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Mighty Amazon
theodp writes "Fortune reports that the patent-pending practice of selling partners' used and new goods next to Amazon's own was CEO Jeff Bezos' response to the emerging threat of eBay. Seeing an opportunity to overtake the online auctioneer as well as a way to slow the need to add warehouse capacity, Bezos 'bet big and put hundreds of his best people on it.' While Bezos' decision caused a lot of discomfort at the time, including the Authors Guild protest and the subsequent e-mail campaign in Amazon's defense, today almost 20% of the e-tailer's unit volume is sold through others, yielding revenue that is almost pure profit."
Mighty Amazon
Jeff Bezos has been hailed as a visionary and put down as a goofball. He's proved critics wrong by forging a winning management strategy built on brains, guts, and above all, numbers.
FORTUNE
Monday, May 12, 2003
By Fred Vogelstein
"Mr. Bezos, can you hold that bottle of water on your head so I can make sure I'm in focus?" "Mr. Bezos, when you jump, can you spread your arms and legs in the air?" "Mr. Bezos, while you're in the air can you turn your body 90 degrees and land in a sitting position?"
Jeff Bezos is having his picture taken jumping on a giant trampoline, and, remarkably, he looks like a man in his element. Most CEOs wouldn't pose for a photo like this in a million years. Risk life and limb to look undignified? Not a chance. But Bezos, who is 39, embraces the experience with the enthusiasm of a 10-year-old in an arcade. He cracks jokes about his receding hairline, he chats up the photographer about his equipment, he even helps the photo assistants rearrange the shot. "We ought to try this on the vomit comet," he says mid-jump, referring to the plane astronauts use to simulate weightlessness. "That would be really cool." He protests only once, after 30 minutes of jumping, when the water bottle he keeps placing on his head for the photographer springs a leak. "Next time we do this I think I'm going to need a stunt double," he says. When it's all over, he pulls out his own camera and orders everyone onto the trampoline for a group shot.
Anyone who knows Bezos understands that it doesn't take much to get the founder and CEO of Amazon.com to start acting up. In good times and bad, Bezos has always been a man of exaggerated gestures, whether he is dressing up like a four-star chef to promote Amazon's kitchen store, climbing atop a conference table on all fours to signal his interest in a business presentation, or just unleashing his famous braying honk of a laugh. During the Internet bubble his oversized personality made him seem fun and inspiring, and he shrewdly used that to make himself and his company one of the most talked about business stories in a generation. When Amazon's stock price fell and its losses continued to mount, he endured whispers that his behavior made him look clueless.
Today only three questions about Bezos's behavior are relevant: Is he as goofy as Bill Gates? Is he as goofy as Michael Dell? And is he as goofy as the late Sam Walton? Such comparisons would have been laughable when conventional wisdom had Amazon joining the dot-com trash heap. Not anymore. Amazon has started to thrive. While most of American business is still sputtering, Amazon's revenues, at $4 billion, are growing by more than 20% a year. Marketing, inventory, and warehouse operating costs, once so high they made old-fashioned retailers look efficient, are now so low that only Dell's and very few others' are better. Amazon's operating profit margin, at 5% in the all-important fourth quarter, beat that of most retailers, and approached Wal-Mart's 6%. And Amazon is generating so much cash--$135 million last year, rising to an estimated $300 million this year--that it just paid off 12% of its $2.3 billion debt. At a recent $30, Amazon's share price is at a two-and-a-half-year high, making it one of the top stocks over the last five years, even taking into account its rise and fall during the bubble. It has outperformed Dell, Cisco, Microsoft, Wal-Mart, and GE, to name a few.
And while Amazon still hasn't turned a profit yet, it's headed toward profitability so fast that investors have stopped worrying about whether it will ever make money. Now they simply debate how much. Profitability has taken awhile because the company borrowed heavily during the bubble to finance its growth, and interest-related expenses still suck away a lot of what flows to the bottom line. Its relatively new electronics, tools, and kitchen business is losing money too, though at a rapidly shrinking rate. But with costs falling and revenues and operating profit rising each quarter, it's exp
For the whole thing, try here
You linked to the third page of the article, not the first. This is particularly inconvenient because every page in a Fortune article is self-contained and looks identical to all other pages. I ended up reading the article backwards.
I suggest that the correct way to link to an article like this is to link to page one and note that the relevant info is on page three. Here's the correct link.
