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Setting aside discussion about whatever larger motivation he had, Jeff Bezos spent much of his final Amazon shareholder letter talking about value creation. Buried in it was a paragraph that we think is worth reflecting on:
“Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes. Compare that to the typical shopping trip to a physical store – driving, parking, searching store aisles, waiting in the checkout line, finding your car, and driving home. Research suggests the typical physical store trip takes about an hour. If you assume that a typical Amazon purchase takes 15 minutes and that it saves you a couple of trips to a physical store a week, that’s more than 75 hours a year saved. That’s important. We’re all busy in the early 21st century.”
What’s notable here is the framing.
When Bezos talks value creation for customers, he doesn’t talk about “low prices, vast section, and fast delivery.” In fact, in the letter, he suggests we “ignore” all of it for the purpose of estimating the value.
Instead, he suggests we focus on time. In his framing, time—not another store—is the competitor.
Why?
Maybe it was an easier way to make a point. Maybe it was an easier way to get the largest dollar figure to prove outsized value creation. Those don’t seem like reasons Bezos would pick, though.
For one, he had plenty of room to “play” with value, given that customers were the outsized winner in his letter. So, he could have maintained a customer-centric story while still reducing that value creation figure by monetizing a different unit of measurement and, given the focus on employee working conditions recently, he could have justifiably found a way to make employees the largest beneficiaries or Amazon’s success.
For another, this is a person who has previously said that focusing on “controllable inputs to our business is the most effective way to maximize financial outputs over time.”
And, so, we’re willing to bet his choice to focus on time was rooted in this dynamic.
Over the years, a number of these inputs have proven so significant to financial outputs that brands have followed Amazon’s lead on implementing them. Many are now core components for any online shopping experience—regardless of whether a brand has considered the strategic link: product reviews, recommendation engines, subscribe & save.
(Though not specifically mentioned by Bezos in his letter, we’re seeing Amazon’s “Buy Again” feature emerge in market in the same way. As we see thousands of repeat shopping sessions per month and watch hundreds of shoppers complete purchases in less than 15 seconds, we can vouch for the power of time saved.)
Recently, we talked with a former product manager at Amazon about the Dash Button. While our intention was (and still is) to explore the history of the Dash Button, the conversation expanded to aspects of Amazon’s principles and how an experiment like Dash is explored, validated and measured. We’ll save specifics related to Dash for another time, but one of the things this former product manager said is that a lot of experiments that are approved at Amazon are justified in the spirit of Bezos’ famous quote about customers not wanting less selection, higher prices or slower delivery.
What’s often forgotten in that quote is the beginning part:
“I very frequently get the question: 'What's going to change in the next 10 years?' And that is a very interesting question; it's a very common one. I almost never get the question: 'What's not going to change in the next 10 years?' And I submit to you that that second question is actually the more important of the two—because you can build a business strategy around the things that are stable in time.”
That strategy, of course, is anchored to value creation for the customer. Value—as measured by time (is this convenience?)—appears to be the unit Amazon cares about most. The end result?
It’s become trite to say brands are competing with Amazon, but what’s clear from this final shareholder letter (in actuality, it’s clear from many of them) is that Amazon isn’t playing the same game as most brands.
Amazon is quantifying success in terms of how long it takes someone to checkout, because they’ve anchored their strategy to something that’s “stable in time.” Many brands are quantifying success in terms of how successful they are in getting someone to checkout, because their strategies are to optimize channels for better returns.
No doubt, scale helps here. But this type of thinking has been part of Amazon from the beginning. So, it’s not a luxury they’ve bought over time. If anything, it’s bought Amazon luxury.