How Amazon Became The Everything Store
In May 1997, an online bookstore went public in an IPO that valued it at $438 million. Amazon was once considered a boring ecommerce business, a purveyor of household goods that lacked the vision of Facebook, Google and the other tech titans. Not any more.
The company, and its founder, Jeff Bezos, are ascendant. In recent months they’ve reached new heights. Back in February, Bezos became the richest man in the world, perhaps even in history. And his baby’s market cap recently recorded a personal best of $730 billion, with speculation that Amazon could beat its rivals to become the first ever member of the “Trillion Dollar Club” in the next 12 months.
How did a money-leaking online bookstore become a wealth creation machine and darling of Wall Street in just twenty years, the envy of corporate America and the rest of the world?
In 1994, years before marketplace platforms like PayPal, Uber and Airbnb, Bezos realised that digital commerce would radically transform the way the world does business. And he realised that in order to monetise that insight, his company would have to reinvent logistics. He bet big by focusing on growth at the expense of net income, reinvesting proceeds into building a diversified giant that touches every aspect of our lives. The company continues to pump most of its cash into big strategic plays, like Prime, AmazonStudios, Amazon Web Services and Alexa.
Amazon is a company of companies, tied together by extraordinary leadership. By combining consumer retail, cloud computing, FMCG, entertainment, data science, robotics and now healthcare, Bezos has created a global operation with synergies and economies of scale that make international conglomerates sigh with envy. Amazon is seemingly everywhere, involved in everything, from the books you read, to the websites you consume, to the food you eat.
Furthermore, Jeff Bezos himself has expanded his personal empire to include newspaper publishing, space exploration and philanthropy, a canny move that should cement his political and economic influence for decades to come and perhaps even define his legacy.
Like so many other success stories, it all began with a book. And lots of them.
Amazon disrupted the traditional approach espoused by the likes of Barnes & Noble by taking books online. First it worked with distributors and wholesalers to fill orders. Then it created a secondary marketplace where inventory could be bought and sold, enabling Amazon to carry millions of titles and dominate competition in terms of choice and convenience. In 1997, Bezos reported in his annual letter to shareholders that his company had 1.5 million customers in more than 150 countries, with sales totalling $148 million. He was just getting started.
Next came the Everything Store. Amazon capitalised on its early momentum to rapidly expand its range of consumer products.
After the dawn of the 21st Century, Bezos and his team realised that in their prophetic rush to corner the market for digital commerce, they were now light years ahead of everyone else in terms of technical infrastructure and data management. It would have been easy to keep quiet, sit back and enjoy their competitive advantage. Instead, they decided to monetise their expertise by providing robust and affordable technical support to other companies. Amazon Web services was born. As the smartphone market exploded, demand for server space from app developers and brands skyrocketed. Amazon cleaned up, claiming a place in the pantheon of tech giants alongside Google, Microsoft and IBM. AWS now does over $12 billion in revenue.
Amazon’s multiduous businesses might seem arbitrary and disconnected, but they are anything but. In fact, they augment each other. The company’s hardware – Kindles, tablets AI-powered home speakers, and as of this week, doorbells – complement its product delivery business. Which compliments it’s food operations, boosted by a $14 billion deal with Whole Foods.
Few people realise this, but Amazon is also an important stakeholder in the global fintech industry. By now we’ve all heard the experts saying that big tech is going to disrupt financial services. Amazon is doing this via the back door by using its cloud computing business to lower barriers to entry for fintech startups and recalibrate the industry.
A recent article in Quartz mentioned Starling Bank, an app-based current account built on Amazon’s cloud, explaining that processes that once cost $30 million can be done for $30,000, thanks to Amazon. AWS provides pay-as-you-go processing capacity, leveraging AI to optimize data storage, which keeps costs down. We should know at Origin, we use it for our platform.
By making itself indispensable to a new generation of innovative startups, Amazon and Bezos are future-proofing themselves for decades. I certainly wouldn’t bet against them. Would you?