2002 – Peculiar

I formulate my “recap” of each letter by reading and taking notes as I go and pulling out interesting facts and quotes. I got three sentences in this letter and wrote the word “Peculiar.” Jeff then goes to call out Amazon’s peculairities in the second paragraph and how some find it odd that Amazon wants to achieve both the lowest prices possible AND the best customer experience possible. He explains some of the how in the quote I’ve pulled below.

We also see the intro of free shipping on orders $25 and up and learn that Amazon’s inventory is turned 19x a year, meaning that Amazon’s sales are 19x that of the value of it’s inventory. The metric is meant to symbolise how often the entire inventory of a company is sold, though it doesn’t mean that every warehouse is emptied 19x a year.

He then goes on to describe a pricing exercise between Amazon and brick-and-morter stores. And in the spirit of Customer Obsession, the three times where when a book was found to be more expensive on Amazon, the price was lowered.

“With customer experience costs largely fixed (more like a publishing model than a retailing model), our costs as a percentage of sales can shrink rapidly as we grow our business. Moreover, customer experience costs that remain variable—such as the variable portion of fulfillment costs—improve in our model as we reduce defects. Eliminating defects improves costs and leads to better customer experience.” — Jeff Bezos