Transcript of Sam Donaldson Interview With Amazon.com's Jeff Bezos

Business Wire, Dec 21, 1999

     Donaldson: Today we're going to talk about the great engine of
e-commerce, Amazon.com and we're going to talk to the founder, Jeff
Bezos, who's standing by in New York City. Jeff, welcome.

     Bezos: Thanks Sam. It's great to be here.

     Donaldson: Well, it's great to have you. Now, let's see. You
graduated from Princeton summa cum laude and Phi Beta Kappa, but
you're just 35 years of age, you've founded this company and went
online in what, July of 1995? And you're worth what, seven billion
dollars? How did you do it?

     Bezos: Well, in the spring of '94 I came across this startling
fact that Web usage was growing at 2,300% a year and, you know Sam,
things don't grow that fast. That's very unusual. So, that was sort of
a wake up call and I made a business plan that called for selling
books as the first best product, primarily because books are
incredibly unusual. There are so many of them so you can build a store
online that simply couldn't exist any other way and that's really how
it all started.

     Donaldson: How do you come up with the name Amazon? I mean it has
that big, burley sound to it.

     Bezos: It's Earth's biggest river, Earth's biggest selection,
that's how the name came up. And I actually went through the A section
of the dictionary looking for the name.

     Donaldson: At least it could have been called Triple A service.

     Bezos: Exactly.

     Donaldson: Jeff, what do you anticipate for this holiday season
as your gross sales?

     Bezos: Well, we'll have to wait to see what the whole quarter
will be until the end of the quarter, of course. But what we did see
was that Thanksgiving weekend, which is really the beginning of the
holiday sales cycle, we saw order rates that weekend two-and-a-half
times what we saw last year at the same time.

     Donaldson: Are you going to be able to fill them quickly? Because
last Christmas, it's no secret, you almost went under because what,
you had no business? Wrong. Because you had more business than you
anticipated.

     Bezos: Well, you know Sam, every Christmas, this is our fifth
Christmas now, we've always had a tremendous number of orders and
we've always had the sweat, blood and tears to make sure we service
customers and we've done it every time. This year we're more prepared
than we ever have been. We have 12 million feet of ribbon in our
distribution centers and we have something like seven million square
feet of wrapping paper, too, so we're ready.

     Donaldson: Well those figures are astounding, but it's like your
commercials. I don't know if you're still running it. The one that
says, "Hello, is this the Pentagon and can we rent space from you?"

     Now let's look at some of the figures or the projections about
holiday shopping online and offline. In 1998 online sales were about
$3 billion. The total sales for that holiday shopping period -- $174
billion. Here are the projections for this year. Online sales are
projected between $6-9 billion and we chose $6-7 (billion) as the
average. Total sales have increased to $186 billion. So, Jeff, you and
your competitors are making progress, but you still only have about 3%
of the total market.

     Bezos: That's right. This is the very beginning. This is still
day one for e-commerce and we know 2% today of what we'll know 10
years from now about e-commerce. And people are still coming online.
And what we'll find, I think, is that the services will be even better
and the selection of things you'll be able to find will be better, it
really is the beginning. But it doesn't mean that physical stores are
going to go away.

     Donaldson: Why not ...

     Bezos: ... they are going to continue to thrive.

     Well, I'll tell you, the physical world is still the best medium
ever invented. You can do things in the physical world that you just
can't do any other way.

     Donaldson: Yes you can, but as far as shopping goes. I suppose if
you want to actually feel the texture of the material or try it on,
you can't try it on online. Is that it?

     Bezos: That's right. That's one example. Another example would be
if you have something that is an acute need. Like you need a
prescription drug right away, not something that is a chronic
condition, but something. You need your penicillin immediately and
you're going to go to the pharmacy and pick that up yourself. There
are a whole bunch of reasons why people are going to continue to shop
in the physical world.

     Donaldson: Let's get to some of the chat e-mail questions that
have been received here. Jason wants to know what precautions are Web
companies taking to prevent hackers from intercepting credit card
numbers?

     Bezos: Well, there are good companies and this is one of the
things you should check when you shop online. Make sure they're using
a secure server. So this uses an encryption technology called SSL and
it makes it very difficult, if not impossible, to intercept credit
card numbers in transmission. And giving your credit card online is
much, much safer than giving it to a random stranger in a restaurant
or any of the various ways we use credit cards. At Amazon.com we take
it a step further and we guarantee that if your credit card is
intercepted somehow that we will make good on the $50 part that the
credit card company itself does not cover.

     Donaldson: Jeff, as you've explained, if the server ... if it's
protected then they can't in fact steal the credit card numbers, is
that it?

