Your team literally saw you disappear — like you were no longer in your seat and they had no idea why. It was not a common thing. Amazon was not like that. There were some all-nighters and there were some nights when five hours of sleep would be a recharge. For me, at the height of the project I was working between and hours a week.
Are you sure the math works on this program? It was not obvious to even people that were writing the code that it was going to work in the long term. So we put together a bunch of names. I agree. I like Prime. He was so convinced Prime was the right name. Sometimes people miss what a big bet it was on multiple dimensions. Could we scale it just to meet the promise with customers?
Would they love it? And if they loved it too much, would we be able to eventually figure out how to pay for it? Google had this product called Froogle at the time and eBay was doing considerable volume relative to Amazon.
Inside eBay, though, problems were mounting. When it revealed its financial results to investors in early , its stock price plunged 19 percent.
There was also dysfunction stemming from friction between eBay executives and those at PayPal, the online payments darling the auction site had purchased in Sounds like a perfect recipe for a big competitor to launch. I think there were a couple places in history where eBay made the wrong determination about Amazon. So you could see how smart people would convince themselves that there was nothing to worry about. But the difference was, when you look back at those Amazon shareholder letters and you look back at what Jeff Bezos wrote, you look back at the tolerance they had for low gross margins, for a low stock price, for just grinding it out and investing and investing and investing, and trusting that if you do right for the buyer, everything else takes care of itself.
This is Sam Walton all over again. You can imagine the first people who signed up for Prime were people who have been paying for two-day shipping. Those people out there who were dropping 10 bucks every time because they wanted their stuff really quickly. And so then to create a program that essentially gives them what they were already paying for — for less money — can be costly.
And so that was the first wave of looking at those numbers. There was a separate set of angst for people on the business side. Shipping revenue was part of the profit margin when Amazon sold goods. If only the very best customers at Amazon signed up for Prime and then they took full advantage of free two-day shipping and did not have to pay, then that was going to add up pretty quickly.
But at the same time, the supply-chain teams were starting to get smarter and smarter about where inventory should be located and how we could reduce our reliance on air shipping.
So we sort of held firm and kept looking at the shopping behavior. Jeff just saw the strategic benefit of Prime and he saw the value to customers. That allowed merchants to qualify their goods for Prime two-day shipping and helped Amazon greatly expand the catalogue of goods available to Prime members. It was, and is, a huge competitive advantage. I just remember thinking this is the end of eBay. A large part of what I did and what the team did, what we focused on as a team, was to improve the value proposition for Prime customers to make the shipping faster, to make more products eligible, to address some of the anomalies in the early days.
It was substantially better if you ordered on a Monday than if you ordered it on a Thursday. That sort of thing. I recall the state of it when I joined: There was a big lack of clarity around whether this was going to prove out long-term, financially. We had to look at these two extremes of heavy bulky stuff and the low-price-point stuff. That gave us some flexibility. The key to making this program profitable was in lowering the cost of fulfillment for two-day, which is all operations, and increasing the product profit margin, which is all retail.
And so I would go so far as to say Prime would not have continued to exist and would not be close to what it is today if it were not for the work that the operations team Prime members still have a few days longer. The company says they can order by December 22 for two-day shipping and the 23rd for one-day shipping and still get orders in time for Christmas. Amazon's extension of the promotion may be a response to competition from big-box stores that are also running free-shipping promotions.
Most notably, Target announced last month that it would offer free two-day shipping to all customers until December 22, with no order minimum. Best Buy also removed its free-shipping threshold but gave no time guarantee.
For you. World globe An icon of the world globe, indicating different international options. Get the Insider App. Worse, sales aren't growing as fast as shareholders would like. After reporting its results Thursday, investors finally spanked Amazon shares with an 11 percent loss. As late as June , Amazon sales were doubling compared to the same time a year earlier.
Compared to that kind of growth, any losses related to the too-good-to-be true Prime were easy to justify. Now sales growth stands at around 20 percent, and Prime has started to look like it's not holding up its end of the deal. Last year, we speculated that Amazon might even consider cutting the price of Prime because it was such an invaluable source of sales for Amazon. If that momentum is flagging, however, Amazon will have a much harder time justifying the shipping losses Prime inflicts.
Along with bringing in more money to cut those losses, perhaps a Prime price increase would serve as a kind of litmus test. Purchase of small items will now incur charges. Out go some super-saver deals as Amazon brings in new charges. Photograph: Frank Baron for the Guardian.
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