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We opened our virtual doors in July 1995 with a mission to use the Internet to offer products that educate, inform, and inspire. We decided to build an online store that would be customer-friendly and easy to navigate and would offer the broadest possible selection.
Amazon.com, Inc. is the world's biggest book and music store, offering more than 3 million book and music titles over the internet. The leading online shopping site by the end of the 1990s, Amazon.com possesses virtually unlimited online shelf space and offers its vast selection of retail items to customers through efficient search and browse features. A pioneer in the relatively new business of internet commerce, Amazon.com offers customers features such as 1-Click ordering, secure credit card payment, and direct shipping.
The Beginnings of Amazon.com
Throughout the 1990s, the popularity of the world wide web and the internet swept across the world, and personal computers in most businesses and households got hooked up in some form or another to internet providers and web browser software. As use of the internet became more prevalent in society, companies began looking to the web as a new avenue for commerce. Selling products over the internet offered a variety of choices and opportunities. One of the pioneers of business on the internet was Jeff Bezos, founder of Amazon.com.
In 1994, Bezos left his job as vice-president of the Wall Street firm D.E. Shaw, moved to Seattle, Washington, and began to work out a plan for the company that would become Amazon.com. After reading a report that projected annual web growth at 2,300 percent, Bezos drew up a list of twenty products that could be sold on the net. He narrowed the list to what he felt were the five most promising: compact discs, computer hardware, computer software, videos, and books. Bezos eventually decided that his venture would sell books over the web, due to the large worldwide market for literature, the low price that could be offered for books, and the tremendous selection of titles that were available in print. He chose Seattle as the company headquarters due to its large high-tech workforce and its proximity to a large book distribution center in Oregon. Bezos then worked to raise funds for the company while also working with software developers to build the company's web site. The web site debuted in July 1995 and quickly became the number one book-related site on the web.
In just four months of operation, Amazon.com became a very popular site on the web, making high marks on several internet rankings. It generated recognition as the sixth best site on Point Communications' "top ten" list, and was almost immediately placed on Yahoo's "what's cool list" and Netscape's "what's new list". The site opened with a searchable database of over one million titles. Customers could enter search information, prompting the system to sift through the company database and find the desired titles. The program then displayed information about the selection on a customer's computer screen, and gave the customer the option to order the books with a credit card and have the books shipped to them in a just a few days.
Unlike its large competitors, such as Barnes & Noble and Borders, Amazon.com carried only about 2,000 titles in stock in its Seattle warehouse. Most orders through Amazon.com were placed directly through wholesalers and publishers, so no warehouse was needed. Amazon.com would simply receive the books from the other sources, then ship them to the customer. At first, the company operated out of Bezos' garage, until it was clear that it was going to be a success and the company decided to move to a Seattle office, which served as the customer support, shipping and receiving area. It was interesting that such a small venture realized such a broad scope so quickly; for example, within a month of launching the web site, Bezos and Amazon.com filled orders from all fifty states and 45 other countries. This feat was attributed to the large geographic range that the internet gave access to a retailer such as Bezos.
Making the Site Customer Friendly
As a pioneer in the world of Internet commerce, Amazon.com strived to set the standard for web businesses. With that goal in mind, Bezos went to work on making the web site as customer friendly as possible, and relating the site to all types of customers. For those people who knew what book they were looking for and just wanted quick performance and low cost, Amazon.com offered powerful search capabilities of its expanded 1.5 million-title database. The company also began offering ten to thirty percent discounts on most titles, making the prices extremely affordable. For other customers who were just looking for something to read in a general area of interest, Amazon.com offered topic areas to browse, as well as lists of bestsellers, award winners, and titles that were recently featured in the media. Finally, for people who were just in the mood to read anything, Amazon.com offered a recommendation center. There a customer could find books based on his or her mood, reading habits, or preferences. The recommendation center also offered titles based on records of books the customer had purchased in the past, if they were return customers to the site.
Other hits with customers were the little touches, such as optional gift wrapping of packages, and the "eye" notification service, which acted to send customers e-mails alerting them when a new book in their favorite subject or by their favorite author came into stock. The site also offered the ability for customers not only to write their comments about different books and have them published on the site, but to read other customers' comments about books they were interested in buying.
Public Offering in 1997
After less than two years of operation, Amazon.com became a public company in May 1997 with an initial public offering of 3,000,000 shares of common stock. With the proceeds from the IPO, Bezos went to work on improving the already productive web site and on bettering the company's distribution capabilities.
