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Bezos: Reinvesting To Bring Smiles To Consumer Faces

12/15/2013 07:00:00 PM Eastern

Amazon has a broad mandate from founder Jeff Bezos. “We seek to be Earth’s most customercentric company for four primary customer sets: consumers, sellers, enterprises and content creators,” declares the company’s mission statement.

At least in the consumer market, he means it.

Bezos’ steadfast focus on customer service, and his ability to look beyond short-term earnings to reinvest in the business, has made Amazon the No. 1 online retailer in the world.

In 2012, the company was the third largest retailer of consumer electronics in the U.S., with $12.9 billion in sales, up 7.5 percent from the previous year. The company’s volume accounted for 9.7 percent of all CE volume generated by the nation’s top 100 CE retailers in 2012, according to TWICE’s annual Top 100 CE Retailers Report. In 2012, Amazon sold 40 percent of all e-readers purchased online, 30 percent of all tablets, 29 percent of all Blu-ray players, 38 percent of all earphones/ear buds, and 32 percent of all networked music systems, Parks Associates found in a first-quarter survey of adults with broadband-connected homes.

Those are big percentages of big percentages. A total of 44 percent of all tablets purchased in 2012, for example, were purchased online, Parks says. A total of 51 percent of e-readers purchased in 2012 were purchased online.

In Best Buy’s fiscal year ending February 2012, the multichannel retailer estimated Amazon captured a 21 percent share of the $30 billion online market for CE, appliances, and physical music and movie formats.

By continually reinvesting in the business, outspending rivals, and implementing a low-price strategy aided by constant monitoring of competitors’ website pricing, Bezos has grown Amazon’s global sales from $19.2 billion in calendar 2008 to $61.1 billion in 2012.

Net income is another story.

Net income grew in 2008, 2009 and 2010 to reach $1.15 billion, but net income fell in 2011 to $631 million, and the company posted a $39 million net loss in 2012. The company posted net losses in two of its first three quarters in 2013 and could well post a net loss for the year.

This year, because of Bezos’ focus on customer satisfaction, Amazon gained the highest customer-satisfaction scores in MSN Money’s Customer Service Hall of Fame for the fourth consecutive year. The award, based on customer surveys, was attributed by MSN Money to Amazon’s user-friendly website, low prices, one-click shopping, no-hassle returns, free-shipping options “and even the sense of community it fosters.”

In one major advance in customer service, Amazon this year launched its Mayday button to deliver free, live, on-device tech support right from its new Kindle Fire HDX tablets. One touch connects users to a tech advisor who can guide them remotely through any feature any time of day on every day of the year. The tech advisor is visible on the user’s display, but the tech adviser can’t see the user. The company’s response-time goal is 15 seconds or less.

In another customer-service advance, the company teamed up in November with the U.S. Postal Service to provide Sunday deliveries to Amazon Prime customers in Los Angeles and New York. The partners said they plan to extend the service to “a large portion of the U.S. population” in 2014, including Dallas, Houston, New Orleans and Phoenix. Millions of Amazon products are eligible for the delivery program.

The decision is part of a strategy launched in the past two years to deliver items faster than the competition. As part of that strategy, the company has been building more warehouses, many close to major metropolitan areas. More warehouses also help reduce Amazon’s shipping costs.

Many of the warehouses are located in states such as New Jersey where the company has obtained state incentives to build distribution centers in exchange for collecting state sales taxes. In November, Amazon began collecting sales taxes on items purchased by residents in Connecticut, Massachusetts and Wisconsin. Those three additions brought to 15 the number of states that have hammered out sales-tax collection deals with Amazon.

A majority of the U.S. population resides in the 15 states where Amazon now collects sales tax, although studies by investment firms have found little change in customer buying behavior after sales taxes were imposed. Amazon initially resisted e-commerce sales-tax collection.

In other customer-focused advances this year, Amazon has:

• developed pilot episodes for original comedy and children’s shows to get viewer feedback that will help determine which shows would become full series airing exclusively on Prime Instant Video;

• extended its AutoRip service to vinyl records — AutoRip provides consumers with free MP3 versions of CDs and vinyl records purchased from Amazon;

• expanded the Kindle Fire “X-Ray for Movies” feature to TV shows, which enables viewers to get background on the actors appearing in the shows.

• brought new enterprise features to its tablets so consumers can use them for work, including hardware and software encryption, secure Wi-Fi connections and VPN integration; and

• expanded the Kindle Owners’ Lending Library to more than 350,000 books, enabling Kindle owners with Amazon Prime to choose from more than 350,000 books to borrow for free with no due dates, up to one per month.

What else is in Bezos’ plans to boost sales?

Having launched Kindle e-readers and tablets at near break-even prices to sell e-books, music, movies and TV episodes, some analysts believe Bezos plans an Amazon smartphone, a TV set-top box to stream video via the Internet, and an audio-only audio-streaming device.

Not that big of a stretch for someone who this year bought the Washington Post.