Jeff Bezos, the founder and top executive of internet giant Amazon, is taking a completely unexpected step aside. As of the third quarter of this year, he will pass the torch to Andy Jassy, who now heads the cloud services branch Amazon Web Services.
First book sold in 1995
All too often, portraits exaggerate the achievements of great names. But in the case of Jeff Bezos, it is almost an understatement to say that the man has completely revolutionised the retail industry over the past quarter century. And much more than that, too.
In 1995, Bezos – who had turned his full attention to the Internet after a brief career on Wall Street – sold his first book through his online bookstore, which he had named Amazon after a difficult search for a name. The book in question? ‘Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought’ by Douglas Hofstadter. An appropriately obscure title for an initiative that, at the time, was viewed with a bit of a shrug by all observers.
Share price increase of over 10,000%
After all, retail experts were in complete agreement: Amazon would soon be crushed by the large existing book chains once they would also become active on the Internet. But Bezos understood very well that these big chains could not just make the leap. He put his foot down hard on the accelerator.
Barely two years later, Amazon went public. In those days, you paid 18 dollars for a share. Whoever had the guts to invest roughly 1,000 dollars in Bezos’ little bookshop back then, today owns a package of shares worth 1.14 million dollars. That amounts to a price increase of more than 10,000%. This was only possible because all this time Bezos did not allow himself to be distracted from his goal: to make Amazon an indispensable link on the internet and by extension in the lives of all of us.
Bezos expanded Amazon’s range of products at lightning speed. At first, with logical additions such as CDs and DVDs, but it grew systematically, even during the dotcom crisis, which brought the company into very tight straits several times. The entrepreneur continued to innovate and imbued his ever-growing company with a nonstop start-up mentality.
Cash-burning monster
This strategy came at a price: for years, Amazon was a cash-consuming monster. Profit and margins were secondary to growth and market share. A risky strategy, but time and again Bezos managed to get that scorching growth rate financed. Until he reached the desired scale, and profits followed almost automatically.
The figures are staggering. In the fourth quarter of 2020, including the crucial end-of-year sales, Amazon passed the 100 billion dollar mark in sales for the first time in its history (125.6 billion dollars or 104.3 billion euros). In three months. Earnings per share amounted to 14.09 dollars (11.7 euros), while market analysts had pointed to an average of 7.34 dollars per share. Even in times when Amazon has proven so much, the outside world still underestimates what Bezos is capable of.
This success has not only hurt classic retail chains – not to mention the bookstore chain Barnes & Noble, which has been badly hit. Since then, Amazon’s model has been copied with varying degrees of success. Just look at what is happening in the world of taxi services such as Uber, or meal deliveries. A number of players are fighting each other there with the same strategy: first become the biggest and then the profits will follow.
Pressure cooker full of retail experiments
Despite all the side-steps into other sectors – video streaming to name but one – Amazon remains a pressure cooker full of retail experiments. The takeover of US premium supermarket chain Whole Foods raised a lot of eyebrows among observers. What is an online player planning to do with a network of almost 500 physical supermarkets? But Bezos gave the critics a run for their money. Whole Foods gave Amazon a network with which it could further expand its home delivery services.
Amazon is also experimenting with brick-and-mortar stores elsewhere. Think of the completely cashless Amazon Go convenience stores, brimming with technological innovations. The physical bookstores Amazon Books are the icing on the cake. Those who are inclined to roll their eyes when they hear talk of omnichannel strategies, should think twice. If Amazon does it, there will at least be something to it.
Not a departure, but a new job
Bezos himself sees (re)inventing as the core of what he has been doing at the helm of Amazon for the past 25 years. “If you get it right, a few years after a surprising invention, the new thing has become normal,” he said. “People yawn. And that yawn is the greatest compliment an inventor can receive. When you look at our financial results, you are actually looking at the sum of a long series of inventions. Today Amazon is at its most inventive, which makes it a great time for this transition.”
That Bezos’ successor is coming over from Amazon Web Services is no coincidence. Offering cloud services to third parties has become Amazon’s growth engine. And that engine is already a big muscle car with a turnover of 45 billion dollars.
Bezos himself can now concentrate more on his many side projects. The most important of these is the space company Blue Origin. It is one of the reasons why Bezos is so often mentioned in the same breath as Tesla and SpaceX chief Elon Musk. But he is not yet letting go of his baby completely: Bezos will become executive chairman, and from that role he will be closely involved in important strategic decisions. “Jeff isn’t leaving, he’s getting a new job”, as finance director Brian Olsavsky put it.
