Image by: Steve Jurveston
By Michael Sterling
According to its latest earnings report, Amazon’s net income in 2013 was $274 million compared to its sales of $74.45 billion. Though the profit margin was virtually nonexistent, it’s all due to strategy of its founder Jeff Bezos.
Bezos, who is reportedly worth $25 billion, runs the busiest E-Commerce business in the world handling over 300 orders per second. He didn’t get there easily, in fact, the success story is unlike any in history. Along the way, however, he’s picked up a few tricks of trade. Let’s discuss some of them:
Prioritizing Longterm vs. Short Term Value
Despite what you may think, Amazon doesn’t exactly clear that much money. That sounds surprising since we’re talking about one of Wall Street’s most beloved stocks. But Bezos’ strategy has always been to invest the money back into the business, rather than pocketing its profits.
“In the long run, if you take care of customers, that is taking care of investors,” he said in a 60 Minutes interview. He also said that he won’t raise prices even when market analysts tell him to because it “erodes trust.”
There are countless of business owners who’s sole purpose is to drive a profit, which is great, but how you spend money determines the future of your business. Personal gain is always temporary and requires split-making decisions.
But, a long-lasting business requires the courage of one’s convictions (and promises) to investors and consumers. More money requires the necessities you need for creating high quality and fast service – both are the ingredients to loyal customers.
Future Technology Is Where It’s At: 2014 & Beyond
Something that Bezos is known for is bringing the future quickly into the present through technology and gadgets. His latest invention was, at first, thought to be an internet hoax. Turns out, it’s real.
Amazon is investing money in what’s called “Octocopters,” which are basically drones that will one day deliver products to your house in under 30 minutes. Check out the video here.
“These are Octocopters,” Bezos said to 60 Minutes, “These are effectively drones, but there’s no reason they can’t be used as delivery vehicles… I know this looks like science fiction, but it’s not. We can do half-hour deliver and we can carry objects up to five pounds…
These are autonomous. You give them instructions of what GPS coordinates to go to and they take off and fly to those GPS coordinates. They hard part here is putting in all the redundancy, all the reliability, all the systems you need to say, ‘look, this thing can’t land on somebody’s head while they’re walking around their neighborhood.’”
The great thing about technology is that it provides shock value and creates a spectacle. Businesses like Lyft and Uber have also created an incredible interest from consumers simply by implementing data into their product tools. Bezos takes this lesson to new heights and people always pay attention.
Investors Are The Best Wing Men
Amazon barely ekes out a profit, but spends a fortune on expansion and free shipping, and is famously upfront about it. Despite all this, investors continue to flock to the stock, pushing up the company’s share price to $388 – a 400% rise since 2008.
In a letter to his shareholders, Bezos writes “I frequently quote investor Benjamin Graham – ‘In the short run, the market is a voting machine but in the long run, it is a weighing machine.’ We don’t celebrate a 10% increase in the stock price like we celebrate excellent customer experience. We want to be weighed, and we’re always working to build a heavier company”
His strategy inspires shareholders and investors. Why? Because they probably are also his consumers. If your vision is clearly defined and even more clearly seen, investors will no doubt eventually carry the infrastructure of the business’ fiscal responsibilities.
If there’s one thing Amazon can teach us, it’s the idea of no limitations. Anything you need, anything you want can be bought through them. It’s become virtually a one-stop shop for all items a consumer is looking for, and it’s this very idea that’s kept their customer satisfaction to the highest numbers.
“I would define Amazon by our big ideas,” Bezos said to 60 Minutes, “which are: customer centricity – putting the customer at the center of everything we do. And invention – we like to pioneer, we like to explore, we like to go down dark alleys and see what’s on the other side.”
All the money the company puts back is going towards building distribution centers all around the world to achieve their goal of same-day delivery. This, again, is pushing their limitations passed what was. A company with no limits for its customers will also have no limitations on how it grows.