Business

Amazon's kingpin

While the critics sneer and his company’s shares plunge, Jeff Bezos digs in and expands his Web tentacles

Jennifer Hunter June 21 1999
Business

Amazon's kingpin

While the critics sneer and his company’s shares plunge, Jeff Bezos digs in and expands his Web tentacles

Jennifer Hunter June 21 1999

Amazon's kingpin

While the critics sneer and his company’s shares plunge, Jeff Bezos digs in and expands his Web tentacles

Business

Jennifer Hunter

The most physically remarkable thing about him is his laugh, a wheezy blend of whoopee cushion and Pavarotti canto, rising deep from the diaphragm and swallowing the whole room. The laugh is so startling and infectious that a homeless man on a Seatde street who once heard it began his own uproarious imitation, not stopping for 10 minutes. That only made Jeff Bezos, founder and chief executive officer of virtual bookseller Amazon.com Inc. bellow even more. Always sensitive to his audience, Bezos uses his laugh as a marketing tool to disarm prickly journalists and charm Wall Street analysts. The sound of merriment is his herald, resonating down the corridors of his Seatde-based headquarters, letting employees know the boss has arrived.

At this point in his young life, Bezos,

35, can afford to be gleeful. Amazon.com, which is only four years old, has become the template for how e-commerce businesses should be run, the putative McDonalds of the Internet, with sales of $892 million in 1998 and more

than 10 million customers worldwide. Last year, Canadians spent $12 million buying from Amazon.com and contributed to the virtual sellers growth as one of the largest bookstores in Canada. “They have blazed a trail for any company trying to create a business on the Internet,” concedes Larry Stevenson, president of Chapters Inc., the Toronto-based national bookseller that is trying to compete with Amazon with its own Web site. William Koty, a University of British Columbia instructor who specializes in e-commerce, says he loves bookstores, “but Amazon provides convenience, a good price and lots of information, including book reviews.”

Lately, though, Amazon has won fewer accolades and faced far more criticism. A couple of colicky columnists from Barron’s magazine have suggested Amazons shares are greatly inflated and disparaged its inability to make money—the company posted a $93.6-million loss for the first quarter of 1999 and has never earned a profit. Barron’s latest article is titled “Amazon.bomb,” and the day after it appeared on May 31, Amazon’s share price fell again. Impa-

tient U.S. investors have begun muscling down Amazon’s stock from a spectacular high of $221.25 (U.S.) per share in April to $105.81 last Friday. (The stock was originally offered to the public in May, 1997, at $18 per share.)

Still, Bezos keeps laughing, a happy billionaire who owns 41 per cent of the firm. “Long term, being a profitable company is extremely important to Amazon,” he told Maclean’s. “But we think it would be shortsighted to optimize for short-term profits. This is a time to be investing in building great customer experience and introducing ourselves to new customers.” In plain English, that means expanding beyond books: offering CDs for sale, setting up an online auction service, buying into a virtual grocery store, investing in drugstore.com and Pets.com. He is trying to make Amazon a brand name, like Coca-Cola. “Our vision is to be the world’s most customer-centric company, where customers can come to find anything they want to buy online,” Bezos explains. Already, 52 per cent of adult Americans know the name Amazon.com, according to a recent study by Opinion Research Corp. International of Princeton, N.J.

Before Bezos, few had considered the expansive possibilities

of selling online. “He’s brilliant,” says Rick Broadhead, coauthor of The 1999 Canadian Internet Handbook and an e-commerce expert. “He had the vision to recognize the enormous potential of the Internet.” In 1994, when Bezos was working as a vice-president for a hedge fund company in Manhattan, he noticed a startling statistic: Web use was growing by 2,300 per cent a year. Bezos began to explore the entrepreneurial possibilities of developing an Internet business. He drew up a list of 20 potential products, including computer software, CDs and books. He determined books were the best bet. “There are three million titles in print around the world and with that many titles you can offer something online that you could never offer in a physical store.”

Much of what happened next has become Internet folklore: how Bezos left his lucrative job, avoiding what he calls “regret minimization” or missed opportunities; how he flew to his parents’ home in Fort Worth, Tex., borrowed his father’s beat-up Chevy Trail Blazer, and with his wife, MacKenzie, drove to Seattle, where software experts were easy to find and near the

Oregon warehouse of the Ingram Book Group, a giant distributor. With $1 million raised from family and friends, Bezos rented a house and set up his business in the garage.

All of this may seem impulsive, the chucking of a promising career and the move across the country, but Bezos relishes the eccentric, labelling himself a nerd and pointing to his atomically powered watch and dog, Kamala (named after a minor Star Trek character) to underline what he calls his “goofiness.” “As a child I was not developed along any of the social dimensions,” he says in his Bezosian jargon, followed by a huge guffaw. He was born in Albuquerque, N.M., but led a peripatetic life growing up in Houston and Miami, due to father Mikes engineering job at Exxon Corp. As a three-yearold, he demanded his mother move him from a crib to a bed. When she refused he tried to dismantle the crib. By 14, he conducted experiments in the family garage, hoping to fashion a vacuum cleaner into a hovercraft. In the summer, he stayed with his maternal grandparents on their Texas ranch, learning how to brand cattle. He went to Princeton University to study theoretical physics, but soon realized it was not his calling and switched to computer science and engineering.

In Seattle, Bezos and his crew of five worked from the garage for a year, figuring out how to source books and setting up the computer system that has made Amazon so easy to navigate. At first, he wanted to call the company Cadabra, as in abracadabra, but when he phoned his Seattle lawyer to test the name, the response made him reconsider: “Cadaver! Why

would you want to call your company that?” So the moniker Amazon, after the worlds second-longest river, was adopted and in July, 1995, the company opened for business. Growth has been stupendous. In September, 1996, Amazon had 100 employees. This year, it has 3,100, including some in Britain at Amazon.co.uk and Germany at Amazon.de. “I didn’t expect what happened to happen,” Bezos says. ‘Anyone who did would immediately be sent to the doctors in white coats.”

But making money will not come easily. Competition from Web newcomers such as New York City-based Barnes & Noble Inc. and Chapters is intense—hence Amazon’s recent decision to halve the price of titles on The New York Times bestsellers list and move beyond books. While Barnes & Noble has only about 11 per cent of the Web book market compared with Amazon.corn’s 85 per cent, it is gaining ground. Its Web site sales for 1998 were $102.6 million, while it has already rung up $47.2 million in the first quarter of this year.

Bezos says that without continued hard work and faith on the part of investors his company risks being a mere footnote in Internet history. “Amazon isn’t for the faint of heart,” he concludes. “Were trying to build something important and lasting.” He envisions a retail universe that will dominate the Worldwide Web. And if he is successful, he may very well have the last laugh on those who ever questioned that dream. ED