Amazon & Reliance
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A Report on Amazon & Reliance Origin, Growth Stories, and Key Insights Published by Finance and Investment Cell Shri Ram College of Commerce Contributors Gokula Krishnan Parth Ranjit Kulkarni Rishab Didwania Rishabh Khetawat Vatsal Sharma Vidhya Sriram A Report on Amazon & Reliance Table of Contents: S.N. Topics Page No. 1. Overview 3 2. Key People 7 3. Sectors and Profits 9 4. Similarities in Business Activities 12 5. A bit on Failures 14 6. Competition Survey 15 7. Conclusion 20 Page 2 of 20 Finance and Investment Cell, SRCC A Report on Amazon & Reliance 1. Overview Amazon Amazon started as an online bookstore based in Seattle. It was founded by Jeff Bezos in 1994. This idea supposedly dawned on him when he came across astonishing growth prospects in internet and e-commerce-based businesses. He chose to market books online as it was a low value, low risk, high demand product to ship and deliver. Though the short-term goal was to start an online retail venture to make books easily accessible by all, the long-term ambition was to establish a platform wherein customers could purchase every product possible. Within a few months of commencing business, Amazon had delivered across 50 states of the USA and 45 different countries. In the initial stages, Amazon received a lot of discouragement as brick and click stores like Barnes and Noble were also on their way to launch online bookstores and revolutionize the way retail bookstores looked and functioned. To combat this competition, Amazon launched 4.5 million titles that could be browsed through on a computer. The easy accessibility, smooth interface, relatively competitive pricing, and delivery system made consumers purchase frequently at Amazon instead of its competitors. To keep up with rapid growth and demand, Amazon had to open its doors to private investors in 1997. Later, Amazon went public with a market valuation of $300 million. Raising funds helped them aggressively expand into other product lines - in 1998, they started selling DVDs and Videos, the music section had a whopping 125,000 titles which was a high number in comparison to physical music stores. In 1999, Toys, electronics, home improvement, software, and video games. Furthermore, in 1999, Amazon patented the 1 click technology worth billions of dollars, which allowed customers to avoid the hassle of entering and re-entering shipping and payment details and made the transaction process quicker and simpler. Amazon licensed this technology to other websites till 2017, when its patent expired. Between 2000 to 2010, the E-commerce landscape had transformed drastically, and Amazon played a significant role in this change. People preferred to shop from the comfort of their homes instead of visiting retail shops, which became the new normal in retail shopping to a large extent. In 2005, Amazon launched its prime services which provided a quicker and simpler ordering process, free delivery – thus resulting in massively improved consumer loyalty. Amazon brought about changes in the Economy of the US as well, bringing in severe price-setting competition in the market. Earlier, retailers responded in terms of price changes only due to inflation or sudden changes in competition. However, with the growth of Amazon, online retail depended on market demand causing frequent changes in price setting. It also brought about uniform prices across the country and eliminated price discrimination to a certain extent. This meant the market was now flooded with cheaper goods, which was good news for the lower-income groups. Hence, a huge chunk of the population started preferring buying goods from online retailers who had established a presence on Amazon. Page 3 of 20 Finance and Investment Cell, SRCC A Report on Amazon & Reliance AWS: Bezos envisioned amazon as a technological company, more than a platform for retailers. However, till 2000, amazon held inventory in warehouses and held control in its delivery system. Post that, amazon allowed other small companies or individual sellers to operate via their platform. Amazon saw huge surges in traffic and orders, but they started facing scaling issues as their software was slowing down, both in efficiency and in terms of responsiveness and serving their customers. To cope with this situation, Amazon started working on Amazon Web Services or AWS, which would provide cloud computing platforms to individuals and companies. Amazon began to splinter its three largest data sets — customers, goods, and orders — into separate items that, in turn, were broken down into smaller units, such as login information or security requirements. At the same time, Amazon began offering computer systems and tools, such as renting IT infrastructure and applications online to other tech ventures, so they could sell their products via Amazon.com. Amazon brought structural change into the way customers