We’ve all seen the movies like the Godfather and Goodfellas, but what you wouldn’t expect is one of the world’s most powerful companies to adopt a business strategy based on the principles of gangsterism. Jeff Bezos is an American entrepreneur who is the founder and chairman of Amazon.com which is the world’s biggest online retailer and is consistently increasing its market share with ruthless tactics and little remorse.
The Gazelle report
This is what Amazon called its initiative to cajole book publishers into giving them better deals. Bezos is known to have said, ‘ Amazon should approach these publishers the way a cheetah would pursue a sickly gazelle’.
Amazon does the following;
– Makes company’s offers they can’t refuse
– Holds onto information unless absolute necessary – Unlike Frank Lucas and Sammy the Bull
– Keeps his teams small – 2 pizza rule, if it takes more than 2 pizzas to feed them the teams too big
– Don’t talk so much
– Embrace adversary
It sounds like mob rules straight from a 90’s mafia flick but this kind of tight ship mentality must be working for the worlds 5th richest man. The company’s share price boomed during 07-08 when the rest of the market got beaten bloody. The company took advantage of the change in consumer psychology as markets tightened, people became more stringent with their money and online shopping increased dramatically. Amazon had net sales of over $100bn in 2015 with an estimated 35-40% of the online retail market. Constantly acquiring and pushing smaller competitors into a corner, the monster continually grows.
Even though 186 million people visit the site every month and the average American spends $625 dollars a year on the site, the company has yet to make a meaningful profit in over 20 years. Part of their business strategy is to focus on free cash flow, eating up market share and future growth. Over the next 20 years I cannot see this stock slowing down apart from the general blip that will be coming in this overpriced market. It will be interesting to see what futuristic elements Amazon will be adopting in its bid to literally take over the world. Amazon using drones to delver products isn’t that far off but how about a Virtual Reality shopping experience. What ever they have in the pipeline Alibaba and Walmart are going to have to work extremely hard to math the Amazon monster.