Amazon’s Jeff Bezos: “The cagiest of Internet moguls.”
From a Nicholas Carr review in the Washington Post of the book Bezonomics by Brian Dumaine:
A week later, everything had changed. France was under lockdown, the Carbone dining room was shuttered, and Amazon was facing its biggest challenge since the dot-com crash 20 years ago. Hit by a wave of panic buying, the company was struggling to fill orders, often delaying shipments for days or weeks. Its global supply chains were seizing up. Its workers were staging protests and sickouts over health and safety concerns. . . .(Bezos owns The Washington Post.)
While the pandemic poses difficult problems for Amazon, in the long run the outbreak seems likely to make the company more powerful than ever. Not only is Amazon the world’s largest online retailer; it also operates a growing media-streaming business, a big Internet pharmacy and a burgeoning digital advertising operation. And its lucrative cloud-computing unit, Amazon Web Services, provides data processing support for many other companies’ online operations. As social distancing practices push people to spend even more time on their phones and computers, the company stands to make more money and wield more influence.
Journalist Brian Dumaine’s new book on Amazon, “Bezonomics,” offers an illuminating exploration of the underpinnings of the firm’s success. . . .
He explains the logic behind the company’s Prime loyalty program, which, despite incurring high costs for rapid deliveries, locks customers into Amazon’s “ecosystem” of retail and media offerings. He describes the voice-recognition technology that gives the Alexa chatbot an eerie semblance of consciousness. He explains how Bezos and his lieutenants use artificial-intelligence techniques, such as machine learning, to match supply with demand on a vast scale. And he takes the reader on a tour of Amazon’s huge warehouses, where squads of robots and humans work in tight synchronization to pack millions of cardboard boxes a day. . . .
He attributes the firm’s rapid growth to what he calls its “flywheel” paradigm. By keeping prices as low as possible, he explains, Amazon attracts more customers to its site. That generates ever greater economies of scale, which in turn allow it to cut prices even further. . . .
Amazon’s early success did stem from its pricing advantage, but the source of that advantage is more complicated than Dumaine allows. The company was able to undercut competitors’ prices for many years because, unlike other businesses, it didn’t have to worry about turning a profit. Stock market investors, dazzled by the Amazon story, supplied the company with cheap capital even as it racked up big losses. Many local mom-and-pop stores, struggling to make loan payments and meet the weekly payroll, never stood a chance. Even large, traditional retailers couldn’t afford to match Amazon’s prices. They had expensive stores to maintain, and their investors were not so indulgent.
The advantage provided by abundant capital was magnified by a loophole that allowed Amazon to avoid charging sales taxes on purchases made by customers outside its home state, Washington. One reason Bezos decided to establish Amazon in Seattle, Dumaine reports, was that the company would be able to offer tax-free purchases to buyers in populous, high-tax states like California and New York. That made its low prices feel even lower.
Amazon’s pricing flexibility not only gave it an edge over brick-and-mortar stores; it allowed it to crush small Internet retailers before they could threaten its business. . . .
n recent years, Amazon’s pricing advantage has eroded. As big brick-and-mortar retailers like Walmart have expanded their online offerings, they’ve been able to match Amazon’s discount, and states have passed laws requiring Amazon to collect sales taxes. But Amazon has found another powerful source of competitive advantage: data. As Dumaine reports, thousands of independent retailers sell goods through Amazon’s site, which gives the company privileged access to information about competitors’ products, prices and sales. Amazon claims it doesn’t use that information for its own benefit, but the evidence suggests otherwise. . . .
Amazon is an innovative, well-managed company, but it has also had the good fortune to compete on an uneven playing field that tilts in its favor.
Bezos has always been the cagiest of Internet moguls. He remains an elusive presence in the pages of “Bezonomics.” He’s “a force of nature, moving at warp speed through a vast canvas,” Dumaine writes at one point, tangling himself in cliches. Whatever Bezos is, a force of nature he is not. He is shrewd, calculating and ruthless, and he has built his empire in his own image.
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