Who says that the CEO of the Internet’s largest consumer retail “experience” and TIME Magazine’s new millennium “Man of the Year” won’t spare a few minutes to sit down with the local media and give us the benefit of his erudition? Hmm, come to think of it, we’ve heard at least one colleague grumble something along those lines, and not without some foundation. Still, it practically pings the mind to stop and think about the time constraints of someone who juggles so many products-partners-customers-buyer profiles-stockholders-analysts-servers-clickthroughs or bandwidth. Not to mention the one cyber-celeb who has appeared on as many magazine covers over the past two years as Britney Spears. So we were jazzed when we learned that Jeff Bezos would be keynoting this year’s WSA Industry Achievement Awards gala on Feb 7. And considered ourselves lucky when we were able to gab with Jeff for a few minutes before he entered the sold-out ballroom at the Westin Hotel, while the audience of Puget Sound digirati finished up their chocolate glazed strawberries. This elucidation then, something we affectionately call the “Jeff Bezos ShopTalk”, is a compilation of Mr. Amazon’s remarks before, during and after his keynote address. For those in attendance and for posterity, Mr. Bezos was speaking locally but thinking globally.
On Amazon’s Rate of Change over the Last Six Years and the Next Five:
Bezos: The last six years have been astonishing. I can’t imagine that there’s ever been a period with a greater rate of change. If you go back in history there probably were things that exploded very quickly but certainly in our memories, there hasn’t been anything like this.
Six years ago we launched what we thought was going to be a little company. If you look at the original business plan, we predicted that in the year 2001 we would have $70 million dollars in sales and a $4 million operating profit. Well, we actually have significantly exceeded one of those variables. There have been many, many twists and turns over the last six years to be sure.
The next five years are going to be much more critical than the last five. I would even say that it’s possible that the five after that will be more important still. People do not understand just how much this is day one on the Internet.
To put this in a little context, we have images of our Website six years ago and it’s astonishing what it looks like. It’s so primitive. And yet I guarantee you, it’s going to look just as primitive to go six years in the future and look back to today. There’s so much coming.
On Amazon’s Earliest Success:
Bezos: We launched the store in July of 1995. And we were astonished in that first month that we had orders from all fifty states and 45 different countries. The most memorable experience to date in the history of Amazon.com for me is that moment when we got an order from a stranger. We had ten employees and everybody was trying to assure us that, “It’s not my Mom!” We programmed a bell to ring whenever we got an order. And in a few days we had to deprogram the bell because it got annoying.
We got orders from Bulgaria from a guy who had Internet access but didn’t have a credit card. He paid us for his order in cash, which he mailed to us, a method of payment we do not encourage. He stuffed the money into a floppy disk and he put a note on it that said that the money was inside the floppy disk.And the reason he did that, he wrote, was that the Customs Inspectors steal the money, but they don’t read English. And sure enough inside were two crisp $100 bills.
On the Initial Challenges of Shipping Product:
Bezos: I think our lack of preparedness in terms of shipping and fulfillment in the early days is what really solidified our focus on our customer base. [At that time], everybody in the company, no matter what they were doing in their day job, had to spend the second half of the day packing and shipping books. We were so woefully unprepared where we used to have the office, next to Pecos Pit barbecue, not too far from Home Depot and Sears, where Starbuck’s headquarters is. Anyway, we were in this building which was underneath a ColorTile and we had a 400 square foot fulfillment center, about the size of a one car garage. We had gotten pretty technical, we had EDI with the vendors and so on, but we didn’t have any real physical systems. We were down there packing, and we were on our hands and knees putting things into boxes, and it was back-breaking work on a cement floor.
I had what I thought was this brilliant idea. “We should get kneepads!,” I said. And someone who was more experienced at this than I said, “[No] we should get packing tables!” The next day we had packing tables. And our productivity improved 20%! I don’t think that’s an uncommon story among start-up companies, especially start-up companies [during] those early periods of serious technological dislocation. That’s certainly what we’ve just lived through in the last six years when there have been amazing amounts of technology built and lots of innovation.
