Amazon.com Chief Plunges Ahead Despite Turbulent Waters
Heading into its sixth holiday season, Amazon.com has found itself facing some of the greatest challenges of its short but illustrious life.
The company always has been a poster child of Internet commerce--and it still is. But along with all the usual accolades this year has come an unfamiliar din of complaints.
Analysts and investors have yelped over the company’s continuing losses--expected to total about $700 million for the year. They also have questioned Amazon’s strategy of branching out from books and music into an array of other products, such as stereos, computer peripherals, lawn and patio equipment, power tools and even cars.
Adding to its troubles, Amazon has faced increasing competition from traditional bricks-and-mortar retailers, and more recently, a move by unions to organize the company’s workers.
Over the last year, Amazon’s stock has been on a steady downward spiral, dropping from a high of $113 last December to a low of $19.38 in October. Its stock closed at $24.63 Friday.
As part of Amazon’s strategy to become the Internet’s dominant retailer, it launched yet another new product line in November--this time, cellular telephones and service.
At an interview last week in an office high above Seattle with views of Puget Sound, the Olympic Mountains and the Cascades, Amazon Chief Executive Jeff Bezos was his usual upbeat self.
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Question: Is the new competition this year from big operators such as Wal-Mart and Sears causing problems for Amazon?
Answer: I think our big advantage for customers is that we have done this for six years now. We are getting good at it. Why is Michael Jordan good at basketball? Because he practiced a lot. Well, we have done a lot of practicing. We focus on what customers want and listen to them.
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Q: Are you worried that consumer confidence seems to be on the wane?
A: One of the things to note here is that confidence in Amazon.com from repeat customers is actually very high. In fact, a study released [in November] shows we have a customer satisfaction rating of 84. No service company in any industry has ever had a satisfaction rating that high. I think that we are bucking the trend.
If we stay heads-down focused on customer service and don’t allow ourselves to get distracted by any of the other factors, that is the right strategy.
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Q: Are you confident you will be able to satisfy the demand of your customers this holiday season?
A: Definitely. That’s what we do. And we have done it. Every year has been hard, every year has been bigger than the previous year. We’ve never let customers down, and we are not about to start. That’s job one at Amazon.com.
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Q: What kind of revenue do you expect from this holiday season?
A: We haven’t made any announcements about that. What we have told people is that we don’t give mid-quarter guidance. In our conference call, we said that we expected $950 million to $1.05 billion--and that would be roughly 40% more than last year.
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Q: How much longer until the company is profitable?
A: Books are already profitable. Our other stores, like tools and electronics, will follow in time. We do not disclose what our target date is for companywide profitability.
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Q: How much attention do you pay to Amazon’s stock price?
A: We are very focused on building shareholder value, but we are long-term focused in that way. The thing we like to do is focus specifically on customers and on our belief that in the long term the stock price will take care of itself.
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Q: Do you worry on a day like today [Tuesday] when the stock is down 7%?
A: No. If you have followed Amazon.com for some time, this is a very common occurrence. Stocks that can go up by a factor of 20 in three years can also go down 7% or more in a day. We have lots of days where the stock is up a lot and lots of days where the stock is down a lot. Our stock is so volatile that to follow it on a short-term basis would just be confusing.
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Q: What do you think about the way that analysts seem to go back and forth all the time on rating Amazon.com?
A: I think that is part and parcel of being a pioneering company. You are doing something new; hopefully you’ll have lots of supporters--and we are very grateful because we always have--but you also have lots of critics. That’s unavoidable. The thing that makes me incredibly happy is that people never criticize our customer service, and that’s the thing we are really focused on.
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Q: Was the wireless store launched for the holidays?
A: We launch things when they are ready. If it had been ready earlier, we’d have launched it earlier. If it had been ready later, we’d have launched it later. But it is nice to launch it in the middle of the holiday season, because these are great gifts.
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Q: What’s the difference between what you are offering and what others offer?
A: On Amazon.com, you can find out in your community--we already know your ZIP Code, or you can enter your ZIP Code--how a particular service plan, how a particular wireless carrier works in that area and what they offer. That’s particularly important to people, and that’s a feature that has never been available before. Not only do we have a large selection of phones and service plans, we also have a large selection of batteries and faceplates. We even have glow-in-the-dark faceplates.
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Q: How much of your growth is going to be driven by opening new stores like this, and how much by encouraging more people to shop online?
A: We have two different growth initiatives. One is called Current Customers, the other, Go Global. Outside the U.S., we see the majority of our growth coming from new customers. Inside the U.S., where we already have 21 million customers, we expect most of the growth, or at least a large part of it, to come from existing customers shopping in new categories with us.
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Q: Are you looking at a similar rate of growth for new categories in the coming year?
A: We’ll have to wait and see. That is certainly what we would hope for.
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Q: How intertwined are the stores under the Amazon umbrella? Could they be split off if one of the businesses failed?
A: They are actually quite intertwined. One of the things we do, as you see with our wireless launch today, is my ZIP Code pops up on the screen because it is already on file. The whole is greater than the sum of the parts. We believe that we can launch new categories at very little incremental cost. It makes a lot of sense to launch those categories, even if they build slowly. We are happy to let them build slowly.
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Q: Tell me about the efforts to unionize the workers at Amazon.
A: We think that unions serve a role in society, but we don’t think unions at Amazon.com would benefit the customers or the company. And we don’t think they’d benefit the employees. It is true that we have mandatory overtime. It’s unfortunately one of the essential aspects of our business that during this particular season, with customers doing a lot of shopping, that we do have to take care of those customers. But, I’ll tell you, the vast majority of people at Amazon.com really want to take care of those people.
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Q: Are you confident that the union drive will fail?
A: I certainly believe that a union would not help employees. The employees who come here, one of the things they want is to make people happy. There is no trade-off there, no reason we can’t have happy people and make the customers happy.
