Amazon Story

Jeff Bezos

2017.04

Amazon_ A letter from Jeff Bezos
Amazon Story
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I. Amazon today

Amazon.com is an American electronic commerce and cloud computing company. It is the largest Internet-based retailer in the world by total sales and market capitalization. The company strives to make the world a more accessible place for all consumers with its services.

  • Sales on and offline: Amazon gives customers easy access to products and services at an affordable price. The company leads the market in product assortment, product search, pricing, delivery speed, and ease of use.
  • Amazon Web Services (AWS) – cloud computing services: AWS offers reliable, scalable, and inexpensive cloud computing services for businesses at 10-20% of the price of most other cloud computing platforms. AWS is highly competitive in the industry with respect to its price, speed, usability, and versatility.
  • Fulfillment by Amazon (FBA): With FBA, you store your products in Amazon’s fulfillment centers, and Amazon picks up, packs, ships, and provides customer service for these products. Amazon has also been implementing robots and drones to speed up processing and delivery, demonstrating the capacity to critically shape the future of purchasing and shipping.


With roughly 300 million active users worldwide, Amazon reported $136B in revenues but $0 in net profit in 2016 and is currently valued at nearly $430B.

  • Users: Amazon.com has close to 300 million users, and more than 100 businesses use AWS.
  • Revenue/profit: In 2016, Amazon.com made $120B and AWS made $12B, but total profit is estimated at $0 (AWS makes up for the losses in Amazon.com).
  • Valuation: In April 2017, Amazon was worth $430B, which is twice that of Walmart ($224B) and in line with Facebook ($408B) and Google ($590B).

⇒ Amazon is twice the size of Korea’s largest corporation, Samsung Electronics ($230B).



Unlike typical Silicon Valley startups, Amazon continues to emphasize intense competition within its workforce.

  • Employee count: In 2017, Amazon has a workforce of 340,000 employees, which stands in contrast with Facebook’s 20,000 and Google’s 70,000. Because of the nature of the distribution industry and its massive need for low-cost labor, Amazon hires more people but pays lower wages than pure tech companies like Google and Facebook.
  • Culture: Unlike many of Silicon Valley’s startups, Amazon employees work long hours for lower pay and fewer welfare benefits. In 2016, an investigative piece by the New York Times uncovered Amazon’s bureaucratic structure and further publicized the truth of its awful culture.


Despite this, we observe Amazon flourish and produce innovative products. How has this been possible?




II. Amazon’s history

The company was founded in 1994 as an “online store.” For its first 2-3 years, Amazon focused on being an online bookstore, building itself to become the biggest book distributor in the world.

  • Online distributor: Founder Jeff Bezos called Amazon his “regret minimization framework,” which described his efforts to fend off any regrets for not participating sooner in the Internet business boom during that time. Bezos brainstormed a way to create an online distribution company using only the money that he had.
  • Amazon.com, the online bookstore: Bezos decided that his new business would sell books due to the large worldwide demand for literature, the low price-points for books, and the huge number of works available for print. He launched Amazon.com, an online bookstore, in 1995.
  • The success of Amazon.com: By concentrating primarily on distributing books, Amazon.com quickly became the go-to source to buy an array of books at affordable prices.


Amazon has since been increasing its number of product categories and is currently the largest online general shopping platform in the world.

  • Product expansion: Books DVDs and video games makeup, household items, and clothing electronics and accessories food and beverages.
  • Geographic expansion: After its launch in the US, Amazon expanded to Germany and the UK (1998) and to France and Japan (2000), and the company now operates around the world, fulfilling nearly 50% of the world’s demand for consumer goods. By supplying the world’s developed countries, Amazon has emerged as the premier online distribution company.


With the development of Amazon Kindle, the company created and dominated the e-reader industry and has also functioned as an online content distributor.

  • Bringing books online: Apple made music more accessible with the iPod. Netflix made movies and TV shows more accessible with its streaming service. Amazon, on the other hand, made books more accessible by developing the Kindle.
  • Developing e-book hardware and software: In 2007, Amazon released the first edition of the Kindle, an e-reader device. The company also used its tremendous bargaining power over publishers to swiftly sweep the US e-book market. Amazon now has a 65% market share in e-books and a 74% market share in e-readers.
  • Amazon Prime and expansion into other online content: By subscribing to Amazon Prime (a yearly fee of $99), users are given unlimited access to a breadth of music, TV shows, and movies.


In addition, Amazon now offers on-demand cloud computing platforms.

  • In the past, online distributors would have to purchase 10 times the usual server space during the [1] Black Friday and Cyber Monday season to deal with the heavy traffic. But once the season ended, the large server capacity would become useless.
  • Amazon launched AWS in 2006 to provide online cloud services based on usage, which allowed the company to sell virtual servers to web developers and other clients for a discounted price during periods with light traffic.
  • AWS offers on-demand cloud services, which means that clients can flexibly alter their server use depending on website traffic.
  • Using AWS eliminates the need to purchase physical servers and hire workers to maintain the servers. In addition, clients can save time when using cloud storage services because they no longer have to allocate time to install the physical servers. Thus, AWS has been able to cut the cost of data storage by 90% and has been wildly successful throughout the world.


