At 20 Amazon is bulking up. It is not—yet—slowing down
Jun 21st 2014 | PHOENIX AND SEATTLE | From the print edition
HIGH-TECH creation myths are expected to start with a garage. Amazon, impatient with ordinary from the outset, began with a road trip. In the summer of 1994 Jeff Bezos quit his job on Wall Street, flew to Fort Worth, Texas, with his wife MacKenzie and hired a car. While MacKenzie drove them towards the Pacific Northwest, Jeff sketched out a plan to set up a catalogue retailing business that would exploit the infant internet. The garage came later, in a suburb of Seattle, where he set up an office furnished with desks made from wooden doors. About a year later, Amazon sold its first book. The world saw a website selling books and assumed that Amazon was, and always would be, an online bookshop. Mr Bezos, though, had bigger plans. Books were a good way into online retailing: once people learned to buy books online they would buy more and more other stuff, too. The website would be able to capture much more data about what they looked at and thus might want than any normal shop; if they reviewed things, that would enrich the experience for other shoppers. He saw a virtuous circle whereby low prices pulled in customers and merchants, which boosted volumes, which led to ever lower prices—a
“flywheel” that would generate growth for as long as the company put the interests of the customers first. Early on, Mr Bezos registered “relentless.com” as a possible name; if it was a little lacking in touchy-feeliness, it captured the ambition nicely. A phone to shop with
The latest manifestation of that ambition was unveiled in Seattle on June 18th: Amazon’s first phone. The Fire Phone is designed to stand out in a market crowded with sleek devices in various ways, such as with a sort-of-3D screen, but none is more telling than its Firefly button. This uses cloud computing to provide the user with information about more or less anything the phone sees or hears, be it a song, a television show, a bottle of wine or a child’s toy—including how to buy it from Amazon. If it works as promised, it will turn the whole world into a shop window.
The Fire Phone takes pride of place in an expanding family of devices with which Amazon has both anticipated and responded to shifts in the way consumers read, shop and divert themselves. Offering iPad-like tablets, e-readers and a television set-top box for streaming videos has brought the company into more direct competition than ever before with Apple and Google, which also offer suites of hardware, digital content and services. Amazon’s hope is that its signature selling points—features and quality that belie their relatively low pricing—will attract consumers to its devices just as they have to its online shops. Then they will end up shopping for other stuff, too.
There is a lot of other stuff for them to buy. According to Internet Retailer, a magazine, Amazon now carries 230m items for sale in America—some 30 times the number sold by Walmart, the world’s biggest retailer, which has its own fast-growing online business—and there is no sign of let-up. Amazon’s total revenues were $74.5 billion last year, but when one takes into account the merchandise that other companies sell through its “marketplace” service the sales volume is nearly double that. Though by far the biggest online retailer in America, it is still growing faster than the 17% pace of e-commerce as a whole (see chart 1). It is the top online seller in Europe and Japan, too, and has designs on China’s vast market.
Last year Amazon was the world’s ninth-biggest retailer ranked by sales; by 2018 it will be number two, predicts Kantar Retail, a research group.
On top of its online-retail success, Amazon has produced two other transformative businesses. The Kindle e-reader pioneered the shift from paper books to electronic ones, creating a market that now accounts for more than a...
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