W14784

AMAZON GOES GLOBAL1

Yong Li and Jing Li wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either
effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying
information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
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Copyright © 2015, Richard Ivey School of Business Foundation Version: 2015-05-08

From its start in 1995 until 2013, Amazon.com, Inc. (Amazon) evolved from a small online bookstore to
the largest online retailer in the world. Known as the company with the earth’s biggest selection, it
expanded its offerings from books to DVDs, electronics, toys, tools, housewares, apparel, the Kindle e-
book reader and the Kindle Fire tablet. Amazon’s revenue increased from US$511,000 in 1995 to around
US$61 billion in 2012 (see Exhibit 1).2

Much of the company’s success was owed to its direct-to-consumer online model. Online selling offered
customers large selection and convenience. Amazon kept its inventory in low quantities in strategically
important locations, which reduced the inventory risk that typical brick-and-mortar companies had. This
business model enabled the company to get paid by customers before it had to pay the suppliers for
goods, which helped Amazon create a negative operating cash flow cycle. In 1999, Time magazine
recognized the company’s success in popularizing online shopping and named Jeff Bezos “Person of the
Year.” Bezos, founder and chief executive officer (CEO) of Amazon, believed in a long-term orientation
in business development:

If you’re long-term oriented, customer interests and shareholder interests are aligned. In the short
term, that’s not always the case. We have other stakeholders, too — our employees, our vendors,
etc. We take it as an article of faith that if we put customers first, other stakeholders will also
benefit, as long as they are willing to take the long-term view . . . and a long-term approach is
essential for invention, because you’re going to have a lot of failures along the way.3

Amazon’s international expansion accelerated its growth. It made its first foreign entry by getting into the
United Kingdom in 1998. By 2013, Amazon had operating subsidiaries in 10 overseas countries: the
United Kingdom, Germany, France, Japan, Canada, China, Italy, Spain, India, and Brazil. Subsidiaries in
some countries such as the United Kingdom and Japan performed better than subsidiaries in other
countries such as China. What would be Amazon’s next step in its international expansion? Would the
company focus on growing in existing markets or pursuing new market opportunities?

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THE ONLINE RETAILING INDUSTRY

The online retailing industry saw rapid growth as Internet use became more prevalent and as consumers
became more familiar with the idea of online purchasing. With the advent of PayPal,4 secure Internet
payment systems emerged in the marketplace and online purchasing had been accepted as a safe and
convenient method of shopping. Each year, more than 100 million Americans purchased goods online; the
online retailing industry outperformed most brick-and-mortar retail stores in the United States.5 In
addition, the industry was expected to grow quickly (see Exhibit 2).

As of 2012, online shopping accounted for less than 10 per cent of retail sales in most developed and
emerging markets according to Forrester Research,6 and the top five Internet retailing companies
worldwide were Amazon (12.3 per cent), Alibaba (5.7 per cent), eBay (5.1 per cent), Apple (3.8 per cent)
and Rakuten (2.8 per cent) (see Exhibit 3). In 2012, Amazon’s sales accounted for 17 per cent of the U.S.
e-commerce and online auction market with eBay as a distant second. According to IBISWorld, online
shopping was a fragmented industry by 2013.7

The major players’ market shares increased as they expanded product mix to reach a wider customer base.
For example, in addition to direct online merchandising, Amazon started a third-party seller marketplace.
When merchants sold to consumers through the Amazon website, Amazon received a commission on the
products and services sold. The gross margin on these items was thinner than that of direct sale by
Amazon. However, this model not only created a consistent shopping experience for customers but also
dramatically increased the number of products available on Amazon. The marketplace contributed 30 per
cent of Amazon’s total sales in 2013.

Amazon faced an increasingly competitive environment. Because online retailing was a relatively nascent
industry, the company had to compete against traditional retailers that had long-secured relationships with
important suppliers. Further, brick-and-mortar retailers such as Wal-Mart and Barnes and Noble had
established a strong online presence of their own over the past five years, posing a huge threat to the
online retailers.

AMAZON’S PORTFOLIO OF PRODUCTS AND SERVICES

Amazon’s products were categorized into retail goods, consumer electronics and digital content. Retail
goods included a variety of products such as books, music CDs and DVDs, software, kitchen items, toys
and games, apparel, beauty products, clothing, and groceries. They could be purchased in highly
competitive global markets served by many companies, either online or offline. Rivals included eBay’s
Half.com and Wal-Mart. While Wal-Mart’s prices were cheaper, the convenience of shopping online,
along with the better stock of items, kept Amazon’s sales growth higher.8 According to Amazon, in the
last three months of 2010, it sold more e-books than paperback books in the United States for the first
time.9

The core item in the consumer electronics category was the Amazon Kindle, first launched in 2007. The
Kindle was an e-book reader that allowed customers access to over 850,000 titles both for cheaper prices
and without the hassle of a bookshelf. While book prices had to take into account printing and distribution
costs, e-books were more affordable, with prices usually ranging from $0.99 to $9.99.10 In 2011, Amazon
introduced the Kindle Fire, which was Amazon’s first step into the tablet computer market. Some of
Amazon’s competitors for the Kindle were Apple iPad, Samsung Galaxy and Google Nexus.

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Digital content included e-books and MP3 files. E-Books formed a multi-billion dollar category for
Amazon and grew fast, up approximately 70 per cent from 2011 to 2012.11 In 2007, Amazon launched
MP3, an online music store, selling music from both independent labels and the four major record labels
(EMI, Universal, Warner Bros. Records and Sony Music).

