In 2019 Amazon delivered more than 3.5 billion packages to customers worldwide and saw an 80 percent increase in the number of people that tried grocery delivery. Amazon's 2019 annual revenue increased 20 percent to $208 billion, with a net income of $11.6 billion. The first quarter of 2020 was even better. While most companies were suffering due to the worldwide COVID-19, Amazon reported a 26 percent increase in net sales! Amazon continues to be one of the most innovative and profitable companies in the world. 

You may think of Amazon as simply an online retailer, and that is indeed where the company achieved most of its success. To do this, Amazon had to build enormous supporting infrastructure - just imagine the information systems and fulfillment facilities needed to ship billions of packages. That infrastructure, however, is needed only during the busy holiday season (Black Friday through Christmas). Most of the year, Amazon is left with excess infrastructure capacity. Starting in 2000, Amazon began to lease some of that capacity to other companies. In the process, it played a key role in the creation of what are termed "cloud services," which you will learn about in a few weeks. For now, just think of cloud services as computer resources somewhere out in the Internet that are leased on flexible terms.

Today, Amazon's business lines can be grouped into three major categories:

• Online Retailing
• Order fulfillment
• Cloud services

Consider Each.

ONLINE RETAILING

Amazon created the business model for online retailing. It began as an online bookstore, but every year since 1998 it has added new product categories. The company is involved in all aspects of online retailing. It sells its own inventory. It incentivizes you, via the Associates program, to sell its inventory as well. Or it will help you sell your inventory within its product pages or via one of its consignment venues. Online auctions are the major aspect of online sales in which Amazon does not participate. It tried auctions in 1999, but it could never make inroads against eBay.

Today it's hard to remember how much of what we take for granted was pioneered by Amazon. "Customers who bought this, also bought that;" online customer reviews; customer ranking of customer reviews; books lists; Look Inside the Book; automatic free shipping for certain orders or frequent customers; and Kindle books and devices were all novel concepts when Amazon introduced them.

Amazon's retailing business operates on very thin margins, meaning it makes very little money off of any one item. Products are usually sold at a discount from the stated retail price, and 2-day shipping is free for Amazon Prime members (who pay an annual fee of $119) How does it do it? For one, Amazon drives its employees incredibly hard. Former employees claim the hours are long, the pressure is severe, and the workload is heavy. But what else? It comes down to Moore's Law and the innovative use of nearly free data processing, storage, and communication.

ORDER FULFILLMENT

In addition to online retailing, Amazon also sells order fulfillment services. You can ship your inventory to an Amazon warehouse and access Amazon's information systems just as if they were yours. Using technology known as Web services your order processing information systems can directly integrate, over the Web, with Amazon's inventory, fulfillment, and shipping applications. Your customers need not know that Amazon played any role at all. You Can also sell that same inventory using Amazon's retail sales applications.

CLOUD SERVICES

Amazon Web Services (AWS) allow organizations to lease time on computer equipment in very flexible ways. Amazon's Elastic Cloud 2 (EC2) enables organizations to expand and contract the computer resources they need within minutes. Amazon has a variety of payment plans, and it is possible to buy computer time for less than a penny an hour. Key to this capability is the ability for the leasing organization's computer programs to interface with Amazon's to automatically scale up and scale down the resources leased. For example, if a news site publishes a story that causes a rapid ramp-up of traffic, that news site can, programmatically, request, configure, and use more computing resources for an hour, a day, a month, or whatever it needs.

With its Kindle devices, Amazon has become both a vendor of tablets and, even more importantly in the long term, a vendor of online music and video. Amazon Echo (Alexa-enabled ordering system) and Amazon Dash (a one-button reordering device) hafve become two of Amazon's top-selling products.

In late 2016, Jeff Bezos announced the first package delivery by drone via Amazon Prime Air in the UK. But regulations have slowed its adoption in the United States. Drone deliveries were supposed to begin in late 2019 but were still not happening by mid-2020. While drone delivery is something that will happen int he future, consider a more traditional service that Amazon is offering right now through its Amazon Go stores.

In mid-2017 Amazon made news by acquiring grocery giant Whole Foods. By 2020 Amazon had opened or announced 26 locations of its own automated grocer stores named Amazon Go. Amazon Go stores don't use cashiers or checkout terminals. Customers scan their phone as they walk in, shop, and then walk out. Not only did Amazon's expansion into traditional grocery store space drive speculations about Amazon's future expansion plans, but Amazon is now licensing its cashierless technology all retailers.

And to induce customers to buy Kindle apps, in 2013 Amazon introduced its own currency, Amazon Coins. And, recently Amazon opened a 3D printing store from which customers can customize their own toys, jewelry, dog bones, and dozens of other products. Amazon is also beginning its foray into drone delivery.

QUESTIONS

2. Based on the facts presented, what do you think is Amazon.com's competitive strategy? Refer to Porter's Competitive Strategy Framework to assist you, and to explain your answer.
4. Jeff Bezos, CEO of Amazon.com has stated that the best customer support is none. What does that mean? Explain your answer.
6. Suppose you work for Amazon, or a company that takes innovation as seriously as Amazon does. What do you suppose is the likely reaction to an employee who says to his or her boss, "But, I don't know how to do that"? Explain your answer.
8. Using your own words and your own experience, what skills and abilities do you think you need to have to thrive at an organization like Amazon? Explain your answer.
10. What should UPS and FedEx be doing in response to Amazon's interest in drone delivery via Amazon Prime Air? Explain your answer.