Amazon is one of the most influential economic and cultural forces in the world, as well as one of the most valuable brands. It focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence. Beyond that, it has permeated our lives deeply, especially in the last couple of years. It is the American multinational technology company, Amazon.com, Inc. Amazon founder Jeff Bezos is, currently, one of the most recognizable names on the planet.
He founded the company on 5th July 1994 from his garage in Bellevue, Washington. It was, initially, an online marketplace for books. Amazon quickly expanded into a multitude of product categories earning the moniker ‘The Everything Store. Initially named Cadabra, Inc. Bezos renamed it to Amazon as he wanted the company to be as ‘exotic and different’. In his initial days, Bezos reportedly told a journalist – “There’s nothing about our model that can’t be copied over time. But you know, McDonald’s got copied. And it’s still built a huge, multibillion-dollar company. A lot of it comes down to the brand name. Brand names are more important online than they are in the physical world.”
The Journey
Amazon Acquisitions
Reasons for Acquisitions
The Journey
As a new start-up Amazon only sold books online because of its worldwide demand, low unit price, and large number of titles available in print. Within the first couple of months, the business grew to sell its books to all 50 states and over 45 countries. In October 1995, the company announced its intention to issue an Initial Public Offering (IPO). Within the next three years, Amazon was sued first by Barnes & Nobles in 1997 for claiming itself as the world’s largest bookstore and then by Walmart in 1998 for allegedly stealing trade secrets by hiring Walmart executives. Eventually, both lawsuits were settled out of court and Amazon implemented stricter internal policies and restrictions.
Initially, Amazon’s growth and profit were nominal leaving stockholders wary of investing or even the company’s survival prospects. When the dot-com bubble burst in 2001, Amazon not only survived the bloodbath but went on to post a modest profit in the fourth quarter of that year. This was a boost of confidence that eased the investors. From that point on, the unconventional business model of Jeff Bezos has not stopped growing till today. In 2020, Amazon generated sales worth USD 386 billion which were 38% higher than its sales in 2019 in the US alone. Amazon’s Marketplace sales represent an increasingly dominant portion of its e-commerce business.
Amazon Acquisitions
Within the time span of the last two decades, the tech behemoth has acquired or invested in at least 128 companies across the world. These companies belong to a wide plethora of industries from healthcare to entertainment, helping diversify their core revenue. It has also provided Amazon with inroads into better understanding their customer’s likes, dislikes, and preferences. The top ten Amazon Acquisitions by value are –
| Company Name | Acquired On | Acquired For |
|---|---|---|
| Whole Foods Market | Jun 16, 2017 | $13.7 billion |
| Metro-Goldwyn-Mayer | May 26, 2021 | $8.5 billion |
| Zoox | Jun 26, 2020 | $1.2 billion |
| Zappos | Jul 22, 2009 | $1.2 billion |
| Ring | Feb 27, 2018 | $1 billion |
| PillPack | Jun 28, 2018 | $753 million |
| Twitch | Aug 25, 2014 | $970 million |
| Kiva Systems | Mar 19, 2012 | $775 million |
| Souq | Mar 27, 2017 | $580 million |
| Quidsi | Nov 8, 2010 | $545 million |
Whole Foods
Revolutionizing the domain of grocery shopping, Whole Foods is an American multinational supermarket chain. Amazon acquired Whole Foods in 2017 for $13.7 billion. The acquisition added 400 physical stores to the set of e-commerce stores that Amazon already had. Additionally, the acquisition gave a huge impetus to the tech giant in the domain of grocery shopping, which was further used by Amazon to push people to purchase their Prime membership in return for the wonderful offers given.
MGM Studios
Founded in 1924, MGM Studios, or Metro-Goldwyn-Mayer, is a California-based studio that has produced many popular films, many of which have won academy awards as well. Some of their popular films include the James Bond franchise, the Rocky series, Robocops, Fargo, Silence of the Lambs, etc. In 2021, Amazon acquired MGM Studios for $8.5 billion. The deal was completed in March 2022.
Zoox
Zoox is a startup that develops self-driving technology with the aim of proving a full-stack solution for ride-hailing. In order to provide automatic self-driving capabilities, they use their own software and artificial intelligence, which has become a unique innovation in the arena of self-driving vehicles. They specifically focus on custom vehicle design, which they believe will be able to overcome the problems posed by self-driving vehicles. Amazon acquired the startup in 2020 for $1.2 billion.
Zappos
Zappos was founded by Tony Hsieh in 1999 as an online shoe seller after identifying the difficulties with which customers grappled due to the unavailability of the right size and desirable models. In 2009, Amazon bought Zappos for $1.2 billion.
Ring
Ring is a video doorbell and security camera maker that is worth more than $1 billion. They sell their products in the US, UK, and Europe. After establishing themselves as a reputable company in their area, they headed in the direction of the Internet of Things and in-home delivery spaces. In a deal that was valued at more than $1 billion, Amazon acquired Ring in 2018.
