Amazon | E-commerce, Amazon Web Services, History, & Facts

Amazon began as an online bookseller, but the company went on to become a major disruptor across sectors and industries. And as with many classic “disruptors” throughout history, affecting wholesale change required that Amazon invent (and sometimes acquire) new technologies and new ways of doing things. Amazon’s innovations—including the Kindle e-reader and Echo line of so-called “smart home” products—have not only improved the customer experience but also have altered how people and companies transact business.

Launched in 1995: The bookselling platform

Bezos, a billionaire 170 times over and the third richest person in the world (as of 2024), never saw Amazon purely as a bookseller. From the beginning, he viewed Amazon as a technology company, a sentiment that was scoffed at by many naysayers and gave rise to a 1999 Barron’s cover story with the headline “Amazon.bomb.”

Based on his research, Bezos saw books as an easy entry point into e-commerce. He envisioned an all-encompassing retail site that would eventually expand into the realm of department stores, sporting goods stores, jewelers, grocery stores, music and video stores, as well as independents and everything in between and beyond.

His mantra was “Get big fast,” which he emblazoned on employee T-shirts and proved pretty quickly was a winning strategy. As with many start-ups, Amazon’s early days were marked by quarterly losses. Although its sales and cash flow were robust, many of those dollars in the early days were rotated back into the business to fund rapid expansion, with a heavy leaning toward technological advancements aimed to improve delivery time, manage and track inventory, and optimize its online platform. Amazon didn’t record its first profit until 2003—six years after its 1997 initial public offering.

Bezos’s original Amazon.com strategy was inventory free. But he soon found that to achieve more control over deliveries he needed warehouses. After its 1997 IPO, the company started what would evolve into a growing mass of warehouses, both big and small, in nearly every corner of the country.

Launched in 2000: Third-party services

As part of its goal to create the biggest online shopping site, in 2000 Amazon opened its store to third-party sellers, giving independent retailers a space to offer a variety of new, used, refurbished, and/or unique items. Amazon would host the platform and handle much of the logistical legwork in exchange for transaction fees.

The company strengthens its partnership with sellers by offering new products and services. Some of those include incorporating warehouse fulfillment and distribution, delivery services, shipping and inventory management, as well as customer relationship management (CRM) services into their partnerships. The company also offers a financial arm, Amazon Lending, which allows qualified sellers to borrow as much as $5 million.

The third-party seller services segment continues to grow, and as of 2023, it accounted for roughly 60 percent of sales.

Launched in 2002: Amazon Web Services (AWS)

Amazon Web Services is a comprehensive cloud computing suite featuring more than 200 services globally. As of the 2020s, it’s also Amazon’s most lucrative business segment and, with artificial intelligence (AI) as a hot topic (more on this below), could continue to grow at a robust pace.

If anything underscores Bezos’s vision of Amazon as a technology company, it’s AWS. In its early days, AWS offered data on Internet traffic patterns, website popularity, and other vital statistics for developers and marketers. In 2006 the division began offering a suite of cloud computing services to businesses unable (or unwilling) to take on the up-front capital infrastructure expenses themselves for computer hosting and storage.

Amazon developed AWS to solve its own software and database issues and then began renting it out on a pay-as-you-go basis. It did so by expanding the AWS portfolio with its Elastic Compute Cloud (EC2), which rents out computer processing power in small or large increments. Also, in 2006, Amazon introduced its Simple Storage Service (S3), which rents data storage over the Internet. With these offerings, AWS essentially reinvented the computer infrastructure market.

As of 2023, AWS holds about one-third of the cloud market, ahead of Microsoft’s (MSFT) Azure (23 percent) and Alphabet’s (GOOG) Google Cloud (11 percent). AWS is also a highly profitable business for Amazon, historically accounting for 15 to 18 percent of total sales, but yielding nearly 50 percent of the company’s operating income.

