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CHAPTER7
DistributionStrategies1995-1998EstablishingA
1995,7JeffBezosfoundedAmazon1995-1998EstablishingA1996-1997Tosupporttheincreasedtrafficandsales,thecompanybuiltupitsinfrastructureandsystems.Distributioncentercapacitygrewfrom50000to285000squarefeet.IncreasedthenumberoftitlesheldinitsDCstoover200000attheendof1997andreducedpromiseddeliverytimesonthosetitles.Majoreffortsweremadeinsoftwaredevelopmenttosupportback-officeoperations.1995-1998EstablishingA1998,Amazonexpandeditsproductlines.Nonetheless,withtheadditionalproductlines,theinventoryturnsdroppedfrom56in1997to24.8in1998.1999BuildingAdditionalFulfillmentInfrastructureBylate1998,thecompanywasbeginningtofacetoughtercompetitionfromplayer.So,Amazonstartedaddingnewproductlinesandfeaturesatafastpace.1999BuildingAdditionalFulfillmentfrastructureTosupportitstransformationanditsprojectedtriple-digitgrowth,Amazonadapteditssupplychainanddistributionnetwork.1999BuildingAdditionalFulfillmentfrastructureJustbeforetheChrismas1999season,thenewdistributioncenternetworkwasupandrunning.Amazondeliveredmorethan99%ofitsordersintimeforChristmas1999.Inthefourthquarteraloneof1999,amazonshippedabout20millionitemsandacquiredmorethan2.5millionfirst-timecustomers.2000-2002OptimizingthecustomerInearly2000,WallStreetbegantoputprofitpressureonalldotcoms,includingamazon'sstockpricewhichhadreachedarecordhighof$106.49inDec.1999.Fulfillmentnetwork2000-2002OptimizingthecustomerInthiscontext,JeffBezosacknowledgetheneedforprofitabilityand"astrongerfocusonoperationalexcellence,whichmeanstreatingcustomersrightbutatlowercost."
Fulfillmentnetwork2000-2002OptimizingthecustomerJeffWilke,thenewvicepresidentofoperationsatamazon,quicklylaunchedseveralinitiativestoreducecostsassociatedwithstockingandshippinggoods.StreamliningUSDistributionCenters'ProcessesInventoryCostsDeliveryProcessesFulfillmentnetwork2000-2002OptimizingthecustomerByasetofmeasures,Amazonreducecostsassociatedwithstockingandshippinggoods.FulfillmentnetworkAinEuropeLaunchingAmazonintheUKandGermanyLaunchingAmazoninFranceAmazon'sChanllengesinEuropeQrganizationofAmazonEuropeanSubsidiariesGoingForwardAssessingtheEDNOpportunityLaunchingAmazonintheUKandGermany
1998AenteredtheEuropeanmarket,targetingthetwocountries-theUKandGermany-thatrepresentedboththelargestonlinemarketsandthelargestmarketsforbooksinEurope.LaunchingAmazonintheUKandGermany
LaunchingAmazoninFrance
2000,9,AmazonlaunchedFrance.AinEuropeAttheendof2000,theinternationalsegmentofAmazoncomprisingtheUK,German,andthenewlylaunchedFrenchandJapan(launchedinNovember2000)sitesreached$381millioninsales,accountingfor13.8%ofthecompany'stotalrevenue.Internationalsalesgrew74%in2001toreach$661million,accountingfor21%ofsales.GoingForward
By2002,internationalrevenueswere$1.2billion(35%ofAmazon'stotalrevenue).Goingforward,AmazonexecutivesinSeattleplannedtorolloutsomeproductcategoriesandfunctionalitiesalreadyavailableinUS.SoAmazonEuropeneededtobuildupitsinfrastructuretosupportthisambitiousvision.TomTaylorwastransferredfromSeattletoLondontoaddresstheseissues.AssessingtheEDNOpportunity
TomTaylorshouldconsiderwhetherAmazonneededthreeindependentdistributioncentersorcoulditbuildaEuropeandisreibutionnetwork(EDN).TayloralsohadtoconsiderthebenefitsofanEDN,function,locationandtheimpactoftheimplementationoftheEDN
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