Amazon had a diversified portfolio of services. For $79 per year (increased to $99 per year in 2014),
Amazon offered an annual membership called Amazon Prime that provided members with Amazon
Instant Video, free two-day shipping on all eligible purchases and discounted one-day shipping rates.
Amazon also offered members access to the Kindle Owner’s Lending Library, allowing them to borrow
books for free for up to a month with no due date. Amazon Instant Video allowed customers to rent and
purchase television shows and films. This service was only offered in the United States. The Amazon
Prime and the Amazon Instant Video features were well-received by customers and gained ground over
competitors such as Netflix. Amazon Web Services (AWS) provided remote computing services that
formed a cloud computing platform. Some of the web services included Amazon simple storage service
(launched in 2006) and Amazon Glacier (launched in August 2012). Other services included Amazon
publishing, a content production service, and Donations, which was funneled through the Red Cross,
AmazonLocal, Amazon Wireless, Amapedia and Amazon Vine.

GLOBAL EXPANSION

When Bezos first started working on his business plan, he came across a report that estimated annual
Internet growth at 2,300 per cent in 1994.12 As a result, he compiled a list of 20 products that could be
traded online and started Amazon. The products he chose were CDs, computer hardware, computer
software, videos and most importantly, books. With the success of online book selling, Amazon started to
expand internationally. Its first international entry was the United Kingdom in 1998, followed by
Germany, France and Japan (see Exhibit 4). In 2012, Amazon’s international sales experienced a 23 per
cent growth compared to sales in 2011, and accounted for 43 per cent of its total sales. In 2012, the top
three overseas markets were Germany (14.3 per cent of total sales), Japan (12.8 per cent), and the United
Kingdom (10.6 per cent) (see Exhibit 5).

AMAZON UK

In October 1998, Amazon acquired Britain’s largest online book retailer, Bookpages.co.uk. Books
accounted for Amazon’s main source of revenue and Amazon offered more than 1.4 million book titles in
the United Kingdom and United States in 1998.13 Among these books were the Harry Potter series, which
had a best-selling book in Amazon’s first year and also the best-selling book for 2003 and 2005. In 2007,
the series had a 6,000 per cent increase in sales.14

Amazon UK subsequently expanded its product and service offering and experienced sales growth. In
1999, Amazon opened a music store; in 2000, a DVD/video store; in 2001, an electronic, photo, toys and
games store; in 2002, a marketplace; and in 2003, a home and garden store. In November 2007, Amazon
UK launched Amazon Prime after its successful launch in the United States and Japan.15 During the
promotion, customers were offered unlimited free one-day delivery for an annual fee of $79. In 2010, an
MP3 app for Android was launched, along with Kindle Direct Publishing and Windowshop for iPad. In
2011, an app for Android with barcode-scanning features and an all-new Kindle were launched.

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In March 2002, Amazon UK reached the five million customer mark and won several awards for
customer service and home delivery service.16 By 2011, Amazon UK had $5.34 billion in sales,
accounting for 24.6 per cent of Amazon’s total international revenue.

Amazon stayed on top of the competitive U.K. market. Competitors included Blackwell UK, Tesco, and
WHSmith. Blackwell UK was an online business retailer that sold educational books. WHSmith was an
online retailer that also sold books, e-books, magazines, toys, gifts, games and stationary. Tesco was also
an online retailer that had a larger variety of products, including clothing, groceries, electronics and many
others.

AMAZON IN GERMANY AND FRANCE

In October 1998, Amazon acquired ABC Bucherdienst/Telebuch.de, a new but thriving online bookstore
in Germany, and created the website Amazon.de. Germany had one of the highest portions of English-as-
a-second-language speakers in the world.17 Amazon started off selling books but soon expanded to selling
DVDs, videos and games and opening fulfillment and customer service centres.18

In August 2000, Amazon launched an online store in France. It similarly started off selling books, music,
CDs, DVDs and videos to the global French-speaking market. Customers in other European countries
could order from the site. Amazon France subsequently started a game store, the marketplace, a consumer
electronics store, Amazon Prime and the Kindle.

AMAZON JAPAN

In November 2000, Amazon launched Amazon.co.jp. Its initial plan was to offer 1.1 million titles in
Japanese and 600,000 in English. With offices in Tokyo, a distribution centre roughly 20 miles away in
Ichikawa and a customer service centre in Sapporo, Amazon.co.jp became the first website in an Asian
language and the fourth international store for Amazon. Prior to the entry, Japan was Amazon’s largest
export market, bringing annualized sales of $34 million.

It was a challenge to extend one of Amazon’s strengths, competitive price, in Japan. Japanese books were
sold at low prices, with the average paperback at a price of $4.50. There were legal restrictions that
prohibited deep discounts and bypassing of the sales tax. As a result, prices for online selling remained
about the same and there were extra shipping and handling costs. Amazon.co.jp was able to offer books in
English at a bargain compared with Japanese retailers. Nevertheless, English-language book sales
represented only a small fraction of the $9.3 billion book industry in Japan. Japanese consumers still
hesitated to use credit cards online. Some Internet book sellers introduced a system of payment and
delivery at convenience stores.19

Amazon focused on customer service to grow its customer base. Over 70 per cent of the population in
Japan used the Internet. The per capita online spend was over $500 a year, second only to approximately
$700 per capita in the United States.20 However, approximately 99 per cent of the population fully
comprehended only website content in the Japanese language. Amazon developed a Unicode-enabled
platform for its Japanese language site, in collaboration with Basis Technology, a software service
provider with expertise in Asian-language information processing. While Japanese consumers enjoyed
Western products and lifestyle, most goods were attached to their own culture.21

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Since its launch, Amazon Japan quickly expanded beyond online book selling. In July 2003, Amazon
launched an electronic store with tens of thousands of products,22 and later that year opened the home and
kitchen market. In November 2005, Amazon Japan launched a new sports store, giving customers more
than 100,000 sports items to choose from and also access to a rewards program.23 In January 2010, the
Amazon Kindle DX became available in Japanese.24

Amazon formed alliances and made acquisitions after the launch in Japan. In September 2002,
Amazon.co.jp and Virgin Megastores Japan, an entertainment product retailer, announced the launch of
Virginmega.co.jp powered by Amazon’s e-commerce platform, to increase the selection of media items.25
Shortly after the tsunami that hit Japan in 2011, Amazon teamed up with the Red Cross in the relief
efforts.26

Competition intensified after 2010. Softbank Mobile, with more than 29 million customers in Japan in its
mobile business, launched the SOFTBANK Bookstore in December 2010.27 Founded in 1997, Rakuten
was Japan’s biggest Internet retailer, with a 45 per cent market share in 2011, ahead of Amazon (17 per
cent) in Japan.28 Rakuten engaged in Internet services, online retail and e-commerce. It had major
operations in 13 countries and regions by 2013, including Austria, Brazil, China, France, Germany,
Indonesia, Malaysia, Singapore, Spain, Taiwan, Thailand, United Kingdom, and Japan, its home
country.29 By 2012, Rakuten was already among the world’s largest Internet retailers, according to
Euromonitor (see Exhibit 3).

