Just days after Sony authorized Amazon.com to sell consumer electronics on its Web site, Jeff Bezos, founder and CEO of the most recognized e-tailing site in the world, was the keynote speaker at the sixth annual CEA CEO Summit, held here late last month.
In an entertaining, off-the-cuff style speech, Bezos provided background on the development of Amazon.com, its philosophy and why it turned to the consumer electronics industry three years ago.
“Our philosophy is that we start with customers and work backwards,” Bezos said, and since Amazon.com made its debut in July 1995 its average customer is more than that. “Our typical consumer has a $77,000 annual income, likes higher end products and is an early adopter.”
To find out if Amazon should turn to the CE business, they turned to their customers. “We checked the demographics and sent out e-mails and our customers wanted consumer electronics online,” Bezos said.
The company entered the business three years ago and soon after began selling Sony products, but not as an authorized dealer. In reporting on the Sony deal last month the Wall Street Journal said that during the first quarter the company had operating losses of $20.8 million for its electronics, tools and kitchen category, with most of the blame for the loss going to the CE business. When asked about the report Bezos didn’t comment, but did say after the keynote speech, “We have done $600 million in three years with CE. We are humble about our progress and are working on it.”
But Bezos is pleased to have entered the CE business because, “We sell a disproportionate mix of high-end, highly profitable products. We deliver a richer product mix.” Frank Sadowski, consumer electronics VP for Amazon who also attended the Summit (see further coverage of the event on pgs. 14 and 17), confirmed afterwards, “We sell plenty of high-end goods. For instance, in digital cameras, products are flying out of inventory.”
Concerning inventories, Bezos said, “We have good supply chain efficiencies.” And while he said Amazon turns it CE inventory 17 times a year, “We are still in the infant state of inventory management.”
Another advantage that Amazon brings to the CE business is information. “Manufacturers like it that we present accurate product information to consumers. We try to work with them to get better info online. Often we ask manufacturers, ‘If your product manager spoke to a consumer about his product for a few minutes, what would you want him to say?'”
In fact Bezos added, “Some consumers may eventually go elsewhere to buy a product, but we think accurate information helps our branding in the long view.”
The Amazon founder also recounted the company’s successes in partnering with Toys ‘R’ Us and Circuit City, where his company screens customers, provides technology and shipments. In the case of Circuit City, Amazon can ship directly to consumers, “or we can provide in-store pickup” at Circuit City locations.
Bezos noted that Amazon has tried to “play to the Web’s strengths,” in which he means that Amazon can redesign its “store,” its site, online and provide more selection far more economically than traditional retailers.