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Last Updated: Tuesday, 12 July, 2005, 22:15 GMT 23:15 UK
Birthday greetings to Amazon.com
Stephen Evans
By Stephen Evans
BBC North America business correspondent

Jeff Bezos, Amazon boss, AP
Amazon boss Jeff Bezos has reason to smile

It's hard to doubt the genius of Jeff Bezos.

As the 10th anniversary of Amazon.com approaches this weekend, the company's founder surveys a retail world he has turned upside down.

Before Jeff Bezos, bookshops were bricks and mortar.

Now, they're on our computer screens and a couple of clicks of a mouse buys you a book - or one of the many other products now sold on the site.

Dotcom profits

But does a brilliant idea add up to good business?

Amazon
Amazon continually develops new products and services

Amazon certainly makes a profit now, in contrast to earlier years when Mr Bezos would regularly tour television studios and smile and assure investors that the company's "burn rate" was coming down.

The "burn rate", you remember, was one of those quintessentially 1990s terms for the speed at which cash got eaten up.

And during the dotcom boom it sometimes felt that the higher the burn rate, the better the company was doing.

At the end of the 1990s, Amazon's revenue was around $1.5bn (800m) a year, but it was still making a loss.

And it was borrowing $1bn each year just to keep afloat.

But it's come through the storm, if not to smooth water and an easy passage, then to difficult commercial seas, but at least comfortably afloat and moving forward steadily.

Stock market doldrums

Its stock price has fallen this year and is nowhere near the highs of the bubble years, but the company now makes a tidy profit.

Amazon boss Jeff Bezos, AP
Amazon's shareholders are less happy

Mr Bezos' aim was to turn Amazon into the Wal-Mart of electronic retailing, with a company mantra of "get big fast".

Ten years on, he has created a company that is the biggest in internet retailing.

It does not, though, have Wal-Mart's reach and profitability - and Wal-Mart, which is moving much of its business online, may end up being the Wal-Mart of internet retailing.

Biggest on the web

All the same, Amazon's sales last year were nearly $7bn, more than those of any other internet retailer.

Dell sold goods for $3.25bn.

Only Ebay was bigger than Amazon with sales of $34.2bn, but Ebay doesn't sell on its own behalf; it only acts as the market for sales by others.

Wall Street, though, is not utterly convinced by Mr Bezos' strategy.

There is a view that slower growth in fewer areas might be more profitable in the long run.

An analyst's report from Bank of America last year wondered whether the company shouldn't sell fewer items and confine its inventory to goods that made a profit.

The counter view is that building customer loyalty - and Amazon has nearly 50 million loyal customers - takes time and depends on people automatically turning to the site in the knowledge that there'll be something there they want.

If people fail to find a book on Amazon, they'll stop surfing it so frequently.

Bezos style

You can't really separate the Bezos strategy from the Bezos style.

All that relentless publicity in the late 1990s has paid off.

He is an avuncular character who exudes enthusiasm, and that's an image that suits the company.

His view has always been that ups and downs in stock price would not drive the company.

Amazon would be focussed on long term growth and that meant making the customer king, seemingly whatever the cost.

There have been several genuine innovations, like software that remembers your details and sends your shopping cart swiftly and smoothly to the check-out.

Buying books is effortless because Amazon remembers your shipping address and credit card details. It works out your preferences so it continually offers you books you might well like on the basis of past purchases.

Amazon continually expands into new products.

New products

For example it is developing a new venture where books can be printed on demand.

It is also letting other sellers use its website for their own wares.

Its website is interesting and quirky, with reviews and recommendations by readers and even a tongue-in-cheek analysis of words per dollar.

But it's a tough business where costs are rising and where success breeds competition in a market where it's relatively easy to get access.

On top of that, to sell books or any other product on-line, there has to be a big discount, so profit margins are tight.

On the weekend, Amazon holds a 10th birthday party, what it calls a "Show of Thanks" featuring Norah Jones and Bob Dylan and streamed live on the Amazon website.

And a show of thanks there should be.

On-line bookshops have transformed reading, making books more available in more places, widening intellectual horizons.

Is it a way of making big money? That's another question.


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