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Jeff Bezos, CEO, Chairman, and President of Amazon.com—a.k.a. the king of all e-commerce—spoke at last week's ShopSmart Summit at the Consumer Reports headquarters in Yonkers, New York. We're pretty sure that our obsession with Bezos started back in the late-90s (circa then) when he appeared on Oprah and mentioned that he made a habit of taking a photograph every day—this was before everyone had digital cameras—so he'd have a visual history of his life. Wow, we thought, this is a cool guy, a real visionary. So we were really excited to see him speak.
We've transcribed the entire panel discussion after the jump—Bezos talks about issues affecting online shoppers—privacy, customer service, etc.—and intersperses his straightforward answers to reporters' questions with anecdotes, strategies, and ways of thinking about problems that more than hit the nail on the head, but also drive home the ethos and mission statement of Amazon.com as an entire, organic corporation.
Q: Amazon is in every aspect of our lives now. You started with books and now you sell just about everything under the sun. You even have a service now where you can put your data from your computer on Amazon's cloud service. The question is: What keeps you up at night? There have been a lot of data breaches out there and people are really concerned about their personal information and I guess my question is, what are you doing about it? Has your strategy changed? What do you think companies are doing wrong out there that's causing this? Do you think it's going to get worse before it gets better?
Jeff Bezos: Well, first of all, let me assure you that I sleep very well at night. But that's just because I happen to sleep very well, and you should take no comfort in the fact that I sleep well at night. You know, data security is one of these very dynamic situations where the bad guys get better an the good guys have to keep getting better too—it's not a static situation. There are a bunch of reasons people want to steal data—some of them are for-profit reasons—and they're sophisticated gangs of criminals all over the world, some of them operating in areas that are very hard to even get police cooperation. And so, there has developed, over time, and certainly with credit card companies are very focused on this, a set of standards, and I think that all companies, at a minimum, should be sure that they're adhering to those standards.
I think this is going to be an ongoing issue for the duration, I don't think this is ever going to go away. It's like trying to say that you're going to get crime to go away. It's unlikely to happen. We do work extraordinarily hard. I think we have some of the most talented people in the world—security experts who work on this. And it is our top priority.
Q: Going along with that same theme: What can consumers themselves be doing more of to protect themselves, make themselves less vulnerable. Are consumers making mistakes being a little too casual.
Bezos: Probably the most important thing that consumers could do is choose harder passwords. It's a simple thing to do but people don't generally want to do it. It's very very common for people to set their passwords to relatively easy things to guess and you know, so that is one way, a very unsophisticated way to get at someone's information online. Another thing people do is they use the same password everywhere. And so, if it leaks in one place, because it didn't have good security procedures, whoever got the password from there could then use it in other places.
The problem with this is it's inconvenient—changing your password, trying to keep track—we're busy in the early 21st century, we humans. It's asking a lot to ask people to change their password every three months, make sure it's not a word, and it has capital letters and uses a pound sign in it somewhere. It gets harder for people.
Q: Another issue in terms of what's on people's minds these days is privacy. And you can almost see Amazon as big brother—you know what we buy, you even know what we wish for. In terms of marketing and the whole do-not-track issue, where do you stand on that? What are some of the areas of push-back that you've found from your customers?
I think, if I were giving advice to companies that were recording and using customer purchase data and so one, I would say kind of make the things your customers do everyday on your website self-showing. As you use the website, oh yeah, they do have... If you go to a detail page on Amazon of product you already bought, it will tell you, "You bought this on December 20th 1998." And the reason we added that feature, by the way, is that people were accidentally buying things twice.
We had a discussion about that, because we could measure it. That feature, we call it "In Line Order Update," and it's a little stripe at the top of the detail page that says, "Here's when you bought this item." And we were able, with good statistical precision, to calculate how much that hurt sales. And, because people would buy a DVD or a music CD and they would look at that and they would say, you know, I'll just go find it, it must be in my music collection somewhere, so our calculus on things like that is that it may hurt sales in the short term, but in the long term what it does is earn trust.
