Jeff Bezos‘ letter to Amazon shareholders

So I used to work for Amazon and now work for a consulting firm focused on e-commerce and other digital businesses.

Having been an Amazonian, and having experienced the culture at this one-of-a-kind firm, and having moved to a role where I advise retailers and manufacturer brands in Western Europe on their e-commerce strategy and operations, I am often amazed by the differences between the Amazon world and all the rest. Let me digress.

In his very first letter to shareholders in 1997, Jeff Bezos already alluded to the fact that the company is in it for the long-haul:

It’s All About the Long Term

We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.

Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise.

At the time, Amazon had just done $150m in revenues by selling books in the United States.

Fast forward to 2018 and the annual report for 2017. Here, Bezos doesn’t even mention the revenue numbers in his letter to shareholders anymore. Amazon did $177 BILLION in revenues in 2017. That works out to 1180 times 1997 revenues. Amazon is now selling everything in retail and makes about $17.5B with Amazon Web Services.

How do you get there?

So many reasons, but two I personally really believe in and have been actively engaged with while working at Amazon are:

  1. Relentless focus on the customer
  2. Continuous improvement

To put it in Jeff B’s words in the current letter to shareholders:

One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’. I see that cycle of improvement happening at a faster rate than ever before. It may be because customers have such easy access to more information than ever before – in only a few seconds and with a couple taps on their phones, customers can read reviews, compare prices from multiple retailers, see whether something’s in stock, find out how fast it will ship or be available for pick-up, and more. These examples are from retail, but I sense that the same customer empowerment phenomenon is happening broadly across everything we do at Amazon and most other industries as well. You cannot rest on your laurels in this world. Customers won’t have it.

So focusing on the customer requires you to always improve and never stand still.

Now go and compare that mindset to your organization. What I find in many is that there is hollow mantra of „customer-centricity“, but the organization doesn’t walk the talk, i.e. there are no real incentives in place to put the customer first and the org does not really put money behind that promise.

Second, what I find is there is hardly a relentless focus on continuous improvement. You will see many companies identify a problem to tackle (i.e.: switch to new e-commerce shop platform).

Once the initiative that „solves“ the problem is accomplished, there seems to be a sense of „we can rest now“.

The problem is, the world is unfortunately moving too fast these days and as Jeff says customers are never satisfied.

For an example of a company who apparently still hasn’t understood the basics of customer experience, look at Wayfair – relatively new to Germany, but doing something around the order of $4B worldwide in revenues:

I ordered two items from them the other day. While delivery speed for the first item was acceptable, it took them an additional 2 days after arrival of the first item to cancel the order for the second. Their explanation was that the item was not in-stock anymore. So it took them a grand total of 5 working days to figure out that an item wasn’t in-stock anymore. (I realize this has to do with their dropship business model, but what do I care as a customer?)

– That was my first order ever with them. Guess, who I will not be considering for furniture in the future?

This confirms my doubts about the viability of business models of many mid-sized, run-of-the-mill retailers in the market these days.

Or as a partner at a private equity firm I was speaking to the other day said:

„Which retailer other than Amazon would you invest in? Who has a chance against Amazon?“




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