Amazon.com 2006 Annual Report Download - page 14

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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 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
customers. Our transaction-processing systems handle millions of items, including multiple status inquiries,
shipping addresses, gift-wrapping requests, and 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 completing customer payment
transactions, which vary by geography, but include credit cards and electronic fund transfers, among other
payment mechanisms.
Competition
Our market segments are rapidly evolving and intensely competitive. Our current and potential competitors
include: (1) physical-world retailers, publishers, vendors, distributors, manufacturers and producers of our
products; (2) other online e-commerce sites, including sites that sell or distribute digital content; (3) a number of
indirect competitors, including media companies, Web portals, comparison shopping websites, and Web search
engines, either directly or in collaboration with other retailers; (4) companies that provide e-commerce services,
including website development; third-party fulfillment and customer-service; and (5) companies that provide
infrastructure web services or other information storage or computing services or products. We believe that the
principal competitive factors in our retail 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, as well as our customers’ overall
experience and trust in transactions with us and facilitated by us on behalf of third-party sellers. For our
e-commerce and web services, additional competitive factors include the quality of our services and tools and the
speed and reliability of our services. Many of our current potential competitors have greater resources, longer
histories, more customers, and greater brand recognition. They may secure better terms from vendors, adopt
more aggressive pricing and devote more resources to technology, fulfillment, and marketing. Other companies
also may 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 confidentiality 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 filed U.S. and international patent
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