Rakuten was smaller than Amazon, with $18 billion in sales and $412.6 million in net income by 2013.
According to Bloomberg, Rakuten’s annual sales growth averaged 13 per cent from 2007 to 2011, much
less than Amazon’s 35 per cent during the same period. However, Rakuten adopted an aggressive global
acquisition strategy. Some major acquisitions included the U.S. online retailer, buy.com, in 2010; the
busiest e-commerce site in France, PriceMinister, in 2010; the U.K. music and game retailer Play.com in
2011; a leading e-reader and tablet maker in Canada, Kobo, in 2012; a leading provider of e-commerce
services in Brazil, Ikeda, in 2011; the leading video-on-demand service company in Spain and one of the
largest in Europe, Wuaki.tv, in 2012; and the U.S.-based logistics and services company Webgistix in
2013.30 Hiroshi Mikitani, Rakuten’s founder and CEO, had an ambitious global expansion plan, with a t-
shirt that read: “Beat Amazon.”31

AMAZON CANADA

Subsequent to entry into Japan, in June 2002, Amazon launched Amazon.ca in both English and French,
claiming to bring Canadians the “selection, convenience and value of the Amazon shopping experience
with prices in Canadian dollars and local shipping from Canada Post Corporation.”32 Amazon selected
Assured Logistics, part of Canada Post, as the partner for handing fulfillment services. Amazon
subsequently expanded its product offerings to include software, computer and video games, and home
and garden products, among other products.

AMAZON CHINA

Amazon made its foray into China through the $75 million acquisition of Joyo.com Limited in August
2004. It was Amazon’s second-most costly acquisition at that time.33 Founded in 2000, Joyo.com was
then the largest Internet retailer of books, music and videos in China.34 Amazon planned to combine
Joyo’s experience in serving the Chinese market with Amazon’s expertise in online retailing. It was
believed that the acquisition would help the company gain access to one of the world’s biggest Internet

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markets.35 Amazon owned 100 per cent of Joyo. In June 2007, “joyo.com” was renamed as “amazon.cn.”
Joyo increased the number of product offerings by 32-fold from 2004 to 2007, but did not turn a profit.

“The challenges involved are significant,” said Michael DeSimone, CEO of Borderfree, a company with
expertise in assisting companies to adapt e-commerce sites for new countries. “Culture is so different.
Language is so different. To really do business in those countries, you need to be on the ground.” “The
majority of Chinese consumers are unwilling to pay for e-books at this stage,” said Julia Zhu, founder of
Observer Solutions, a market research company that helped foreign companies invest in e-commerce in
China.36 At the time, many customers in China still did not use credit cards and instead paid with cash
when their purchase arrived at their door.

As of 2012, Amazon sold most e-books in China for less than ¥10.1 Its China site featured many Chinese
and foreign books. The top-selling foreign book on February 6, 2013, was “The Upside of Irrationality,”
by Dan Ariely, for about $3.61. The e-book sold for $8.99 in the United States.37

Amazon’s signature product in the United States was its Kindle e-reader and the Kindle store, which
debuted in September 2011. Amazon did not start a Kindle store on its Chinese website until December
2012.38 By then the Kindle Store, although a pioneer in the e-book industry in the United States, was
entering a congested marketplace in China. In Kindle’s absence, local brand e-readers came to dominate
the Chinese market. As of the second quarter of 2012, Beijing-based Hanvon Technology Co. had 50 per
cent market share, while Shanghai-based Shanda Interactive Entertainment Ltd.’s Bambook had 28 per
cent, according to Analysys.39

When the Kindle store arrived in China it was missing one key ingredient: the Kindle itself, which was in
third place in the global tablet market in 2012, following Apple and Samsung Electronics, according to
International Data Corporation. Due to regulatory barriers and complications in launching its cloud
service40, which was required for customers to store and access the books they purchased, Amazon
launched its Kindle store in China without the Kindle Fire or Kindle e-reader available until June 2013.41

Competition had risen. As Amazon tried to get its cloud service up and running in China, Dropbox and
local competitors like Alibaba’s Aliyun (Ali Cloud) were competing intensively for market shares in
China.42 Local competitors like Dangdang, Alibaba and Jingdong (360buy) had grown rapidly in recent
years while Amazon had limited localization of content and lacked popular purchase features in China
like group buying.43 Xiaomi, an emerging Chinese smartphone maker that sold 18.7 million smartphones
in 2013, launched an e-reader app and an ebook store in November 2013. Rather than simply sell the
ebooks, Xiaomi charged readers .03 Yuan for every thousand characters read, with the revenue evenly
split between Xiaomi and the content provider.44 The popular e-reader apps in China were the iReader for
iOS and Android, with 20 per cent market share, and Tencent’s QQ reader, with 12 per cent market share.
Tencent owned the popular WeChat app, which had 355 million monthly active users by the fourth
quarter of 2013.45

“No company has built a profitable business in China around e-books,” said Michael Clendenin,
managing director of RedTech Advisors, a consulting firm that provided research for U.S. investors.46 In
fact, online book-selling companies, including Hanvon and Dangdang, were unable to take some of the
market share of Alibaba, the country’s top online retailer.47 China’s largest e-retailers relied primarily on
sales of clothing and electronics because pirated e-books hampered prospective sales of legitimate e-
books.

