The Everything Store

When, in 1994, the Internet began to show its potential, one of the most enterprising companies on Wall Street, D.E. Shaw (known as DESCO), decided to bet on the sector chosen by Jeff Bezos, who was vice president of the company at the time, to help steer the business. Well known for his intuition, and determined to learn from anyone, Bezos was the right man for the job: meticulous, disciplined and analytical. The initial project was very simple: to open an online shop that “sells everything”, to create a computerised company that acted as an intermediary between clients and producers of any goods, in any part of the world. Among its key characteristics was to allow buyers to leave product reviews.

They needed to choose a category of goods to launch the product, and Bezos chose books based on careful analysis: when buying books, customers know what to expect, there are few competitors and millions of titles. He was so sure of his idea, that he decided to leave DESCO, and once he had recruited his friends as programmers, he started up on his own.

The company was founded in Seattle, for several reasons: the city already had a reputation as a great technology hub, and the state of Washington, which has a relatively small population, had a lower sales tax. They didn’t have much money at the time: the budget was small, 10,000 dollars in cash, $84,000 in bank loans, a few thousand invested by Shel Kaphan, who was to become his main associate, and more than $100,000 put up by Bezos’ parents.

The first name they came up with for the company was Cadabra Inc. that they soon dropped because it sounded like they were saying cadavre, and even more so on the phone. So they registered the domain name Relentless.com, but Bezos found the perfect word in the dictionary, which they adopted in 1994: Amazon, the name of the biggest river on Earth, was to become the name of the biggest bookshop on earth.

One of the first obstacles they had to overcome was the low sales volume: usually distributors ask vendors to order at least ten books at a time, but Amazon certainly did not have orders that big. Their strategy was to order nine copies of a book on lichen that the bookshop had in its catalogue, but which was sold out, along with the book they wanted. So every time the book would arrive with a note attached on which was written, “We are sorry but the book on lichen is currently not available”.

The next step was to implement a function to collect reviews, set up in just a weekend by friend and colleague Shel Kaphan: Bezos felt sure that by increasing the number of reviews written by readers themselves, that the number of clients willing to trust his online bookshop would also increase. Not filtering negative reviews proved to be a great move, Bezos felt sure of his intuition: “we don’t make money when we sell things. We make it when we help customers make purchase decisions.” And he was right.