From Jeffy's Online Books to everything from A to Z, Amazon.com is an empire amongst empires. Bezos created something remarkable.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands.

Stephen Semple is a marketing consultant, story collector, and storyteller. I'm Stephen's sidekick and business partner, Dave Young. Before we get into today's episode, a word from our sponsor, which is... Well, it's us, but we're highlighting ads we've written and produced for our clients. So here's one of those.

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Dave Young:

Ding-dong. Okay. Well, I was making noises there as we started. Welcome to the Empire Builders Podcast. Dave Young here alongside Stephen Semple, and we're talking about empires. I mean, businesses that started tiny and grew into behemoths, in this case, and often... Well, every time what we do is we let the countdown to the recording start, and then Stephen whispers in my ear today's topic, and we see if I recognize it. Maybe perhaps I've heard of them. And today, he just said one word, Amazon. And I'm like, "Is that a river?" I mean, that's what we all said back in the day when Jeff Bezos started it-

Stephen Semple:

Yes.

Dave Young:

... was, "Really, you named it after a river in South America? What are you thinking? What's wrong with you?" But I guess he proved them wrong.

Stephen Semple:

What you're going to discover, wasn't actually the first name.

Dave Young:

Oh, cool. They started with a different name and then switched to Amazon.

Stephen Semple:

Jeffy's Online Books?

Dave Young:

Well, and here's the thing. We're 200-and-some-odd episodes in, and we've managed to hold off not covering Amazon.

That's a good point. Yeah.

Stephen Semple:

And I resisted myself, because basically everything that's to be said about Amazon has probably been said, but I did come across a couple of interesting little tidbits that we're going to focus on-

Dave Young:

Oh, cool.

Stephen Semple:

... that I hope gives a little bit different picture to Amazon than the other things, people. Look, Amazon is a massive success, has changed the way the world is, was unbelievably innovative and forward-thinking. And today, Amazon does like 8,000 orders a minute.

Dave Young:

A minute?

Stephen Semple:

A minute.

Dave Young:

Unbelievable.

Stephen Semple:

Crazy, isn't it?

Dave Young:

Mm-hmm.

Stephen Semple:

And Jeff Bezos is one of the richest men in the world, and Amazon is just a monster out there. But here's the thing that's also really interesting. Jeff Bezos did not come from technology or retail. And how often have we seen this over and over and over again, that these businesses are built by people from outside the industry? That is like 9 out of 10, or probably even more like 99 out of 100.

He was an investment guy that was working in the early '90s on Wall Street. That's what he was doing. And he was making big bucks doing research in the technology space. So he was working in the space, but he wasn't a tech guy or a retail guy. And he comes across this report about growth in the internet space. And he literally... It boggles his mind. He's working away in Wall Street, comes across this report, and it says, the space is growing at 2300%. And he literally, as the story goes, picks up the phone, calls the analyst, and said, "There's a typo here." And they were like, "No, this is how it's growing." And he was like, "Oh my God."

Now, let's think about this for a moment, because it's easy to forget this. 1989 is when the first online transaction on the World Wide Web happened.

Dave Young:

I wouldn't have thought it was even that long ago, but yeah.

Stephen Semple:

Yeah, yeah, but it was, like, one-

Dave Young:

Yeah. It's ancient history now, but...

Stephen Semple:

We forget, we forget how much the growth is. And if you really want to go back, probably the best documentation of the growth we've had is episode 227 on AOL. Because AOL was really a driver of internet growth. It really was. It was really one of the pioneers that took people online. So to be looking at these things in the early '90s and go, "Hey, I see growth in online retail," that's really forward-thinking. I've got to give Bezos credit. Not a lot of people were thinking that way.

So he looks at this growth and he says, "There's got to be potential to do a business in this space." And that's where he starts off. We've got to do a business in this space. So he does brainstorming ideas with his wife at the time, McKinsey, and they look at investment sites, they look at advice sites, but he decides it needs to be a store, because people shop every day. Everyone. It's mass-

Dave Young:

An online store, yeah.