     Bezos: Well, in terms of interception, it's the connection
between the server and your browser, whether your using Internet
Explorer or Netscape Navigator, that connection between the browser
and the server is the key thing, and you can encrypt all of the data
that flows across that connection and that's what Amazon.com does.

     Donaldson: I learn something everyday. Believe me, there's a lot
more room to go.

     You were just, if I may use the word bragging, and what's wrong
with that, about your service and the fact that you've improved and
it's going to be quick. I understand Barnes & Noble, of course one of
your chief competitors at least for books, is now testing a service in
New York City with bike messengers and they're going to say we can
deliver within hours, not just 24 hours. Can you match that?

     Bezos: Well sure we can Sam, if that's something that customers
want we figure out a way to give it to them. This is, our motto at
Amazon.com is we want to be Earth's most customer-centric company. And
we don't even just mean online. We mean across any industry, any time,
any geography. And the way you do that is you listen to customers, you
figure out what they want, you figure out how to give it to them, you
invent on their behalf because it's not their job to invent for
themselves and then you personalize the experience for them. Those are
the three components of being customer-centric and that's always what
we work on.

     Donaldson: By the way, Jeff, I don't want to make trouble, though
my reputation has a certain feel about that, but you were on our "This
Week" program with Cokie Roberts and me the other day and with Steve
Case, and Steve made the statement that he hoped AOL would be the
largest corporation in the world and I didn't get a chance to ask you
and I'll ask you now -- are you going to let him get away with that?

     Bezos: Our goal is different. We want to be Earth's most
customer-centric company rather than the largest and we're going to
work on that obsessively, and heads down focus on the customer.

     Donaldson: Jeff, here's a question from Paul who wants to know
when will Amazon record their first net profit?

     Bezos: Well, Amazon.com is, as you know Sam, a famously
unprofitable company, and that is a conscious decision. I should
add ...

     Donaldson: What? It's a conscious decision to be unprofitable?

     Bezos: Yes it is. I should add ...

     Donaldson: I've got some land to sell you in Florida ...
(laughter)

     Bezos: No company cares more about long-term profitability than
Amazon.com. No company cares more about return on invested capital
than Amazon.com. But we believe it would be a big mistake at this time
to be focused on short-term profitability. This is the critical
category formation time; this is a time when we need to be investing.
You know, we just opened a new toy store, which PC Magazine has rated
the No. 1 toy store online, the best place to buy toys, and we've
opened a tool store, a home improvement store, software, video games,
[inaudible] shops, auctions, and so on and so on. All these endeavors
require investments and we think that this is the time to do that
rather than later.

     Donaldson: Jeff, you talk about profitability now, let me ask you
to respond to the criticism that I see in some articles that you're
running a sweatshop, that you don't pay wages that are worth anything,
you work people too hard. Anything to that?

     Bezos: No. The vast majority of people at Amazon.com are all part
of what we're trying to do. The wages in our customer service center
are very, very competitive. People get paid between $10-13 an hour,
they get health benefits, medical and dental, as well as, of course,
stock options. So no, it's a very, it's a company that believes in
ownership and I think it's a very enlightened company in that way.

     Donaldson: We have an interesting question for you from someone
who signs themselves Anti-shopper. Jeff, it says, what have you bought
online this year?

     Bezos: Well, in terms of buying online, my occupation is a
hazardous one. I'm dangerous with one-click shopping. So, of course, I
buy a tremendous number of things on Amazon.com. I buy, you know, we
have a toy store and we have ...

     Donaldson: Just answer the question if you will, sir. What have
you bought online? You're dancing around like any good Washington
politician (laughter).

     Bezos: I buy all of my groceries online from Homegrocer.com. I
don't like to go to the drug store so I buy my drugs online from
Drugstore.com and I buy silly toys like the Silly Slammers, the Austin
Powers Silly Slammers -- Dr. Evil, Mini Me, it's a great toy.

     Donaldson: You answered the question. Final question from Biff.
Biff wants to know what product won't you ever sell online, if any?

     Bezos: We have a couple of policy areas where we decided not to

do anything. We're not going to sell firearms online, we're not going
to sell living creatures. Those are two of the ideas. Actually, one of
the companies we've made an investment in has already started to sell
goldfish online, so, you know.

     Donaldson: I want to now give the results of our ballot question
and see what you think of them. We asked people who wanted to hit that
ballot tab -- How much of your holiday shopping will you do online?
All -- 3%, Most -- 12%, Some -- 37%, and this is an interesting
figure, None -- and these are people online remember or they wouldn't
be answering the question -- 47%. Is that bad news Jeff?

     Bezos: No, I think that's about what you would have expected. And
one of the things I think you're seeing come through in that survey is
that this really is day one. This still is the very early innings of
e-commerce and that's why when you talked about the less than 3%
figure earlier, I think what you're seeing there is very consistent
with that.