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, selling other items -- such as electronics, apparel and accessories, auto parts, home furnishings, health and beauty aids, toys, and groceries -- contributes more than two-thirds 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.
Amazon rings up 60% of its sales in North America. Important international markets include Germany, Japan, and the UK, each contributing roughly 10%, 11%, 8%, and 8% respectively of the company's 2015 sales. Amazon also does business in Brazil, China, France, Italy, Australia, Mexico, the Netherlands and Spain. The company's Appstore serves customers in some 200 countries.
In addition to products (which make up nearly 75% of sales), Amazon is increasingly a provider of services. Service sales represent third-party seller fees earned (including commissions) and related shipping fees, digital content subscriptions, and other non-retail activities. Its Amazon Web Services unit caters to developers, start-ups, and larger enterprises by providing access to Amazon's technology infrastructure. (Clients include Pinterest and airbnb.)
In 2015 the company changed its reportable segments to North America, International, and Amazon Web Services (AWS).
The North America segment (60% of total net sales in 2015) consists primarily of retail sales of consumer products (including from sellers) and subscriptions through North America-focused websites such as www.amazon.com, www.amazon.ca, and www.amazon.com.mx. This segment includes export sales from these websites.
The International segment (33%) consists of retail sales of consumer products (including from sellers) and subscriptions through internationally-focused websites such as www.amazon.com.au, www.amazon.com.br, www.amazon.cn, www.amazon.fr, www.amazon.de, www.amazon.in, www.amazon.it, www.amazon.co.jp, www.amazon.nl, www.amazon.es, and www.amazon.co.uk.
AWS (7%) includes global sales of computer, storage, database, and other AWS service offerings for start-ups, enterprises, government agencies, and academic institutions.
Sales and Marketing
Amazon advertises its wares through online marketing channels including sponsored searches, portal advertising, direct sales, and email campaigns. The company spent $3.8 billion on advertising and other promotional costs in 2015, up from $3.3 billion and $2.4 billion in 2014 and 2013, respectively.
During the past several years, the online giant's sales have grown dramatically -- from about $15 billion in 2006 to $89 billion in 2014. In 2015, net sales increased by 20% due to higher sales from North America segment.
The North American sales growth reflects increased unit sales (including sales by marketplace sellers) driven largely by its continued efforts to reduce prices for its customers, including from its shipping offers, and sales in faster growing categories such as electronics and other general merchandise.
In 2015 Amazon reported net income of $596 million compared to a net loss of $241 million in the previous year due to increased sales partially offset by higher technology and content expenses.
Net cash provided by the operating activities increased by 74%.
Beyond being a best-in-class, low-cost and high-convenience online retailer, Amazon is focused on expanding by increasing both product and service (e-commerce, etc.) offerings; it also intends to continue its international expansion. In 2015, the company's Amazon Web Services business introduced its AWS Marketplace for Desktop Apps and Amazon WorkSpaces Application Manager products. That year it also launched its unlimited cloud storage Amazon Cloud Drive platform, as well as its Kindle Direct Publishing EDU platform that enables educators and authors to easily share eTextbooks and educational content via tablets and smartphones. In 2014, Amazon launched its Fire smartphone and its Fire TV streaming platform.
The Kindle Fire and Kindle Voyage are the latest in Amazon's line of Kindle e-readers. Digital books have emerged as the fast-growing segment of the book market. In fact, Amazon now sells more Kindle e-books than print books. The Kindle, Kindle Paperwhite, Kindle Voyage, and 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 sells its own e-reader Nook, emerged as a formidable competitor to Kindle, but has since faded. As a way to boost its already robust e-book services business, Amazon in 2013 purchased online book community Goodreads. Based in San Francisco, the social media site, which is used by 30,000-plus book clubs, provides the platform for its 30 million members to share book reviews and recommendations.
Boosting its service sales, the company has inked a number of deals to expand into new markets. In mid-2014, Amazon introduced its Zocalo service, which allows customers to securely store and share files including documents, spreadsheets, presentations, and webpages online. To boost membership in its Prime shipping and customer loyalty program, Amazon has partnered 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 Netflix.
The company has grown Prime two-day delivery selection from 1 million items to over 30 million, added Sunday Delivery, and introduced Free Same-Day Delivery on hundreds of thousands of products for customers in more than 35 cities around the world. It has added music, photo storage, the Kindle Owners’ Lending Library, and streaming films and TV.
This year, it created a new program called Seller Fulfilled Prime. It invited sellers who are able to meet a high bar for shipping speed and consistency in service to be part of the Prime program and ship their own orders at Prime speed directly. It also created the Amazon Lending program to help sellers grow.
India is another example of how the company globalizes an offering like Marketplace. Amazon invented Amazon Tatkal, which enables small businesses to get online in less than 60 minutes. Amazon Tatkal is a specially designed studio-on-wheels offering a suite of launch services including registration, imaging and cataloguing services, as well as basic seller training mechanisms.
In 2016 Amazon announced plans for a new technology development center in downtown Minneapolis.
Mergers and Acquisitions
Growing its media presence, in 2016 Amazon Studios acquired all North American rights, including theatrical and streaming, for Woody Allen’s latest as yet untitled feature film.
In 2015 AWS acquired Elemental Technologies, pioneers in software-defined video solutions for multiscreen content delivery. The acquisition brought together Elemental’s leading video solutions with the AWS Cloud platform to provide media and entertainment companies with a range of integrated solutions to efficiently and economically scale video infrastructures as the media industry increasingly moves to internet based delivery.
To expand its menu of media and entertainment content, Amazon in October 2014 acquired Rooftop Media, an online comedy service. The purchase of Rooftop, which produces audio and video programming, furthers Amazon's foray into the digital content market where it seeks to compete with Netflix and other online digital media services. Also that year the acquisitive company purchased comiXology, a digital comic book platform; and Twitch Interactive, a live video platform for gamers.