Amazon Cadabra – The Bezos Bookstore’s Origin and Future

By February 5, 2021Weekly TGIF

Amazon launched in the Summer of 1995, as a website that sold books. The company was formed less than a year earlier in the garage of Founder Jeff Bezos. He was 30 years old. Bezos had $10,000 in seed money to get it off the ground. It was an instant hit.

Amazon sold books to people in all 50 states and in 45 different countries in its first month in business. This was before most Americans even had an email address. Jeff Bezos and his first few employees took the orders, packed the books and drove them to the post office themselves in those early days. Whatever it takes was the attitude.

They changed the world. The Digital Age was on. It’s just incredible to take a step back and think about what’s transpired in just a score and a quarter years’ time. The Amazon Effect completely changed consumer purchase habits and disrupted retail forever. It is said that Bezos knew from the very beginning that he wanted Amazon to be “an everything store.” It certainly is.

There was no guarantee. Far from it. It’s remarkable that neither of the dominant booksellers of the day, Barnes & Noble or Borders, entered Amazon’s digital domain or even acquired the seedling startup. Borders filed for bankruptcy in 2011. Barnes & Noble has been struggling for survival for years. All the while, the Amazon Empire has grown to a nearly $2 Trillion Titan of Tech.

Did you know that Amazon was not the first choice in name? Apparently, Jeff Bezos wanted to give the company the magical sounding name “Cadabra.” His lawyer struck it down because it sounded too much like “Cadaver,” which he deemed bad for business. Bezos also liked the name “Relentless” for his web startup. But that didn’t stick either. Jeff Bezos finally settled on “Amazon,” naming the company after the largest river in the world. Just for fun: Try going to the site Relentless.com, it still navigates straight to Amazon.

It’s been quite a ride for the stock. Accounting for the companies 3 share splits, all coming before Y2K, the stock closed its first day of trading under $2. That was 1998. It raced to a then all-time high, just over $100, in 1999. The stock fell 96% during the Dot-com crash, hitting a low of $5 in 2001. That was then. It cleared $3500 last Summer. It’s at $3300 today. There’s been no stock split since 1999.

Amazon now accounts for half of the American Consumer purchases online, selling darn near everything under the sun and delivering it expeditiously. Amazon has over 150 Million Prime members, which account for nearly 2/3 of its customers. Amazon Web Services has become the largest public cloud provider, and is by far the company’s most profitable business.

This week, Amazon reported record revenues. They generated over $125 Billion in Q4, up a whopping 44% from the prior year on the back of strong holiday demand. However, the biggest news wasn’t at the register. Jeff Bezos said he would step aside later this year, though he would remain engaged at Amazon as Executive Chairman. Andy Jassy, the head of the company’s cloud division, will take over the lead in July. Jassy is an Amazon veteran (he’s been with Bezos since 1997) and was the architect of Amazon Web Services.

Now at age 57, Bezos is formally hand­ing over the Amazon reins. It comes while the company’s core busi­nesses of on­line re­tail and busi­ness computing ser­vices are boom­ing dur­ing the pandemic. The trend that was already in place accelerated, as work and life shifted to the in­ter­net more than ever. Amazon has never been stronger.

Amazon’s success and size has drawn attention from the Department of Justice, like the other Tech Titans. The company will have to face the anti-trust allegations in the months and years ahead. There is talk of breaking up the company, which seems highly unlikely. Amazon lowers prices in the marketplace. Customer satisfaction is so high. The new CEO will have to navigate through the challenges ahead.

A Founder handing the baton off to a successor is anything but new. Both Microsoft and Apple grew substantially with great success after Bill Gates and Steve Jobs stepped down. Tim Cook executed Steve Jobs’ vision like few could’ve imagined and expanded the company’s size and scope, becoming America’s largest company in history. He was the right guy, at the right time. After a decade of losing its way under Steve Ballmer, Microsoft has reinvented itself as a dominant player in the Cloud under the skillful leadership of Satya Nadella. Microsoft is now the second-largest American company. It’s now Andy Jassy’s time at Amazon, the 3rd largest American company.

It’s been over 3 years since Amazon acquired Whole Foods Market. Since joining the Amazon family, Whole Foods’ growth accelerated. There are now over 500 stores, of which 10 new locations opened in 2020. Amazon continues to invest in grocery delivery, which is now available in over 2,000 cities. Prime members can get 2-hour delivery in nearly 100 locations. Amazon has delivery down.

The Amazon-Whole Foods marriage has also made it clear that it’s difficult to sell fresh food inexpensively, either in a physical store or through delivery. Stating the obvious, bananas are different than books. But Amazon is in it to win it. Amazon is considering designing stores specifically with pickup and delivery in mind, with a smaller area dedicated to fresh in-store shopping. Whole Foods was simply the beginning, not the end.

What’s next for Jeff Bezos? Well, he will still keep tabs on Amazon, as its Executive Chairman and largest shareholder. He still owns 11%. But his attention seems to be drawn to Blue Origin, his aerospace startup. Bezos has called it the most important work he’s doing. He wants to go to space to protect Earth; Hence the name. The time is right.

The US Military has embraced private enterprise like never before to rejoin the space race. It’s still the new frontier. Foreign threats are on the rise, led by Russia and China. Anti-satellite weapons have emerged and communication jamming is occurring with increased frequency. Space Force was created to launch a new campaign of American ingenuity and influence beyond the Earth’s surface and the Pentagon is teaming with innovative leaders like SpaceX, Virgin Galactic and Bezos’ Blue Origin to get it off the ground. It is very early days, and the sky is truly the limit.

The next chapter of the Bezos Storybook is just beginning. An idea, a garage and $10K in his pocket brought more than magic. Abra Cadabra, the Amazon Empire was born. The future looks bright for investors throughout the galaxy. Go big is the theme. It’s all very investable.

Have a nice weekend. We’ll be back, dark and early on Monday.

Mike

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