Chapter 8 Amazon: 8.1 to 8.3

Amazon's 2020 Performance

Sales increased nearly 60% during the pandemic; profits up 86%; added over 427,000 employees.

Andy Jassy

New Amazon CEO, previously led AWS (Amazon Web Services).

Amazon Profitability History

Went 7 years without profit, losing $3 billion; stock price dropped from $100 to under $3/share.

Amazon's Key Focus Areas

Expanding warehouses, e-commerce operations, AWS, Kindle, Alexa, video/gaming devices, branded stores.

Fire Phone

Amazon's failed smartphone attempt.

Amazon Management Concepts

Includes cash efficiency, logistics advantages, scale benefits, data personalization, and tech-fueled profits.

Kindle & Alexa Importance

Mobile computing for media, sales, advertising, and product category leadership.

AWS (Amazon Web Services)

Leader in cloud computing, driving profits and competitive assets.

Amazon's Three Pillars

Large selection, customer experience, low prices.

Two-sided Network Effect

Growth cycle where more buyers attract more sellers and vice versa (e.g., Amazon Marketplace).

Negative Cash Conversion Cycle

Amazon collects customer payment before paying suppliers; boosts cash flow.

Random Stow Method

Amazon's warehouse rule: similar items aren't stored together to avoid confusion.

Robots in Amazon Fulfillment Centers

Over 200,000 robots used; reduce fulfillment costs by 40%, improve speed, and store 50% more products.

Dynamic Pricing

Prices shift based on demand; Amazon uses this to stay competitive.

Amazon Basics & Private Labels

Amazon cuts supplier costs via own brands like Amazon Basics, Mama Bear, Happy Belly.

Amazon Prime

Subscription service offering fast delivery, video/music streaming, Whole Foods discounts; 100M+ members.

A/B Testing at Amazon

Used for performance comparisons between two options, improving services/products.

Collaborative Filtering

Personalization strategy based on customer trends and preferences.

Affiliate Marketing Program

Amazon rewards partners (affiliates) who drive sales.

Flash Sales

Deep discounts on limited inventory for short periods to boost sales quickly.

Amazon Delivery Infrastructure

Includes Prime Air jets, branded trucks, local delivery stations, Amazon Key, ocean freight, drones/robots.

Shipping Cost Savings

Amazon saves ~1/3 by handling its own logistics instead of outsourcing to third parties.

Amazon Business

Amazon's corporate procurement platform; fastest-growing retail segment.