Amazon (AMZN) is known for selling nearly everything, from electronics to disinfecting wipes, but of course the e-commerce giant started out selling only books when it launched in 1994.
In a fireside chat last week at The Economic Club of Washington D.C., Amazon’s chief executive explained the original business plan for the company focused entirely on selling books online — an idea that occurred to Bezos in 1994 after calculating the nascent internet was rapidly growing at roughly 2,300% a year.
“I looked at that and was like, I should come up with a business idea on the internet and let the internet grow around this,” Bezos recalled. “And so I made a list of products and started force-ranking them, and I picked books, because books are super-unusual in one respect, which is there are more items in the book category than there are items in any other category,” Bezos recalled. “There are 3 million different books active and in print around the world at any given time. So, the founding idea of Amazon was to build a universal selection of books.”
Emailing 1,000 customers
But after the company also began selling music and electronics in the late 1990s, Bezos turned to Amazon customers to figure out how he could further expand the business.
“I emailed 1,000 randomly selected customers, and asked them, ‘besides the things we sell today, what would you like to see us sell?’” Bezos recalled. “And that answer came back incredibly long-tailed. Basically, the way they answered the question was whatever they were looking for at that moment. One of the answers was, ‘I wish you sold windshield wiper blades, because I really need windshield wiper blades.’ And I thought to myself, we can sell anything this way! And then we launched electronics and toys and many other categories over time.”
The rest is history for Amazon, which now sells a wide array of items from third-party merchants, not to mention Amazon itself. During the company’s second quarter, online store sales generated $27.2 billion, with nearly $9.7 billion generated from third-party sellers. Put another way: Amazon has “built $840 billion of wealth for other people” over the last 21 years, Bezos added.
Those kinds of figures, as well as Amazon’s aggressive and successful push into areas such as cloud computing and advertising, have helped catapult Amazon into the stratosphere. The Seattle tech giant’s market cap crossed $1 trillion in early September, making it the second U.S. company to do so after Apple (AAPL) accomplished a similar feat in August.
A bumpy few months
Still, Amazon, like other tech giants, has had a bumpy few months. Amazon stock dipped over 3% on Monday following a Wall Street Journal report claiming employees accepted bribes in exchange for confidential information, bringing the company’s market cap down to almost $931 billion. However, Bezos has cautioned employees in the past not to worry too much about fluctuations in the company’s stock.
“At almost every all-hands meeting, I say, ‘Look, when the stock is up 30% in a month, don’t feel 30% smarter, because when the stock is down 30% in a month, it’s not going to feel so good to feel 30% dumber,” Bezos explained.
Instead, Amazon’s chief executive has his sights set on future quarters.
“None of the people who report to me should really be focused on the current quarter,” Bezos explained. “Sometimes, we’ll have a really good quarterly conference call or something, and Wall Street will like our quarterly results. People will stop me and say, congratulations on your quarter, and I say, ‘Thank you.’ But what I’m really thinking is, that quarter was baked three years ago. Right now, I’m working on a quarter that’s going to reveal itself in 2021 sometime. And that’s what you need to be doing: you need to be looking to two to three years in advance.”
Last week’s surprisingly frank discussion additionally covered a wide range of topics. The 54-year-old Amazon chief executive also reflected on his stepfather, a Cuban immigrant, and his mother, who had Bezos in Albuquerque, New Mexico, when she was 17 years old. He spoke of the virtues of getting eight hours of sleep each night, which enable him to make “a small number of high-quality decisions.” He also acknowledged that big businesses like his should be scrutinized.
Bezos even disclosed Amazon would reveal the location of HQ2, the company’s second headquarters, by the end of 2018 — a long-awaited announcement expected to heavily impact the chosen city’s local residents, labor, and housing.
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