Amazon.com 2002 Annual Report Download - page 14

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eÅect on our sales of toys (which are mainly sold through our Merchants@ program relationship with
Toysrus.com) and electronics.
Technology
We have implemented numerous Web-site management, search, customer interaction, recommenda-
tion, transaction-processing and fulÑllment services and systems using a combination of our own
proprietary technologies and commercially available, licensed technologies. Our current strategy is to focus
our development eÅorts 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. Our transaction-processing systems handle millions of items, a number of diÅerent
status inquiries, gift-wrapping requests and multiple shipment methods. These systems 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.
Competition
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 manufactur-
ers of our products, many of which possess signiÑcant 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) other online e-commerce sites; (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; and (4) companies that provide e-commerce services, including Web-site developers
and third-party fulÑllment 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 fulÑllment, ease
of use and ability to adapt to changing conditions. For services we oÅer to business and individual sellers,
additional competitive factors include the quality of our services and tools and speed of performance for
our services. As the market segments in which we operate 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, domain names, trade dress, trade
secrets, proprietary technologies and similar intellectual property as critical to our success, and we rely on
trademark, copyright and patent law, trade-secret protection and conÑdentiality and/or license agreements
with our employees, customers, partners and others to protect our proprietary rights. We have registered a
number of domain names and 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, domain names and copyrights in the U.S. and internationally, and we have Ñled
U.S. and international patent applications covering certain of our proprietary technology. We have licensed
in the past, and expect that we may license in the future, certain of our proprietary rights, such as
trademarks, patents, technologies or copyrighted materials, to third parties.
Employees
We employed approximately 7,500 full-time and part-time employees at December 31, 2002.
However, employment levels Öuctuate due to seasonal factors aÅecting our business. We also employ
independent contractors and temporary personnel on a seasonal basis. None of our employees is
5