In just a few years, Amazon grew from a tiny warehouse in Seattle to the world’s preeminent
Internet retailer with facilities across the United States, Europe and Japan. Beginning largely as
an Internet order-taker for books, the company grew into an online mega mall supported by a
network of distribution centers. Amazon’s early high profile stock market success, supported by
impressive sales growth, came to epitomize the go-go days of Internet valuations of the late
1990s. Even after the decline and fall of many of its online cousins, Amazon grew apace. By
2001, under the gravity of investor focus on profitability, however, Amazon’s cost structure
clearly dragged on the company.
What should Amazon do next? Should it continue its international expansion, or perhaps
retrench to allow for more profitable operations? Should it add product categories or cut back to
its Books, Music and Video core? Could Amazon use its brand strength and sophisticated
personalization algorithms to individually price its way into the black? Or, could Amazon steal a
page from Wal-Mart and focus on supply chain management to part the sea of red ink?
Alternatively, should Amazon return to its virtual roots and outsource order fulfillment, allowing
it to focus on its front-end Electronic Commerce platform? When Amazon’s share price was
rising, few cared. But in 2001, with many of Amazon’s dot-com peers resting in peace, it
mattered more than ever.