Insert witty sig here.
An anecdotal comparison: I own an item that's been out of print for quite a while and is rather rare. Being a broke college student, I naturally was looking into selling it. A little searching showed that the item sells on ebay regularly for around $80-100; on amazon (where people go who don't know how to use ebay or are afraid to) it goes for $170-200.
Simple choice, right? Well get this, ebay's fees (in my case) are $0.93 plus 2.75%. Amazon charges $0.99 plus 15%! I really hate paying huge fees when they're doing hardly any work, but the visibility is what they're selling.
Sell on ebay: $90 minus $3.40 fees = $86.60 NET PROFIT
Sell on amazon: $170 minus $26.49 fees = $143.51 NET PROFIT
Would you give up $56.91 purely to avoid supporting an "evil" company and their stupid patents? For most people, it's just not worth it. I hate his guts but Bezos is smart as hell.
Fortune reports that the patent-pending practice of selling partners' used and new goods next to Amazon's own...
No. If you read the Fortune article, or the patent itself, you will see that this is not the case.
The patent covers the specific feature of pre-orders, e.g., allowing buyers to set up requests for used products.
It does not cover the basic idea of selling used goods next to the new. This is hardly patentable, because it does not pass the basic criterium for being patentable - it is not new!
Tor
From personal experience, I've found ordering used stuff from Amazon to go very smoothly. I've had only one bad experience with a seller - I ordered a limited edition of a DVD, and they shipped the regular one... repeated attempts to get them to send me the correct one (even after I had returned the original) ended with them claiming I was supposed to get the normal edition, even when I showed them the email receipt from Amazon.
Then I noticed Amazon's A-to-Z guarantee - All I had to do was provide details of what went wrong and they reversed the charge. It was much, much simpler and quicker than trying to go through Safe Harbor on eBay.
I still like eBay for a lot of stuff (after all, there are a lot of people there and I trust the rating system more...), but Amazon continues to really hold the crown customer service wise.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
An interesting footnote to the "Amazon is kicking ass" coverage in Fortune is that Bezos is selling shares again.
He sold 6 million shares this week. His salary is only about 80,000, but still, it doesn't look great. $6,000,000 is probably just chump change compared to his 2-3 billion bankroll of AMZN shares.
This is not an indication that the sky is falling (AMZN looks like it is ok going forward), and diversification is smart. Nevertheless, he is selling and not buying shares. That is worth something to know.
GF.
Lots of petrified grits
Oxford Books Too (a now gone used book store) in Atlanta had this back in 93/94. You could have them put you on a waiting list for something you were interested in, and when it came in, they called you.
The Fortune article states "With FedEx everyone knew about the mail and airplanes, but no one had put it together". Does the author know anything about how the airline industry was formed in the US? Hint, mail routes, using early aircraft to carry mail... OK, nit picking, but that wasn't really a true statement.
Naw, that isn't how corporations work.
You see as a C-Corporation, profit is pretty much the money you haven't spent on something. When you make profit, you have to give a portion of it, say 20% of it, to the government, which you never get back.
Instead, you can re-invest it into the company, and you have a bigger company that can do bigger things in the future. If you "invest" it into a company jet, you do so with company money and viola, it can be purchased at effectively 25% less (as you didn't have to pay income tax on that profit). And salaries of employeess of the company, such as that of bezos himself, are an expense and do not come out of the profits of a corperation.
Sure the company owns the plane, but you CONTROL the plane, and get all the benefits out of it.
Imagine monopoly, the board game, with the same rules as usual, but every time you hit go you write down how much money you have. If you have more money this time than the last time, you give %20 of the difference to the bank.
See how in that situation, you'd do well to spend that money on things such as improvements on your properties, and buying new properties, rather than to turn a profit?
I recommend the book, Inc and Grow Rich, to learn more about the workings of C-Corperations from a working man's perspective.
Want to see every step I took to start my company? http://www.rowdylabs.com/blogs/pitchtothegods
Yes, that's what happens when you group a lot of stuff into one package for the free shipping...you have to wait for thing to get shuffled around between the amazon warehouses until all your stuff is in one place. The shipping is still as fast as always when it's just one item, and decently fast when it's two items. Three or four can take forever.
It's better to make two orders of $27 than one order of $54, the way things are set up right now for the free shipping.