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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."
Visit one of Amazon's six warehouses today, and it becomes quite clear why Bezos believed he would prove Wall Street wrong. They are models of GE-like efficiency. The Fernley, Nev., site sits about 35 miles east of Reno and hundreds of miles from just about anything else. It doesn't look like much at first. Just three million books, CDs, toys, and housewares in a building a quarter-mile long by 200 yards wide. But here's where the Bezos commitment to numbers and technology pays off: The place is completely computerized. Amazon's warehouses are so high tech that they require as many lines of code to run as Amazon's website does. Computers start the process by sending signals to workers' wireless receivers, telling them what items to pick off the shelves; then they crunch everything, from which item gets plucked first to whether the weight is right for sending.
Along the way the computers generate reams of data on everything from misboxed items to chute backup times--and managers are expected to study the information as if it were the Talmud. Bezos typically visits one warehouse for a week in the fourth quarter. For the workers, it's like their wacky uncle dropping in. For executives like Tim Collins, who manages the Fernley warehouse, it's more like a visit from the IRS. Bezos arrives firing a barrage of inquiries about picking algorithms, line speed, and productivity, and doesn't stop asking until he gets answers that satisfy him.
In response, the managers sweat every last drop of productivity out of the warehouses. For example, by redesigning a bottleneck where workers transfer orders arriving in green plastic bins to a conveyor belt that automatically drops them into the appropriate chutes, Amazon has been able to increase the capacity of the Fernley warehouse by 40%. Today, Amazon's warehouses can handle three times the volume they could in 1999, and in the past three years the cost of operating them has fallen from nearly 20% of Amazon's revenues to less than 10% percent. The company doesn't believe it will even have to think about building a new warehouse for another year.
The warehouses are so efficient that Amazon turns over its inventory 20 times a year. Virtually every other retailer is under 15. Indeed, one of the fastest-growing and most profitable parts of Amazon's business today is its use of its warehouses, and sometimes its entire back end, to run the e-commerce business of other retailers, such as Toys "R" Us and Target.
All of this helps explain Bezos's larger point, one he's been making since he started Amazon but that people are only now starting to believe. "In the physical world it's the old saw: location, location, location," he says. "The three most important things for us are technology, technology, technology." Amazon spent big on software development, but now its platform requires little additional investment. Thanks largely to its conversions to the free Linux operating system, technology and content expenses are down 20% in the past two years. "There just aren't other companies that let a consumer order two out of what are millions of products in a warehouse and then quickly and efficiently, at low cost, get those two things into a single box," Bezos says.
Bezos has outfoxed other retailers, too, by welcoming competitors instead of fighting them. Alongside its own wares, Amazon now sells other retailers' products, as well as used items. They are all on the same web page. This sounds suicidal, and when Bezos first proposed the idea in early 2001, that's what most of his staff thought. Amazon was a retailer still in the early stages of developing relationships with suppliers. Now it was going to tell these suppliers that they would be competing on the same page against sellers of new and used items? "He saw eBay as an emerging threat, and he saw this as an opportunity to overtake them," says an ex-Amazonian. "He bet big and put hundreds of his best people on it. But it caused a lot of discomfort." The decision caused such a stir in the book-publishing
Does it come with a VibrATOR?!! BWARRR
simple really
behold the power of amazon.com
RIAA and MPAA and I hate the DMCA and Palladium.
What about my fair use rights?!
Patriot 2 and Micro$haft!
Also, KDE Gnome and WiFi and Ximian desktops.
???
Profit!
I don't need no instructions to know how to rock!!!!
Are you fucking high. What exactly did I fail?
Are you still sharing the gay pr0n with Fyodor?
Bezos 'bet big and put hundreds of his best people on it.'
How can one person honestly work close enough with thousands of people that he knows each and every one of them, and then be able to pick the "best hundreds" out from the total pool. This project may have been a top priority for Amazon but attempting to show how high with a statement like the above proves nothing.
This year, my lawn has been such a priority for me that I have spent 5 times the amount of time and 100 times as money on it then I did last year. This efort has really paid off as this year my lawn and trees are greener, fuller, and look great.
What that really means is:
Last year we did not have any rain so nothing was growing and I did not spend more then 2 hours a month cutting the brown grass. All I had to buy was weed wacker line for $10. This year it has been raining a lot, my lawn is growing about 4 inches a week because of the rain and I have to cut it more often. I also had to spend a $1000 on a tractor because my old POS mower finally died.
Okay, mod as troll... I just thought that original statement was bogus.
Bad boys rape our young girls but Violet gives willingly.