Café helps Jeff Bezos revive Amazon

After more than 30 years of operation, Amazon is currently a multinational company with a capitalization of US $ 2,380 billion and is one of the largest retailer in the world. However, in 2001, they were pushed to the verge to collapse after the dotcom bubbles were broken and the Amazon stock lost up to 90%. Some analysts believe that Amazon will not recover. However, the founder of Jeff Bezos turned the situation, thanks to the helpful advice of Jim Sinegal – founder of retailer Costco – Amazon’s opponent.

According to the book The Everything Store, that year, Bezos made an appointment to meet Sinegal at a Starbucks store near the Amazon office in Bellevue, Washington. Bezos wants to talk about cooperation to Costco is a wholesale supplier of some products. However, the conversation quickly turned into a discussion about the price strategy.

Sinegal explained to Bezos they can sell many super cheap products by reducing unnecessary costs and maintaining close relationships with suppliers to wholesale good prices. Low price is the key that makes customers buy the annual member package of Costco. This is a great contribution to the company’s gross profit.

“The member fee is only paid once, but whenever customers come in, they can see the 74 -inch TVs sell cheaper than elsewhere to 200 USD. It strengthens the concept of value. Will find really cheap items in Costco, ”he said.

Costco’s approach is “all victory value”. They will always make efforts to ensure that they bring enough value to help customers feel happy. In The Everything Store, Sinegal said he believed “Jeff has considered that approach and thought that he could apply to his company.”

Bezos has never announced the meeting with Sinegal inspired Amazon’s price strategy. However, only a few days later, he opened a meeting in Amazon. The content is a “inappropriate” price strategy and must find a way that is always lower than the opponent.

That summer, Amazon lowered the price with some key products, such as books, music and videos. Some are discounted up to 30%. “There are two types of companies: one trying to raise prices, and two are trying to reduce prices,” Bezos said then, according to New York Times. Bezos said that Amazon would always try to do the second company.

At the end of 2001, Amazon’s revenue increased again. The company even recorded the first quarter profitable. Bezos thinks that the reason is the lower price strategy and the commitment to eliminate unnecessary costs to keep the price low. This strategy is similar to Costco.

“We have a great quarter and really feel proud. We always try to keep the price low, but just a little more reduction, the business results have improved big,” Bezos for know above Fox News January 2022.

In 2005, Amazon launched the Amazon Prime membership program, further discount and free shipping for prepaid people a fee. In the letter to shareholders in 2016, Bezos explained the idea behind Prime, using the language that reminds Sinegal and Costco: “We want Prime to bring good value. You will regret if not a member” .