Amazon Finally Clicks

Ten years old and profitable at last, it offers a textbook lesson on how to be both focused and flexible.

Target falls into the other category, Merchant.com, in which the retailer controls the look and feel of the site while letting Amazon handle technology services, fulfillment, and customer service. The revenue model also is different. “Suffice it to say we have a variable revenue model for Merchant.com, in which the revenue varies depending on the sales recorded,” says Stabingas.

Amazon won’t disclose revenue from either model or even supply the number of seller relationships. “What I can say,” Stabingas says, “is that at the end of the day, what we’re selling is the same, whatever the model, and that is the Amazon customer experience.”

E-Business: They Wrote the Book

Amazon.com’s 10-year climb to profitability offers lessons that many companies should take to heart, including:

Focus on the long term. “One of the things that was striking on my visits to Amazon was the attention their management paid to long-term value,” says Erik Brynjolfsson, a professor at MIT’s Sloan School of Management. “There were a number of options they had which would have boosted short-term profits, such as raising prices slightly or modifying their logistics, or not ‘investing’ in new product categories, but that would hurt their long-term efforts. In numerous separate conversations with different managers, they consistently were interested in the long term, not just making next quarter’s numbers. That’s something I don’t often see at other companies I visit, and clearly it comes from the top.”

Truly understand your customer. Much lip-service is paid to customer service and related disciplines, but Amazon builds customer commitment into everything it does. CFO Thomas Szkutak says Amazon has consistently begun with the customer experience in mind and worked backward to create the infrastructure needed to satisfy customer demands.

Balance focus with flexibility. Amazon hasn’t gotten everything right, but it’s been quick to identify mistakes and capitalize on changing market opportunities. As a result, it evolved from a store to a mall to a virtual construction company—or, more accurately, a hybrid of those. More changes are in store as E-business competition intensifies, but all of Amazon’s course corrections have been made with a single guiding vision in mind: providing customers with easy access to anything and (almost) everything online.

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