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 some 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.
In addition to products (which make up 80% 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.)
The company's Audible Audiobooks unit is the world's largest producer and seller of audiobooks. In 2013, Audible customers downloaded nearly 600 million hours' worth of spoken word content. Amazon's Whispersync for Voice app allows readers to switch between reading a book on their Kindle and listening to the corresponding audiobook on their smart phone. Similarly, in the gaming arena, Whispersync for Games lets users switch play between different devices without losing their game progress.
Amazon rings up 60% of its sales in North America. Important international markets include Germany, Japan, and the UK, each contributing roughly 10% of the company's sales. Amazon also does business in Brazil, China, France, Italy, and Spain. The company's Appstore serves customers in some 200 countries.
The company added 420,000 sq. ft. of space to its Seattle headquarters; the location will eventually take up four city blocks.
Sales and Marketing
Amazon advertises its wares through online marketing channels including sponsored searches, portal advertising, and email campaigns. The company spent $3.3 billion on advertising and other promotional costs in 2014, up from $2.4 billion and $2.0 billion in 2013 and 2012, respectively.
During the past several years, the online giant's sales have grown nearly fivefold -- from about $15 billion in 2006 to $89 billion in 2014. Sales in 2014 jumped another 20% to $88.99 billion, fueled increased unit sales, especially in fast-growing categories such as electronics and other general merchandise. Price cuts and free-shipping promotions helped drive sales volume, as did efforts to increase in-stock inventory and product selection. Geographically, sales rose by 25% in the North American market, while sales in international markets grew by 14%.
Despite soaring revenue, Amazon returned to the red in 2014, with losses of $241 million during the year. Higher cost of sales, which includes product, digital media content, and shipping costs, continued to squeeze the company's razor-thin profit margins and led to a loss for the year. The company also spent more toward building its technology infrastructure, including its Amazon Web Services, which serve developers with various application platforms.
Cash levels continued to rise, however, with operations providing $6.84 billion in 2014, mostly as earnings rose after adjusting for non-cash items such as depreciation, amortization, and stock-based compensation.
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.
Mergers and Acquisitions
To expand its menu of media and entertainment content, Amazon in October 2014 agreed to acquire 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.
Historically, Amazon's vast scale and efficient operating model have allowed it to prosper despite downward pressure on prices. (Offering customers low prices is key to Amazon's business strategy.) However, the company reported steep declines in net income in 2011 and 2012, largely due to razor-thin margins on the sale of the Kindle fire tablet. (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 company returned to profitability in 2013, when it netted $274 million. While increased sales helped Amazon see black that year, other factors such as favorable impact on earnings in lower tax rate jurisdictions -- primarily related to its European operations -- also contributed to the turnaround.