Amazon: don't blame us for the revolution on the high street

When Jeff Bezos sat down in 1994 to write the business plan for a new website called Amazon.com, he estimated it would take the online bookseller a decade to reach a turnover of $100m. In fact it took, as he puts it “a couple of years”. Although the former hedge fund manager started his own business because he saw the disruptive power of the internet, the man now hailed as Silicon Valley’s greatest visionary “had it down as books only, US only”.

Today Amazon employs 70,000 people, turns over $48 billion a year globally and has earnt New Mexico-born Bezos a $21billion fortune. What started as a books business has been transformed by the Kindle ereader, and now sells digital music, films, books, games and more, alongside its still burgeoning selection for delivery that runs from books to clothes and nappies to power tools. Now more than ever it lives up to its name: “Earth’s biggest river; Earth’s biggest selection”.

“I saw the opportunity for the internet to improve the customer experience for book buyers – there are three million books and you can’t fit them in a store, so they have to carry only the best sellers. When we launched we had over a million books,” says Bezos. "But I had no idea."

So great has been Bezos’ success, in fact, that now he’s accused of being the leader of the internet trend that is destroying town centres and defacing local high streets. How can a local book shop survive in the face of Amazon?

His response is polished, but combative: “I’d say two things: firstly, high street shops will evolve so they won’t freeze in time – they’ll change, they’ll evolve, they’ll figure out a new path. The competition will make everybody better. And our job is to provide the best service we can – efficient, low prices, the best selection. The customers decide where they want to shop. But if somebody buys a Kindle they continue to buy physical books.”

Indeed, although Tim Waterstone, the founder of the Waterstones bookshop, once said “Amazon is killing the British books industry”, now even his shop sells the Kindle that will, surely, stop some people buying the physical books Waterstones relies on. Bezos, in London this week to launch the latest two Kindles, said he recently visited “impromptu, but not in disguise” and sings the praises of a shop that has glamorous “signage” and a demonstration station.

Bezos agrees that the Kindle has come to define Amazon, but says he’s only got there with practice. “When we first started experimenting with ebooks in 1998 for your laptop, we offered them, but we didn’t sell them. Nobody bought them.”

He says the business quickly realised that if they wanted to make ebooks work, they needed to make hardware. Eight years later, the Kindle is into its fifth generation. The latest, film and music playing, multimedia tablet takes on Apple’s iPad and is, on pre-orders alone, the site's number one best seller.

Bezos, though, doesn’t want to take on Apple at their own game. “Proud as I am of the hardware we don’t want to build gadgets, we want to build services,” he says. “I think of it as a service and one of the key elements of the service is the quality of the hardware. But we’re not trying to make money on the hardware – the hardware is basically sold at breakeven and then we have a continuing relationship with the customer. We hope to make money on the services they buy afterwards.”

And make money they do, but Amazon is still not Apple’s size. Would Bezos like it to be? “Even though this device is only £159, in some ways it's better than a £329 iPad – way better wifi, the iPad only has mono sound and the Kindle bookstore is by far the best electronic bookstore in the world.”

He claims Amazon is customer focused “almost to a fault”. So he adds, “Even if in some ways this is better, these are very big market segments and there is room for lots of winners. Even as Kindle fire has taken 22 per cent of tablets, Apple has grown too. Are we in competition? Sure. Are we competing? Yes. Is there room for multiple winners yes. This difference is semantic.”

Still, Bezos, maintains his approach is superior: “Apple don’t make iTunes work on other devices. One of the nice things about our approach for our consumers is you buy a Kindle book you can read it on your iPhone, your iPad, your BlackBerry, your Windows Phone. We’ve take the opposite approach. We’re the opposite of competitive. We’re partnering.”

The overall effect, says Bezos, is a huge, diverse business that is defined by its customers and possible because of the internet. “What happens if your customers have a need your current set of skills don’t support? We realised if we want to support customers with ebooks we need to build new hardware. Our values mean we’re going to keep inventing. If you routinely use new skills, you will stay creative. Even if you run every morning you should once in a while ride a horse. If there’s one about.”