1
¥=Chinese yuan (CNY). ¥1=US$0.16.

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China experienced exploding growth of online transactions after 2003.48 Its online retailing industry
posted 120 per cent compound annual growth from 2003 to 2011 — higher than the rate in any other
country. Online retail sales in China reached $120 billion in 2011, and surged to $225.5 billion in 2012.
Online shopping represented 6.3 per cent of all retail sales in 2012. According to McKinsey, China’s
online retail sales would reach between $420 billion and $650 billion by 2020. China had the world’s
largest population of Internet users (over 500 million people by 2012) and was expected to have more
than 800 million by 2015. Although the Chinese government exercised tight control over the Internet, it
allowed Chinese e-commerce to develop without a great deal of intervention.

In comparison, online retail sales in the United States reached $231 billion in 2013, and would reach $370
billion by 2017; the e-commerce growth rate in Europe was estimated to be slightly higher over the same
period, with overall online retail sales projected to hit $247.1 billion by 2017, up from $165.6 billion in
2013.49

After more than eight years of effort, Amazon obtained less than 2 per cent of China’s over $200 billion
e-commerce market in 2012. The world’s largest Internet retailer struggled to catch up with Alibaba in
China.50 Alibaba was an e-commerce company that developed business-to-business online marketplaces,
retail and payment platforms, shopping search engines, and data-centric cloud computing services.
Alibaba also established consumer-focused websites for small businesses, including Taobao Marketplace
in 2003, and Tmall.com in 2008. Taobao was the largest consumer-to-consumer online shopping platform
in China, featuring nearly a billion product offerings and serving more than 37 million registered users as
of 2010. In 2012, Taobao Marketplace and Tmall.com together had one trillion yuan ($179.7 billion) in
gross merchandise volume — more than their competitors, eBay Inc. and Amazon, combined. eBay
entered China in 2002, but shut down its website in 2006, when it failed to compete against Taobao.51

Amazon seemed to have an edge over domestic competitors in logistics.52 The company had built 11
fulfillment centres by May 2012 — more than its rivals — to ensure swift delivery of online purchases.
These centres handle warehousing, inventory management and logistics. That advantage, however, was
precarious. In May 2013, Alibaba followed Amazon’s lead and launched China Smart Logistic Network
(CSN) with eight other companies. CSN aimed to provide 24-hour delivery across the country. It was
backed by 100 billion yuan ($16 billion) and expected to complete in eight to 10 years.53

For Amazon, China was “a long-term opportunity, something that we’ve been investing in for several
years,” Amazon’s chief financial officer said in October 2012. 54 The introduction of the Amazon Kindle
products in June 2013 was another push into the Chinese online retailing market.

AMAZON’S INCREASING PRESENCE IN EUROPE

Amazon launched amazon.it in November 2010, which signaled the start of the company’s second wave
of global expansion since its entry into China in 2004. Amazon was able to make profits in the Italian
market by adopting the category expansion strategy; it offered “more categories at launch than any of its
others, including over two million Italian and foreign-language books, and more than 450,000 CDs and
120,000 DVDs, as well as video games, consumer electronics, software and toys.”55

In Spain, Amazon launched amazon.es in September 2011. In October, Amazon acquired BuyVIP to
secure market share with an established customer base and expand product categories. BuyVIP was a
fashion sales site based in Spain with its avenues in seven different EU countries. Amazon Spain offered a
large variety of products such as books, CDs, DVDs, electronics products, games, toys, watches and small

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appliances. The company entered a phase of rapid international expansion, similar to the period from
1998 to 2002, when it expanded into five new countries in five years, according to Mayuresh Masurekar,
an analyst at Collins Stewart. Amazon brought the Kindle and its associated online store to Italy and
Spain in December 2011.

AMAZON IN MORE EMERGING MARKETS

Amazon launched Junglee.com in India in February 2012. Unlike its previous launches, customers could
not buy directly from the site but would be redirected to the sites of sellers including Amazon.com.56 This
marketplace approach allowed Amazon to bypass government rules prohibiting foreign multi-brand
retailers from operating in India.57 Amazon acquired the Junglee portal from two Indian entrepreneurs in
early 2000. In June 2013, Amazon launched Amazon.in, a marketplace that only sold books and DVDs.58

India’s $2 billion book market was growing at a rate of about 15 per cent a year. Flipkart, India’s top
online bookseller, was set up by two former Amazon employees in 2007. It quickly expanded into mobile
phones, appliances, music and movies. It targeted $1 billion in revenue by 2015.

It was estimated that e-commerce in India would grow from $10 billion in 2011 to $200 billion by 2020.59
India’s online retail industry was forecasted to surge to $1.43 billion by 2015, as broadband availability
and Internet usage became more common. In 2012, the country had 52 million active Internet users, of
which 40 per cent had shopped online, making prospects for e-commerce even bigger.60

Amazon’s latest foray into emerging markets was the launch of the Brazilian site, Amazon.com.br, in
December 2012. It was Amazon’s first attempt to enter a new market with an operation of e-bookstore
only. The all-digital approach, with the offering of e-books and the Kindle, would allow Amazon to
minimize the risks that a bigger retail launch would entail in a country with underdeveloped
infrastructures and complex tax systems.61 Amazon.com.br would save the 200 million consumers in
Brazil from paying high import taxes on online orders shipped from overseas. The Brazil Kindle Store
featured more than 1.4 million titles, with more bestsellers, more free books in Portuguese and lower
prices than any other e-bookstore in Brazil.62

Kindle sold at a subsidized price of BRL299 ($143). The Positivo Alfa, the leader in the Brazilian e-book
reader market, retailed for $465, using Adobe’s eBook platform.63 Amazon also allowed customers to
download free Kindle reading apps in Portuguese for the popular devices and platforms. In addition, it
provided the Kindle Direct Publishing platform to self-publishing authors and independent publishers.
Google launched its digital bookstores in Brazil though a partnership with Kobo, currently owned by
Rakuten.64

Amazon was the latest U.S. company tapping into Brazil’s online retail market, which reached $12 billion
by 2013. Fueled by a growing middle class, the market was expected to have more than 100 million
Internet users by 2014, but less than 40 per cent of them were digital buyers in 2013.65

THE NEXT STEP

Operating globally and launching country-specific sites allowed Amazon to mitigate risks from
overdependence on the home market or any single international market (see Exhibit 6). After more than a
decade’s global expansion, Amazon’s international operations accounted for about 43 per cent of its
revenue, bringing in $26.28 billion in 2012.