It's the same reason we allow negative customer reviews on the website. In the early days, I'd get complaints from mostly book publishers because we were mostly books at the time, and they would say: "You don't understand your business. You make money when you sell things. Why don't you delete the negative customer reviews." And our thought on that is very different. We think we make money when we help customers make purchase decisions. And that's different. It's point of view.
There's a great Allen Kay quote, he said, "Point of view is worth 80 IQ points." And if you're point of view is I'm going to be long-term oriented, then that long-term orientation allows you to align your behaviors and your activities with your customers. Because in the long term, take a sufficiently long investment horizon, customers and shareholders are very aligned. If you're trying to optimize things for the next three months, then you would go get rid of all the negative customer reviews, because for three months, your sales would go up. But if you're really focused on the long term, you want to help people make purchase decisions, and people will say, "This is a very useful site because it helps you make purchase decisions."
Q: To what extent do you try to authenticate the totality of the feedback? Does anything send off a red flag when you suspect something might be remiss in the feedback world?
Bezos: We have a lot of sophisticated algorithms designed to find feedback abuse—customer review abuse. And, is it perfect? Can it ever be perfect? No. A lot of the people who do that do it in fairly sophisticated ways—they make 20 accounts. I don't want to disclose the procedures we use to find them. They're very similar to what credit card companies would do to try to find credit card fraud. It's the same kind of machine-learning techniques that we can apply to finding patterns of people who are trying to pump up their feedback.
Q: This is more of a broad question about the future of online shopping. You're getting into a lot of new business, one of them is fashion. What do you think are some of the most interesting trends in online retailing that really speak to how we're going to be shopping in the future?
Bezos: I think a big one is mobile. I think you're going to see that more and more over time people are going to be buying from tablet computers—the lean-back on their sofa. If I go back to when Amazon started, 15 years ago, most households had one computer, if they had a computer, not all households had computers—penetration's very high now—and most of that was desktop computer, and they had at best a 28.8k modem. Remember the days of dial-up?
So that was just 15 years ago. It's unbelievable the transformation that's happened. And it's not just a technical transformation, it's an infrastructure transformation. And you're seeing that now, that same expansion in the wireless world with smartphones and tablet computers. That's very exciting for us. It gives us a new environment to experiment and invent in. We launched something for tablet computers called window-shop, and it's completely different user-interface that's really optimized for that device that you hold like this.
Q: How do you get people to buy through their cell phones and smartphones and tablets?
Bezos: I think the user interface has to be optimized for that. The tablet is very different from the smartphone in that regard. The smartphone is getting better so fast, but I think it's going to become a very good shopping tool over time. The key is that to continue to have better 4G bandwith—you'll be able to do a lot more as the processors inside the smartphones get fast enough that your web browser's snappy and responsive, the apps get responsive.
Q: Why should Amazon.com not have to collect state sales taxes? Don't you think it gives Amazon an unfair advantage?
Bezos: Well, you know, first of all, most of where we do business—Europe, Japan, some of the states in the United States—we collect sales tax. More than half of our business, we collect sales tax or the European equivalent. It is, in the US, the Constitution prohibits states from interfering in interstate commerce. There was a Supreme Court case decades ago that clarified—for mail order at that time, because the internet did not exist—that mail order companies could not be required to collect sales tax in states where they didn't have what is called nexus. It was a very clear decision.
Our point of view on this is that we should simplify the sales tax system. The Streamline Sales Tax initiative—I think 21 or 22 states have signed onto this—is the right place to fix this is through Federal legislation. Sales tax collection is very complicated, and we're no different from big chains of retailers—they don't collect sales tax from states where they don't have nexus either. Everybody is following the same rules, and I don't think our customers would say, "Why don't you guys optionally collect sales tax? I know you're not required to do it, but, ah, go ahead."
Q: Amazon ranks very high when it comes to customer satisfaction overall. We recently did a major survey on customer service that showed there's a lot of discontent out there, that showed that people are livid over their inability to connect with a live person—having to deal with arcane phone menus, and just be kept on hold forever. From your perspective, we've been getting a lot of complaints that when they try to contact Amazon, they're very unresponsive. What do you think? Do you think these are valid customer criticisms? What is Amazon doing to enhance the customer service experience to make it better and do you see areas in Amazon where you do need to get better?
