Amazon turns 10, helped by strong tech, service

IDG News Service |  Business

Eddie Bauer, Target Corp. and Office Depot Inc., as well as many small retailers, have stores within the Amazon.com Web site, making it an online shopping mall. Meanwhile, through its Amazon Services Inc. subsidiary, Amazon.com also provides e-commerce services, such as Web site building and hosting, order fulfillment and product transportation, to companies such as Sears Canada Inc. and OshKosh B'Gosh Retail Inc.

Along the way, Amazon.com has grown from selling a single type of product -- books -- from a U.S. Web site, to selling a wide variety of wares -- including CDs, DVDs, apparel, home & garden supplies and consumer electronic devices -- from various international Web sites, including Canada, the U.K., France, Germany, China and Japan.

Amazon.com, founded in 1994 and operational on the Web since July 1995, is today a Fortune 500 company. In 2004, it had net revenue of $6.92 billion, up 31 percent from 2003, and net income of $588 million, or $1.39 per share, up from net income of $35 million, or $0.08 per share in 2003. It has come a long way from 1997, the year the company went public, when net sales were $147.8 million and the net loss was $27.6 million, or $1.27 per share. In the past year, the stock has fluctuated between $50.40 and $30.60. It closed on Wednesday at $36.51.

Having survived its first decade, Amazon.com is looking in the coming years at a new set of challenges, according to observers and to the company's latest annual report, issued in April. These challenges include:

-- Increased competition in both the retail and the e-commerce services markets, where Amazon.com faces some rivals with more customers, more financial resources and greater brand recognition.

-- Risks associated with its expansion into new countries and into new product segments. The international expansion inherently involves risks associated with doing business in different countries, where Amazon.com has to deal with different set of laws and regulations, face strong local competitors and extend its technology and business practices to accommodate its foreign business. Its continuing product diversification puts it in competition with companies that are entrenched in those markets and are more experienced in them.

-- The need to continually manage properly its efforts to sell and ship at discounts, to make sure that those lower prices are generating their intended business results.

-- Making sure that, as it grows, its technology infrastructure can keep up, an issue that comes up occasionally whenever the company faces system interruptions that make its Web sites unavailable or affect its ability to fulfill orders and provide services to third parties.

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