A brief summary of Amazon capabilities

By , August 9, 2011 7:25 pm
Amazon positions itself as a technology company, not a retailer
  1. Target the long-tail with million titles, while the largest physical book store may only store 400,000
  2. Intensive investment in technology
  3. Location: Seattle, near computer talents
  4. Product search, data mining, personalized shopping
  5. In-house software systems
  6. Leader in cloud computing
  7. Supplementary product: Kindle
  8. Scalability
  9. B2C to C2C
Jeff Bezos’s vision and financial expertise
  1. Prior to Amazon: Princeton Computer Science & Electrical Engineering graduate, 2 years in Commercial Banking and 4 years in NY Investment Banking
  2. Focus on customer service, avoid price war
  3. Started with books then diversified
  4. Act like a Venture Capitalist to other younger e-commerce firms then get advertising fees from these partners
  5. Lock out competition with this partnership network
  6. Use sophisticated financial structure including:
    • Private equity (only $1 in 1994)
    • Convertible preferred shares ($8 in 1996)
    • $326m 10% senior discount notes mature in 10 years
    • Debt repurchase
    • $1.25b 4.75% convertible subordinated notes mature in 10 years
    • $680m 6.875% euro-denominated subordinated notes mature in 10 years
    • Live many years on credit rating CCC but the company has had enough cash to spend. Good governance!
  7. Good accounting compliance
Operations
  1. Revenue sources: commission, advertising, affiliate marketing, cloud computing leasing
  2. Order from suppliers after customer has made an order
  3. Weathered the dot-com bubble and GFC well

Reference

Cott J., Palepu K., ‘Amazon.com’

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