(#2) Case 19: Amazon.com?2018

www.amazon.com, AMZN

Headquartered in Seattle, Washington, the year 2017 was phenomenal for Amazon that over the last twenty years has grown from being solely an online bookstore to a worldwide powerhouse, selling virtually everything today to everybody. Amazon is the largest online retailer in the world as measured by both revenue and market capitalization. The second largest online retailer is Alibaba Group located in China. Led by their CEO, Jeff Bezos, Amazon has expanded heavily into smart homes and through its Alexa platform, and even into machine learning. In 2017, the firm shipped over 5 billion items with Prime worldwide with more paid members joining Prime in 2017 than any previous year, both in North America and worldwide.

Amazon reported record revenues in 2017, up 31 percent?helped in part by Fire TV Stick and Echo Dot?that were the bestselling products across all of Amazon's products sold. Tens of millions of Echo devices alone were purchased, but a portion of the revenue increase can be explained through the acquisition of Whole Foods. Amazon hired 130,000 new employees in 2017, globally, and employs over 17,500 veterans and their spouses in the United States. In 2017, Amazon Prime Video reported over 18 million views from customers in 11 NFL games across over 200 countries on their smart TVs and other devices. Amazon also now holds the global TV rights to The Lord of the Rings. The company even launched two furniture brands in2017.

Amazon reports in three segments: North America, International, and Amazon Web Services (AWS). Amazon, in early 2018, launched a new service called "Shipping with Amazon" aimed at competing with FedEx Corporation and United Parcel Services (UPS). But the Amazon's 40planes and 300 warehouses pale in comparison, for example, to FedEx's 650 planes, 150,000trucks, 400,000 employees, and 4,800 operating facilities globally to handle about 12million shipments a day. UPS is even larger than FedEx and handles 20 million packages a day with service to more than 220 countries through a fleet of more than 500 planes and 100,000 vehicles. At least for now, neither FedEx or UPS is concerned that Amazon wants into the shipping business, but that could change.

History

Amazon opened for business in July 1995 as an online bookstore and has since grown into the largest e-commerce firm in the world. The name Amazon was chosen because the Amazon River region is "exotic and different" and the biggest river system in the world; founder Jeff Bezos planned to make his bookstore the biggest in the world. Amazon started an associate program where other websites could post on amazon.com; this led to allowing individuals to post items for sale. Online shopping became popular with the growth of the Internet in 1995 with the world's population percentage of using the Internet being 0.4 percent. That was a total of 16million people using the Internet in 1995.

After a decade, the world's population percentage of using the Internet grew to 15.7 percent; which is a total of 1,018 million people. As of June 2017, the world's population of using the Internet was 51.7 percent; which is a total of 3,885 million people. The demand for online shopping also has grown substantially.

Amazon's number of worldwide customer accounts has grown from 1.5 million customer accounts in the 1990s to over 500 million in 2018. In 2005, Amazon created the Amazon Prime membership program where members were eligible for faster 2-day, or even 1-day, shipping on their orders. The program also allowed members to have access to the Amazon Instant Video where members could stream videos. About 60 percent of Amazon users in the U.S. are Amazon Prime subscribers.

In 2007, Amazon

In 2007, Amazon began offering its Kindle 3^rd-generation-readers, paving the way for e-books. Today, you do not even need a kindle to read e-books as the free kindle app is sufficient. The firm's establishment of Prime offering free shipping and select audio and video to customers for free was a hit with consumers and now Amazon generates more revenues from Prime customers than from nonprime customers in the United States.

Amazon, in the last few years, is aggressively expanding its Amazon Web Services (AWS) business which focuses on machine learning, powering smart homes, and other data driven applications. Many people are familiar with Amazon's smart speakers, or Alexa, who is ready to help on many items.

In early 2017, Amazon acquired Whole Foods Market for $13.7 billion in at attempt to both move into the brick and mortar business, but possibly as a means of delivering groceries in the future. Whole Foods is a leader in organic foods in North America and has over 477 stores in North America and the United Kingdom.

Amazon is locating a second headquarters in a city with at least a million people; the city is to be revealed in mid-2018. The $5 billion second headquarters, starting with 500,000 square feet and eventually expanding to as much as 8 million square feet, may have as many as 50,000 employees. The company is also building a new downtown Seattle building, expected to be completed in 2020.

Exhibit 6 Amazon versus Two Rivals on Seven Variables Amazon Walmart Trader Joe's $ Market Cap. 748B 26.6B 2.7B # Employees 566,000 2.3M 16,600 $ Revenue 178B 500B 1,553M % Profit Margin 1.7 1.97 39 $ Net Income 3B 9.9B 135M $ EPS Ratio 6.15 3.77 3.69 $ Total cash 31B 6.76B 24.48M Source: Based on a variety of sources.Exhibit 2 Amazon's Income Statements (in millions USD) Income Statement 12/31/16 12/31/17 Percent Change Revenues $135,987 $177,866 30.80% Cost of Goods Sold 88,265 111.934 26.82% Gross Profit 47,722 65.932 38.16% Operating Expenses 43,536 61.826 42.01% EBIT 4,186 4,106 -1.91% Interest Expense 294 300 2.04% EBT 3,892 3,806 -2.21% Tax 1,425 769 -46.04% Non-Recurring Events (96) (4) 95.83% Net Income 2,371 3,033 27.92%Exhibit 3 Amazon's Balance Sheets (in millions USD) Balance Sheet 12/31/16 12/31/17 Percent Change Assets Cash and Short Term Investments $25,981 $30,986 19% Accounts Receivable 8,339 13,164 58% Inventory 11,461 16,047 40% Other Current Assets 0 0 NA NA Total Current Assets 45,781 60,197 31% Property Plant & Equipment 29,114 48,866 68% Goodwill 3.784 13,350 253% Intangibles 0 0 NA NA Other Long-Term Assets 4,723 8,897 88% Total Assets 83,402 131,310 57% Liabilities Accounts Payable 25,309 34.616 37%Liabilities Accounts Payable 25,309 34,616 37% Other Current Liabilities 18,507 23,267 26% Total Current Liabilities 43.816 57,883 32% Long-Term Debt 7,694 24,743 222% Other Long-Term Liabilities 12,607 20,975 66% Total Liabilities 64,117 103,601 62% Equity Common Stock 5 5 0% Retained Earnings 4.916 8.636 76% Treasury Stock (1,837) (1,837) 0% Paid in Capital & Other 16,201 20,905 29% Total Equity 19,285 27,709 44% Total Liabilities and Equity 83,402 131,310 57% Source: Based on Amazon's 2017 04 Report and company data