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the Software View: Amazon.com, a river runs through it (Part VI)
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Gentle readers, Bezos spends hours at a time thinking about the future: trawling for ideas, exploring his company's own site, sometimes just surfing the World Wide Web, particularly on Mondays and Thursdays, which he tries to keep unscheduled. "I catch up on electronic mail, I wander around and talk with people, or I set up my own meetings - ones that are not part of the regular calendar." His surfing is not always confined to retail. He also gathers new ideas from other wanderers from the company. Like an investor checking his portfolio, every three months Bezos sits down with his assistant to examine and analyze his calendar for the quarter just past. He wants to know, among other things, how much time he has devoted to each of the dozen or so categories to which his assistant has assigned every meeting, telephone call, or trip. (The categories include standard ones like recruiting, as well as one-time items like the launch plans for Amazon.com's United Kingdom and German sites.)
Here is a story that will impart a bit of insight into Bezos's persona. One night, during a game of "Capture the Flag" with laser-tag guns and vests, the entire Bezos clan raced around in the dark zapping each other. But Bezos stacked the deck in his favor. He possessed a pair of night-vision goggles. "Do not assume," says Bezos, "that you are supposed to have a level playing field when you are marching into battle."
Bezos once again enumerates Amazon.com's unlimited upside and its not insignificant advantages over the bricks-and-mortar, physical stores - small, centralized inventory, low-cost warehouse space, one-to-one knowledge of consumer preferences. "There is no comparison between the two different business models," he says gleefully. "On-line electronic commerce is so much cheaper." The innovative, pioneering quality of his business model is as much an aspect of his personality as the personality of Amazon.com. "You can not," he says, "make a business case that you should be who you are not. One of the things that I hope will distinguish Amazon.com is that we continue to be a company that defies easy analogy," he goes on. "This requires a lot of innovation, and innovation requires a lot of random walking" - that is, spontaneous, open-ended searching. "There is a strong case to be made for being a copier. It is just not as satisfying, or as fun!" Rule number one on how to succeed in business, from the new master of the game."
On December 16, 1998, a CIBC Oppenheimer stock market analyst by the name of Henry Blodget made an amazing announcement: He was raising his target price on Amazon.com from $150 per share to $400 per share. It captured the market's attention. That day, an astounding seventeen million shares of Amazon.com changed hands. By the time the market closed on December 16, the value of Amazon.com had increased by twenty percent, to $15 billion, and Amazon.com's founder, Bezos, was worth north of $5.7 billion, $914 million more than he had been twenty-four hours earlier. Amazon.com, an upstart with sales revenues per year of $607 million and losses that grow bigger every year, was then worth seven times more than Barnes & Noble Incorporated, a chain of 1,000 book stores with sales of $3 billion. The book business is all about cannibalization. And Bezos knows how to cannibalize. Early on, on-line sales were thought to be incremental. But now the industry data suggest that on-line sales are coming at the expense of someone else's market share. Right now, that someone else appears to be Barnes & Noble. The title of the top-selling book at Amazon.com for the year of 1998 is A Man in Full, by author Tom Wolfe.
Indeed, in nearly the blink of a cursor, Amazon.com has blossomed into cyberspace's biggest consumer merchant. In the month of June of the year of 1999, Amazon.com had ten million registered customers (sixty-four percent of them are repeat buyers), sold seventy-five percent of all books ordered on-line, and $607 million in sales revenues for the year of 1998. The company is on track for more than $1 billion in annual sales revenue this year. No wonder investors are ga ga. "We want Amazon.com to be the right store for you as an individual," says Bezos. "If we have 10 million customers, we should have 10 million different stores."
"There are plenty of opportunities to stumble and become a Visi-Calc," he says of the pioneering spreadsheet that is now all but forgotten. Bezos is acutely aware of Amazon.com's place in history. He always carries a camera in his pocket, snapping a photo per day with his Canon Elph camera to provide a reminder years from now of what really happened - though it seems highly unlikely that anybody will ever forget.
Bezos has said, "We are in this for the long-term. We are not trying to build short-term value. We are trying to build an ongoing, important enterprise that is a world-wide franchise. Unless we execute extremely well, there are plenty of opportunities for us to fail, plenty of opportunities for us to be an interesting footnote in the history of electronic commerce instead of an important, valuable, and lasting company, and if that happens, we will have no one to blame but ourselves."
Sincerely,
Mark Kuharich
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