The Everything Store?

Abstract

OVERVIEW: Amazon.com started off only delivering books through the mail. But its visionary founder, Jeff Bezos, wasn't content with being just a bookseller. He wanted Amazon to become what he termed an everything store offering limitless selection and seductive convenience at disruptively low prices. Detailing the inner workings of Amazon, author Brad Stone illustrates in his book entitled The Everything Store the history of the company and, accordingly, what has made it great.-AMAZON'S ORIGINS: Jeff Bezos was 29 years old and working for the Wall Street technology-based hedge fund D.E. Shaw when the newly blossoming internet caught his attention and imagination. As Stone explains, Bezos saw the internet's vast commercialization potential. Early in 1994, he imagined an "everything store", an internet intermediary between consumers and manufacturers. Yet he knew such a proposition was not feasible as a starting point. Researching products that could be distributed online, books emerged as his best initial option, with only two major distributors controlling the supply chains. With his concept set, Bezos left the hedge fund and ventured out on his own to start an online bookstore.-BEZOS' VISION: Bezos moved to Seattle for its low sales tax and abundant technology talent. Computer engineers Stan Kaphan and Paul Davis were their first hires. Bezos funded the start-up with his own money, interest-free loans and $100,000 from his parents. Starting out of his garage, Bezos named the company Amazon after the Earth's largest river. The site went live on July 16 th , 1994. At first, staffers ordered books wholesale from distributors and mailed them to customers, an extremely cumbersome and inefficient process. Every single employee helped pack orders and drive the boxes to UPS or the post office. Nicholas Lovejoy, a part-time worker at the time, suggested assembling orders on packing tables. Bezos declared the idea brilliant, and according to Stone, Amazon still uses packing tables as desks companywide. Another early problem arose from the ordering process from disributors. As Stone writes, "One early challenge was that the book distributors required retailers to order ten books at a time. Amazon didn't yet have that kind of sales volume, and Bezos later enjoyed telling the story of how he got around it. "We found a loophole," he said. "Their systems were programmed in such a way that you didn't have to receive ten books, you only had to order ten books. So we found an obscure book about lichens that they had in their system but was out of stock. We began ordering the one book we wanted and nine copies of the lichen book. They would ship out the book we needed and a note that said, 'Sorry, but we're out of the lichen book.'" By 1996, such creativity helped revenues grow by 30%-40% monthly, with Bezos doggedly pursuing the strategy "get big fast". He sought venture capital and hired seasoned executives who displaced original employees. (Kaphan and Davis both left the company at this time.) With Deutsche Bank as lead underwriter, Bezos and new CFO Joy Covey traveled the US and Europe, pitching an initial public offering (IPO). The retail book chain Barnes & Noble explored a collaboration with Amazon, but instead launched a competing website. In May of 1997, Amazon launched its IPO, raising $54 million and placing the company officially in the public eye.