Amazon.coms First-Mover Advantage in Online Retailing

Amazon.coms path to becoming the worlds largest online retailer began in 1994 when Jeff Bezos, a Manhattan hedge fund analyst at the time, noticed that the number of Internet users was increasing by 2,300 percent annually. Bezos saw the tremendous growth as an opportunity to sell products online that would be demanded by a large number of Internet users and could be easily shipped. Bezos launched the online bookseller Amazon.com in 1995. The start-ups revenues soared to $148 million in 1997, $610 million in 1998, and $1.6 billion in 1999. Bezoss business planhatched while on a cross-country trip with his wife in 1994made him Time magazines Person of the Year in 1999.

The volume-based and reputational benefits of Amazon.coms early entry into online retailing had delivered a first-mover advantage, but between 2000 and 2013 Bezos undertook a series of additional strategic initiatives to solidify the companys number-one ranking in the industry. Bezos undertook a massive building program in the late-1990s that added five new warehouses and fulfilment centres at a total cost of $300 million. The additional warehouse capacity was added years before it was needed, but Bezos wanted to move pre-emptively against potential rivals and ensure that, as demand continued to grow, the company could continue to offer its customers the best selection, the lowest prices, and the cheapest and most convenient delivery. The company also expanded its product line to include sporting goods, tools, toys, grocery items, electronics, and digital music downloads, giving it another means of maintaining its experience and scale-based advantages. Amazon.coms 2013 revenues of

$74.5 billion not only made it the worlds leading Internet retailer but made it larger than its 12 biggest competitors combined. As a result, Jeff Bezoss shares in Amazon.com made him the 12th wealthiest person in the United States, with an estimated net worth of $27.2 billion.

Moving down the learning curve in Internet retailing was not an entirely straightforward process for Amazon. com. Bezos commented in a Fortune article profiling the company, We were investors in every bankrupt, 1999-vintage e-commerce start-up. Pets.com, living.com, kozmo.com. We invested in a lot of high-profile flame- outs. He went on to specify that although the ventures were a waste of money, they didnt take us off our own mission. Bezos also suggested that gaining advantage as a first mover is taking a million tiny stepsand learning quickly from your missteps.

Question: Describe and explain how Amazon.com defined its strategic position.