By David Dorf-Oracle on May 01, 2015
If you're serious about understanding the retail industry, you have to closely study Amazon. I've come to have great respect for the company and its leader, and I continue to be amazed at their accomplishments. That said, here are my five favorite quotes from Jeff Bezo's most recent annual letter to shareholders:
Jeff Bezos graduated from Princeton and started his career in the financial industry, so he's always been interested in business models. This first quote references Tinder, a dating site where "a swipe can change your life."
A dreamy business offering has at least four characteristics. Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time – with the potential to endure for decades. When you find one of these, don’t just swipe right, get married.
Jeff is very proud that Amazon is not just a single business, but many related businesses with synergy. In his letter he called out three main businesses: Marketplace, Prime, and Amazon Web Services. This next quote refers to Amazon's ability to efficiently fulfill orders quickly.
Our worldwide network of fulfillment centers has expanded from 13 in 2005, when we launched Prime, to 109 this year. We are now on our eighth generation of fulfillment center design, employing proprietary software to manage receipt, stowing, picking, and shipment.
While Prime started out focused on free shipping, many additional benefits have been added including instant video. This year, Transparent, an original series won a Golden Globe award.
I’m pretty sure we’re the first company to have figured out how to make winning a Golden Globe pay off in increased sales of power tools and baby wipes!
Combining the benefits of Prime and Marketplace has been a successful endeavor that accelerates growth in both programs, or in Bezos-speak "powering the flywheel."
No doubt you know Amazon's $5B cloud business is growing fast. What started as a platform mostly used by start-ups is now maturing to attract many established enterprises. This quote refers to AWS:
Every time a seller joins Fulfillment By Amazon, Prime members get more Prime eligible selection. The value of membership goes up. This is powerful for our flywheel. FBA completes the circle: Marketplace pumps energy into Prime, and Prime pumps energy into Marketplace.
What customers really want in this arena is “better and faster,” and if “better and faster” can come with a side dish of cost savings, terrific. But the cost savings is the gravy, not the steak.
Whether you love Amazon or hate them, you have to respect what they've accomplished. And there are lessons we can all benefit from in our ongoing quest to serve shoppers.