Amazon (company)

Company information

• Date founded: July 5, 1994
• Industry: Internet services and retailing
• Corporate headquarters: Seattle, Washington
• Type: Public

Amazon.com, Inc., also known simply as Amazon, was founded as an online bookstore by Jeff Bezos in 1994. In the span of a few years, Amazon became the largest internet retail company in the world. Bezos named Amazon after the Amazon river in South America—considered the biggest river in the world—to reflect his goal of creating the largest bookstore in the world. By 2000, Amazon had expanded into an online marketplace selling a vast array of products and services. Amazon became known for its stunning stock inventory, bold creativity, and range of services, although it also later attracted criticism for some of its business and labor practices.

Despite this resounding success, the company posted quarterly losses for years. Bezos's strategy favored reinvestment into business growth over short-term profitability. This strategy led the company to develop several massive projects through the years, such as the Amazon Fire phone, Amazon Prime Instant Video, Amazon Cloud drive, and others, with many eventually proving very successful.

Amazon also suffered several massive sell-offs in its financial history, such as when its stock fell 94 percent during dot-com bubble crash from December 1999 to September 2001. Nevertheless, the overall stock trajectory of Amazon over the years proved impressive. Amazon shares increased from $1.50 in 1997 to over $700 in 2016, a stunning return of 46,500 percent. In 2022 the average share price was around $100; in July 2024 the share price of Amazon reached a high of over $200 on multiple days of trading. It is difficult for analysts to calculate the company's annual sales, since Amazon rarely made its sales figures public.

One of the key points for Amazon's success was the relentless control of storage and delivery efficiency and cost. It also showed the ability to move beyond the e-commerce world that it dominated, becoming a major player in cloud computing, streaming media, and other areas. However, the company also attracted considerable controversy over the years, including around complaints of monopolistic practices, ethical concerns over worker and consumer rights, and scrutiny of its environmental impact.

History

The rise and evolution of Amazon represented a fundamental change in the history of business worldwide. Amazon grew from its inception as a global bookstore to become a book publisher, a retailer of many other goods, a manufacturer, a video and music distributor, a production studio, and a tech industry giant, among many other roles.

In 1994, Jeff Bezos left his financial career on Wall Street to start an online bookstore in Seattle. Bezos was a visionary who recognized early the commercial potential of online markets, harnessing the huge selection of books made accessible by the internet. By 1997 it was calculated that Amazon's book stock could fill six entire football fields. The company went public that same year. Over the next few years it steadily expanded its range of offerings to include music, videos, electronics, toys and games, household items, and more. Bezos was recognized as Time magazine's person of the year in 1999 for Amazon's role in developing e-commerce.

Amazon posted its first profitable quarter in 2001. In 2002 the company opened Amazon Web Services, which offered cloud-based services such as storage, computer rental, and computation through Amazon Mechanical Turk. It would continued to expand into innovative technology services over the years. In 2006, for example, the company launched Elastic Compute Cloud (EC2), a web service to allow individuals and small companies to rent computers for their applications. It was the first accessible cloud computing infrastructure service. Another important development in 2006 was the launch of a platform allowing third-party sellers to sell products through Amazon's platform and distribution infrastructure.

In 2007 Amazon launched the Kindle, an electronic book (e-book) reading device. Around this time it also opened a store for streaming digital music and videos. By 2008 Amazon was generating approximately $20 billion a year in revenue, more than the combined sales of all other US bookstores, although it had started to lose market share in music and videos to competitors, mainly Netflix and Apple. In 2009 the Amazon Publishing wing was launched, followed by Amazon Studios the next year. By 2010, despite the competition from a growing number of other digital publishers, Amazon controlled 90 percent of the e-book market. In the 2010s the company also branched out with other electronic devices, including Echo smart speakers using the speech-recognizing personal assistant service known as Alexa, the Fire line of tablet computers, and the Fire TV line of streaming media players. The company was increasingly seen as one of the major players in not just online retail, but also the broad field of information technology.

Much of the market share gained by Amazon was due to its incisively efficient pricing competitiveness. Critics, however, pointed out that Amazon managed to keep prices low by following the Walmart model of manufacturer relations. In other words, Amazon demanded ever greater shares and more favorable shipping terms, as well as charging fees to its providers and smaller businesses using its platforms to sell. Nevertheless, Amazon often ranked among the United States' most admired businesses. In 2012, Amazon was third on CNN's list of most admired companies. It also continued to grow: in 2014, it ranked number thirty-five on the Fortune 500 list. In 2016 Amazon was ranked as the world's eighth largest retailer; according to Forbes, it took over the top spot for the first time in 2019.

