"The Everything Store"
2024 Reading List: Book 2 of 50 complete. 48 to go.
“The Everything Store: Jeff Bezos and the Age of Amazon” by Brad Stone
I categorized this book as a study on “Value Delivery” — one of The Five Functions of Business.
Let's talk about what that means before diving in.
If “Value Creation” is precisely what the customer pays for, then “Value Delivery” is how the business ensures the customer effectively (and hopefully, efficiently) receives the created value.
And now the book...
Of my 167 highlights, here are my top 17 highlights and takeaways.
“…we don’t make money when we sell things. We make money when we help customers make purchase decisions.”
This is a necessary distinction. As we think about the function of selling, we must consider its root purpose, which is to help customers make purchase decisions. Keyword: help.
“Amazon found that customers were reluctant to go through the extra effort of evaluating books. So Bezos suggested that the personalization team develop a much simpler system, one that made recommendations based on books that customers had already bought.”
Reduce the friction. Make it easier.
“Bezos recalled speaking at an all-hands meeting called to address the assault by Barnes & Noble. “Look, you should wake up worried, terrified every morning,” he told his employees. “But don’t be worried about our competitors because they’re never going to send us any money anyway. Let’s be worried about our customers and stay heads-down focused.”
This is just an important reminder not to let lawsuits, shareholders, resource management, etc., distract us from creating and delivering value for the people the business was built to serve in the first place.
“Bezos, Breier says, did not seem overly concerned with the depressing math behind America’s literary interests. He told Breier to organize the new Harvard Business School graduates into a “SWAT team” to research categories of products that had high SKUs (the number of potentially stockable items), were underrepresented in physical stores, and could easily be sent through the mail. This was a key part of Amazon’s early strategy: maximizing the Internet’s ability to provide a superior selection of products as compared to those available at traditional retail stores.”
Excellent “value delivery” examines the following question: “How do we get the value (the solution to their problem) to them more efficiently?”
“Jeff Bezos embodied the qualities Sam Walton wrote about. He was constitutionally unwilling to watch Amazon succumb to any kind of institutional torpor, and he generated a nonstop flood of ideas on how to improve the experience of the website, make it more compelling for customers, and keep it one step ahead of rivals.
By reducing the friction of online buying even marginally, Amazon could reap additional millions in revenue while simultaneously digging a protective moat around its business and hobbling its rivals.”
Improve the experience. Make it more compelling. Keep it one step ahead of rivals. Reduce the friction. None of this activity is “what the customer pays for.” It plainly simplifies the customer’s journey in receiving the value they’re in search of.
“Bezos made a big show of keeping one chair open at the conference-room table, “for the customer,” he explained.”
Everything that’s being done inside of a business is for the customer. By definition, retailers (Amazon’s storefront, Walmart, etc.) don’t originally (at first) create value. They simply deliver it. So many businesses accomplish the feat of creating value without spending any significant resources on the consideration of its deliverability.
“The new strategy would result in years of tension between various divisions, between Amazon and its suppliers, and between industry trade groups and the company. Bezos didn’t care about any of that, as long as it offered more choices to customers and, in the process, gave Amazon a greater selection of products. With a single brilliant and nonintuitive strategic move, he managed to upset almost everybody, even his own colleagues. “As usual,” says Mark Britto, “it was Jeff against the world.””
Consider this question: what would our businesses do differently if we were pure about what was in the best interest of the customer?
“Scott also talked about how Walmart viewed advertising and pricing as two ends on the same spectrum. “We spend only forty basis points on marketing. Go look at our shareholder statement,” he said. “Most of that goes to newspapers to inform people about what is in our stores. The rest of our marketing dollars we pour into reducing prices. Our marketing strategy is our pricing strategy, which is everyday low pricing.”
I really appreciate this. “Our marketing strategy is our pricing strategy.” There’s a lot of talk about avoiding “the race to the bottom.” I think there’s wisdom in that — especially if you’re in the “value creation” game. But if we focus purely on delivery, then “everyday low pricing” is a heck of an effective strategy.
领英推荐
“Sinegal explained the Costco model to Bezos: it was all about customer loyalty. There are some four thousand products in the average Costco warehouse, including limited-quantity seasonal or trendy products called treasure-hunt items that are spread out around the building. Though the selection of products in individual categories is limited, there are copious quantities of everything there—and it is all dirt cheap. Costco buys in bulk and marks up everything at a standard, across-the-board 14 percent, even when it could charge more. It doesn’t advertise at all, and earns most of its gross profit from the annual membership fees.”
“My approach has always been that value trumps everything,” Sinegal continued. “The reason people are prepared to come to our strange places to shop is that we have value. We deliver on that value constantly.”
Costco is so wildly successful, in part, because of how simple they have made the delivery of value to the customer.
