http://www.lrb.co.uk/v35/n23/deborah-fr ... n-business
Review of:
The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone (Bantam, 2013)
... Bezos told the Washington Post (before he bought it) that ‘to be nine times bigger than your nearest competitor, you actually only have to be 10 per cent better.’ And his site was better, though by how much who could say? In 1999, when Toys ’R’ Us launched its website in time for Christmas, Amazon bought out its entire stock of the most popular toys (taking advantage of a free shipping promotion), and resold them on its own site. Toys ’R’ Us was fined by the Federal Trade Commission for over-promising. A department within Amazon called Competitive Intelligence noticed that a New Jersey company called Quidsi was having success with a site called Diapers.com: it sold nappies at a loss to entice customers to buy its other baby products. Amazon tried to acquire the company, but Quidsi wasn’t interested. So Amazon started selling its nappies for even less than Quidsi, though it meant losing $1 million a day. When Quidsi still wouldn’t sell, Amazon threatened to start giving away nappies. Quidsi sold to Amazon; nappy prices went back up. To make Amazon’s catalogue deeper than barnesandnoble.com, it bought up stock from used book dealers, then started letting the dealers sell their stock on Amazon’s site for a fee. Publishers didn’t like their new books competing with cheaper versions of the same titles, but Amazon made money either way. In addition to selling products from their own warehouses, they would become the biggest middleman of the internet: more than two million registered ‘marketplace sellers’ pay Amazon fees and commissions to have their products listed on the site, or pay Amazon to warehouse and ship their products for them. There are blogs that keep track of the more unlikely items: tanks, wolf urine, simulation models for infant circumcision, uranium ore, live ladybirds, Zimbabwean trillion dollar banknotes. Type in ‘dog Halloween costume’, and you’ll see thousands. The more different things the site sold, the more people used the site, the more businesses would pay to have their products listed on the site. Customers were a commodity like anything else.
But it was losing out on music. Apple had taken control of the digital music market while Amazon kept pushing CDs. They wouldn’t allow the same thing to happen to books. Hence: the Kindle. ‘Your job is to kill your own business,’ Bezos told the engineer in charge. ‘I want you to proceed as if your goal is to put everyone selling physical books out of a job.’ He was convinced that Apple had made the iPhone too profitable: the smartphone market became glutted with cheaper competitors. Instead Amazon would lose money when people bought the Kindle, but make money when they used it – by buying e-books from Amazon. ‘Publishers that didn’t digitise enough of their catalogues, or didn’t do it fast enough, were told they faced losing prominence in Amazon’s search results or in its recommendations to customers.’ Amazon’s plan to charge only $9.99 for e-books frightened publishers, who knew it would cut into their hardback sales. When five major US publishers attempted to create an electronic bookstore with Apple, Amazon complained to the US Department of Justice, arguing that the publishers were conspiring to raise prices for electronic books in violation of antitrust law. The publishers paid at least $164 million to make the charges go away; they also gave up their bookstore.
Stone has covered Amazon almost since its creation, first for Newsweek, now for Bloomberg Businessweek. He admires it because it’s good at giving us what we want, which is why he thinks we should fear it; and he thinks it will ‘expand until either Jeff Bezos exits the scene or no one is left to stand in his way’. In the few months since Stone’s book went to press, Amazon has bought eight million square feet of warehouse space and taken on 70,000 temporary American workers for the Christmas rush; launched Amazon India and a Kindle store in Mexico; unveiled a new tablet; started the largest website for the sale of fine art; begun selling groceries throughout Los Angeles (other markets to be announced); and made an unprecedented deal with the US Postal Service to have customer deliveries on Sundays. London is to get Sunday deliveries too, via Amazon’s own trucks. The company is also preparing to launch its own smartphone (possibly with ‘eye-tracking’ software: no clicks necessary, just blink) and is manufacturing a box that will let users access Amazon content through their televisions. All this in addition to building up its own publishing house, television and film studio, and continuing its dominance over the sale of server space for tech companies.
The Everything Store is listed for sale on Amazon. MacKenzie Bezos, Jeff Bezos’s wife, has reviewed it on the site: one star out of five because she doesn’t think it’s accurate. Shel Kaphan, Amazon’s first employee, also reviewed it – four stars – and says that it is, ‘by and large’. You can buy it new in hardback at 46 per cent off list price; or cheaper used; or even cheaper on Kindle. You can also listen to it through Amazon’s company Audible.com – for free if you’ve never tried Audible.com before. Shipping is free if you’re willing to buy something else too, and they’re betting you will.