Amazon.com 2005 Annual Report Download - page 13

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Third-Party Sellers
Through Amazon Services, we offer Amazon Marketplace and Merchants@ programs that enable third
parties to sell their products on our websites, allow customers to shop for products owned by third parties using
our features and technologies, and allow individuals to complete transactions that include multiple sellers in a
single checkout process. We are not the seller of record in these third-party seller transactions, but instead earn
fixed fees, sales commissions, per-unit activity fees, or some combination thereof.
Amazon Marketplace generally serves individuals and small businesses, enabling them to offer their
products for sale on our websites alongside our products and products made available by other third-party sellers.
Our Merchants@ program generally serves larger, branded businesses and is primarily focused on expanding the
selection of new products available on our websites. We also sometimes offer fulfillment-related services to
third-party sellers.
Services
Amazon Enterprise Solutions (formerly known as Merchant.com) provides third party retailers with back-
end e-commerce and fulfillment solutions to enable third party e-commerce businesses operating under their own
brand name and website address (e.g. www.target.com). We also offer web services applications to developers. In
addition, we have co-branded credit card agreements and marketing and promotional services, such as online
advertising.
Marketing and Promotion
Our marketing strategy is designed to increase customer traffic to our websites, drive awareness of products
and services we offer, promote repeat purchases, develop incremental product and service revenue opportunities,
and strengthen and broaden the Amazon.com brand name. We believe our most effective marketing efforts result
from our focus on continuously improving the customer experience, which drives word-of-mouth promotion and
repeat customer visits. We also deliver personalized Web pages and services and employ a variety of media,
business development activities, and promotional methods. We employ various means of advertising, which
consist primarily of online advertising, including through our Associates and Syndicated Stores programs,
sponsored search, portal advertising, e-mail campaigns, and other initiatives. We also participate in cooperative
advertising arrangements with certain of our vendors and other third parties. Our Associates program directs
customers to our websites by enabling independent websites to make millions of products available to their
audiences with fulfillment performed by us or third parties. We pay commissions to hundreds of thousands of
participants in our Associates program when their customer referrals result in product sales.
We offer everyday free shipping options worldwide and in the U.S. also offer Amazon Prime, a membership
program in which members receive free two-day shipping and discounted overnight shipping. Although
marketing expenses do not include the costs of our free shipping or promotional offers, we view such offers as
effective marketing tools.
Technology
Using our own proprietary technologies, as well as technology licensed from third parties, we have
implemented numerous features and functionality that simplify and improve the customer shopping experience,
enable third parties to sell on our platform, and facilitate our fulfillment and customer service operations. Our
current strategy is to focus our development efforts on continuous innovation by 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 continually invest in several areas of
technology, including search technologies, seller platforms, web services, and digital initiatives.
We use a set of applications for accepting and validating customer orders, placing and tracking orders with
suppliers, managing inventory and assigning it to customer orders, and ensuring proper shipment of products to
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