From the beginning, Amazon operated as a virtual organization and leveraged its network structure. For example, it developed and oper- ated the Amazon.com website to draw in custo- mers and to learn about creating an effective online customer experience. However, the com- pany owned little or no inventory, warehouses, distribution centers, or customer-service opera- tions. Early on, order fulfillment was left to Ingram Book Distributors, one of the largest book wholesalers, who also contracted out delivery to third-party vendors, such as UPS.
In June of 1998, Amazon began selling CDs, and added DVDs and videos in November 1998. It added electronic products, toys, software, and video games in 1999, and tools, health and beauty products, kitchen products, and photo services in 2000. It also expanded internationally starting in 1999, opening up markets in Canada, Europe, and Asia over the next decade. Amazon’s first West Coast distribution center was built in 1996 and an East Coast distribution center was added in 1997. In 1999, in anticipation of the Christmas rush, Amazon built five warehouse and distribution facilities and several customer-service centers to improve its order fulfillment capabilities.
Amazon’s initial forays into a broader network began in 1999 but were compartmentalized on the website. Non-Amazon products, such as used books or individuals auctioning off different products, were not allowed to infiltrate Amazon’s millions of book, CD, and DVD pages. Third-party products were put under “tabs” that roughly described the kind of commerce to be conducted, such as the “auction” tab or the “zShops” tab, which contained a variety of vendor products. Thus, traditional Amazon products were separated from products offered by others. Continued profit pressure, however, forced the organization to look at relationships differently.