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Looking ahead, the world’s largest online retailer faced both opportunities and challenges. Some of
Amazon’s international operations (such as those in Europe and Japan) achieved more success than others
(such as in China). What should Amazon do with its less successful operations? In addition, some
recently launched operations such as India and Brazil had great growth potential but presented significant
challenges as well. Should Amazon take a break from its global expansion, as it did after 2004, and focus
on strengthening its existing operations? Or should the company continue to explore new market
opportunities? If the global expansion continued, where would be Amazon’s next stop?

The authors thank Nikki Cheon, Jiaxiao Zhang and Jordan Richards for their outstanding research
assistance preparing the first draft of the case, and Tailan Chi for his valuable comments.

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EXHIBIT 1: AMAZON’S FINANCIALS

Income Statement (Million $)

2012 2011 2010 2009 2009 2007

Net Income 902 631 1,152 902 645 476
Depreciation 1,653 1,083 568 206 340 271
Interest Expense -34 65 39 34 71 77
Pre-tax Income 1,115 922 1,504 1,155 892 660
Operating Income 676 1,945 1,974 1,386 1,129 926
Revenues 61,093 48,077 34,204 24,509 19,166 14,835

Balance Sheets 2007-2012 (Million $)

2012 2011 2010 2009 2008 2007

Assets
Cash 8,080 5,270 3,780 3,440 2,770 2,539
Inventories 6,030 4,990 3,200 2,170 1,400 1,200
Total Assets 32,560 25,280 18,800 13,810 8,130 6,485

Liabilities
Short-term Debt 0 0 0 0 0 0
Long-Term Debt 3,240 1,420 641 252 533 1,282
Total Liabilities 24,360 17,520 11,930 8,560 5,640 5,288

Total Shareholder’s Equity 8,190 7,760 6,860 5,260 2,670 1,197

Source: Amazon’s annual reports, http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsAnnual, accessed

December 1, 2013.

EXHIBIT 2: FORECASTED GROWTH OF ONLINE RETAILING INDUSTRY 2012-2017

2012-2017 Period 2012-2017

2012-2017 Compound
Growth in Absolute Period Growth
Annual Growth Rate (%)
Value ($ Billion)* Rate (%)**
Asia Pacific 263.5 169.4 21.9
Australasia 7.8 116.9 16.7
Eastern Europe 33.4 151.1 20.2
Latin America 23.7 121.1 17.2
Middle East and Africa 5.3 191.1 23.8
North America 180.0 97.5 14.6
Western Europe 128.7 83.6 12.9

Notes: * Period Growth in Absolute Value = 2017 value – 2012 value; ** Period Growth Rate = (2017 value – 2012
value)/2012 value.
Source: Euromonitor International, www.euromonitor.com/, accessed December 1, 2013.

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EXHIBIT 3: MAJOR INTERNET RETAILING COMPANIES’ WORLDWIDE MARKET SHARES (%)*

Home
Company 2007 2008 2009 2010 2011 2012
country
Amazon.com Inc USA 7.2 8.2 9.8 10.7 11.9 12.3
Alibaba Group Holding Ltd China - - - 1.1 3.2 5.7
eBay Inc USA 6.1 6.3 5.9 5.6 5.0 5.1
Apple Inc USA 2.5 3.1 3.3 3.5 3.6 3.8
Rakuten Inc Japan 1.8 2.2 2.7 3.1 3.0 2.8
360buy.com (Jingdong Mall) China 0.0 0.1 0.2 0.4 1.0 1.7
Otto Group Germany 1.6 1.9 1.8 1.8 1.7 1.4
Wal-Mart Stores Inc USA 0.8 0.8 0.9 1.0 1.0 1.3
Dell Inc USA 2.7 2.6 2.2 1.9 1.6 1.2
Softbank Corp Japan 1.4 1.5 1.6 1.3 1.1 0.9
Tesco Plc UK 1.3 1.2 1.1 1.0 0.9 0.9
Liberty Interactive Corp USA 0.7 0.8 0.9 0.8 0.8 0.7
Best Buy Co Inc USA 0.6 0.6 0.8 0.7 0.7 0.6
Sears Holdings Corp USA 0.9 0.9 0.8 0.8 0.7 0.6
Kering (PPR SA) France 1.1 0.9 0.8 0.8 0.7 0.6
Casino Guichard-Perrachon SA France 0.4 0.5 0.5 0.4 0.4 0.5
Dixons Retail Plc UK 0.6 0.7 0.6 0.6 0.6 0.5
Macys Inc USA 0.3 0.3 0.4 0.4 0.4 0.5
Target Corp USA 0.6 0.6 0.6 0.5 0.4 0.5
Newegg.com Inc USA 0.7 0.6 0.6 0.6 0.5 0.4
Suning Appliance Co Ltd China 0.0 0.0 0.0 0.1 0.2 0.4
Valve Corp USA 0.1 0.1 0.2 0.3 0.4 0.4
Lojas Americanas SA Brazil 0.5 0.6 0.5 0.5 0.4 0.4

Notes: * Only the companies with at least 0.4% worldwide market share in the year of 2012 are included in this table.
Source: Euromonitor International, www.euromonitor.com, accessed December 1, 2013.