sought their computing needs, whether it was storage or networking. The customers could just rent it and use it as they go. After years of research and development and a mighty amount of funds being invested in the process, they launched AWS with its cloud product Simple Storage Service (S3), which rented data storage and Elastic Compute Cloud (EC2). At $10.22 billion in quarter 1 of 2020, Amazon Web Services revenue grew 33% on an annualized basis and it became Amazon’s fastest-growing source of revenue that formed a bulk of the profit. As of 2020, AWS offers a broad set of global cloud-based products including compute, storage, databases, analytics, networking, mobile, developer tools, management tools, IoT, security, and enterprise applications. Amazon Kindle: Amazon launched Kindle in 2007 with the sole purpose of bringing digital books to readers on a device with minimal distractions. This device was never meant to compete with tablets, PCs, and other mobile devices, but to have its niche place as a convenient book reading device. The features of the first kindle were a quirky keypad, a headphone socket, speaker, and minimal storage. However, since then, 12+ models later, Kindle has come a long way in terms of increased resolution, touch screen, screen size, waterproofing, auto-brightness settings, sleeker and flatter display, better storage, Bluetooth options, and much more. E-book sales soared up 1,260 percent between 2008 and 2010, and readers preferred it over print versions. Bookstores and Publishers faced this phenomenon with great dismay as this could eat up their business. This fear further aggravated when Borders declared bankruptcy and Barnes & Noble, which was once a huge shark in the bookstore business moved on to shut down over 150 stores in the past decade. Kindle has also somewhat taken a hit in the past few years mainly due to three reasons. Firstly, the rise in streaming platforms like Netflix has shifted a huge chunk of the new generation into being binge-watchers, rather than binge readers. Secondly, better quality tablets and mobile devices in the market have led people to Page 4 of 20 Finance and Investment Cell, SRCC A Report on Amazon & Reliance invest in one device rather than buy a separate device for reading. Lastly, readers have started showing increased affinity towards prints than E-books, a classic scenario of change in preference amongst consumers. So, the terror that Kindle once was for bookstores has now dwindled, but it remains the leader of E-reading platforms. Amazon Echo: In 2014, Amazon Echo, a smart speaker whose Virtual Assistant is famously known as Alexa was launched into the market by AmazonLab126. Initially, Echo was capable of controlling music and not much else. But Alexa, the AI technology behind Echo was developed over the years to allow one’s voice command to control it all. Amazon revolutionised the market for smart home appliances, as it could all be linked to Alexa and operated via voice command. It has sold more than 100 million Echo devices, integrated Alexa with 85,000 smart home products, and its app store now boasts over 100,000 skills. Alexa allows voice interaction, access to real-time information, weather forecasts, podcasts, music streaming, controlling home appliances and much more. Alexa combines the Amazon Web Service (AWS), high- quality speech synthesizer and an independent speech recognizer, which is tied to simple hardware to listen to commands in speech form and decode the commands; and responds with the appropriate responses. Physical Retail shops: Retail apocalypse has been a huge issue in recent times, where colossal retail-based companies have come to shut down multiple shops across the world. The major two reasons that are held responsible are the e-commerce boom and debt traps that companies got caught into. Despite such trends E-commerce giants like Amazon have entered the brick and mortar space but they come with a twist. Amazon has rolled out different types of retail outlets ranging Amazon Go Grocery, which has a no cashier system, Amazon books outlets, Amazon Pop Up themed kiosks, Amazon general merchandise stores, Amazon Fresh Pickup grocery pickup locations, and the 500 whole foods outlets that it has secured. Identifying the ideal type of store which is most well suited to the consumers in that location has been the reason behind this slow yet targeted approach that they have taken up. The objective behind this endeavour is not only to conquer the physical retail space they were initially missing out on but expand the Amazon ecosystem and consumer base. For example, if an individual buys an Alexa from the Amazon store, they will eventually purchase prime for shopping, becoming a member of other Amazon services as well. Amazon has also entered the Indian brick and mortar market as well and with an aim of having kiosk stores, wherein customers will be able to experience the products it sells online.