Amazon.Com: the Brink of Bankruptcy

Topics: Electronic commerce,, Jeff Bezos Pages: 7 (2500 words) Published: May 8, 2009 The Brink of Bankruptcy Jeffrey Bezos, formerly a senior vice president for D. E. Shaw & Company, founded in 1994. D. E. Shaw is a Wall Street-based investment bank, and Mr. Bezoswas assigned to find good Internet companies in which to invest. During the summer of 1994, he stumbled across a Web site that showed the number of Internet users was growing by 2,300 percent per month. He quickly realized the vast potential of the Internet, and began putting together a list of possible products that he could sell on the World Wide Web. He eventually narrowed his list to music products and books. Although music products and books both had enormous potential, he eventually selected books because he believed that he could compete more evenly in the book segment due to the lack of a very dominant player. In contrast, the music industry had only six major record companies. These companies controlled the distribution of records and CDs and, therefore, had the potential to lock out a new business threatening the traditional record-store format. To begin his new venture, Mr. Bezosleft New York and moved to Seattle. He decided to move to Seattle for two reasons: 1) Ingram Book Group's warehouse is located near Seattle; and 2) Because of the Seattle area's reputation for computer expertise. In 1995, Amazon began selling books entirely online, operating out of a rented facility and using doors laid across sawhorses for desks. He soon was able to generate several million dollars from venture capitalists, and sales were astounding. Sales for 1995, 1996, 1997, 1998 and 1999 were $0.5, $16, $147, $610 and $1,640 million respectively. Amazon's customer base has increased dramatically from 180,000 in 100 countries in 1996 to 12 million in 160 countries by mid-1999. In 1998, Amazon began to expand into other product categories. The companybegan to sell music products and videos, and within two months of these additions, Amazon became the number-one seller of books, music, and videos on the web. During 1999, the companyfurther expanded its product line. Amazon now offers toys and video games, electronic greeting cards, electronics and software, home improvement supplies, online auctions, DVDs, and an online mall called zShops. More recently, Amazon has begun to expand internationally. The basic mission and goals of the company are evident in the words of Mr. Bezos, "We have one strategy at - provide the customer with the best shopping experience." Additionally, "our goal is nothing short of building the world's most customer-centric company." These quotes from Mr. Bezoscould be combined to create an effective mission statement, as follows: The mission of is to leverage technology and the expertise of our invaluable employees to provide the best buying experience on the Internet. Our goal is nothing short of building the world's most customer-centric company capable of providing our customers with the best shopping experience online today, and into the future. Amazon posted $410MM in books, music, and video U.S sales. Growth in this sector continues to be fairly anemic. Moving into other segments of the online retailing industry (i.e., consumer electronics) could dampen this negative trend. Lastly, "the growing number of bankruptcies among pure-play e-commerce companies should enhance the competitive position of companies, such as Amazon, longer term. In other words, fewer industry participants should lead to increased potential scale for survivors such as Amazon. Not only will fewer companies lead to less distribution of e-commerce revenues among smaller e-tailors, but should also benefit from less price competition over time. Another potential threat for Amazon is that the barriers to entry in the online retailing market are minimal. Start-up costs are minimal, and anybody can start their own Internet shop. "According to Mr. Bezos, Amazon differentiates itself from potential rivals in many...
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