Bezos: Yes, for sure, and it will probably always be true. The best customer service is if the customer doesn't need to call you—it just works. And that is one of the primary metrics that we follow and have that improved every year since we've been in business. It's "Customer Contacts Per Units Sold." And we endeavor to drive that down every year. And the way we drive it down is through incremental improvement in every single aspect of our operations.
So the number one contact has always been: "Where's my stuff?" That's number one. Where's my stuff? And we have driven that contact down so far. And the way we've done it is by delivering everybody's stuff.
And so, how do you do that? It's a bunch of different things and it's not one big panacea solution. That's the best customer service: find the defects that drove the contact, work those defects all the way back to their true root cause. There's a process, it's a Toyota phrase, the Five-Whys: you ask why did this defect happen, and whatever the first answer is, you ask why did that happen. And whatever the answer is to that, you ask why did that happen. You do that five times as a sort of heuristic to get back to the root cause. And if you solve those problems year by year systematically at the root, you will have fewer contacts.
We've been doing that for 16 years and I think that's the reason the company has been successful. It's one of the big reasons we get high ratings on customer satisfaction surveys, and we're going to keep doing that. We will not be happy with any customer contact. The only contact should be people saying, "I just had this thought I should thank you guys.” That would be a good kind of contact.
Our mission, we have been talking about for more than ten years that I think great companies have missions that are bigger than the company. One of my role models for that is the guy who founded Sony right after World War II. His name was Morito. And Morito-san said, “We’re going to make Japan known for quality.” He didn’t say, “We’re going to make Sony known for quality,” he said, “We’re going to make Japan known for quality.” At that time, Japan was synonymous with cheap, copycat products, and so our thing that we’ve talk about internally and externally for ten years is we want to raise the entire bar on customer experience, and we’ve broadened it to customer experience and not just customer service because customer service, you know, it’s already too late by the time you’re doing customer service. You do need to do a good job of trying to make things better.
We have a program called customer connection where every employee at headquarters has to go do two days of customer service every other year, and it’s excruciating. It’s absolutely excruciating. Because for the most part, we have, through defect reduction, eliminated most of the easy contacts. So the ones that remain are excruciating. There’s a special kind of hell we call snowball contacts. That’s where we messed up something, and then in the process of fixing it, we messed up the fix. And if you have more than 100 million customers, you’re going to do that everyday. So when you take these calls, you have to hire a special kind of person to do that job day in and day out because you need a person who can exercise empathy with the customer but at the same time those kinds of people, it’s a little bit like, a lot of negativity. Most customers when they call, even though we’ve made a mistake, are unbelievably polite.
When I take those calls, there’s an occasional angry customer, I’m always astonished.
Q: Do you get a lot of customer contact via phone?
Bezos: We take customer contacts in three ways: phone, email, chat. We get a lot of phone calls. Most of our phone calls prefer the callback system. You come online and work your way through the online forum and then you press the call me button. We call you back within seconds. The advantage of that is that the customer service rep already has all your information up on their screen.
Q: What are some of the biggest misconceptions about Amazon?
Bezos: That’s a very good question. There used to be more misconceptions. I think that some of the myths have faded over time. One thing that astonishes me is that a lot of our customers still don’t know that we sell more than books. That’s gone down over time, but we do these focus groups with heavy book buyers occasionally. We bring them in, and we say, “We’re curious, why haven’t you bought anything other than books from us?” And they’re like, “Well, you don’t sell anything else.” And we say, “Oh, no no, we do!” And then we show them the website and they’re amazed that there’s all that stuff there.
That’s a reminder that people are busy. People are on a mission. When they come to Amazon, they’re on a mission. They type in their search terms, they see the book they want, they buy it, and they go back to their family and their children or whatever is really important to them. And so we’re not that important.
We look at it and we’re like, “How come you’ve never bought a digital camera from us?”
And that is changing. Five years ago, that was a major initiative inside the company to try and figure out ways. I think we’re on the tail end of people not knowing we have this broader product assortment. But there’s still some misconceptions.
· Amazon.com [Official Site]
· ShopSmart [Official Site]