Stephen Semple:

It's mass, it's something we do all the time, it's habitual, and he doesn't want to do something that's a niche. And it has no boundaries, and ideally you could remove a lot of the friction in shopping. But he realizes he can't start that way. This is the other part where I thought he was brilliant. His vision was always online store, but he knew you can't start as an online store. You can't become known for being an online store. It's too big. You need to pick one thing.

Dave Young:

But he had that vision long before he started selling books.

Stephen Semple:

The goal was to sell everything.

Dave Young:

Everything.

Stephen Semple:

But he knew that's not where you start. And this is what I find interesting. It's amazing how many startups I talk about have these massive visions, and it's too big. You can have that massive vision, but you got to still start with something smaller. And that starting something smaller doesn't limit you. Jeff Bezos has proven that.

So he steps back in this point. He's trying to figure out, "Well, what's the one thing I want to do?" And he ordered a book called Cyberdreams by Asimov, and it took two weeks to arrive and arrived damaged. And the ordering process was a bit of a pain in the neck. And he went, "You know what? There's an opportunity to do better here." And at the time, the book business is very fragmented. There's two big players, Barnes & Noble, and Borders. But they combined are only 25% of book sales. So still, most book sales are being done by little retailers.

So it's dominated by all sorts of little players, and they don't do a good job of shipping books. So he says, "There's the opportunity. Books is the opportunity." He quits Wall Street where he is making like a million bucks a year, moves to Seattle to start the business, and he moves to Seattle because University of Washington at the time has got basically the top computer engineering school, Microsoft is there, so there's lots of good engineers available.

Dave Young:

Gotcha.

Stephen Semple:

Hires a programmer, Shel Kaphan. And the first name of the company was not Amazon. It was Cadabra, as in-

Dave Young:

Cadabra. Abra.

Stephen Semple:

As in "Abracadabra, your book arrives."

Dave Young:

Yeah.

Stephen Semple:

Name didn't work well. People thought it was...

Dave Young:

Magic supplies, or-

Stephen Semple:

No. Well, they actually mistake it, Cadabra for cadaver.

Dave Young:

Yeah, that's not good either, now that I think about it.

Stephen Semple:

So they needed a new name, and they had very much still the phone book mentality. Remember how everybody wanted to be listed first in the phone book?

Dave Young:

Sure. You start with an A.

Stephen Semple:

So you start with an A, and the first name that kind of came along that they thought they could do anything with was Amazon. Okay, yeah. You know, it's [inaudible 00:08:32] a river, all this other stuff. So they just went, "Sure, let's do Amazon. We can make that work."

Dave Young:

Well, and the smart thing is he picked a... unless I'm wrong, he picked one word as the name.

Stephen Semple:

Yes.

Dave Young:

It wasn't Amazon Booksellers.

Stephen Semple:

No, Amazon.

Dave Young:

Amazon Online Booksellers.

Stephen Semple:

Right, because he still had the vision --

Dave Young:

That's limiting. Yeah.

Stephen Semple:

Right, because he still had the vision, "I'm going to do more than this, but I need to start with one thing." So Amazon.

Dave Young:

So that vision dictates you find a name that is big enough to handle the vision.

Stephen Semple:

Yes. World's biggest river, right? So it's June 16th, 1995, Amazon goes live. They wanted to make it simple and easy to order books, and what would happen is they will get the sale, then they turn around and buy the book from the wholesaler, repackage the book, and ship it out to you. So they basically had no inventory.

Dave Young:

I was going to say, you could test the whole idea by just setting up your office near a brick and mortar bookstore and walking over and buying the book.

Stephen Semple:

Instead, they were buying the wholesale.

Dave Young:

Drop it in the mail. But they're buying from wholesale, so there's a little profit in it for them. That's good.

Stephen Semple:

Yep. So the book would come in, they would repack it, ship it to the customer. So really, at first they had no physical inventory, but they had a list of a million books. They could basically sell any book that they could get from a wholesaler. And Amazon rolls out with this claim. They have the Earth's biggest bookstore, which is really crazy. Any book store could claim that, because they all had access to the same million books. But I also love... There was a little bit of an unusual wording here.

Dave Young:

Stay tuned. We're going to wrap up this story and tell you how to apply this lesson to your business right after this.