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EXHIBIT 4: AMAZON’S GLOBAL EXPANSION, 1998-2013

Year Country Initial business(es) Initial Entry mode Subsequent business(es)

Music, Auctions, DVDs/Videos,
Acquisition of Software, Toys & Kids, Electronics,
1998 UK Book Selling
Bookpages.co.uk Travel, Office Supplies, Groceries, Pet
Supplies
Fulfillment Centre, Auctions & Shops,
Book, Amazon Acquisition of ABC
1998 Germany DVD & Video, Software, Overnight
Associate Program Bucherdienst/Telebuch.de
Express Service
Software & Video Games, the
Book, Music, Video, Marketplace, Consumer Electronics,
2000 France Launch of Amazon.fr
DVD Toys, Kitchen, Jewelry & Home, Tools,
Pets, Kindle
Electronics, Computers, Toys &
2000 Japan Books Launch of Amazon.co.jp
Hobby, Sports, Amazon Kindle DX
Software & Computer, Video Games,
2002 Canada Books Launch of Amazon.ca Relaunch of HMV.com, e-commerce
alliance with Sears Canada
Shoes & Apparel, Office Supplies,
‘Selling on Amazon & ‘Fulfilled by
2004 China Books, Music, Video Acquisition of Joyo.com
Amazon,’ Global selling program, Pet
Store
Kindle Touch & Kindle Touch 3G,
Amazon App for Android, Baby Store,
2010 Italy Books, Music, Video Launch of Amazon.it
Kindle Fire, MP3 Store and Amazon
Cloud Player
Books, Music, DVDs, Kindle, Kindle Store & Kindle Direct
Launch of amazon.es and
Electronics, Publishing
2011 Spain acquisition of BuyVip
Software, Jewelry
(fashion sales website)
and Watches
A marketplace that N/A
2012 India does not sell directly Launch of Junglee.com
to customers
e-bookstore only: e- N/A
books, Kindle and
2012 Brazil Launch of Amazon.com.br
Kindle Direct
Publishing
Source: Compiled by case authors based on Amazon’s annual reports, http://phx.corporate-
ir.net/phoenix.zhtml?c=97664&p=irol-reportsAnnual, accessed December 1, 2013; “History & Timeline,” Amazon,
http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-corporateTimeline, accessed September 9, 2014.

EXHIBIT 5: AMAZON’S REVENUE BY COUNTRY/REGION IN 2012

Amazon
International North
UK Germany Japan Europe Total (Intl. +
Total America
N. Am.)
Revenue ($ Billion) 6.47 8.73 7.80 16.71 26.28 34.81 61.09
Growth rate from 2011 (%) 21.20 20.70 18.70 38.00 23.00 30.40 27.10
Percentage of Amazon’s
24.60 33.20 29.70 63.60 100 - -
international revenue (%)
Percentage of Amazon’s
10.60 14.30 12.80 27.40 43.00 57 100
total revenue (%)
Source: Amazon’s annual reports, http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsAnnual, accessed
December 1, 2013.

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EXHIBIT 6: COUNTRY INFORMATION

Billion)
%, 2012
%, 2012
(Million)
(Million)
(Million)
(Million)
Index, 2011
Index, 2012

Ease of doing

Population, 1997
Population, 2012
ICT Development

Market Size, 2017 ($

Internet Users, 1997
Internet Users, 2012

Size, 2012 ($ Billion)

E-Commerce Market
GDP, 1997 ($ Billion)
GDP, 2012 ($ Billion)
Business Index, 2012

Leading Market Share

Amazon Market Share

Logistics Performance

Predicted E-commerce
Australia 3.23* 10.76 0* 5.9* 435.9 1,542 19 22 3 9.5 10 7.05 3.73
Brazil 9.88 21.73 1.2 16.5 871.2 2,435.20 1.6 199 0.013 77.6 130 4.72 3.13
Canada 5.14 10.98 32.1 32.1 638 1,821.40 30 35 4.52 29.2 17 7.04 3.85
China 225.5 450.12 1.7 50.6 952.65 8227 1,236 1,350 N/A 517.1 91 3.88 3.52
France 26.39 53.99 8.1 8.1 1,220 2,780 58 66 2.5 52.2 34 7.3 3.85
Germany 22.92
58.75 21.4* 21.4* 2,160 3,400.58 82 81.8 5.5 67.9 20 7.39 4.03
*
India 0.88* 4.76 0* 23.1* 421 1,824.83 965 1,259.7 0.97 127.2 132 2.1 3.08
Italy 4.96 12.25 10.1 21.4 1,200 2,014.08 57 60.9 1.31 34.6 73 6.28 3.67
Japan 41.22 63.42 14 26.4 4,324 5,963.97 126 127.6 11.6 101.4 24 7.76 3.93
South Africa 0.33 0.97 1.7 6.9 149 384.315 41 51.1 0.63 10.7 39 3.42 3.67
South Korea 22.6* 37.58 0* 3.7* 532 1,155.87 46 48.9 1.65 41.0 8 8.56 3.70
Spain 2.35 9.36 10 11.1 573 1,352.06 40 46.2 1.11 31.2 44 6.62 3.70
U.K. 46.78 71.7 16 16 1,369 2,440.51 58 63.2 4.33 51.8 7 7.75 3.90
U.S.
177 351.57 17 17 8,332 15,684.75 272.7 314 58.89 244.5 4 7.48 3.93

Note: * data as of 2011.

Source: Euromonitor International (www.euromonitor.com); World Bank (http://data.worldbank.org/data-catalog/world-development-indicators); International
Telecommunications Union (www.itu.int); Internet World Stats (www.internetworldstats.com), accessed December 1, 2013.

