How much do you know about the history of Amazon?
Amazon is one of the biggest e-commerce marketplaces in the world. Today, Amazon is also the platform where new entrepreneurs can make millions selling products online.
Often touted as “The Everything Store,” you can buy nearly anything you can think of on Amazon—from novelty coffee mugs to high-spec laptops. This vast product selection, paired with a customer-centric business model, explains why Amazon represented 49% of the U.S. e-commerce market in 2018.
Amazon wasn’t always the retail monolith you know today. In this article, we offer a brief history of Amazon. You’ll find out all about the milestones that propelled this garage startup to e-commerce royalty. Plus, feast your eyes on the epic “Everything You Need to Know about Amazon” infographic below.
But first, if you’re really here because you want to build a physical products brand that sells on Amazon, watch this video.
The History of Amazon (Including Little Known Facts That May Surprise You)
How Did Amazon Begin?
The protagonist of this story features Jeff Bezos. After graduating from Princeton University in computer science and electrical engineering, Bezos worked several jobs, including a telecommunications startup and a banking firm.
In 1994, Bezos landed at the hedge fund D.E. Shaw. He quickly climbed the ladder, becoming Vice President in just four years. Here, Bezos was responsible for researching new business opportunities on the budding internet at the time. But when Bezos proposed a list of 20 products they could sell online, they shut him down. This is when Bezos finally decided it was time to set out on his own.
“I knew that I might sincerely regret not having participated in this thing called the internet that I thought was going to be a revolutionizing event. When I thought about it that way… it was incredibly easy to make the decision.” – Jeff Bezos
A crazy idea and some old books.
The Amazon is the largest river in the world, so it is no coincidence that this was the name chosen for Jeff Bezos’ 1994 online bookseller start-up company. Originally called Relentless, which is also a suitable formula for the organisation (and this domain still takes you to Amazon’s website), Amazon is now the largest and most relentless online retail giant in the market.
Jeff Bezos five-year business plan for an online bookstore turned retail giant, Amazon, surprisingly included several years of $0 turnover. “Continued reinvestment of funds into the business has allowed Amazon to expand into areas far beyond the grasp, or perhaps even aspirations, of a traditional retailer”, (Mintel, 2017) By constantly reinvesting into the company, Bezos’ hard worked for money cannot be taxed and the business prospers and grows, this is called ‘no- profit growth’.
Although being the largest online retailer with over $67.8 billion worth of products in its inventory, success has not come without failure to the Amazonians*. Although having many successful products i.e. the Kindle, the Fire (a rival for Apple’s iPhone) was a huge failure leaving little marks of destruction within the company’s funds.
When deciding what Amazon was going to distribute, Bezos used books as there, “are too many in and out of print, they are hard to break when delivering and there were far too many to be held in a physical book store. However, Bezos had no passion for books, they were just a way to get names and data and therefore a customer acquisition strategy.”
Amazon’s supplier relationship has been extremely rocky and controversial throughout the 23 years the company has been operating. In the beginning, to get a feature on Amazons home page publishers would be spending a lot of money, for example one former employee suggested that publishers paid $10,000 (Packer, 2014) for a book to be predominantly featured on the home page.
Bezos was also known to have a temper and had feuds with publishers and in the process, would remove the ‘buy’, button from their books pages, making them suffer huge losses. In the mid-noughties Amazon brought out the first digital eBook reader. After seeing what main competitor Apple had done with iPhone and iPod and the digital music industry, Bezos sensed they would soon be testing the water in books if he didn’t get to it first.
The ‘Kindle’ was then prototyped and made. As a result, in 2007 Amazon controlled 90% of the Market in digital books, however, this didn’t come without a huge power struggle. In order to get the publishers on the side, Bezos’s use scaremongering as a persuasive tool to get them joining his eBook movement. He approached and got on board 90% of the best sellers list on the hardback charts. However, Amazon failed to mention that when launching the Kindle, all books would be priced at $9.99. Publishers had no pricing control over their stock.
Amazon was accused of holding a ‘monopoly’ and with the launch of the iPad in 2010 Apple didn’t like this and the publishers/ suppliers felt that Amazon was devaluing books and was looking for any competition/ business rival to pull Amazon down. Therefore, Apple approached the 6 publishing giants, Penguin, Random House, Macmillan, Simon & Schuster, Hachette, HarperCollins and needed 5 to sign their deal, Random House was the publisher that held out.
Although Amazon was offering a better deal the publishers didn’t like that they had no price control over the retail price Amazon was selling at. However, this didn’t work quite as Apple had planned, Amazon took them to court and all 5 publishers and Apple were sued heavily for “Conspiring to raise prices and restrain competition” by the Federal Trade Commission’s Justice Department in April 2012. Chevalier and Goolsbee (2003) noted that “a price below the static profit-maximizing level … would be attractive in a growing market with switching costs,” cautioning that when “Amazons growth stops, we may see prices rise substantially.”
Amazon Didn’t Just Expand Their Product Categories
Amazon did more than just selling more product categories. Bezos also started acquiring and starting subsidiary companies.
After achieving massive profitability in a couple of years, Bezos invested heavily in computers and servers to run its business operations. Eventually, Bezos realized a winning idea. They’d use their computer systems to help other companies run their businesses.
Amazon Experiencing a “Wealth Surge” During Pandemic?
Despite the overall trend of the economy in 2020, Amazon still reported $75.5 billion in the first quarter. Fortunately, Bezos is putting this money to good use in these uncertain times.
“[Bezos] has announced that Amazon currently plans to spend all of its expected $4 billion operating profit for the second quarter of this year on measures to insulate the company against COVID-19,” Dailystar UK reports. These insulating measures include:
- More cleaning in fulfillment centers
- Protective gear
- Changes to promote social distancing
- Higher wages
- Regular coronavirus testing for employees
Moreover, Amazon has hired 175,000 additional workers within the last business quarter. Whether the recent May Day strikes have influenced this change, Bezos is using his company’s profits to contribute to his employee’s health and safety.