Amazon.com 2001 Annual Report Download - page 14

Seasonality
Our business is generally affected by both seasonal fluctuations in Internet usage (which generally declines
during summer months) and traditional retail seasonality. Traditional retail sales for most of our products,
including books, music, DVDs, videos, toys and electronics usually increase significantly in the fourth calendar
quarter of each year. In particular, the fourth quarter seasonal effect may be even more pronounced in our sales
of toys, which are mainly sold through our strategic alliance with Toysrus.com, and in our sales of electronics, in
comparison with our other product categories.
Technology
We have implemented numerous Web-site management, search, customer interaction, recommendation,
transaction-processing and fulfillment services and systems using a combination of our own proprietary
technologies and commercially available, licensed technologies. Our current strategy is to focus our development
efforts on creating and enhancing the specialized, proprietary software that is unique to our business and to
license or acquire commercially-developed technology for other applications where available and appropriate.
We use a set of applications for accepting and validating customer orders, placing and tracking orders with
suppliers, managing and assigning inventory to customer orders and ensuring proper shipment of products to
customers based on various ordering criteria. Our transaction-processing systems handle millions of items, a
number of different status inquiries, gift-wrapping requests and multiple shipment methods, and allow the
customer to choose whether to receive single or several shipments based on availability and to track the progress
of each order. These applications also manage the process of accepting, authorizing and charging customer credit
cards. Our Web sites also incorporate a variety of search and database tools and provide personalized features for
individual customers such as instant personalized recommendations, personalized notifications and wish lists.
Competition
The online-commerce retail channel is relatively new, rapidly evolving and intensely competitive. In
addition, the retail environment for our products is generally intensely competitive. Our current or potential
competitors include: (1) physical-world retailers, catalog retailers, publishers, distributors and manufacturers of
our products, many of which possess significant brand awareness, sales volume and customer bases, and some of
which currently sell, or may sell, products or services through the Internet, mail order or direct marketing;
(2) online vendors of products that we sell; (3) a number of indirect competitors, including Web portals and Web
search engines that are involved in online commerce, either directly or in collaboration with other retailers;
(4) Web-based retailers using alternative-fulfillment capabilities; and (5) companies that provide e-commerce
services, including Web-site developers and third-party fulfillment and customer-service providers. We believe
that the principal competitive factors in our market segments include selection, price, availability, convenience,
information, discovery, brand recognition, personalized services, accessibility, customer service, reliability,
speed of fulfillment, ease of use and ability to adapt to changing conditions. For our services segment and third-
party sellers channel, additional competitive factors include the quality of our services and tools, and speed of
performance for our services. As the online-commerce market segments continue to grow, other companies may
also enter into business combinations or alliances that strengthen their competitive positions.
Intellectual Property
We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary
technology and similar intellectual property as critical to our success, and we rely on trademark, copyright and
patent law, trade-secret protection and confidentiality and/or license agreements with our employees, customers,
partners and others to protect our proprietary rights. We have been issued a number of trademarks, service marks,
patents and copyrights by U.S. and foreign governmental authorities. We also have applied for the registration of
other trademarks, service marks and copyrights in the U.S. and internationally, and we have filed U.S. and
international patent applications covering certain of our proprietary technology. We have licensed in the past, and
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