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ENDNOTES
1
This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Amazon.com, Inc. or any of its employees.
2
All figures in US$ unless otherwise indicated.
3
Morten T. Hansen, Herminia Ibarra and Urs Peyer, “The Best-Performing CEOs in the World,” Harvard Business Review,
January 2013, 91(1/2), pp. 81-95.
4
Founded in 1998, PayPal is an American e-commerce business allowing payments and money transfers to be made
through the Internet. www.paypal-media.com/about, accessed September 9, 2014.
5
“E-Commerce & Online Auctions in the U.S.,” IBISWorld Industry Report, September 2014,
www.ibisworld.com/industry/home.aspx, accessed November 18, 2014.
6
Lauren Indvik, “Forrester: U.S. Online Retail Sales to Hit $370 Billion by 2017,” Mashable, March 12, 2013,
http://mashable.com/2013/03/12/forrester-u-s-ecommerce-forecast-2017/, accessed September 9, 2014.
7
“E-Commerce & Online Auctions in the U.S.,” op. cit.
8
Harry Bradford, “Walmart Prices 20 Percent Lower than Amazon’s on Average,” Huff Post Business, June 22, 2012,
www.huffingtonpost.com/2012/06/22/walmart-prices-20-percent_n_1618884.html, accessed September 9, 2014.
9
“Amazon Kindle E-Book Downloads Outsell Paperbacks,” BBC News, January 28, 2011, www.bbc.co.uk/news/business-
12305015, accessed September 9, 2014.
10
Linda McMaken, “E-Books vs. Print Books,” Investopedia, August 21, 2012, www.investopedia.com/financial-edge/0812/e-
books-vs.-print-books.aspx#axzz2Nl8vbUum, accessed September 9, 2014.
11
Leena Rao, “Amazon Misses: Q4 Sales Up 22 Percent To $21.3B, Net Income Down 45 Percent To $97M,” Techcrunch,
January 29, 2013, www.techcrunch.com/2013/01/29/amazon-misses-q4-sales-up-22-percent-to-21-3b-net-income-down-45-
percent-to-97m/, accessed September 9, 2014.
12
“From the Archives: Jeff Bezos,” Success, July 1998, www.success.com/articles/1231-from-the-archives-jeff-bezos,
accessed September 9, 2014.
13
“Amazon.co.uk Launches in the UK with Huge Selection and Keen Pricing,” Amazon, http://phx.corporate-
ir.net/phoenix.zhtml?c=251199&p=irol-newsArticle&ID=1707514&highlight=, accessed September 9, 2014.
14
Ibid.
15
Ibid.
16
Ibid.
17
“Europeans and Languages,” Eurobarometer, September 2005, https://duckduckgo.com/l/?kh=-
1&uddg=http%3A%2F%2Fec.europa.eu%2Fpublic_opinion%2Farchives%2Febs%2Febs_237.en.pdf, accessed September
9, 2014.
18
“History & Timeline,” Amazon, http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-corporateTimeline, accessed
September 9, 2014.
19
Ibid.
20
Ajeet Khurana, “The Japanese Ecommerce Market,” About Money, http://ecommerce.about.com/od/eCommerce-Trends-
and-Issues/a/The-Japanese-Ecommerce-Market.htm, accessed September 9, 2014.
21
Ibid.
22
“Amazon.co.jp Launches Electronics Store,” Amazon, July 1, 2003, http://phx.corporate-
ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=502751&highlight=, accessed September 9, 2014.
23 “
Amazon.co.jp Opens New “Sports” Store! Huge Selection of More than 100,000 Sports Items Available, Offering up to
20% Reward Program for Golf Related Items!,” Amazon, http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-
newsArticle&ID=786005&highlight=, accessed September 9, 2014.
24
Ibid.
25
“‘Virginmega.co.jp Powered by Amazon.co.jp’ Launched on September 19,” Amazon, September 19, 2002,
http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=503044&highlight=, accessed September 9,
2014.
26
“Contributions to the Red Cross’ Japan Earthquake and Pacific Tsunami Relief Efforts Can Be Made via Amazon Sites,”
Amazon, March 11, 2011, http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=1538638&highlight=,
accessed September 9, 2014.
27
“Softbank Mobil Builds Online Content Store,” telecomasia.net, July 19, 2012, www.telecomasia.net/content/softbank-
mobile-builds-online-content-store, accessed September 9, 2014.
28
Nate Holmes, “Amazon Gives Rakuten Trouble . . . In Japan,” RetailNet Group, October 26, 2012.
http://connected.retailnetgroup.com/index.php/2012/10/26/amazon-gives-rakuten-trouble-in-japan/, accessed September 9,
2014.
29
“About Us,” Rakuten, www.rakuten.com/ct/aboutus.aspx, accessed September 9, 2014.
30
“Rakuten Asquiere Wuaki.tv,” Wuaki.tv Blog, June 13, 2012, http://blog.wuaki.tv/2012-06/rakuten-adquiere-wuaki-tv/ (in
Spanish), accessed September 9, 2012.
31
Ibid.
32
“Amazon.ca Launches Today, Providing Significant Savings and Great Convenience for Canadian Book, Music, Video and
DVD Buyers,” Amazon, June 25, 2002, http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-
newsArticle&ID=503032&highlight=, accessed September 9, 2014.
33
“Top 10 Costliest Amazon Acquisitions,” Flavours of Thought: A Blog about the Costliest Things in the World,
www.flavorsofthought.com/costliest-amazon-acquisitions.html, accessed September 9, 2014.

