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Amazon Web Services LLC

About Amazon Web Services LLC

What began as Earth's biggest bookstore has become Earth's biggest everything store. Expansion has propelled Amazon.com in innumerable directions. While the website still offers millions of books, movies, games, and music, electronics and other general merchandise categories, including apparel and accessories, auto parts, home furnishings, health and – more... beauty aids, toys, and groceries ring up about 60% of sales. Shoppers can also download e-books, games, MP3s, and films to their computers or handheld devices, including Amazon's own portable e-reader, the Kindle. Amazon also offers products and services, such as self-publishing, online advertising, e-commerce platform, hosting, and a co-branded credit card.

During the past five years, the online giant's sales have more than quadrupled from about $10.7 billion in 2006 to more than $48 billion in 2011. Indeed, sales rose 41% in 2011 vs. 2010, fueled by increases in fast-growing categories, such as electronics and other general merchandise, and price cuts and free-shipping promotions. Historically, Amazon's vast scale and efficient operating model have allowed it to prosper despite downward pressure on prices. Offering its customers low prices is key to Amazon's business strategy. However, four consecutive years of profit growth came to an end in 2011 when net income declined more than 45% vs. 2010. Drags on profitability include razor-thin margins on the sale of the new Kindle Fire tablet computer launched in November 2011. Amazon is apparently willing to take a short-term hit to profits to achieve its larger goal of increasing merchandise sales at its online store down the line.

The Kindle Fire is the latest in Amazon's line of Kindle e-readers (launched in 2007). Digital books have emerged as the fast-growing segment of the book market. In 2011 Amazon announced that it now sells more Kindle e-books than print books. The Kindle, Kindle 3G, and new Kindle with Special Offers (which sells for less but displays ads and sponsored screen savers) comprise Amazon's e-book offering. Rival Barnes & Noble, which launched its own e-reader Nook in 2009, has emerged as a formidable competitor to Kindle, especially since the release of Nook Color in 2010. 

Amazon has stepped up its physical and e-book publishing activities. Signaling an increased interest in content production, Amazon in 2012 acquired the publication rights to more than 3,000 backlist titles from Avalon Books, which will be published under the West Coast imprints of Amazon Publishing alongside Montlake Romance and Thomas & Mercer. Amazon become a book publisher with five imprints, including AmazonEncore and Montlake, in late 2010 when it purchased the publication rights of about 120 fiction and translated titles published by The Toby Press. Under the terms of the deal, the company's AmazonEncore and AmazonCrossing publishing imprints will release The Toby Press titles in print and Kindle editions for sale on Amazon's websites and at bookstores in the US, the UK, and Germany. Previous purchases made to strengthen its Kindle business include TouchCo, a manufacturer of touch screens (in early 2010), and the digital audiobooks publisher Audible for about $300 million in 2008.

To grow its customer base and sales channels, Amazon spent a total of $771 million on acquisitions at home and abroad in 2011. It purchased UK-based online bookseller The Book Depository in the fall. The Book Depository was founded by Andrew Crawford, a former Amazon.co.uk employee, and acquiring it strengthened Amazon's market share in the UK and bolstered its position in the e-book market. Raising its entertainment stakes in Europe, Amazon in 2011 acquired the remaining shares it did not already own in LOVEFiLM International, which streams video and rents DVDs by mail to customers in the UK, Germany, Denmark, Norway, and Sweden (like Netflix in the US). Amazon previously held a 42% stake in LOVEFiLM. The deal was announced amid rumblings from Hollywood studios that Amazon will roll out an Internet movie subscription operation to rival Netflix, so Amazon could make use of LOVEFiLM's technology in that pursuit. Amazon could also use its Hollywood connections to expand LOVEFiLM's video offerings and grow its market share in Europe.

At home in the US, the company purchased Woot Inc., an early entrant into the social shopping e-commerce niche in 2010. Dallas-based Woot operates as an independent subsidiary of its parent. It also acquired Quidsi, the owner of online shopping sites Diapers.com and Soap.com for $500 million in cash and $45 million in debt. Diapers.com sells baby care products and Soap.com sells everyday essentials. Both companies operate as independent units and retain their current executive leadership teams.

Looking to improve its automation fulfillment centers, as well as cut processing times and personnel costs, Amazon in 2012 acquired Massachusetts-based Kiva Systems, a warehouse technology company, for around $775 million. 

Meanwhile, in 2011 Amazon gave in to increasing pressure from state legislatures and its brick-and-mortar rivals to begin collecting sales tax on its online sales. After pitched battles in several states, including Texas and California, the company agreed to begin collecting taxes in The Golden State in 2012.

To boost membership in its Prime shipping and customer loyalty program (launched in 2005), Amazon has struck a deal with Discovery Communications. Discovery has agreed to sell the online-streaming rights to some of its older programming, including episodes of the popular shows "Dirty Jobs" and "Whale Wars," to Amazon's online-streaming service. Amazon's Instant Video streaming service is a distant second to Nexflix, with more than 21 million subscribers vs. only about 5 million for Amazon.

Jeff Bezos, who founded the company and serves as its chairman and CEO, owns nearly 20% of the firm. – less

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