In the summer of 1997, the St. Paul Pioneer Press sent me to Seattle to interview Microsoft executives about the Twin Cities launch of Sidewalk, the software giant’s online entertainment guide. (Sidewalk was sold to Ticketmaster two years later after failing to take off.)
What I really wanted to do in Seattle, though, was visit Amazon’s headquarters and interview founder Jeff Bezos. I was on good terms with his PR person, Kay Dangaard — we talked and emailed often for my weekly Pioneer Press TECH section column — and she went out of her way to convince him to spend some time with me. (She told me she did it by pointing out that my story would go out on the Knight Ridder/Tribune wire to many newspapers, and not just run in the St. Paul paper.)
Last week’s Bezos-Washington Post news had me trying to remember what I wrote about Bezos 16 years ago. Thanks to the Pioneer Press staffer who went into the paper’s archives today and found my story. It’s after the jump.
8 / 8 – Monday, July 21, 1997
Edition: Metro Final
Source: James Romenesko, Staff Writer
Illustration: 1 Photo:
1 Illustration: Noah Musser//Pioneer Press
THE HEIGHT OF ONLINE SUCCESS//TINY AMAZON.COM SQUARES OFF AGAINST INDUSTRY GIANT BARNES & NOBLE.
BY JAMES ROMENESKO
When Amazon.com founder Jeff Bezos watches the 40-foot postal trucks pull up to his Seattle warehouse each morning, he marvels at how fast his online book-selling business has grown.
Just two years ago, Bezos says, he was the mailroom grunt, as well as the founder and chief executive officer of Amazon.com.
“I drove all the books to the shippers, UPS and the postal service, in a 1987 Blazer for the first couple of months,” says the 33-year-old former Wall Street computer programmer. “We thought we’d just have a few orders at first and that business would build slowly, but it didn’t work that way.”
From the start, he was deluged with orders.
“The word-of-mouth was extraordinary,” he says.
Bezos’ first warehouse had previously been used as practice space for a grunge band. “It was about the size of a one-car garage,” he says.
Today his operation occupies four floors of an aging downtown Seattle building, across the street from a boarded-up pawn shop. A nearby strip joint advertises “12 beautiful women and one ugly one.”
A receptionist in the Amazon.com lobby chases a panhandler out on a recent day and apologizes to the waiting guests.
Bezos’ office is four floors above the street scenes, in a modest and cluttered space. An unopened bottle of champagne – a gift he received the day his firm went public – sits in one corner. In another, there’s a sleeping bag that Bezos pulls out and uses after especially trying and long days.
In a recent interview, Bezos talked about his life since May 15 — the day his online bookstore offered shares to the public – and the threat from Barnes & Noble, which recently set up its own online site.
“How has my life changed post-IPO?” he asks, referring to the initial public offering. “Personally, it hasn’t changed at all. I still drive a 1996 Honda Accord. The big difference is that we now have $50 million in the bank, which is huge.”
Three years ago, when he quit his programming job and drew up a business plan for an online bookstore, Bezos knew he was venturing into an untested retail arena.
“To do something a little bit crazy you have to be very optimistic, and I was. I always expected Amazon.com to be very successful,” he says. “But what’s unusual is that it has vastly outpaced my expectations in terms of how big of a company it’s become.”
Last year, the online firm sold $16 million in books, but it lost a few million along the way, too – something he says was expected.
Bezos welcomed online shoppers for the first time on July 15, 1995, and less than a year later, he was on the front page of The Wall Street Journal. He couldn’t ask for a better way to introduce himself to investors, many of whom were anxious to put money into any company with Internet ties.
The story called Amazon.com “an underground sensation for thousands of book-lovers around the world,” and said the online bookstore “caught fire” because Bezos understood Web technology like no other retailer.
With that, Amazon.com moved aboveground and became a media darling. When reporters needed to cite an online success story, they usually pointed to Bezos’ operation – even though he wasn’t close to turning a profit.”
“The primary benefit of that article was that it gave us credibility with publishers, suppliers and other parties we do business with,” Bezos says of the Journal story.
A year later, Bezos returned to New York City and went to Wall Street to watch Amazon.com go public.
On May 15, Wall Street bought up the bookstore’s shares at premium prices. They were initially offered at $14 to $16 per share, but closed on the first day of trading at $23.50.
Since that first offering two months ago, Amazon.com’s stock has been volatile, dipping as low as $14, then rising to $30. Lately it’s hovered around $28.
Analysts are uncertain about Amazon.com’s future now that Barnes & Noble has finally gone online to peddle books.
“The difference between the two is that Amazon.com is an insignificant speck in the book-selling universe,” says Bill Bass, an analyst with Forrester Research. “But they’re a rapidly growing speck. Still, book publishers are first going to take care of the people who sell billions of dollars of books, and that’s Barnes & Noble.”
But Bass doesn’t believe Amazon.com is out of the game.
“What Amazon has done better than any other Internet merchant is take its store to the people,” he says. “They’ve just cut deals with America Online and Yahoo!, so now they’re weaving themselves more into the fabric of the Internet. Where ever you go on the Net, you will see an Amazon.com store. But they’re going to be in a dogfight with Barnes & Noble.”
Bezos says he always knew he’d eventually do battle with the giant book retailer.
“I’m surprised at how long it has taken (for Barnes & Noble to sell online),” he says. “It’s extremely unusual in the business world to have almost two years to compete against, more or less, a vacuum. We’ve been especially lucky, because the fact of the matter is unless you get a substantial head start like that it’s very difficult to compete against a company with $2.4 billion in sales and 28,000 employees.”
Bezos says he and his estimated 300 employees are going to survive by providing better service. It’s the offline bookstores that have to worry and rethink their selling strategies because of the Net, Bezos says.
“Physical bookstores are going to have to compete on the basis of being fun places to be – you know, with softer sofas and tastier lattes,” he says.
David Unowsky, owner of Hungry Mind Bookstore in St. Paul, pooh-poohs that, and says online bookstores are no more of a threat than any new retailer on the street.
“I’ve seen the list of the top 100 books sold last year by Amazon.com and 95 of them were business or computer books,” he says. “Those aren’t strong departments in our store.”
Unowsky notes that many people still savor the traditional method of choosing books.
“A lot of book lovers want to see the physical book,” he says. “And (Bezos) can talk about some cutesy things like sofas and lattes, but most people I know like the social interaction they have when they go to a store and that you can’t get on your computer.”
The Hungry Mind owner notes, too, that online book retailers have yet to prove they can turn a profit on the Internet.
“They did $16 million in sales and lost $5 million last year, so they’re more of a threat to their stockholders,” he says of Amazon.com.
In 2000, Unowsky sold the name Hungry Mind and used the profits to keep his store going. He went out of business four years later.