In recent years, Amazon has made advances in the shopper experience with AWS.

  • Amazon Dash Button is a small electronic device designed to make ordering products easy and fast. With a click of a button or a scan of a barcode, users can automatically order goods from Amazon.com.
  • Amazon Echo is a smart speaker that connects to the voice-controlled intelligent personal assistant service Alexa. 4 million users own Echo and use it in conjunction with Amazon.com to facilitate shopping.
  • Mechanizing product maintenance. Amazon has 45,000 robots in its warehouses that stock and manage the products. Mechanizing the process minimizes errors and cuts labor costs.
  • Amazon Prime Air is a conceptual drone-based delivery system. The program aims to reduce delivery time and costs.
  • Amazon Go is a prototype grocery store that enables customers to purchase products without using a cashier or checkout station.


III. Amazon competes with tech companies around the world

It is becoming clear that Amazon’s main competitors are not other retail companies, but rather tech companies like Google, Apple, Microsoft, and SpaceX.

  • With the exception of Costco, most retail and distribution companies are lagging behind online businesses like Amazon.
  • Amazon competes with tech companies to develop the best AI, big data, machine learning, and voice recognition technology.


Google is likely to be Amazon’s greatest adversary. In the battles for online commerce searches, data storage, and artificial intelligence, Google is leading the industry.

  • Commerce search: Amazon’s Dash Button and Echo [2] incentivize consumers to purchase goods without looking them up first on Google.
  • Smart speakers: Echo has already secured 4 million customers, which is a higher number than those who own Google Home.
  • Data storage: AWS has a comfortable lead over Google Drive and Google’s other cloud services.


Amazon leads the e-book market, with a close competitor, Apple, trailing behind.

  • E-books: With the iPad and its own e-book app, Apple has attempted to beat Amazon but has conflicted with book publishers. The momentum retained by Amazon Kindle has [3] thwarted Apple’s efforts.


Jeff Bezos’s Blue Origin competes against Elon Musk’s SpaceX to build a reusable rocket.

  • Blue Origin took off late in the race for space, but the company has made admirable strides in a short period of time and is currently testing its first version of the reusable rocket.
  • Unlike SpaceX, which aims to commercialize space travel and enable human colonization of other planets, Blue Origin is developing technologies to enable private access to space as a means to improve supply chain logistics.


Despite these successful projects, Amazon has been losing talent to Google, Apple, and Microsoft, which is cause for concern in the years ahead.

  • Perhaps due to its start as a simple retail and distribution company, Amazon has been unable to provide a creative work environment for employees, pressuring them instead to focus on improving efficiency and lowering costs.
  • Amazon falls behind Google and Facebook with respect to their salaries, flexibility, and work spaces.


IV. Lessons from Jeff Bezos

Behind Amazon’s growth is founder Jeff Bezos’s philosophies.

1. True customer obsession is key

  • Many companies obsess over their competitors, production technology, and business model, but give very little attention to the customers using their services.
  • In his 2016 Letter to Amazon Shareholders, Bezos outlined true customer obsession as being key to the company culture. Focusing on the customers, their complaints, and their level of satisfaction allows the company to adapt quickly and provide the best services possible.


2. Resist proxies

  • Many businesses rely on [4] proxy data (e.g. customer surveys, market research, etc.) as their primary means of understanding customers.
  • However, Amazon collects and analyzes raw data from its own customers, giving the company an accurate view of itself.


3. Embrace external trends

  • Artificial intelligence and machine learning (like Alexa) are two tech trends that allow humans to interact with data in a conversational way. Bezos seeks to offer a greater product using such advances.
  • Amazon must be aware of external trends and hop on board to develop products that people want to buy (e.g. Amazon Echo, Amazon Go).


4. High-velocity decision making

  • When making decisions, it is wiser to make a fast decision using 70% of the available information, rather than a slowly executed one using 100% of the information.
  • Even if there are clashing opinions, trust that all members of your team have good intentions and values you can trust. Democratizing the decision-making process may leak precious time that could otherwise be used to make a greater impact on the company.
  • Rely on your supervisors to mediate divisive arguments. Elongating discussions unnecessarily again wastes time.


V. Closing remarks

Jeff Bezos has grown Amazon by emphasizing its customers, the need to be up-to-date on tech trends, and efficient decision-making.

How will Amazon influence customers’ lives in the future?
Has Amazon earned a rightful place alongside Google, Apple, Microsoft and SpaceX?
What kind of businessman will Bezos be remembered as?
In the early 2000s, South Korea had a flourishing group of online retail companies (e.g. Interpark, CJ Shopping Mall, etc.) Why haven’t these been as successful as foreign retailers like Amazon?



Please discuss Amazon with your Ringle Tutor and take the time to work on your spoken English.

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