Amazon often made headlines for its cutting-edge developments. For example, in the mid-2010s the company began experimenting with the use of drones to control delivery speed. On December 7, 2014, Amazon made its first drone delivery, dropping off an Amazon Fire TV and a bag of popcorn to a customer in rural England. The delivery took thirteen minutes to arrive from a fulfillment center in Cambridge, England, after a customer placed the online order. Although headquartered in the United States, Amazon explained that its drone service was first tested in England because US regulations for drone testing were too strict.

As Amazon grew it continued to diversify into many different areas. By 2016 it was estimated that only about 7 percent of its annual revenue came from books. Although books were no longer its core business, many predicted that Amazon's dominance of the e-book market would nevertheless lead it to become the biggest publisher in the world. The company also heavily invested in its media services through the 2010s, positioning its Prime Video platform as one of the leaders in the growing streaming media market and acquiring other companies such as the live-streaming service Twitch (purchased in 2014). Amazon Web Services also grew rapidly, with cloud computing becoming one of the company's most profitable businesses.

Amazon took another major step in June 2017, when it acquired the high-end grocery store chain Whole Foods in a reported $13.4 billion deal. The move was widely seen as an attempt to increase the company's brick-and-mortar store presence, and also an effort to improve its performance in the massive US grocery sector. Amazon had been selling groceries online for almost ten years, but consumers had proved reluctant to purchase such items, especially perishables, sight unseen. The Whole Foods acquisition immediately gave Amazon an outlet to circumvent this issue, bolstering a small number of other physical stores Amazon had experimented with in the 2010s. The move was also regarded as a clear attack on one of Amazon's biggest rivals, Walmart, which at the time was the largest retailer of groceries in the United States but continued to lag behind Amazon in online sales. While the deal was generally praised by analysts as a bold strategic maneuver, some observers noted that Whole Foods' reputation for expensive merchandise appeared at odds with Amazon's longstanding policy of low prices. Some industry experts also speculated that Amazon's focus on automation and ultra-efficient supply lines could lead to significant job losses at Whole Foods.

In January 2018, Amazon opened its first public Amazon Go store—a checkout-free grocery store using a mobile application connected to an Amazon account to charge customers as they remove items from the shelf. The first wave of Amazon Go stores opened in Washington, Illinois, and California. Also in 2018 it was announced that its Amazon Prime subscription service, which offered free two-day shipping and other benefits, had surpassed 100 million paid subscribers. That same year the company announced that its annual Prime Day sales promotion, inaugurated in 2015, was the biggest sales day of the year, with Amazon Prime members buying more than one hundred million products.

In September 2018, Amazon became the second US company to be valued at more than $1 trillion, following Apple, which reached that mark the previous month. In November 2018, Amazon announced that it was opening two more headquarters, in Long Island City, New York, and in Arlington, Virginia, following a widely publicized search process for the right location. However, in early 2019 it dropped its plans for the New York facility, in part due to considerable opposition to the plan from local politicians and activists, who argued the move would have negative consequences on the community and criticized the tax incentives promised to the company.

Amazon remained a dominant player in e-commerce, cloud computing, streaming video, and other markets into the 2020s. Among the areas it turned its focus were developing a fleet of electric delivery vehicles and expanding into the financial services sector. Challenges it continued to face included political pressure to increase regulation of major tech companies, global trade uncertainties such as the US-China trade war, and increasingly negative consumer perception of its overall effect on the retail industry and the environment. By 2020, Amazon employed around 798,000 people, making it one of the biggest private employers in the United States.

Beginning in March 2020, Amazon received some backlash amid the coronavirus disease 2019 (COVID-19) pandemic for failing to enact new rules in its warehouses to adhere to social distancing and health guidelines. After several protests and strikes around the country, the company began requiring the use of masks, disinfecting warehouses, implementing higher wages, and creating new protocols to promote social distancing. At the same time, Amazon had a hiring increase in order to keep up with an influx of orders caused by the pandemic. Criticism of the company's labor practices in general increased during this time, helping lead to the organization of the Amazon Labor Union in early 2021 and several subsequent votes on unionization at specific Amazon facilities around the country that attracted considerable media attention. Amazon itself strongly opposed unionization efforts.

In February 2021 it was reported that Bezos would leave his post as Amazon's CEO later that year, moving to a role as executive chair of the company's board of directors. Andy Jassy, head of Amazon Web Services (by then the company's largest driver of operating income), was announced as Bezos's successor as CEO. Also in 2021 it was reported that Amazon would acquire the film production company Metro-Goldwyn-Mayer (MGM). Although the deal attracted some scrutiny from antitrust regulators, it was finalized in early 2022. Later in 2022 the company drew attention for significant layoffs amid a broader downturn in the tech industry. In January 2023 the company announced more job cuts, laying off more than 18,000 workers.

