The making of Amazon Prime

very interesting article with many insights and also some are quite similar to what we (at Tiki) are doing or aiming for

on customer retention

The thing I remember very distinctly is this phrase: “I want to draw a moat around our best customers. We’re not going to take our best customers for granted.”

on engineers being confident and being able to raise his concerns, not just writing code

Sometime in December I got this email from one of the engineers on the team saying, “Greg, we’re working so hard on this project and I look at it and as a [shareholder] I’m really scared. I think it’s going to take down the company. Are you sure the math works on this program?”

on the long-term vision

Prime was very bold and it very much reflected the strategy that we’ve come to expect from Amazon — that this was a multi-decade time horizon. They’re not playing a quarter-to-quarter game.

essentials of inventory placement

I know on my side it was really hard to make money because that subscription revenue for super users just didn’t cover it for all the stuff we were putting into the air.
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.

on data-informed vs data-driven

While it’s an unbelievably analytical company, it doesn’t live or die by what the numbers say. Jeff just saw the strategic benefit of Prime and he saw the value to customers.

on shipping fast and more selection

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.

on being smart

When someone orders a $3 toothbrush and we send it to them two-day delivery, there’s just no way we can make money on that. So we created the add-on program where some items are at a price point where if you want to attach them to an order, great, they’ll come along. But you’re not going to get them in two days for free.
And on the heavy, bulky side, we essentially set up criteria where certain products would be “Prime standard.” It would still be free shipping but it would be pretty standard shipping. That gave us some flexibility.

on the underlying backbone of Prime

Prime is just a nice layer of icing, essentially, on that fulfillment business, in many ways.

on chicken and egg vs long term vision (bet)

In 2006, we mostly had our inventory in the Midwest. The cost between the fulfillment center and the customer was about $1.50 a package. The cost by air was about $15. So it was 10x more expensive to send a package by air.
I’ll always remember, I presented the numbers to Jeff Bezos and I said, “This is what Prime is going to cost because of the percentage by air.” And Bezos said, “You aren’t thinking correctly.”
It was a self-fulfilling prophecy: If customers liked Prime, the demand would go up. And because the demand would go up, we had more freedom to build new fulfillment centers.

on being there throughout the whole customer life-cycle

The two times in your life when you were most likely to change your shopping behavior are when you’re a student — when you become a new adult — and when you have children. So as they got older, they were already sort of addicted to Amazon being the best place for them to get their stuff.

on tiers in pricing

One of the reasons that we offer a monthly service is it’s an easier onramp rather than just the annual offering. People can pick and choose what they think is right for them based on their economic situation and their tastes.

on showing the best of Amazon to customers via Prime

As we started to see how people were adopting and responding very positively to the video content, I started going to every business leader in Amazon and said, “Hey, Prime is this opportunity to provide our premium customers the best of Amazon. What is it in your business unit that you think we could include in Prime as a way to drive more engagement, not only for your business, but to add to the flywheel of all things Amazon?” And so that was probably about 2014 that it was made an objective for our teams.
And that’s how we came up with the music service, the photo service, the credit card, the Prime exclusive products, the Prime Reading.

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Jamie Larson