PillPack
It is an American pharmaceutical company that was founded in 2013 by TJ Parker and Elliot Cohen. By integrating novel technology into the midst of the business, the company saw tremendous growth over a short span of time. They were a step ahead of their fellow companies by demarcating their customers’ medications by dose and delivering them to their doorstep. In 2018, Amazon acquired PillPack for $753 million, and the company changed its branding from “PillPack, an Amazon company,” to “PillPack by Amazon Pharmacy.”
Twitch
It is a platform that allows users to stream their games to their followers so that they can watch them play the game. It was launched in 2011, focusing on live video gamers. In 2014, Amazon acquired the company for $970 million. Amazon’s purchase was a very prudent decision, foreseeing the pathbreaking interventions that the gaming industry and metaverse can have on humanity. With a vision to think differently, Jeff Bezos said that they were looking forward to offering better services for the gaming community.
Kiva Systems
It is a Massachusetts-based company that manufactures mobile robotic fulfillment systems. They innovated novel approaches in the distribution chain with the help of database systems and automated guided vehicles, which are also called bots. In 2012, Amazon acquired Kiva Systems for $775 million. Today, Kiva Systems is known as Amazon Robotics. This change came into effect in August 2015.
Souq
Launched in 2005 in Dubai, Souq was the largest e-commerce platform in the UAE. In 2017, Amazon acquired it for nearly $580 million. This acquisition gave Amazon tremendous anchoring in the Arab world through Souq’s 45 million visitors every month. By integrating Souq’s customer base and Amazon’s technical backing, customers can enjoy a wide range of product selections and seamless delivery.
Quidsi
Quidsy is an e-commerce company that was founded by Marc Lore, Vinit Bharara, and Wei Yan in 2005. This US-based firm aimed at revolutionizing the online shopping experience by improving every aspect of it, including 1-2 day delivery, the novel e-commerce experience, and excellent customer service. In 2010, Amazon acquired Quidsi for $545 million.
Other notable Amazon acquisitions since 1998 include IMDb, Alexa Internet, Twitch Interactive, etc. Some of the companies that Amazon has acquired over the years are now defunct.
Very recently, Amazon acquired iRobot for approximately USD 1.7 billion. iRobot is the company that makes Roomba vacuums. With this acquisition, Amazon has increased its footprint in individual households and deepened its penetration in the market.
Reasons for Acquisitions
Over the years, Amazon has grown from strength to strength and now is a global presence with deep market penetration. Its popularity has grown during the pandemic and the name has become synonymous with retail shopping.
There are various reasons why a company like Amazon acquires or invests in different companies.
Economies of Scale
‘Bigger is better is the ideology behind an acquisition for economies of scale. Larger companies enjoy better cost savings and competitive advantages than their smaller counterparts.
Market Share
This is the most common motive for an acquisition. Apart from reducing the competition, it also gives the company an immediate increase in market share and also a boost to its sales.
Acquire New Expertise / Technology
Over time, newer technologies get introduced introducing newer ways to work. Therefore, it becomes necessary for companies to also evolve and embrace the changes. One way to do it is to acquire companies that provide this technology and expertise.
Similar Synergies – Creating Value
Many times, the logic of acquiring a new company makes more sense than the numbers. This is clearly visible in Amazon acquiring Whole foods and trying to bring the power of ecommerce to traditional food retail.
Geographical Diversification
This is a huge value driver in acquisitions. Acquisitions are the much-preferred way to expand geographically as the company can acquire a ready cash-generating entity with a ready business platform. It is also financially beneficial to the higher costs of setting up a new operation from scratch.
Vertical Integration
This type of acquisition creates a new addition to the value chain of a company. It reduces dependency on third party suppliers and vendors.
Conclusion
Over the years, Amazon has successfully integrated various products into its portfolio by acquiring several companies for one or more reasons as mentioned above. Amazon’s sprawling eCommerce empire is a result of far-sightedness, a futuristic approach, and an adaptable business model.
With the world shifting to the online retail platform, Amazon shows no signs of slowing down. It has, in fact, expanded its operations and offers a wide network of services.
FAQs
What is Amazon’s largest acquisition?
The acquisition of Whole Foods Market by Amazon in 2017 is the biggest company take-over by Bezos’s corporation to date, with a whopping tag price of 13.7 billion U.S. dollars.
What companies are related to Amazon?
Among its 12 subsidiaries, Amazon has AbeBooks.com, Audible, CamiXology, Fabric.com, IMDb, PillPack, Shopbop, Souq.com, Twitch, Whole Foods Market, Woot!, and Zappos.
Did Amazon have any mergers?
Amazon has made 98 acquisitions and 95 investments. The company has spent over $ 46.19B on the acquisitions.
Who is Amazon’s biggest competition?
Its biggest retail competitors are Alibaba, eBay, Walmart, JD, Flipkart, and Rakuten.
What is Amazon’s net worth in 2022?
Amazon’s net worth as of November 25, 2022, is $952.94B.
