at that time website named, but because of the similarities to the word cadaver Bezos renamed it to what is now named, after the world’s largest river. The website was officially launched in 1995 and did not take to long to became popular. The website was so hot that it earned a spot on, at that time, Yahoo’s “What’s cool list?” When the site first began it only carried close to 2,000 book titles at the Seattle warehouse compared to Barnes and Nobles inventory, which had retail outlets in a majority of cities. Having warehouse inventory was not a big concern for Amazon because the orders were directly placed through vendors. used JIT (Just In Time), when the order is placed it then is conveyed to wholesalers and publishers who mail the customer the product, to place orders. Bezos realized that the company was on verge of being a success because within a month time the online retailer had sold products to all 50 states and 45 countries, all due to the phenomenal Internet. Bezos could not work out of his garage and so they needed an office where they can handle customer support, shipment, and receiving area. Seeing that selling only one product was not going to cut it, Bezos wanted to diversify with a vast majority items from music, videos, computer software, hardware, apparel, toys, and more. As a business strategy Bezos believed in “customer-centrism” and had three goals. The first goal, of the founder of, was to be earth’s friendliest company, second was to innovate in behalf of customers, and the third was to individualize the store for each customer. Bezos has not shied away from his goal so much so that he includes the first letter sent out to owners in 1997 so that they know that the owners know that the company’s major idea is to satisfy the customers, and the customers have loved the company with many repeat customers. was so good with their customer service that in 2001 they spent seven dollars per customer to acquire new customers while the average was 123 dollars. The company was doing so well that in less than three years after its launch it went public. Amazon had an IPO (Initial Public Offering) of three million shares of common stock. The company’s success was extraordinary but Wall Street was concerned that Bezos customer-centric instead of focusing on market share. Not only that but the “dot-com crash” during the late 90s and early 2000s concerned investors even more but also Bezos remained focused. Websites were declaring bankruptcy left and right so in order to remain in the game the company started cut costs. Bezos laid off 1,300 employees as well as shut downed a distribution center, then gave discounts on a vast majority of products, and not only that but the company inked deals with America Online, Inc and Target corp. These changes led to the first net profit of $5 million, which many...
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