1995-1998: Establishing Amazon.com
Jeff Bezos founded Amazon in July 1995 with a mission to “use the Internet to transform book
buying into the fastest, easiest and most enjoyable shopping experience possible.”i Initially a pure
online book retailer with a selection of 1 million titles, Amazon quickly increased its selection to 2.5
million titles to become the “Earth’s Biggest Bookstore,” a claim that Amazon would use to
differentiate from its brick and mortar competitors.ii
From its outset, Amazon relied on a distinctive procurement strategy: hold modest inventories
and rely on wholesalers – primarily Ingram Book Company and Baker & Taylor – to build its online
book catalogue and source its vast selection. For example, in its early years, Amazon offered 2.5
million titles, yet stocked only 2,000 titles (comprising about 5% of its orders) in its own warehouse –
a small (50,000 square-foot) facility in Seattle.iii The rest of its titles were sourced on an as-needed
basis only after receipt of a customer order. When Amazon received a customer order for a title that
was not in its own stock, it would submit a purchase order to a wholesaler. The wholesaler would
typically fill Amazon orders quickly, with shipments arriving at Amazon’s distribution center within
two to three days. As volume increased, Amazon opened direct accounts with publishers to obtain
better purchasing discounts. (Amazon would typically receive a 48% discount off a book’s cover price
when buying direct from publishers vs. a 41% discount from wholesalersiv.) However, publishers
were not as operationally efficient as wholesalers and could take weeks to fill Amazon’s orders.v
Once the necessary titles were received in Amazon’s warehouse either from ...