Amazon stock price has sky rocked since its 2007 IPO. Amazon stock price closed at $20.75 its first day trading. A $1,000 investment in Amazon during its IPO at a value of $1.50 a share would be worth $220,000 today. In case you check my math, you must take in consideration the stock splits throughout the years. This stellar growth can be attributed to the strategic genius, Jeff Bezos. What makes Amazon’s case interesting is their business model. They have been growing at such a rapid pace and have made some many strategic long-term plays. There is no doubt in my mind that Amazon will continue to thrive, but I have doubts about continued growth. On thing that is for sure is that Bezos has his work cut out for him.
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Amazon’s Network Structure
Amazon was once had a virtual structure, but after going public in 2007, they progressed to a network structure. Amazon has so many diverse parts of its business. Their business is just not selling retail goods, Amazon has is now a major tech player. They also offer web services and fulfillment service throughout the world. They even offer same day grocery delivery in select cities. Amazon is also a global player, even though its success have not be rapid as the U.S. The network structure fits Amazon best and is a great example of how one works.
Amazon’s Network Structure
Amazon Acquires Zappos
Amazon is has had many acquisitions over the years. In 2010 Amazon acquired Zappos, one of the largest footwear and apparel ecommerce stores in the U.S. It was the largest in Amazon history at the time. Zappos was acquired for somewhere near $1 billon. In 2009, Zappos had $1.2 billion in sales. This is a key example of Amazon buying up the competition to strengthen its brand. Zappos had extensive brand loyalty due to Zappos’s distinguished customer service focus. Amazon decided to keep Zappos separate from Amazon.com due to this. It should be noted that Amazon also would have many benefits and imporvements that most customers would not recognize in its supply chain.
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After a tragic 1999 holiday season, Toys R Us and Amazon created a strategic alliance. The alliance would combine the strengths of two dominant Internet retailers with a cobranded Internet store just in time for the 2000 holiday season and was to last for 10 years. Toys R Us would be in charge of buying and managing inventory, while Amazon handles everything from warehousing, customer service, web development, and fulfillment. This strategic alliance would hopefully help both firms break into the global market as well. John Elyer, the CEO of Toy R Us at the time said that, “Amazon.com is widely regarded as the gold standard in online retailing, and we are thrilled to deliver to our customers the enormous benefits we know this alliance will bring. The strength of the Toys “R” Us brand and our merchandising expertise combined with Amazon’s unbeatable Internet savvy will create an online presence second to none.”
This alliance did not reach the decade long term that was originally agreed upon by the two firms. By April 2003 the two companies had started a legal battle. After a long battle, the alliance was terminated by a New York judge due to a breach of contract by Amazon.
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Amazon’s International Strategies
If Amazon can successfully expand into international markets the sky is the limit. Amazon domestic and international growth were neck and neck at 38% in 2011, but since then their growth has slowed substantially in international markets. The top international markets for Amazon are Germany, United Kingdom, and Japan. In 2013, Amazon still saw growth in Germany and the United Kingdom, but had a 2% reduction in Japan. If Amazon stated that Japan decrease was due to the language barrier and digital content. If Amazon wants to be a big time global player, they will need to invest infrastructure to make Amazon user friendly and better than competitors. International completion is fierce. Rakuten is a thriving marketplace that dominates Asian markets. Rakuten continues to make acquisitions to position themselves in a favorable spot. They even bought their way into the US market by purchasing buy.com. Once Amazon reaches it threshold in the US, they can only look to foreign markets for growth. You can bet that they will continue to push with a global strategy, but they are learning that it will not be as easy as the US.
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Amazon’s international growth slows
With Amazon being the massive giant that it is, it is no surprise that they are branching out to different industries. The degree of diversification is much larger than what we have seen from its competitor ebay. Here are a few of Amazon’s biggest diversification moves that we will likely being see more of:
Amazon Prime Air – Drone service. More than likely a marketing ploy, but it got us all talking.
Amazon Fresh – Fresh produce
Amazon Prime Pantry – Grocery items. I got my first box a week ago.
Diapers.com – If they can’t beat you they will buy you.
Zappos.com – Got bought.
Amazon Fire Phone – The latest and boldest diversification mover. The device has some really cool features, but they only seemed to be concerned with people signing up for Prime.
Amazon FBA – Fulfillment service for Amazon retailers and multichannel commerce.
Amazon Web Services (AWS) – Cloud services and data warehousing
Amazonmechanical turk – take advantage of Amazon sweat shop and slave labor. Just kidding its an outsource workforce program that most people have never heard of.
Amazon Local – Think Groupon, but for Amazon.
And many more – Scroll to the bottom of Amazon.com to see more specialty sites.
Amazon & Industry Evolution
Amazon’s strategies have competitors seeking for solutions to keep from losing market share to Amazon. When Amazon gains a Prime member it is very likely that member will remain loyal to Amazon for all products that are available on Amazon. The retail ecommerce industry is evolving mostly because they do not have a choice.
A good example of this is ShopRunner. ShopRunner is a free two day shipping membership program that thousands of retailers are participate in. Many of them are huge national retailers. The ShopRunner program even offers Amazon Prime members a free year subscription. Free shipping is now expected, but as time progress we can all expect to receive faster free shipping. While we all like to believe we are getting something for free the truth is that it is now just included in the price. Retailers will continue to evolve, but it may be to late to catch up to Amazon if they play their cards right.