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 Page 15 9B14M122

34
“Amazon.com to Acquire Joyo.com Limited,” Amazon, August 19, 2004, http://phx.corporate-
ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=605326&highlight=, accessed September 9, 2014.
35
Ibid.
36
“Bezos’ Kindle-Less Amazon Mashed in China by Ma’s Alibaba,” Bloomberg, February 8, 2014,
www.bloomberg.com/news/2013-02-07/kindle-less-amazon-in-china-doomed-to-1-market-share.html, accessed September
9, 2014.
37
Ibid.
38
Lance Whitney, “Amazon Kindle Debuts in China,” CNET, June 7, 2013, http://news.cnet.com/8301-1035_3-57588185-
94/amazon-kindle-debuts-in-china/, accessed September 9, 2014.
39
“Bezos’ Kindle-Less Amazon . . . ,” op. cit.
40
Josh Ong, “Amazon Launches Kindle Apps and E-Bookstore in China, Hinting at Imminent Kindle Arrival,” TNW,
December 13, 2012, http://thenextweb.com/insider/2012/12/13/amazon-launches-kindle-apps-and-e-bookstore-in-china-but-
devices-yet-to-be-seen/, accessed September 9, 2014.
41
Carol Kopp, “Amazon Faces Hurdles in Chinese E-Reader Market,” USA Today, June 11, 2013,
www.usatoday.com/story/tech/2013/06/11/amazon-china-kindle-yahoo-tmall/2411259/, accessed September 9, 2014.
42
Zachary Keck, “Can Amazon Find Success In China?” The Diplomat, May 9, 2013, http://thediplomat.com/pacific-
money/2013/05/09/can-amazon-find-success-in-china/, accessed September 9, 2014.
43
Melanie Lee, “Interview — Amazon Aims for Top Three in China Market,” Reuters, May 10, 2012,
http://in.reuters.com/article/2012/05/10/amazon-china-idINDEE84907L20120510, accessed September 9, 2014.
44
Paul Bischoff, “Xiaomi Gets Literate, Launches E-Reader App and E-Book Store,” Tech in Asia, November 1, 2013,
www.techinasia.com/xiaomi-literate-launches-ereader-app-ebook-store/, accessed September 9, 2014.
45
Steven Millward, “Wechat Sees Resurgent Growth, Now Has 355 Million Active Users,” Tech in Asia, March 19, 2014,
www.techinasia.com/wechat-355-million-monthly-active-users-q4-2013/, accessed September 9, 2014.
46
“Bezos’ Kindle-Less Amazon . . . ,” op. cit.
47
Ibid.
48
“China’s e-tail revolution: Online shopping as a catalyst for growth,” McKinsey Global Institute, March 2013,
http://www.mckinsey.com/insights/asia-pacific/china_e-tailing, accessed September 9, 2014.
49
Natasha Lomas, “Forrester: U.S. Online Retail Sales to Rise to $370BN by 2017 (10% CAGR) as Ecommerce Motors on
with Help from Tablets & Phones,” Techcrunch, March 13, 2013, http://techcrunch.com/2013/03/13/forrester-2012-2017-
ecommerce-forecast/, accessed September 9, 2014.
50
“Bezos’ Kindle-Less Amazon . . . ,” op. cit.
51
Jillian D’Onfro, “The Remarkable Story Of How Alibaba Defeated eBay In China,” Business Insider, April 14, 2014,
www.businessinsider.com/how-alibaba-defeated-ebay-in-china-2014-4?op=1, accessed November 18, 2014.
52
Melanie Lee, op. cit.
53
Catherine Shu, “Alibaba Group Starts Work On Massive Logistics Network To Provide 24-Hour Deliveries Throughout
China,” Techcrunch, May 28, 2013, http://techcrunch.com/2013/05/28/alibaba-csn/, accessed September 9, 2014.
54
“Amazon Starts Selling Kindle E-Books in China, Joining Brazil,” Bloomberg News, December 13, 2012,
www.bloomberg.com/news/2012-12-13/amazon-starts-selling-kindle-e-books-in-china-joining-brazil.html, accessed
September 9, 2014.
55
Chloe Rigby, “Amazon launches in Italy,” November 23, 2010, http://internetretailing.net/2010/11/amazon-launches-in-
italy, accessed September 9, 2014.
56
Diksha Sahni, “Amazon Launches New Website for India,” The Wall Street Journal, February 2, 2012,
http://online.wsj.com/article/SB10001424052970203889904577198731348201266.html, accessed September 9, 2014.
57
Agnes France-Presse, “Amazon Tests E-commerce Waters in India,” The Raw Story, February 8, 2012,
www.rawstory.com/rs/2012/02/08/amazon-tests-e-commerce-waters-in-india/, accessed September 9, 2014.
58
Jon Russell, “Amazon Marketplace Quietly Launches in India, Initially Only Selling Books and Dvds,” TNW, June 5, 2013,
http://thenextweb.com/in/2013/06/05/amazon-quietly-launches-its-flagship-retail-site-in-india-initially-only-selling-books/,
accessed September 9, 2014.
59
Agnes France-Presse, “Amazon Enters India with Junglee.com,” NDTV Gadgets, February 8, 2012,
http://gadgets.ndtv.com/internet/news/amazon-enters-india-with-junglee-com-224559, accessed September 9, 2014.
60
“Amazon Launches Online Shopping Service in India,” Reuters, February 2, 2012,
www.reuters.com/article/2012/02/02/us-amazon-india-launch-idUSTRE8110LZ20120202, accessed September 9, 2014.
61
Ibid.
62
“Amazon Launches Brazil Kindle Store (www.amazon.com.br) and Free Portuguese Kindle Reading Apps for Android
Phones and Tablets, iPads and iPhones—R$299 Kindle Available in the Coming Weeks,” Business Wire, December 6,
2012, www.businesswire.com/news/home/20121206005492/en/Amazon-Launches-Brazil-Kindle-Store-
www.amazon.com.br-Free, accessed September 9, 2014.
63
Neal Ungerleider, “Amazon Goes To Brazil,” Fast Company, February 24, 2012,
www.fastcompany.com/1819889/amazon-goes-brazil, accessed September 9, 2014.
64
Laura Hazard Owen, “Amazon and Google both Launch Brazilian E-bookstores,” Gigaom, December 6, 2012,
http://paidcontent.org/2012/12/06/amazon-and-google-both-launch-brazilian-ebookstores/, accessed September 9, 2014.
65
“Retail Ecommerce Sales in Brazil to See Double-Digit Growth this Year: Buying Online is Still Not the Majority Practice,”
eMarketer, January 24, 2014, www.emarketer.com/Article/Retail-Ecommerce-Sales-Brazil-See-Double-Digit-Growth-This-
Year/1010556, accessed September 9, 2014.

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