Amazon sells almost everything, runs one of the world's largest cloud computing businesses and delivers to millions of homes every day. But it started in 1994 as a small online bookstore run from a rented house near Seattle. In Part 9 of How Global Giants Began, we look at how Amazon started and why it was willing to lose money for years.
A Wall Street job and a startling number
Jeff Bezos was a computer science graduate from Princeton working at the investment firm D. E. Shaw in New York. In 1994 he read that use of the World Wide Web was growing at an extraordinary rate, commonly cited as about 2,300% a year. He decided to build a business that could ride that growth.
Why books?
Bezos made a list of products that could be sold online and chose books. There were millions of titles, far more than any physical store could stock, and books were standard products that customers did not need to touch before buying. Distributors already had catalogues of titles, which made it easier to start without large inventory.
The regret minimisation framework
Leaving a well-paid job was a big risk. Bezos later explained that he imagined himself at 80 and asked which decision he would regret more. He realised he would not regret trying and failing, but he might regret never trying. He called this his "regret minimisation framework."
A garage in Bellevue
Bezos and his then wife, MacKenzie, drove across the country to Seattle, chosen for its tech talent and proximity to a large book distributor. He wrote the business plan on the way. The company started in the garage of a rented house in Bellevue, Washington.
The original name was Cadabra, but it sounded too much like "cadaver." Bezos chose Amazon, after the world's largest river, which suggested scale and also appeared near the top of alphabetical lists.
Early staff built desks from wooden doors attached to legs, a cheap solution that became a symbol of the company's frugality. Amazon.com opened to the public in July 1995 and sold books to customers across the United States and dozens of other countries within its first month.
Growth before profit
Amazon went public in May 1997. In his first shareholder letter that year, Bezos said Amazon would focus on long-term market leadership rather than short-term profits, and that it would be "Day 1" for the internet and the company. The letter is still attached to Amazon's annual reports.
Amazon expanded into music, videos, electronics, toys and more. It invested heavily in warehouses and technology and lost money for years, frustrating critics.
Surviving the dot-com crash
When the dot-com bubble burst in 2000 and 2001, many internet companies collapsed. Amazon's share price fell by more than 90% from its peak, and many predicted its failure. The company had raised money before the crash, which helped it survive. It cut costs, closed some facilities and focused on efficiency. It reported its first full-year profit in 2003.
New engines: Prime, AWS and Marketplace
- Marketplace: letting third-party sellers list on Amazon greatly increased selection.
- Prime (2005): a membership with free two-day shipping built customer loyalty.
- Amazon Web Services (2006): Amazon rented out computing infrastructure to other businesses. AWS became one of the world's leading cloud platforms and a major source of profit.
- Kindle (2007): Amazon disrupted its own book business with e-books.
Bezos stepped down as CEO in 2021, handing over to Andy Jassy, who had led AWS.
Business lessons from Amazon
- Ride a big trend. Amazon started because the internet was growing fast.
- Start narrow, then expand. Books were a focused entry point.
- Customer obsession wins loyalty. Selection, price and convenience drove growth.
- Think long term. Investing for the future can beat chasing quarterly profits.
- Turn internal tools into products. AWS grew from Amazon's own needs.
- Have cash for bad times. Raising money before the crash helped Amazon survive.
In Part 10, the final instalment, we visit another garage where two Stanford students started Google, and sum up the lessons from all ten giants.
How Global Giants Began: the full series
- Part 1: Coca-Cola
- Part 2: Toyota
- Part 3: LEGO
- Part 4: Samsung
- Part 5: IKEA
- Part 6: McDonald's
- Part 7: Nike
- Part 8: Apple
- Part 9: Amazon (you are here)
- Part 10: Google
Dates, prices and figures are commonly cited historical values and may vary slightly between sources. Company names and trademarks belong to their respective owners; HorizonDesk is not affiliated with any company mentioned.
