The e-commerce giant’s history tells several important stories.
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For many people, it’s hard to imagine what the world was like before Amazon. (NASDAQ:AMZN). People under 40 almost take for granted that they can get anything they want with the click of a mouse. And what’s especially interesting is how Amazon came to emerge as the biggest winner of the e-commerce revolution. Especially since the original goal was much more modest.
Amazon has many lessons to teach investors about what makes a successful business. Therefore, I voyager portfolio. There’s no better place to start than at the beginning. In the first article of a three-part series about Amazon, we have a chance to turn back the clock and see how Amazon became the giant company it is today.
Writing a book about e-commerce
Amazon founder Jeff Bezos founded the company today known as Amazon in 1994. After about a year of preparation, Bezos launched the Amazon.com website, selling books from a garage in the Seattle-area city of Bellevue and handling shipping across the United States and internationally.
But what Mr. Bezos quickly realized was that there was nothing special about books as products sold through e-commerce. In fact, Amazon’s interface was largely independent of the type of inventory a seller wanted to offer. This allowed Amazon to expand its product offerings over time, adding music to physical media in 1998. And in a significant move, Amazon opened its platform to third-party sellers in 2000, allowing websites to dramatically expand their reach and monetize the infrastructure they set up. That will be a recurring theme in other areas of the company’s business.
Surviving the technological collapse
In the early 2000s, the overhyped internet sector went into decline and was infamously shot down by a stupid dot-com concept that had no realistic chance of long-term survival. But Amazon weathered the tough times, made a strategic plan, and has successfully executed on it ever since.
Important events for Amazon’s overall business include:
- Launched in 2005, Amazon Prime is a subscription-based service that was initially limited to unlimited shipping on a two-day schedule. Over time, Amazon used Prime to introduce new features such as its Prime Video streaming service.
- In 2006, the Amazon Web Services cloud computing business was established to provide external clients with the same resources that Amazon developed internally for its own purposes.
- Released in 2007, the Kindle mobile device was the first of many consumer electronics products that Amazon introduced over its history.
- Amazon’s efforts to incorporate brick-and-mortar elements into its e-commerce operations culminated in its acquisition of grocery chain Whole Foods Market in 2017, which provided a new way for e-commerce companies to address some of their distribution challenges.
Amazon currently dominates e-commerce, but its cloud computing business is taking on a life of its own. The company’s e-commerce division is responsible for most of Amazon’s revenue. However, Amazon Web Services is much more profitable, despite having much lower sales. This has made Amazon both a consumer goods company and a technology company.
Amazon’s long road to prosperity
Perhaps the most interesting part of Amazon’s journey is how Amazon’s stock sparked intense debate among investors. As you’ll see in the second installment of this three-part series on Amazon, the company hasn’t been profitable for a long time, but once it did, its growth potential became very clear.
Dan Caplinger holds a position at Amazon. The Motley Fool has a position in and recommends Amazon. The Motley Fool has a disclosure policy.
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