Amazon and the Customer Experience
By Andrew Grabois - Jan 14 , 2008
A very nice piece in the New York Times by Joe Nocera on why everybody but Wall Street loves Amazon.
Over the holidays, Nocera was treated to Amazon’s famous obsession with the “customer experience.” He had ordered a PlayStation on Amazon as a gift for his son, and started to get very worried when December 21st rolled around and it still hadn’t arrived. He went to the site and tracked the package, discovering that the PlayStation had been delivered to his apartment building several days earlier and signed for by one of his neighbors. He also found out that the elusive package then made its way down to the lobby, where it disappeared. Though this was clearly not Amazon’s fault, Nocera called customer service to “beg for mercy.” With no fuss, the Amazon customer service rep had a replacement shipped out to him later that day, arriving on Nocera’s doorstep by Christmas Eve. If that wasn’t impressive enough, the shipping was free.
Nocera shudders to think what would have happened if he had ordered the PlayStation from the likes of Apple or Dell, whose respective strengths do not include customer care. Amazon’s culture of customer service has come at a price, with the company having to subsidize free shipping to the tune of over $600 million a year. On the other hand, Amazon grew 35 percent in 2007, with revenues likely to reach $15 billion. Margins, which had been stuck at a bricks-and-mortar-like three percent for years, doubled last year to six percent. The company now claims 72 million active customers who spend an average of $184 per year. Though Wall Street hates gimmicks like free shipping or sinking millions in R&D, Amazon continues to deliver the kind of innovations that brings new customers to the site like flies to flypaper. Even investors are starting to come around, grudgingly awarding the company with a stock price that increased 140 percent in 2007.
That being said, Nocera interviewed a number of analysts and investors, and they all attributed Amazon’s recent success to everything except customer care, including the slowing of R&D growth compared to revenues, and the growth of its international marketplace and web services businesses. Nobody gave any credit to Jeff Bezos’ determination to do whatever it takes to improve the customer experience.
Amazon sells just about everything, these days, so it’s easy to forget that it all started with books. Amazon changed the business of bookselling by providing free and easy access to a huge, rich database of book information that could be browsed any number of ways. The importance of this cannot be overstated. Before Amazon, bookstores – including the early superstores– were pretty intimidating places, each with their own arrangement of inventory guarded by gatekeepers of unpredictable temperament. One had to ask them where things were, what was good, and what was forthcoming. And only they had access to inventory information (often on microfiche) and to the hefty print version of Books In Print that would be the final word on what was available from whom in the wider world. Amazon forever changed this dynamic by providing consumers with an immensely powerful discovery tool encompassing all books available for sale —- free of charge. And all that was required to complete the sale and send the book on its way to your doorstep, was a single click.
We take Amazon’s innovations like one-click, user-generated comments and lists, purchase-based recommendations, and “read-inside-the-book” for granted. What started out as a vehicle for selling books has now been incorporated into the general online retail environment. But it’s worth remembering that these wonders grew out of Bezos’ obsession with the customer experience.
There are some who still resent Amazon’s success and blame it for driving independent booksellers out of business. The fact is, Amazon has created a huge new market for books that has benefited everyone in the industry (except, perhaps, for Bowker, whose venerable Books In Print franchise is living on borrowed time). While Amazon today derives more of its revenues from the sale of things other than books, it accounts for about ten percent of all U.S. book sales. Let’s hope they don’t forget about the goose that laid the golden egg.
