The retailer-turned-tech firm exemplifies a powerful two-pronged approach to innovation.
In 1994, Jeff Bezos incorporated Amazon.com and billed it as “The Earth’s Largest Bookstore.” In July the following year, the site went live. By 1996, Amazon had $16 million in sales, while its dominant competitors, Barnes and Noble and Borders Books, had roughly $2 billion in revenue each.
Fast-forward twenty years. Today Amazon employs more than 150,000 people and is a $90 billion purveyor of merchandise ranging from books and music to toys, electronics, jewelry, sporting goods, industrial products, diapers, clothes, food, wine, furniture, and fine art. In 2013, Amazon revenue grew 22 percent compared to Walmart’s 2.2 percent increase. It achieved revenues of $50 billion in sixteen years, half the time it took Walmart to hit this number. A McKinsey study indicated that compared to its five largest competitors, Amazon has roughly seven times the assortment of goods, 5 to 13 percent lower prices, and 13 percent higher customer satisfaction scores. Amazon also spends 6 percent of sales on R&D, three times the amount other retailers spend. Meanwhile, Borders has declared bankruptcy, and Barnes and Noble is struggling. In the words of a recent book on Amazon, it has become “The Everything Store.”
How did an online bookseller that held no inventory of its own transform itself in two decades into one of the preeminent technology firms in the world?