Amazon began by selling books through technology most people had never heard of. That was never the final destination, though. The goal from the start was an all-dominant "everything store." How did the plan work so well?
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Enter relentless.com today, and the address sends you to Amazon's homepage. That domain traces back to the summer of 1994, when founder Jeff Bezos almost named his young online company Relentless. Friends talked him out of it, warning that the name sounded too sinister, though Bezos registered the domain anyway. He eventually settled on Amazon because he wanted a name that suggested enormous scale. The initial plan was to create the world's largest bookstore, then expand into something far broader: an "everything store." Still, Relentless may have described the company's underlying approach more accurately - an unyielding focus on efficiency and customer service.
Bezos believed from the start that lower operating costs should benefit customers, not simply become profit. An online retailer had no need for thousands of stores or sales assistants; technology could process more transactions without costs rising at the same pace. As Amazon expanded, it could distribute fixed costs more efficiently and put the savings back into what it offered customers.
Bezos eventually put a name to the self-reinforcing cycle: the Amazon flywheel. According to the story, he drew it on a napkin in 2001 after an internal retreat with business writer Jim Collins. The basic idea was straightforward: lower prices would bring in more customers, driving sales and scale; greater scale would then give Amazon room to cut prices again. The sketch merely captured a philosophy that had guided the company for years - Bezos would accept lower profits today if it strengthened the customer offer and helped the business grow larger tomorrow.
He described Amazon as still being in the internet's "Day 1." For him, that meant the company had to keep the attitude of a young business as it expanded: experiment, invest, and adapt instead of becoming defensive. Amazon soon moved beyond books, adding music and other product categories. The arrival of third-party sellers changed the site even more, turning it from a retailer of its own inventory into a marketplace.
In 1994, the internet remained unfamiliar to most people. By the late 1990s, though, investors believed it would reshape the economy, and money flooded into new online companies despite their scant revenue and nonexistent profits. Stock prices surged, while promises of rapid growth made raising capital almost effortless. Amazon gained from the excitement, yet it was swept up in the frenzy too, investing in other young internet firms and signing commercial deals with them.
Pets.com became the clearest symbol of the collapse. The online pet-supplies retailer went public in February 2000 with backing from Amazon and other investors, then folded before the year was over. Customer acquisition had cost it heavily, and the company had not shown that those customers could be served at a profit. Other dotcoms met the same fate. Once investors turned away, funding vanished and hundreds of companies failed. The bubble burst. Amazon made it through, though its shares dropped from a peak above £100 to below £6.
The experience made Bezos face a hard distinction: growth alone was not enough; investment had to improve the company's competitive position. Amazon reduced spending and tightened its discipline, yet it kept the long-term course set out in the 1997 letter. Its money went toward making the core business more valuable to customers and more efficient as it expanded. Easy money was gone. What remained was a larger customer base, a broader product selection, and a company beginning to show that it could survive without it.
How Amazon grew into a platform
The image shows an iPad displaying the "Amazon Web Services" logo.
The dotcom crash changed Amazon, not Bezos's ambition. By then, the company knew how to handle millions of orders and move merchandise through warehouses and across the globe. Bezos started to realize that the systems built for retail might work just as well outside retail. The opportunity was not merely to add more products. Amazon could create shared technology, pay for it once, and reuse it across separate businesses. A tool designed for one job might support another. That shift made Amazon look less like a store and more like a platform other companies could build on.
Amazon Web Services (AWS) stands out as the clearest example. Its roots were tied to a problem Amazon had created as it expanded: engineers kept rebuilding basic technology for separate projects, with teams repeatedly setting up their own storage and computing resources. Amazon needed one internal system that could provide those services more efficiently. So it built the infrastructure once, made it dependable, and gave developers access whenever they needed it - a central pool of high-grade computing resources.
Amazon's breakthrough was recognizing that the infrastructure built for its own engineers could serve other developers as well. A start-up no longer had to buy, install, and maintain expensive servers; it could rent storage and computing power from Amazon on demand, paying only for the capacity it actually used.
Amazon started testing the idea in the early 2000s. Its online storage service, S3, arrived in 2006; EC2 followed, letting customers rent computing capacity instead of building their own systems. Cloud computing now feels ordinary. Twenty years ago, though, the premise was startling: a small company could gain access to the kind of infrastructure that once demanded a large corporation's money and staff.
That fit Bezos's usual approach. Amazon had spent years building infrastructure to support its retail business, and once it was in place, Bezos searched for additional uses. The company could spread those costs among millions of customers - not just across millions of book orders.
