Like the onrushing river it's named for, Amazon.com is constantly moving. The Seattle company is testing a grocery-delivery service in parts...
Like the onrushing river it’s named for, Amazon.com is constantly moving.
The Seattle company is testing a grocery-delivery service in parts of the Seattle metro area. It offers Amazon Web Services, a program that allows entrepreneurs to piggyback on the company’s server space and software tools. And it’s invested in Bill Me Later, which allows consumers to buy things online without a credit card.
None of those recent initiatives seems to have much to do with Amazon’s core business of selling a wide range of stuff online. Even though Amazon now offers everything from shoes to shampoo, bedding to bicycles, its core products remain books, CDs, DVDs and home electronics.
That hasn’t limited Amazon’s growth to date: Sales of media products jumped by nearly a third last year. But the long-term trend is for more media formats — music, movies, TV shows and even books — to be bought and consumed digitally rather than as discs or paper.
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And several of Amazon’s recent investments indicate the company is trying to position itself for an increasingly digital future. Among them:
• The Kindle electronic reading device.
• An online music store, Amazon MP3, that sells only tunes without copy-protection software.
• The Unbox service for downloading movies, TV shows and other video content.
• Audible, the largest online seller of audiobooks, which Amazon bought for $300 million.
All of those moves cost money, of course. Amazon has taken whacks in the past from Wall Street for spending richly on technology and content (and for steps such as cutting shipping charges) rather than maximizing the bottom line. After its 2006 profit margin fell to the lowest level since 1999, the company consciously cut back its tech spending. But in the first quarter of 2008, tech spending was 32 percent above the same period last year.
Amazon actually has performed well for several years, but missed making the Northwest 100 because it had negative average common equity in 2005 — dragging down its return on equity score.