Launched in 2005: Amazon Prime

Amazon Prime is the company’s bundle-of-services membership program. Created as a means for offering fast, free delivery, Prime started in 2005 with free two-day shipping across the contiguous United States. As of 2023, the company estimates that it has 200 million Prime members across 19 countries, with a suite of offerings that includes:

• Fast, free delivery. That includes free one-day and same-day deliveries on eligible items in more than 90 urban areas as well as designated weekly delivery dates. Prime members near Atlanta, Chicago, Dallas, Miami, and Washington, D.C., can shop at local retail stores through Amazon.com and get the merchandise for same-day delivery.
• Buy with Prime. The Prime logo on third-party sellers’ products is a guarantee of fast, free delivery, a seamless checkout experience, and free returns on eligible merchandise.
• Watch, read, listen, and play. Entertainment options include Prime Video, Prime Reading, Amazon Music, and Prime Gaming.
• Shopping discounts. Exclusive deals and in-store savings are available at Whole Foods and Amazon Fresh stores. Prime members also can get eligible medications for a flat monthly fee through its RxPass. Discounts are available for Amazon Music Unlimited, Amazon Kids+, and Prime Video Channels.
• Food delivery. As of 2024, Prime includes a one-year Grubhub+ membership trial for free deliveries on all orders over $12.

As of 2024, a Prime membership in the U.S. cost $14.99 per month, or $139 annually.

Acquired in 2017: Whole Foods

Although Amazon’s first foray into the online grocery business, Amazon Fresh, had been around since 2007, the company paid $13.7 billion for upscale organic grocery chain Whole Foods in August 2017. Many feared Amazon would shake up the brick-and-mortar grocery world in the same way it did bookstores, expanding Whole Foods across the U.S. and making changes to the Whole Foods concept.

As of 2023, the on-site grocery industry has stayed largely intact—with more disruption coming from the entry of big-box retailers such as Walmart (WMT) and Target (TGT) than Amazon. But Amazon’s play has pushed other big grocers to make better use of technology and to offer delivery services as well as step up their organic and fresh offerings. It has used its Whole Foods stores for distribution and some fulfillment for Amazon deliveries.

Amazon Fresh, which has lower price points than Whole Foods, has thus far remained an independent concept. The company also opened Amazon Go, a convenience-store concept that offers Just Walk Out shopping, which allows shoppers to skip the checkout lines in a technology-laden environment.

Launched in 2023: Amazon Bedrock

Artificial intelligence (AI) has been part of the Amazon lineup since 2014, when it launched the first Echo smart device embedded with its virtual assistant Alexa, a voice-activated AI chatbot. By the early 2020s, Alexa was used to power more than 100 million devices worldwide.

But in 2023, Amazon—and the rest of the tech world—turned attention toward generative artificial intelligence (GenAI) and large language models (LLMs), following the 2022 launch of OpenAI’s ChatGPT. Amazon announced a $4 billion investment in AI start-up Anthropic to better combat its biggest AI competitor, Microsoft (which had earlier made a $10 billion investment in OpenAI). Since then, Amazon Web Services (AWS) has also partnered with AI21 Labs and Stability AI to allow developers access to more LLMs. The combination of these collaborations led to the creation of Amazon Bedrock, which helps developers build content using generative AI.

A look ahead

Despite having branched out well beyond e-commerce, the bulk of Amazon’s revenue—roughly 80 percent, as of 2023—continues to come through selling products online. Its profitability, however, and perhaps its key growth driver, is powered through AWS.

Like many of the top technology platforms, Amazon.com is not without its challenges. The company’s status as the dominant platform in e-commerce and cloud computing has led to increased regulatory scrutiny, including potential antitrust concerns. Wage inflation and other labor challenges—as well as increased cloud and AI competition from Microsoft and Alphabet—could pressure profit margins.

Amazon’s historical strengths have been aggressive technological innovation, expansion into new markets, and leading the evolution of e-commerce.

References

Richard L. Brandt, One Click: Jeff Bezos and the Rise of Amazon.com (2011), is a brief look at the company founder’s life and how his ideas kept Amazon.com ahead of the competition. Robert Spector, Amazon.com—Get Big Fast: Inside the Revolutionary Business Model That Changed the World (2000), is aimed at business readers looking to learn lessons in founding and steering the growth of a company based on the early history of Amazon.com.