Seattle, Washington – It is without question that Amazon has become the world’s largest online retailer. Twenty year ago, they launched their service to sell hard copy books. That success has grown to where roughly one out of every three books sold in the United States is via Amazon.com. Their facilities occupies roughly one fifth of downtown Seattle and they employ more people than their next door neighbor in Redmond who is known the world over as Microsoft. They have also expanded far beyond books to selling electronics, computers, beauty care, food items, CDs, DVDs, mp3 tunes, e-books, and online video content, etc.
For all this, the company generates relatively small profits because their margins are razor thin. The most recent quarterly earnings had them post an operating profit of $146 million. At the same time, they announced they would be taking an operating loss over the next quarter. The news sent their stock prices dropping 10% and since the start of the year, their stock price is down 25% to $300/share.
Investors are demanding the online retail giant generate more revenue. It appears that Amazon has a strategy for accomplishing that very task. They will maintain their existing practices of squeezing their publishers and suppliers for ever smaller prices, but they will also focus on direct publishing. For example, they offer a service called Kindle Direct Publishing (KDP), where self-styled authors can publish their own e-books and via Amazon’s service not only get a 70% royalty, but have the muscle of Amazon to sell their book. Similarly, they have launched CreateSpace for musicians and filmmakers to create their own CDs and DVDs without the minimum production quotas normally required and sell their media through Amazon. Lastly, in a move to compete with video streaming rival Netflix, they will be producing five original series of their own. It is ambitious, but it needs to boost profits in order to fuel their long-term growth.