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Friday, January 07, 2005

Jeff Bezos Speaks To Chris Anderson

Jeff Bezos talks to Chris Anderson editor of Wired,wherein he covers a wide ranging set of issues like advertising, video sales, marketing, search inside the book etc. This interview looks significant as this quickly follows chris anderson's well read article The Long Tail and the blog that he maintains on this theme. Excerpts from this interview:

When Jeff Bezos was launching Amazon.com a decade ago,conventional wisdom held that 300,000 titles would be plenty; the largest physical bookstores couldn't sell enough volumes to justify half that inventory. Bezos took what he calls "the bold, stupid path" and stocked his shelves with a million titles. Smart move: It turned out that early word of mouth came from people looking for more obscure volumes. These days, the site sells more than 20 million products, including all 29 colors of the KitchenAid 5-quart mixer. And it's a $6 billion business, thanks to its focus on niche markets and customer service.

Does Amazon actually create demand for hard-to-find products : We not only help readers find books, we also help books find readers, with personalized recommendations based on the patterns we see. I remember one of the first times this struck me. The main book on the page was on Zen. There were other suggestions for Zen books, and in the middle of those was a book on how to have a clutter-free desk. That's not something that a human editor would have ever picked. But statistically, the people who were interested in the Zen books also wanted clutter-free desks. The computer is blind to the fact that these things are dissimilar in some way that's important to humans. It looks right through that and says yes, try this. And it works.

On How this is different from the approach taken by other retailers: Its Not Push or Pull It is the "hard middle" - marketing an inexpensive product, where the gross profit per sale is low, to a small group. A very successful, profitable, midlist book might sell 15,000 copies. In the old world, finding the right 15,000 people to buy that book was ridiculously expensive. This is something that Amazon.com and the Internet in general have really helped with. Relative to the industry as a whole, we're disproportionately weighted toward harder-to-find titles. People sometimes confuse obscurity with bad quality.

On Search Inside the Book: If you went into a physical bookstore, and all the books were shrink-wrapped shut, would you sell more that way? Probably not. But for the first eight years, that's what Amazon.com was. Now there are hundreds of thousands of books [that can be full-text searched]. Sales of those books are up 9 percent relative to others. We wondered about things like cookbooks and reference titles - would people just take the snippet they need and not buy the book? In fact, by letting people search inside, sales of these types of books have gone up more than average.

On proportion of online, and offline sales : Online ultimately will be 10 to 15 percent of retail. The vast majority of retailing will stay in the physical world because people have acute needs, they want things now. Also, there are products, where the economics of delivery don't make sense.

About videos sale online: One of the big costs here is that an extremely large fraction of those monthly subscription fees are used to acquire new customers. Amazon is well positioned to offer a low-priced service of high quality, and we wouldn't have to pay heavy marketing fees. In fact, this is a general thing that we've done that has been very helpful to our business. About three years ago we stopped doing television advertising . we put all that money into lower product prices and free shipping. That has significantly accelerated the growth of Amazon.our business. Yes, more and more money will go into making a great customer experience, and less will go into shouting about the service. Word of mouth is becoming more powerful. If you offer a great service, people find out.

In its implications for print media :Advertising is going away. But the balance is shifting. If today the successful recipe is to put 70 percent of your energy into shouting about your service and 30 percent into making it great, over the next 20 years I think that's going to invert.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"