How Amazon Happened: A Book Review
By Mike Thornton
The Everything Store: Jeff Bezos and the Age of Amazon
Little Brown &
New York, NY
Amazon has 400 million customers in all parts of the world and sells clothes, appliances, groceries, and jewelery to customers, and industrial products to the wholesale market. They publish books, produce music and video entertainment and established a new service benchmark of “next day” delivery as an expectation for millions of consumers. It is also a technology company that is mentioned in the same breath a Apple, Google, and eBay. When we consider the spectrum of products and business practices that make up Amazon today, it is diffcult to recall that the company started in April 1995 as an online seller of books with some effective, but not exceptional, technology, no inventory and limited warehousing and shipping capabilty.
The journey from then to now, of Amazon and its driven and brilliant leader, Jeff Bezos, is the stroy that Brad Stone relates in his book “The Everything Store: Jeff Bezos and the Age of Amazon.”
The idea for what we now know as Amazon came to Bezos when he was a manager at D.E. Shaw & Co., known to employees as DESCO, a Wall Street hedge fund that relied on quantitative analysis to “exploit anomalous patterns in global financial markets.” Bezos, who graduated from Princeton in 1986, had spent 7 years on Wall Street impressing everyone he met before he joined D.E. Shaw & Co.. Bezos was a natural leader and took on several high profile projects for DESCO’s founder and namesale David E. Shaw. Shaw tapped Bezos to lead DESCO’s internet efforts just when its potential was starting to be understood.
Among the ideas that came out of the collaboratin between Shaw and Bezos was an advertising-supported email service – the idea behind Gmail and Yahoo Mail – and a financial service that allowed internet users to buy and sell stocks online – a precursor to companies like E-Trade. Both of these ideas were spun up into companies that were later sold. Another idea that the two discussed was called “the everything store”. This store was seen as an online intermediary between customers and manufacturers and sold nearly every type of product.
It soom became apparent to Bezos that he could not start “the everything store” right away. He set out to reseach the category that could have the greatest impact and settled on books. After some serious conversations with David Shaw, Bezos left his very good job at DESCO and set off across country to Seattle to start on online bookseller out of his garage. When he settled on a name he chose Amazon after the world’s largest river. At first they set up an internet storefront and filled orders from existing book wholesalers. The Amazon web site went live on July 16, 1995.
Much of the history that Stone provides is filled with details of how the new company overcame operational challenges of shipping books, then e-books, then one category after another. Amazon went from a distribution network that offered one product category, books, to one that shipped millions of porducts. If you like this sort of thing, as I do, you will find this aspect of the company history of particular interest.
Another impact that Amazon had was the inevitable conflicts with the existing companes in the market, brick and mortor bookstores. If Amazon did not disrupt these companies, then some other internet company would have. The demise of many of these bookstores is a cautionary tale about the march of technology and the disruptive declie that it brings with it.
The conflict with book publishers, that continues today, is also instructive. When Amazon entered the e-book distribution business, traditional book publishers failed to establish retail prices in their first contract and were blindsided when Amazon sold them at bargin bin prices upon initial release. This is not an impact of technology, but rather a failure to negotiate a contract.
Along the way, Amazon has become known as a very tough player who often shades the rules for its own benefit. Stone recounts how Amazon disregarded pricing agreements with suppliers and was willing to lose money on every sale in order to gain market share when they entered the market for the home delivery of diapers.
Stone does not gloss over Amazon’s darker side, most notably that it is not a pleasant place to work. The internal cultural is confrontational and the company consistently records high turnover in the executive ranks. Complaints from hourly workers in the fulfillment centers, most notably about the lack of air conditioning, have garned unfavorable publicity, but these complaints are most often quickly addressed. What does not rise to the level of a formal complaint, however, is the relentless reliance on metrices and the number of former hourly employees who publicly state that they are glad they have left.
Above all, the picture that emerges from Stone’s book is of a company that is a reflection of its founder, Jeff Bezos. His vision, intellect and drive have taken Amazon far from its starting point and made it into a formidable retailer, publisher of books, and producer of video entertainment, wholesaler and device manufacturer. Few doubt that he will stop now. This raises the question, what will happen if Bezos runs out of good iders or more likely, what will Amazon be without Bezos?
Mike Thornton is a Solution Manager with SAP’s Wholesale Distribution Industry Business Unit. He lives and works in Chicago.
Mike Thornton is a Solution Manager for Wholesale Distribution at SAP. He lives and works in Chicago.