The early days
In summer 1994, former investment banker Jeff Bezos left New York for Seattle, Washington to create an online bookstore. The web site was launched in July 1995 to sell books through the Internet. These were the early days of Internet and the web site was unattractive. However it worked quite well despite a lack of key information such as publication dates. And Tom Alberg from the Madrona Venture Group was impressed enough to invest $100,000 in Amazon in 1995.
Amazon quickly became more than an online bookstore. It soon became a community in which customers could create book reviews online and research others before buying. It became not just a case of buying books but also of sharing opinions.
In 1996, its first full financial year in business, Amazon generated $15.7 million in sales. In May 1997, Amazon.com raised £54 million in an initial public offering as it launched itself on the stock market. In October 1997 Jeff Bezos himself hand-delivered Amazon’s 1-millionth order to a customer in Japan.
One year after its stock market launch, Amazon added music CDs and videos to its web site. It then followed up with five more product categories – electronics, software, toys, video games and home improvements.
This was growth at absolutely breakneck speed and many onlookers thought that the rapid growth policy would indeed “break their necks”. But early investors, such as Nick Hanauer, were convinced that Amazon would make a profit. However, profits didn’t come quite so quickly. Instead Amazon grew at express speed and profits were waived for the sake of growth to make it impossible for others to duplicate their achievement. It’s said that Hanauer’s initial $40,000 investment was at one time valued at $250 million. Hanauer apparently still keeps an old T-shirt from Amazon’s early days that reads: "Eat another hot dog, get big fast!"
The end of 1999 saw annual sales reach $1.6 billion and on 10 December, Amazon’s stock closed at an all-time high of $106.69. And in the same month, Time Magazine named Bezos "Person of the Year," calling him the "King of Cybercommerce."
But just one month later, the “King's” crown slipped badly.
Amazon fired 150 workers as part of a reorganization plan. Five days later, they reported a loss of $323 million for the fourth quarter, but promised lower losses in future. But the subsequent fourth quarter saw losses exceed that amount by more than $200 million.
By the summer of 2000, Amazon's share price had dropped by almost 70% and analysts began to criticize the company for venturing into too many products and spreading itself too thinly. Speculation on Wall Street suggested that Amazon would file for bankruptcy or be bought out. Some even clearly warned investors to avoid buying Amazon stocks. Gloom and doom mongers gave the company various labels such as Amazon.toast or Amazon.bomb as the collapse of the world’s largest e-tailer was predicted. In early 2001, when Amazon reported a huge fiscal loss of $1.4 billion - the company's worst-ever annual performance - Jeff Bezos finally came up with an answer.
In January 2001, the company’s chief executive promised a profit by the year-end. But expenses had to be cut and the business restructured. 1,300 workers (about 15 percent of its work force) were laid off. Two warehouses and a Seattle customer-service centre closed. Jeff Bezos gave orders to get rid of “crap” and cease selling unprofitable products. The company concentrated on streamlining its storage, packaging and delivery operation. It boosted its online offer by becoming an online shopping portal, offering and selling products from companies such as Toys ”R” Us and Target. It also competed with eBay through Amazon Auctions.
By the end of 2001, Jeff Bezos had kept his word. Amazon reported its first profit with fourth-quarter earnings of $5 million. It was clear that one quarter of profits would not be enough but since then profits have steadily improved. This was only achieved by continuously pushing sales and increasing business efficiency and also expanding the products offered on the web site.
10 years on
Nearly 10 years on and Jeff Bezos’ name remains synonymous with the company. Hanauer, who describes his long-time friend as “the smartest man in the world” is pretty sure that Jeff Bezos will head Amazon for some time to come. "He remains as single-mindedly focused on Amazon now as he ever was” says Hanauer. Amazon has survived and is also making a profit - a fact that many analysts and observers doubted would ever happen. The company has grown into a multibillion-dollar business and is now not only the undisputed leader of Internet commerce but also reaping a profit. Its community of almost 40 million customers will help it retain its market lead.