Amazing Amazon

Fortune writes about how times have changed for Amazon:

While most of American business is still sputtering, Amazon’s revenues, at $4 billion, are growing by more than 20% a year. Marketing, inventory, and warehouse operating costs, once so high they made old-fashioned retailers look efficient, are now so low that only Dell’s and very few others’ are better. Amazon’s operating profit margin, at 5% in the all-important fourth quarter, beat that of most retailers, and approached Wal-Mart’s 6%. And Amazon is generating so much cash–$135 million last year, rising to an estimated $300 million this year–that it just paid off 12% of its $2.3 billion debt. At a recent $30, Amazon’s share price is at a two-and-a-half-year high, making it one of the top stocks over the last five years, even taking into account its rise and fall during the bubble. It has outperformed Dell, Cisco, Microsoft, Wal-Mart, and GE, to name a few.

“In the physical world it’s the old saw: location, location, location,” Bezos says. “The three most important things for us are technology, technology, technology.” Amazon spent big on software development, but now its platform requires little additional investment. Thanks largely to its conversions to the free Linux operating system, technology and content expenses are down 20% in the past two years. “There just aren’t other companies that let a consumer order two out of what are millions of products in a warehouse and then quickly and efficiently, at low cost, get those two things into a single box,” Bezos says.

A related story looks at Bezos’ management style:

Hire smart Even for menial jobs, Bezos banks on brains. His fear? Mediocrity multiplies: A students hire A students, C students hire C’s.

Depend on data Good information trumps good judgments. Junior employees learn that with the right numbers they can outshine senior execs.

Make employees owners Stock options may be out of favor but restricted stock is not.

Blunt the boss Allow employees to make decisions without asking permission.

Bet on tech Technology gets cheaper while everything else gets more expensive.

Think long term Bezos ignores the critics and keeps firing away at his initial idea.


Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.