Amazon: Online Retailer

In 2011, seventeen years after starting as a small internet bookstore, Amazon is the world's largest online retailer with net sales topping $48 billion (Amazon.com Inc., 2011 Annual). Amazon offers a customer first online shopping experience through the philosophy of growth over profits, offering services that aid in customer retention, altering the website to capture an increasing valuable consumer market, and delivering personalized recommendations on-site and e-mail.

Amazon earned its position as the world's largest online retailer fueled primarily through the vast array of products and services offered to a broad range of consumers. Jeff Bezos, the company founder, runs Amazon on the core philosophy of building the company around customer experience and offering products at lower costs than traditional retailers to promote greater sales volume (Lashinsky, 2012). Amazon's retail efforts contribute an enormous portion of its sales revenue, however, the revenue generated from its service offerings contribute a large part of its profit contribution. Services like computing capacity and storage, publishing, and marketplace hosting of third party retailers contribute an estimated 30-40% of profits on only 10% of total revenue (Gallagher, 2011).

Financially Amazon has the sales volume expected of the largest online retailer, but the net profits are continually sacrificed for growth and long term objectives. In the third quarter of 2011 Amazon recorded $10.8 billion in net sales, a 43% increase over the third quarter results of $7.5 billion in 2010 (Amazon.com Inc., 2011 Quarterly). Despite the large increase in sales from year to year, Amazon's net profits fell from $231 million in 2010 (Amazon.com Inc., 2011 Quarterly) to only $63 million in 2011 (Amazon.com Inc., 2011 Quarterly), and then dropped to a net loss of $274 million in 2012 (Amazon.com Inc., 2012 Quarterly). This trend is a result of business philosophy that favors growth over profits through investments that enhance the customer experience through a broad range of Amazon's offerings.

One of the most engaging offerings to customers that Amazon offers is the subscription based Amazon Prime. This service offers free two-day shipping on qualified items, unlimited streaming of videos, and Kindle Library privileges (Amazon.com: Amazon Prime). The current estimate of Prime subscribers is about 10 million people (Lee, 2012). Currently, it is estimated that 30% of all internet product searches originate on Amazon (Sullivan, 2012). However, Prime members are more likely to search exclusively on Amazon for products (Lee, 2012). Along with nearly exclusive purchasing from Amazon, Prime members also are more likely to spend as much as three to four times than average Amazon consumers to take advantage of the free shipping benefits (Sullivan, 2012).

In order to respond to an evolving online marketplace, Amazon initiated a redesign