Two words: low margins. That is the secret of success of the Amazon. When we say it, it sounds crazy. But, Jeff Bezos saw it as a competitive advantage. Amazon has spent a decade and a half for the sake of making a low margin into a profitable thing. According
to Bezos, when you are not obsessed or just focus on high margin, there
will be an inherent discipline about how you operate. But Bezos did not say that the high margins only for those who are lazy. But, you can refer to it as an important point of pride. Everyone can survive at high margins. However, it took the person who actually meant it to survive and thrive in a low margin. And, Jeff Bezos is the one.
Bezos quite clearly and firmly explain the dichotomy of high margins and low margins. In an interview with Wired, he said; "There are two ways to build a successful company. The first is to work very, very, very hard in order to convince consumers to pay higher margins. Second, is to work very, very, very hard to offer a low margin on the consumer. "And, he is the one who chose the second option. Why? Because he believes, by offering the lowest possible price, will enable it to attract a large consumer base. Here is a schematic margin of two to two of Jeff Bezos:
Jeff has chosen a position in the top left of the matrix scheme - a low margin high volume. He had to prove if there is a big business that can thrive there. This is definitely better than the low margins with volume too low; The one road to ruin. He described the state of the technology world now focusing on high-margin, low-volume business to make companies fight it out to win the attention of consumers, and sell high-margin software or hardware on a relatively small number of consumers. And he said, his ability to show low profitability margins, making it able to collect the largest consumer base. The ability to execute a low margin has made Bezos able to enlarge its product and interesting combinations are even larger consumer base.
So, what it takes to survive in low-margin option? The answer is efficiency. Outstanding efficiency. Bezos even been obsessed with efficiency since the first day. And, the efficiency of spread to the whole point peruusahaannya. Bezos has built a distribution system that makes the Amazon can give anything anywhere (at least anywhere in the US) at any time that it is possible to make money, however little it was. The efficiency has allowed Amazon to offer Amazon Prime, which provides free services for two days while still making money (okay, here we know if Amazon Prime is not really free, but he had approached the consumer to increase the volume of orders). Amazon also really focus on cost reduction to customer service. But that does not necessarily mean Amazon ignore the needs of consumers. They just want to work hard to satisfy customers in different ways; which minimizes interference human labor as much as possible. Instead, Amazon offers the service through online - where today, Amazon highest ranks first and promotional services via the internet.
Bezos obsession with efficiency, may be seen clearly in the Amazon Web Services (AWS). AWS is an extension of Amazon's own technical infrastructure (development itself financed and supervised the auspices of the Amazon). Bezos always determined to make AWS provides books in the same way - a high volume, low margin. In addition, Bezos is not willing to use 'product is' to get the lowest price. Low price with high quality has made AWS become the backbone of a large majority of the websites in the world today, such as Foursquare and the New York Times.
Jeff insists that; "The greatest thing you can do is make a mistake" and, as a result, "Amazon is able to focus on minor defects and wipe them down to the roots. It will reduce costs, because everything will work ". It looks like Bezos true, everything works fine. AWS has now become big business, simultaneously also improve the efficiency of the Amazon infrastructure itself - such as diving, drinking water, a double victory.
Low margins are not always in accordance with the chosen strategy everyone. This is a tough business, and unforgiving. But, Jeff Bezos is the type of person who really know the business model chosen and able to run it with a perfect strategy. By reducing costs and improving quality through his obsession with efficiency, Amazon finally could stand to provide the best service at a minimal price. This situation is clearly difficult rivaled by many people. And, of course, that's what Jeff likes.
Of course if Jeff also act like a consultant for himself, Jeff had to be honest and show, indeed, left upper quadrant in the above scheme will always be the most desirable outcome. Matrix in the scheme is no exception. The ability to deliver high volumes and margins as a gift from heaven. There is always a reason why Apple became the most valuable company in the world and has $ 97 billion in the bank. Berhaisl they have cracked the code to achieve higher volumes and margins. As well as Google (which has $ 44 billion in the bank) and Microsoft (which has $ 50 billion in the bank). But, you know, when touched on high volume low margin, Amazon is the only one of the nicest ever.
Bezos quite clearly and firmly explain the dichotomy of high margins and low margins. In an interview with Wired, he said; "There are two ways to build a successful company. The first is to work very, very, very hard in order to convince consumers to pay higher margins. Second, is to work very, very, very hard to offer a low margin on the consumer. "And, he is the one who chose the second option. Why? Because he believes, by offering the lowest possible price, will enable it to attract a large consumer base. Here is a schematic margin of two to two of Jeff Bezos:
Jeff has chosen a position in the top left of the matrix scheme - a low margin high volume. He had to prove if there is a big business that can thrive there. This is definitely better than the low margins with volume too low; The one road to ruin. He described the state of the technology world now focusing on high-margin, low-volume business to make companies fight it out to win the attention of consumers, and sell high-margin software or hardware on a relatively small number of consumers. And he said, his ability to show low profitability margins, making it able to collect the largest consumer base. The ability to execute a low margin has made Bezos able to enlarge its product and interesting combinations are even larger consumer base.
So, what it takes to survive in low-margin option? The answer is efficiency. Outstanding efficiency. Bezos even been obsessed with efficiency since the first day. And, the efficiency of spread to the whole point peruusahaannya. Bezos has built a distribution system that makes the Amazon can give anything anywhere (at least anywhere in the US) at any time that it is possible to make money, however little it was. The efficiency has allowed Amazon to offer Amazon Prime, which provides free services for two days while still making money (okay, here we know if Amazon Prime is not really free, but he had approached the consumer to increase the volume of orders). Amazon also really focus on cost reduction to customer service. But that does not necessarily mean Amazon ignore the needs of consumers. They just want to work hard to satisfy customers in different ways; which minimizes interference human labor as much as possible. Instead, Amazon offers the service through online - where today, Amazon highest ranks first and promotional services via the internet.
Bezos obsession with efficiency, may be seen clearly in the Amazon Web Services (AWS). AWS is an extension of Amazon's own technical infrastructure (development itself financed and supervised the auspices of the Amazon). Bezos always determined to make AWS provides books in the same way - a high volume, low margin. In addition, Bezos is not willing to use 'product is' to get the lowest price. Low price with high quality has made AWS become the backbone of a large majority of the websites in the world today, such as Foursquare and the New York Times.
Jeff insists that; "The greatest thing you can do is make a mistake" and, as a result, "Amazon is able to focus on minor defects and wipe them down to the roots. It will reduce costs, because everything will work ". It looks like Bezos true, everything works fine. AWS has now become big business, simultaneously also improve the efficiency of the Amazon infrastructure itself - such as diving, drinking water, a double victory.
Low margins are not always in accordance with the chosen strategy everyone. This is a tough business, and unforgiving. But, Jeff Bezos is the type of person who really know the business model chosen and able to run it with a perfect strategy. By reducing costs and improving quality through his obsession with efficiency, Amazon finally could stand to provide the best service at a minimal price. This situation is clearly difficult rivaled by many people. And, of course, that's what Jeff likes.
Of course if Jeff also act like a consultant for himself, Jeff had to be honest and show, indeed, left upper quadrant in the above scheme will always be the most desirable outcome. Matrix in the scheme is no exception. The ability to deliver high volumes and margins as a gift from heaven. There is always a reason why Apple became the most valuable company in the world and has $ 97 billion in the bank. Berhaisl they have cracked the code to achieve higher volumes and margins. As well as Google (which has $ 44 billion in the bank) and Microsoft (which has $ 50 billion in the bank). But, you know, when touched on high volume low margin, Amazon is the only one of the nicest ever.
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