In September 2023 the Federal Trade Commission (FTC), a US government agency tasked with protecting consumers, filed an antitrust lawsuit against Amazon. The lawsuit accused Amazon, and Amazon Marketplace in particular, of stifling competition and maintaining a monopoly that hurt consumers and third-party sellers. In February 2024 a federal judge set October 2026 as the trial date for the antitrust trial. Meanwhile, unionization efforts continued at a number of Amazon facilities, and in June 2024 the Amazon Labor Union became affiliated with the International Brotherhood of Teamsters, one of the largest national unions in the US.

Impact

Amazon is widely considered one of the most influential companies of its era. It is credited with a major role in reshaping the global economy in the early twenty-first century, not only by making online shopping mainstream but also by disrupting numerous other industries through technological innovation. Its initial success as a retailer demonstrated a business model based on aggressive competitiveness and efficiency, as well as the potential of combining sales and services with algorithms. Its innovative monitoring technologies tracked and timed employee movement and performance from the assembly line to packing stations to the loading docks, at all Amazon fulfillment centers—vast warehouses to which wholesalers and factories send their products to be packaged and reshipped to Amazon customers. The company also exerted powerful influence well beyond retail, with its web services becoming a particularly important part of the infrastructure of the internet for many other companies and users.

However, along with its great success, Amazon also faced considerable criticism and legal problems through the years. Among these were complaints about its labor practices, which have been called an extreme type of Taylorism. Named for inventor and engineer Frederick W. Taylor (1856–1915), Taylorism is system of "scientific management" that requires industries to time and measure all work tasks to determine the fastest and most efficient movements and processes in an organization's workflow. Employees are then trained to follow these movements precisely to increase productivity. At Amazon, such tasks as shelving, packaging, loading, and unloading, are broken down into subtasks, all of which are measured and timed. This relentless focus on productivity gains without commensurate increases in employee wages may account for the fact that Amazon has been ranked among the top Fortune 500 companies with the highest employee turnover rates and been subject to various class action lawsuits for labor practices. Much controversy also surrounded Amazon's gradual shifting of jobs in favor of robots and drones as automation technologies became more sophisticated.

In 2018, in part due to longstanding criticisms, Amazon increased its minimum wage for US workers to $15 per hour. However, complaints about wages and working conditions continued to surface. A push to unionize warehouse employees in Alabama drew much attention in 2020 and 2021, though workers ultimately rejected the plan by a wide margin amid a strong anti-union campaign by the company. In early 2022 workers at an Amazon facility in Staten Island, New York, became the first at the company to vote in favor of unionization.

Critics have also taken issue with Amazon's regulation of third-party sellers on its platform, as it often changed rules as part of its effort to keep prices low. Similarly, the company faced charges of anti-competitive business practices, including copying various software products and leveraging its market power to shut out the original developers. A US House of Representatives Judiciary subcommittee investigation concluded in October 2020 that Amazon and other big tech companies had monopoly power, and antitrust cases against the company emerged in the European Union as well. In September 2023 the FTC filed an antitrust lawsuit against Amazon, one of the most significant actions the US government had taken to regulate the company up to that point in history.

Amazon has also been involved in legal conflicts in the publishing world. In 2012, after Amazon filed a complaint with the FTC for what it deemed a price fixing collusion scheme between the competition and some publishers, the US Justice Department sued Apple and five publishing companies. One publisher was obliged to pay $75 million and another to pay $20 million. Despite these conflicts with publishing houses, reports suggest that many individual writers appreciated Amazon's services. Thousands of writers lacking access to traditional publishing have been able to have their work read and sold by way of Amazon's platform for independent writers. Moreover, according to most estimates, by 2020 Amazon accounted for about 50 percent of print sales in the US.

In addition to frequent job cuts, Amazon has been accused by many current and former workers of having a toxic work culture, practicing anti-union activities, and avoiding paying taxes. The company has also been criticized by customers for its data collection practices. Amazon has also been criticized for its impact on the environment. Its business model, based around rapid shipping, requires vast transportation networks that consume large amounts of fuel and energy. Critics have also argued that beyond its own direct environmental footprint, the company has done relatively little to support environmental causes, despite wielding much economic and political power. They further point out that Amazon has been linked to organizations and politicians who denied climate change. The company has faced protests and strikes over its environmental record.

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