“Bezos felt that word of mouth could deliver customers to Amazon. He wanted to funnel the saved marketing dollars into improving the customer experience and accelerating the flywheel. And as it happened, at the time, Amazon was conducting an experiment that was actually working this way—free shipping.”
If we’re going to invest money into the system, why not invest it in such a way that benefits and rewards the customer?
“Bezos wanted the Amazon website to be able to tell customers precisely when their packages would be delivered.”
Why? Because it is what the customer would want. If we were customers, it would be what we would want. Oftentimes, inside our own businesses, this gut check would suffice—if we were in the customer’s shoes, would it help us or hinder us?
“Bezos was going on gut and experience. He knew that Super Saver Shipping had changed customers’ behavior, motivating them to place bigger orders and shop in new categories. He also knew from 1-Click ordering that when friction was removed from online shopping, customers spent more. That accelerated the company’s fabled flywheel—the virtuous cycle. When customers spent more, Amazon’s volumes increased, so it could lower shipping costs and negotiate new deals with vendors. That saved the company money, which would help pay for Prime and lead back to lower prices.”
This quote alone is a masterclass on value delivery—and how, when perfected, it operates in the best interest of the customer (first) and the business (second).
“Hsieh was obsessed with the customer experience. Zappos promised free five-to seven-day delivery on orders and aimed to surprise customers with two-day delivery in most major urban areas. The website’s users could return items at no charge for up to a year after their purchases, allowing a customer to order four pair of shoes, try them all on, and return three of them. Hsieh encouraged his call-center representatives to spend as much time as necessary talking to customers to solve their problems.”
There are a couple of stories about Zappos and their examples in this book. They shared similar philosophies with Bezos and Amazon about aiming to serve the customer in the way that would be most helpful for effectively delivering value.
“Bezos sees it as his company’s mission to drive inefficiencies out of the supply chain and deliver the lowest possible price to its customers.”
Boom. What more could be said? Supply chains bloat over time. Amazon has done a reckoning of a job at operating in the customer’s best interest and challenging industries to do work differently. You have to be able to compete. Or else you’ll be kicked out of the competition.
““We know it’s in the customer’s best interest that we have a cost structure that allows us to match competitors and be known for low prices,” says Jeff Wilke. “That’s our objective.” Wilke acknowledges that not everyone is happy with this approach but says Amazon is consistent about it and that manufacturers should understand that it is the nature of the Internet itself—not just Amazon—that allows customers to easily find the lowest price. “If vendors or brands leave Amazon, they will eventually come back,” Wilke predicts, because “customers trust Amazon to be great providers of information and customer reviews about a vast selection of products. If you have customers ready to buy, and if you have a chance to tell them about your product, what brand ultimately doesn’t want that?””
This quote was super well summarized. Often, “lowered or discount pricing” felt to manufacturers like their products were being cheapened and their brand was being ruined. Maybe. But also… “if you have customers ready to buy, and if you have a chance to tell them about your product” — take it. This is where wholesalers forget who their customers are. They sell “wholesale” to retailers. There are laws protecting wholesalers, but at the end of the day, retailers principally need to operate in such a way to close the deal with the end consumer.
“Yet random customer anecdotes, the opposite of cold, hard data, also carry tremendous weight and can change Amazon policy. If one customer has a bad experience, Bezos often assumes it reflects a larger problem and escalates the resolution of the matter inside his company with a question mark. Many Amazon employees are all too familiar with these fire drills and find them disruptive. “Why are entire teams required to drop everything on a dime to respond to a question mark escalation?” an employee once asked at one of the company’s all-hands meetings, which by 2011 were being held in Seattle’s KeyArena, a basketball coliseum with more than seventeen thousand seats. “Every anecdote from a customer matters,” Jeff Wilke answered. “We research each of them because they tell us something about our metrics and processes. It’s an audit that is done for us by our customers. We treat them as precious sources of information.””
Move with the metrics. But don’t forget that not everything is measured. Solve people’s problems. Help the one—and then scale. Scaling “first” puts new customer interactions at risk.
“Bezos’s goal is and always has been to take all the inconvenience out of online shopping and deliver products and services to customers in the most efficient manner possible.”
Reduce the friction. Reduce the friction. Reduce the friction. I love that instead of spending dollars on Marketing, they spent it on increasing their operational effectiveness and efficiencies, directly impacting the customer’s experience.
My review?
Here's my scale:
As this book relates to The Five Functions of Business, I give it a 3 out of 5.
If you know anything about Amazon's lore, this book might serve as a more detailed review of their principles and practices.
It definitely touches on each of the five functions.
And obviously, Amazon continuously offers a masterclass on customer experience and value delivery.
Helping sales teams with customized insights and analysis for those who plan, buy, or sell media.
1 年#linkedinbookclub check this out ??????. Great work Zack Estes ????????