Playing a game to win or benefit alone could get you a lot of opponents. But you’ll find a different story when you play a game where many people can win. People will follow you and support you. Amazon’s Jeff Bezos seems to have figured this out.
Long Range vs. Short Range
When it comes to a business founder’s vision, there seem to be two extremes: (1) the short range, where you start a company, make it profitable (or, in the case of some dot-coms, just wildly popular) then sell it off for a couple billion dollars; and (2) the long range, where you start with the intention of creating something of lasting value, even if it means that you don’t get rich quick.
There’s no right or wrong vision; it just depends on what kind of game you want to play. Amazon’s Jeff Bezos chose to play game #2.
Most news stories about Amazon declare that the company has never made a profit, but that’s not true. While there have been years when the company lost money, they have shown a profit within 10 of the 20 years they’ve been in business. It’s just not a very big one, by most peoples’ standards.
So, though shareholders aren’t earning dividends, the company’s stock value has continued to rise. Amazon employs more than 154,000 people worldwide—as well as a significant number of contractors and holiday season workers. Their free shipping puts approximately $4 billion a year into the pockets of the US Postal Service, UPS and other shippers (free for customers) and they have 244 million active and happy customers. It’s hard to estimate the impact that Amazon is having on the overall economy but it’s evident that plenty of people are winning in Amazon’s game plan.
The Slow Burn
Despite the lack of a wide profit margin, Amazon’s sales revenue has been on a steep uptrend since 1995—practically vertical since 2007. In the last five years alone, sales have tripled, from $24.5 billion in 2009 to $88.9 billion in 2014. Though the profit margins have gotten narrower, the bottom line (no pun intended) is that a profit, no matter how small, is still a profit. If you’ve ever bought anything through Amazon, you’ll likely understand why numbers of people who use the site are increasing. If not, here are a few reasons:
- Their prices on pretty much everything are the lowest.
- You get free shipping on orders over $35.
- Their Amazon Prime service is freebie-filled at a modest $79 a year.
Bezos is not reaping huge profits but by doing it this way, he has effectively invested in a customer base. Amazon continues to build its vast and loyal audience who are used to making purchases along with obtaining content online, and will keep on doing so. For instance, Amazon sells the Kindle reader at an affordable price and in turn, the owners go back to get their books for an equally modest deal. Amazon is willing to take a hit on the front to gain a giant customer base and back-end sales.
Obsession As a Business Model
You can’t deny the customer engagement that Amazon’s uptrending sales figures represent. And that is the key to Amazon’s success up until now and in the long term: “Obsess over customers.” Amazon’s focus right from the very beginning was to keep customers happy. It’s in the first sentence of their mission statement: “We seek to be Earth’s most customer-centric company…” They do it by reading and analyzing every customer complaint: “Every anecdote from a customer matters,” said Amazon Senior VP Jeff Wilke. “We research each of them because they tell us something about our process. It’s an audit done for us by our customers. We treat them as precious sources of information.” They also do it by continuing to develop and offer things that people want. They’ve taken risks. Some have paid off, others have not. Amazon isn’t one thing but a collection of different businesses, some of which are more profitable than others.
It’s ironic that a company that is so patently not focused on the value of their stock (unlike so many companies) has nonetheless seen a 1400% increase in the value of its shares in the last 10 years (currently approaching $700).
Though perhaps it’s an obvious statement, the life of any company is its customers, not its shareholders. Amazon had made it their modus operandi. That doesn’t mean you have to do business at anemic profit margins like Amazon’s. But obsessing over customers—giving them good value, exemplary service, listening and responding when they communicate—creates the kind of loyalty that will build up any kind of business in the short term but more importantly be the investment that gives that business a long term.