Book lover's market

The Everything Store: Jeff Bezos and the Age of Amazon, by Brad Stone

THERE are many good reasons for reading this 350-page book.

I feel sure that every book lover loves Amazon. It gives access to books effortlessly, swiftly, and inexpensively. Knowing more about a company that has added to the pleasure of reading is reason enough.

However, there are two other compelling reasons. The book is the first comprehensive record of this gigantic entrepreneurial effort.

It describes the trials and the complexity of fulfilling a compelling vision for the future of retailing. It is probably a fair account of the man behind this astonishing achievement – his genius, determination and many personality flaws. I have no interest in business people’s personal lives, so it is pleasing that only the scantest attention is given to this, and then only to make points relevant to Amazon.   

Today Amazon is a listed company with a market capitalization of $169bn. It has helped spawn a multi-billion-dollar-a-year industry now called “affiliate marketing” where other companies refer customers to Amazon and earn a commission. Amazon made e-readers the must-have accessory of the reading public.

In South Africa, Amazon is probably best known for being a bookseller, but it also sells goods ranging from jewellery to clothing and electronics and well, everything. That is Bezos’ intention, to be the “everything store” of the book’s title.

It would be misleading to describe what Amazon is today, as the fulfilment of Bezos’ vision. No entrepreneurial success is the fulfilment of the founder’s business plan. Businesses mutate and evolve in contexts that mutate and evolve.

The initial strategic thrust of the business was to get big fast. While obviously correct if you wish to capture a retail market with price as a differentiator, but this does place enormous strain on the operations components.

To get a sense of the scale of the problem, consider what it takes to receive orders in quantities of one, of products from different categories (books, clothes, electronics, kitchen utensils, toys, etc.) and box and ship them in 24 hours. Keep in mind as you are considering this problem, that your volumes are in millions of items shipped daily, not tens.

Involved in this process is warehousing, picking, packing, and shipping, and of course, monitoring. The cost of this effort is what led even generously funded companies like Webvan and Drugstore.com to go off the cliff. If the investing public had not been inexplicably committed to Amazon that would have been their fate, too.

When Barnes and Noble, the bookselling giant went into online retailing, Bezos famously (and typically) told his staff: “You should wake up worried, terrified each morning. But don’t be worried about our competitors because they are not going to send us money anyway. Let’s be worried about our customers and stay heads- down focused.”

This focus on customers is genuine. There have been many decision points at which the more prudent choice would have been to favour the suppliers or the company itself. At each point, Bezos opted to favour the customer.

To assist buyers in choosing wares, Amazon has always encouraged customer review. Imagine a publisher’s response when the books supplied are slated by readers, and these reports are posted for all to see!

Most businesses do not offend their suppliers especially when stock is not available from alternatives. (Ever read a bad review of a restaurant in restaurant guide that's funded by the restaurants?) Amazon came down on the side of the customer and chose to allow negative reviews so customers would not make poor purchasing choices. Amazon also refused to give exclusivities to suppliers because that would limit customer’s choice.

Most of the book is a chronicle of the excruciating process of building what has never been built before, an online Walmart with the customer service of a very high-end department store. Many aspects of what has made Walmart the world’s largest retailer, have been adopted by Bezos for Amazon.

A great admirer of Sam Walton, Bezos insisted on a version of Walmart’s “everyday low prices”. He also adopted Walmart’s obsession with frugality in everything the business did.

Despite having large amounts of cash at critical times, all development in Amazon was underfunded. Staff working over the punishingly difficult Christmas period we put up in hotels, sharing rooms. The company has never paid staff generously and with constant doubts about whether the company would last, the poor salaries could not be augmented with share options that excite.   

Bezos was always very clear about what he wanted to achieve. His extraordinary intelligence (he was sent to a school for the every gifted as a child,) made him a formidable leader. He grasped the intricacies of specialist technologies with frightening speed and tore through flawed arguments with no reserve. The problem, some of his executives report, was that he was, almost always, right!

Bezos fits into the class of CEO’s populated by Steve Jobs, Bill Gates and Andy Grove – all remarkable men with explosive tempers. Screaming at underperformers and insulting the producers of “B-grade” plans was almost their hallmark.

This book does not gloss over the cost of such poor executive behaviour. Many first rate executives left for no other reason than that they could not or did not wish to put up with this abuse. The cost to Amazon is inestimable. There are countless examples of men and women who have grown superb multi-billion dollar businesses without this type bad behaviour.  

Building a huge company in a mature industry, retailing, against strong competition is a mammoth task. To do it well so the business will last and fulfil the aspirations of the missionary leader is a feat few have ever achieved.

This is a remarkable story of an extraordinary company, and its equally exceptional visionary leader. It is an inspiring book in a profound way that holds lessons for all business leaders. 

- Fin24

* Ian Mann of Gateways consults internationally on leadership and strategy.