How Amazon Became Big: The Growth Story

4 Dec 2019 Read 347 Views

Apple Inc. is often quoted as an example for start-ups, for starting small and growing big. Amazon too follows those footprints. It started in garage of Jeff Bezos, who left his job as Vice President in D.E.Shaw & Co., to become synonymous with e-commerce a decade later.

In 1994, Amazon started as an online bookseller and today it is not just a successful e-commerce website that sells ‘A to Z’ (See the Amazon logo if you didn’t get this) but diversified its business to cloud computing, e-wallets, shoes, flour, news and what not.

It actually played by its name. Amazon is named after the world’s mightiest river that flows across entire South America. This is about 25 years of Amazon.

The Start

Amazon was amongst the first companies that foreseen the Industrial Revolution 3.0 and later led the Industrial Revolution 4.0. Initially, it was limited to online book-selling. They focused more on service and not the plethora of stuff they could sell online. They expanded themselves to 45 states of the US in just 2 years and sales rose to as much as $20,000 per week. Jeff realized he could now expand their services beyond the bookstore; and for money, they went public in 1997.

The Post-Listing Years

Amazon’s IPO was not much fanfare as it was for Facebook. The industry was new and Amazon an even newer company. Unlike other companies promising fortunes to their investors, Amazon warned its investors of operational losses beforehand because it planned to invest heavily in technology.

The company expanded well. It moved into new domains of music. Its focus on service ensured a loyal customer base. This helped it weather through the burst of the ‘dot-com bubble’. One important point is that on the day of listing, the share valued less than $2, now valued $106 just before the crisis. In 2001, it touched $1 billion in revenue for the first time. This is no mean feat even after 20 years.

Not-so Vertical Expansion

Although Amazon expanded itself into newer avenues of technology, it cannot be directly termed as a vertical expansion. What started with Amazon Web Services (AWS) has continued ahead with Kindle, Prime, and now Alexa. Amazon that once only provided services of online delivery now was a flag bearer of Cloud computing, artificial intelligence and machine learning.

Thousands of companies now moved to ‘cloud’ SaaS and depend on AWS. Many of them earn billion-dollar revenue. Imagine if those companies make so much money, how much would Amazon earn catering the infrastructure to thousands of such companies. Amazon later acquired Robotics firm ‘Kiva Systems’

Horizontal Expansion

While Amazon expanded in different domains as a flag bearer, it also made some acquisitions that were different from its working. Well, some say ‘Data is the new oil’ but buying newspaper like ‘Washington Post’ in 2013 was a decision that left everyone gaping and bewildered. They also acquired ‘Zappos’ shoes, the movie buff go to ‘IMDb’ and even the supermarket chain ‘Whole Foods’. There are innumerable acquisitions that Amazon did in its domain and outside it.

What sets them apart?

Innovation is the root of the Amazon business model. It has always invested in new technology with a clear aim of what it wants to get. They embraced innovation and integrated with as many products it can. This style has led it to come with newer products every day.

They initially used Machine learning for Amazon shopping, then channeled it into Amazon Firestick, which they eventually integrated with Alexa!

One lesson Amazon taught the world is service to the customers. A plethora of companies came and gone but it stood firm and tall. All thanks to its services that nobody could match. Be it buy-in-one-click to delivery and returns, Amazon is yet to find a counterweight.

Another aspect is it did not emulate Microsoft’s mistakes. Microsoft at once took battles with everyone. It brought its search engine ‘Bing’ against ‘Google’, ‘Surface’ against Apple iPad, Zune against ‘iPod’, and many others. Some of its products definitely became hit, but would have been more successful had they chose their battles wisely.

It is something that Amazon always had. Despite coming with so many innovations, it did not step in Operating systems business (against Android or Windows) or create gaming devices to compete X-Box or PlayStation.

Is Amazon invincible?

25 years, from garage to a market cap of $1tn in 2018 and still growing. Amazon still amazes us with new products every day. However, not to forget, Alibaba in the Chinese e-commerce market hit them badly. That is why they would leave no stone unturned to disarm Flipkart-WalMart to capture the world’s most attractive market, India. They even now have their world’s largest office in Hyderabad.

We would all agree that Amazon is now not just a service providing company, it is the leader of internet revolution. It is one of the four internet giants of GAFA (Google, Apple, Facebook, and Amazon). As long as it is the torchbearer, the world shall follow it.

When Carlos Slim became the world’s richest man, Forbes wrote for him “there is no man in Mexico who never used Slim’s product”. Amazon has the product and service options, and the will to provide it to everyone. The day is not far when the same will be said for Jeff Bezos, but globally.

About the Author: Vivek Tiwari | 51 Posts

Vivek Tiwari is a Software Engineer and a Data Scientist who hopelessly fell for Economics. His plans to move to Finance might now save mankind from his IITJEE selection story.

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