I’ve always been an admirer of Amazon.com – I remember back in 1998 being inspired by Jeff Bezos’ vision, and imagining how I too could sell books online from my garage for a hefty profit. That never materialized (thankfully), but I did become a loyal Amazon customer, and later a stockholder.
I bought the stock at it’s peak in 1999 (quite a stockpicker am I, which is why I leave it to professionals these days), and watched it go way, way south when the tech bubble burst. I bailed out of it a year later, but hoped that this business model would survive the downturn.
And survive it has – Amazon now generates $1 Billion in annual free cash flow.
What’s more impressive is how the company did it – by putting customers first.
There was a great column in the NY Times today by Joe Nocera that chronicled his own Amazon experience just before the Christmas holiday, where a $500 item (through no fault of Amazon) never made it to him, but yet Amazon gladly sent him another one, no questions asked.
As a result of this pleasant experience Nocera looked a little deeper into why Amazon has thrived over all these years, and the answer became clear just listening to what founder and CEO Jeff Bezos has to say about it:
“They (customers) care about having the lowest prices, having vast selection, so they have choice, and getting the products to customers fast. And the reason I’m so obsessed with these drivers of the customer experience is that I believe that the success we have had over the past 12 years has been driven exclusively by that customer experience. We are not great advertisers. So we start with customers, figure out what they want, and figure out how to get it to them.”
Pretty darn simple. But there’s a catch to customer focus – it takes time, money, and effort for it to pay off over the long run. You need patience, and lots of it. Your shareholders also need patience, as you spend money on “intangible” elements like better training for customer service agents, or more intuitive web sites to aid customers.
Nocera notes, quite correctly, that Wall Street never has put much value on this focus on customers – hence, the lack of faith in the business model back in 2000 and 2001 when the stock got hammered. What’s really admirable is Bezos’ unwavering position in the face of all the naysayers – “the customer, the customer, the customer, the customer“.
12 years later, all the loyalty is paying off in spades. Check out this statistic quoted in the article – “According to Forrester Research, 52 percent of people who shop online say they do their product research on Amazon.”.
Think about that one. 52% of ALL online shoppers.
Happy customers bring you the ultimate payoff – great word of mouth. And oh by the way, much more profit growth and stability.
You just gotta be patient. And courageous. Just ask Jeff Bezos.
PS: Because of my admiration for this company I’ve joined their associates program and am happy to offer my readers “one-click” convenience of shopping for my reviewed books at my “Amazon Store” – check it out. All commission proceeds also go to the National Park Foundation too – a nice “twofer”.