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The Soon-to-Be Wealthiest Man on the Planet
In the first dot-com boom, Jeff Bezos was just another Wall Street escapee
with a computer science degree who’d become enamored with the promise of
e-commerce. But his vision and maniacal focus would set him head and
shoulders above the rest. For his online shopfront, launched in Seattle in
1994, Bezos chose the name “Amazon” as an indicator of the scale of the
flow of merchandise he envisioned. However, another name he considered
(he still owns the URL) was more appropriate:
relentless.com
.
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When Bezos started Amazon, online shopping couldn’t serve true
gatherers because the limited web technology (lame experience) had the
nuance and detail of a Lada, the Russian auto brand—ugly and
underpowered. Brands are two things: promise and performance. The brand
“internet” during the nineties and into the noughts was half that.
E-commerce in 1995 needed to be prey you recognized easily and could
kill and take back to the cave with little loss of value or risk that you
accidently brought a plant back that would poison the clan. Bezos decided
this animal was … books.
Easy to recognize, kill, and digest. Books stacked in a warehouse, with a
“look inside” preview. The prey has already been killed and stacked up for
you. An industry—book reviewing—emerged to identify what books were
worth eating/reading, bypassing the diligence of curation offered by a store.
Bezos realized reviews could do the hard work of retailing for him. Amazon
could call on the internet’s less lame attributes: selection and distribution. So,
no nuance like well-lit storefronts, a door chime, and friendly salespeople.
Instead, he leased a warehouse near Seattle airport and filled it in a way that
robots could maneuver easily.
In the early days, Amazon focused on books and hunters—people on a
mission, looking for a specific product. As the years passed, broadband began
to offer shades of nuance, and gatherers showed up, willing to browse, weigh
options, and take their time. Bezos knew he could migrate to things people
weren’t used to buying online yet, like CDs and DVDs. Foreshadowing
Amazon’s threat to all things good in our society, Susan Boyle’s CD
I
Dreamed a Dream
set sales records on the platform.
To outrun competitors and reinforce the core value of selection, Amazon
introduced Amazon Marketplace, letting third parties fill in the long tail.
Sellers got access to the world’s largest e-commerce platform and customer
base, and Amazon was able to balloon its offerings without the expense of
additional inventory.
Amazon Marketplace now accounts for $40 billion, or 40 percent, of
Amazon’s sales.
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Sellers, content with the massive customer flow, feel no
compulsion to invest in retail channels of their own. Meanwhile, Amazon
gets the data and can enter any business (begin selling products themselves)
the moment a category becomes attractive. So, Amazon, should it choose, can
begin offering directly
“Old Asian Man Wall Decals,” “Nicolas Cage
Pillowcases,”
and
“55-Gallon Drums of Lube.”
Amazon appeals to our hunter-gatherer instinct to collect more stuff with
minimum effort. We have serious mojo for stuff, as survival went to the
caveman who had the most twigs, had the right rocks to crack stuff open
with, and got the most colorful mud to draw images on walls so his
descendants knew when to plant crops, or what dangerous animals to avoid.
The need for stuff is real: stuff keeps us warm and safe. It allows us to
store and prepare food. It helps us attract mates and care for our offspring.
And easy stuff is the best stuff, because it consumes less energy and gives
you time to do other important things.
Without capital-hungry stores, Bezos could invest in automated
warehouses. Scale is power, and Amazon was able to offer prices no brick-
and-mortar retailer could afford. He offered deals—to loyal customers, to
authors, to delivery companies, to resellers agreeing to run ads on their own
websites. He drew more and more partners to Amazon. Bezos broke out of
the narrow world of books and DVDs and into … everything. This kind of
experimentation and aggression is what the military calls the OODA loop:
“observe, orient, decide, and act.” By acting quickly and decisively, you
force the enemy—in this case, other retailers—to respond to your last
maneuver as you’re entering the next one. In Amazon’s case, this was done
with a ruthless focus on the consumer.
It also helped that, for the better part of Amazon’s first fifteen years in
existence, traditional retail CEOs were apt to remind people that e-commerce
only accounted for 1, 2, 3, 4, 5, 6 … percent of retail. There was never a
concerted effort to respond to the threat until Amazon had enormous fangs
and unlimited capital—it was too late.
Fast-forward to 2016—U.S. retail grew 4 percent, and Amazon Prime grew
40 percent plus.
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,
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The internet is the fastest-growing channel in the largest
economy in the world, and Amazon is capturing the majority of that
growth.
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In the all-important holiday season (November and December
2016), Amazon captured 38 percent of online sales. The next nine largest
online players captured 20 percent combined.
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In 2016, Amazon was
considered America’s most reputable firm.
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