On Evolution, Extinction and Experimentation:
Bezos: It’s like the Cambrian era, where single cell life exploded into multi-cell life and it was the greatest species-ization ever seen. The fossil record is very clear about that. But it was also the period of greatest extinction. And that’s what we’ve been seeing over the last couple of years. A lot of these things go hand in hand. There’s no way around it. It’s not necessarily a bad thing, not for society. It’s tough for the species that go extinct. But it is what happens when you have a series of ecological dislocations. The experimentation needed to be done. And the capital markets funded that experimentation. The interesting thing is that even now that we’ve seen all that experimentation, I personally believe that we haven’t yet seen the very best innovation.
On Amazon as Innovator:
Bezos: One of our common complaints from customers six years ago was that they couldn’t look inside the books. And so, as bandwidth got cheaper, we could suddenly digitize 250,000 books, 20-50 pages in each book, with a full table of contents, and a full index, and put that up so people could look inside.
One of our people at Amazon.com came up with the idea of warning customers when they were about to buy the same thing twice. That may seem like a simple thing, but it happens all the time. You’re going to buy that Britney Spears CD, and you’re reminded that you bought it two years ago and you’ve forgotten. We test every new feature in simultaneous tests called A/B tests and this feature actually depresses sales, every so slightly, a very little bit but measurably significant because people do buy the same thing twice. But, over the long term, we felt that kind of feature would engender a lot of loyalty, and over time would actually increase sales.
On Amazon as the Web’s Most Customer-Centric Company:
Bezos: I guarantee you that every company that wins an award tonight [during the WSA Industry Achievement Awards], will be a company that is customer-obsessed. They listen to their customers and they also know when not to listen to their customers.
We have had a huge edge in our business because we’re online in terms of gathering customer feedback. I would bet that in the last six years, we’ve gotten more honest feedback from our customers than most companies would get in thirty years. The reason is that e-mail has this fantastic characteristic that turns off the politeness gene in people. People will be honest. If you’re a restaurateur, you could get such good feedback by making your E-mail address really prominent on your menu like “if you don’t like something, when you get home please E-mail us.” Because at the restaurant nobody really wants to ruin their day or mess up the meal, but when they get home it’d be like, “You guys don’t know what you’re doing, and I can’t believe that you’re even cooking.” And that feedback contains the germ of possibility of a new idea and a better way to do things. That has benefited us tremendously over the last six years. So many good ideas have had their roots in some kind of customer criticism. And usually it’s criticism and not a a solution. We can then go away and find a solution to the problem.
We also know when to ignore things. I think one of the things that’s been frequently requested by customers over the years has been this question of book signing. They’ve asked us ,’How are you going to be able to do book signings?’ And I think that probably the answer is ‘we’re not.’ There are things in the physical medium that can’t be done online. [At the same time], there are things that can be done better online, and those things will be invented over the next five years and ten years and twenty years, which is so incredibly exciting.
On Going to Work Every Day:
Bezos: I love my job. I love what I do for a living. Our culture is a customer-obsessed culture. And the innovation comes from lots of smart people feeding off of each other and loving what it is that that creates. We started out attracting a bunch of people who wanted to do something new that’s never been done before. And when you do that, that becomes self-reinforcing.
On Where We’re At in the Internet’s Evolutionary Path:
Bezos: We may not be in the Kitty Hawk stage right now, that stage may be gone, but nobody has thought of the DC-9, and nobody has even imagined the jet engine. And the very best innovations that industry will create, that completely new garage entrepreneurs will create, that smart people of Amazon.com will create, are yet to come. I think for every creative innovation that’s come up there will be ten more over the next ten years.
On Advice for the Businessperson Eyeing E-Commerce:
Bezos: The most important thing is to stick with your plan. Stay heads down, focused on customers. Don’t let yourself get distracted by competitors or capital markets or anything else. Pay attention to those things, learn form them, but stay focused on your customers. Wake up terrified every morning and be afraid of your customers because they’re the ones you have relationships with.
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