To help broaden the company's distribution capabilities, and to ease the strain on the existing distribution center that came from such a high volume of orders, in September 1997 Bezos announced that Amazon.com would be opening an East Coast distribution center in New Castle, Delaware. There was also a seventy percent expansion of the company's Seattle center. The improvements increased the company's stocking and shipping capabilities and reduced the time it took to fill customers' orders. The Delaware site not only got Amazon.com closer to East Coast customers, but also to East Coast publishers, which decreased Amazon.com's receiving time. With the new centers in place, Bezos set a goal for the company of 95 percent same-day shipping of in-stock orders, getting orders to the customers much faster than before.
Another growth area for Amazon.com was the success of its 'Associate' program. Established in July 1996, the program allowed individuals with their own web sites to choose books of interest and place them on their own sites, then allowed visitors to purchase those books. The customer was then connected to Amazon.com, who took care of all the orders. Associates were sent reports on their sales and made a three to eight percent commission from books sold on their sites. The Associates program really began to take off in mid-1997 when Amazon.com formed partnerships with Yahoo, Inc. and America Online, Inc. Both companies agreed to give Amazon.com broad promotional capabilities on two of the most visited sites on the Web. As the success continued, Amazon also struck deals with many other popular sites, including Netscape, GeoCities, Excite, and AltaVista.
As the company continued to grow in 1997, Bezos announced in October that Amazon.com would be the first Internet retailer to reach the milestone of one million customers. With customers in all fifty states and now 160 countries worldwide, what had started in a Seattle garage was now a company with $147.8 million in yearly sales.
Further Expansion in 1998
As Amazon.com ventured into 1998, the company continued to grow. By February, the Associates program had reached 30,000 members, who now earned up to 15 percent for recommending and selling books from their web sites. Four months later, the number of associates had astonishingly doubled to 60,000.
The company's customer database continued to grow also, with cumulative customer accounts reaching 2,260,000 in March, an increase of 50 percent in just 3 months, and of 564 percent throughout the previous year. In other words, it took Amazon.com 27 months to serve its first million customers and only six months to serve the second million. This feat made Amazon.com the third largest bookseller in the United States.
Financed by a $75 million credit facility secured in late 1997, Amazon.com continued to reshape its services in 1998. To its catalog of over 2.5 million titles, the company added Amazon.com Advantage, a program to help the sales of independent authors and publishers, and Amazon.com Kids, a service providing over 100,000 titles for younger children and teenagers.
Amazon.com also expanded its business through a trio of acquisitions in early 1998. Two of the companies were acquired to expand Amazon.com's business into Europe. Bookpages, one of the largest online booksellers in the United Kingdom, gave Amazon.com access to the U.K.'s market. Telebook, the largest online bookseller in Germany, added its German titles to the mix. Both companies not only gave Amazon.com access to new customers in Europe, but it also gave existing Amazon.com customers access to more books from around the world. The Internet Movie Database, the third acquisition, was used to support plans for an eventual move into online video sales. The tremendous resources and information of the IMD served as a valuable asset in the construction of a customer-friendly and informative web site for video sales.
Another big change in 1998 was the announcement of the company's decision to enter into the online music business. Bezos again wanted to make the site as useful as possible for his customers, so he appealed to them for help. Several months before officially opening its music site, Amazon.com asked its bookstore customers and members of the music profession to help design the new web site.
The music store opened in June 1998, with over 125,000 music titles available. The new site, which opened at the same time that Amazon.com had also redesigned it book site, offered many of the same helpful services available at the company's book site. The database was searchable by artist, song title, or label, and customers were able to listen to more than 225,000 sound clips before making their selection.
Amazon.com ended the second quarter of 1998 as strong as ever. Cumulative customer accounts broke the three million mark, and as sales figures for Amazon.com continued to rise, and more products and titles were added, the future looked bright for this pioneer in the internet commerce marketplace. With music as a part of the company mix, and video sales on the horizon, Bezos seemed to have accomplished his goal of gathering a strong market share in the online sales arena. As Bezos told Fortune magazine in December 1996, "By the year 2000, there could be two or three big online bookstores. We need to be one of them." As it approached the end of the decade, Amazon.com already appeared to be one of the biggest online retail operations, if not the biggest of all.
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