At first, investors had trouble making sense of Amazon's plan. The company was known mainly for books, yet it was also renting computing infrastructure to software developers. Developers saw the appeal sooner: two engineers working from a flat could buy storage and computing power from Amazon instead of filling a room with servers or committing to an expensive technology contract. AWS removed one of the biggest obstacles to launching and growing a software company.
The money took longer to reveal itself. Amazon initially folded AWS into its broader accounts instead of reporting it separately, so investors had little way to judge its profitability. For ten years, AWS revenue sat inside a vaguely named segment called "Other Revenue." That changed in 2015, when Amazon reported that the unit had brought in £7.9 billion in revenue and £1.9 billion in operating profit - a margin of almost 24%. AWS is far bigger now. In the most recent full year, it produced £128.7 billion in revenue and £45.6 billion in operating profit. The irony is hard to miss: a service born partly from Amazon engineers' frustration with the company's own IT infrastructure now earns more operating profit than HSBC, the UK's most profitable company.
AWS was not merely a successful diversification. It revealed how Bezos approached Amazon: solve a problem the company had itself, build the infrastructure simply enough for thousands of other users, and keep investing until the growing platform became more useful.
Amazon's loyal customer base
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That idea also shaped Amazon Prime when it launched in 2005. Before Prime, online shoppers either accepted free but slow shipping or paid extra for faster delivery. Bezos wanted neither trade-off: customers would pay one annual subscription, then receive fast delivery without an added charge on each order. The economics were uncertain, especially when frequent users took full advantage of unlimited two-day delivery.
Bezos moved forward, and Amazon changed its customers' shopping habits. After paying for Prime, members had little reason to look elsewhere or worry about delivery charges on each order. They usually shopped more often and spent more, turning the membership fee into a way to build customer loyalty and increase purchases.
Prime grew into something much larger than a delivery service. Amazon kept adding benefits to make membership harder to give up, starting with its 2011 acquisition of LoveFilm, which helped lay the groundwork for streaming. It then spent billions on original television programmes and films, as well as live sports rights. For a conventional retailer, those investments would have seemed like an odd move into entertainment. For Amazon, they strengthened Prime: the more useful the subscription became, the less likely customers were to cancel and the more of their spending Amazon could draw in. Bezos once put it plainly: "When we win a Golden Globe, it helps us sell more shoes."
That readiness to undermine an existing business model showed up in other parts of Amazon as well. The iPod had already demonstrated how fast digital files could displace physical media. Bezos could have focused on defending Amazon's position as the world's largest bookseller; instead, he supported the Kindle and moved the company into digital books before the danger was impossible to overlook. Later, as third-party sellers added millions of products to Amazon's marketplace, the company turned their search traffic into a new source of income by selling advertising around it. That advertising business now brings in tens of billions of dollars in annual revenue.
AI offers Amazon its newest opening for growth. The company is spending heavily, yet the basic plan is familiar: AWS supplies businesses with the computing power and software they need to build and run AI applications, while Amazon applies the same technology internally, from warehouse automation to product recommendations.
Once again, Amazon is building infrastructure for its own businesses while offering it to millions of customers outside the company.
That continuity mattered even more after Bezos left the CEO role in 2021. Andy Jassy, his successor, had joined Amazon in 1997 and worked closely with him before turning AWS from an internal project into one of the world's most important technology businesses. Jassy was not expected to freeze Amazon in place. He had to keep it at "Day 1" - ready to invest and adapt - while preserving the discipline behind those bets. The cost-cutting programme after the pandemic showed the other side of that approach: Amazon sometimes had to do less once its size began creating waste.
Is there an investment case for Amazon today?
The investment question comes back to valuation and future growth. Amazon has seldom appeared cheap when judged by standard profit or cash-flow measures. For years, investors have had to look past the results from a single year and focus on what the company was building. That still applies. Amazon is now so large that it is unlikely to match the exceptional percentage returns of its early years, yet its cloud-computing, online-retail, and advertising businesses operate at vast scale and offer attractive economics. The issue is whether the company can keep turning that scale into fresh growth.
Its history points to a different answer: Amazon's success depends less on guessing the next big technology than on preserving the system Bezos built. The company spends heavily on infrastructure, improves its current businesses with what it builds, and then finds new uses for those assets. AWS makes the pattern easiest to see; Prime, advertising, and the logistics network reflect the same willingness to invest now for returns that may take years. Jassy must apply that method on a far larger scale.
In 1994, "Relentless" might have seemed an odd name for a young online bookseller. Three decades later, it still captures Amazon's operating philosophy: cut costs, make shopping better, put the savings back into the business, then find new uses for the capabilities that result. Investors are drawn to more than Amazon's current scale. They are betting that this cycle can keep producing valuable businesses - often ones no one could have pictured beforehand.
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