Amazon.com founder and CEO Jeff Bezos recently paid a visit to Consumerist headquarters, and in a freewheeling discussion with Executive Editor Meg Marco, he answered questions about everything from the benefits of being an Amazon Prime member to customer service. According to Bezos, Amazon’s new Prime Instant Video service is just the start of a series of enticements to keep Prime members happy — and not an effort to take on streaming giant Netflix.
The Amazon CEO also said that he’s concerned about the privacy of all the data you’re storing in his cloud, and — knock on wood — he says it’s safe. Bezos also touched on one of your favorite topics: wasteful packaging. Turns out that’s one of his favorites as well. Read on for his master plan to banish giant boxes of air from the face of the Earth.
CONSUMERIST: So, the whole streaming thing. Are you guys taking on Netflix?
BEZOS: Well, what we’re trying to do is… we have a program called Amazon Prime where you pay a flat fee per year, $79 in the U.S. It’s a global program and it’s different in every country. You pay $79 in the U.S. and then you get unlimited 2-day shipping for free. And that’s been an incredibly popular program. We launched it seven years ago now? Something like that. And it has gotten to be of substantial scale. People enjoy it. Renewal rates are extremely high. And so we wanted to start to add as people transition from buying DVD to streaming movies and television shows, we wanted to provide some value for Amazon Prime members in that regard. So we left the fee at $79 a year and started adding, and will continue to add… so we’re doing deals with, you know, the movie studios and the television networks and so on…
CONSUMERIST: So Prime members can sort of expect that there will be more value added to this program…it started with shipping and it’s just going to keep going.
BEZOS: Yeah. And so Prime Instant Video is a natural extension of that. So it’s unlimited… just like Prime shipping is unlimited 2-day shipping…this is unlimited instant streaming. And we’re continuing to add to our selection. There are a bunch of things we are not ready to announce yet, but they are on the horizon in terms of adding content to [Prime] and so on.
CONSUMERIST: Are there privacy implications for the new Cloud Player that people aren’t immediately aware of?
BEZOS: I suppose if you’re really concerned, keeping things on your own disk drive is probably the most private way to be. But it also has a lot of inconveniences. And so I think the key on these privacy issues is to work to be straightforward so people understand what’s going on. And, you know, when you store your music in the Cloud…I can’t think of what the scenario would be but, you know, somebody might find out that you have really bad musical taste or something, you know, but… (laughs)
CONSUMERIST: (laughs) That’s funny.
BEZOS: But there are … you know, I think this is a… it’s an area that people are rightly interested in and they should continue to think about and decide where they want to keep their digital assets.
CONSUMERIST: So as a company, is Amazon committed to doing everything it can to respect the privacy of people who are uploading files to the service?
CONSUMERIST: Oh, no! (laughs)
BEZOS: Yeah, I know. Let’s not tempt…
CONSUMERIST: As soon as you say that….
BEZOS: Let’s not tempt the fates. Let the record reflect that I did knock on wood. (knocks on wood a second time)
CONSUMERIST: (laughs) Okay, I will.
CONSUMERIST: Our readers are really enthusiastic about Zappos. They love Zappos.
BEZOS: Yeah, me too.
CONSUMERIST: (laughs) Hey, well, obviously (laughs)…
CONSUMERIST: Are you finding that there actually is an ROI on Customer Service? Is that a model that works?
BEZOS: I’ve always believed that. I broadened it to Customer Experience. It’s just our internal lexicon. We think of Customer Service as a subset of Customer Experience. And Customer Service is on the phone or on email or chat or however you’re helping customers. I mean, the reason we bought Zappos is because they do things differently from Amazon in some cases, but we’re both very customer-focused companies. And so, you know, that was the whole calculus on, “Let’s hook up these companies.”
CONSUMERIST: And it’s been a smooth transition?
BEZOS: It has. It’s been smooth mostly because we’ve left them alone. (laughs) That’s one way to be sure to make things go quite smoothly.
CONSUMERIST: As someone who was acquired by another company, I can appreciate that philosophy.
CONSUMERIST: Alright. So I have to ask you about the biggest complaint we get about Amazon. You ready?
BEZOS: I’m ready. I had a root canal with no anesthesia, I’m accustomed to pain.
CONSUMERIST: Do you have a guess at what it might be?
CONSUMERIST: No. Okay. It’s about giant boxes with…
BEZOS: Oh. (slight cringing expression)
CONSUMERIST: …just one little memory card in it.
BEZOS: Yeah. Well, here’s the good news. We measure the amount of air that we ship around.
BEZOS: And shipping air is extremely expensive for us. (laughs)
BEZOS: And so that pain is shared. We don’t like putting a memory card in a big box. If you think about… you know, most modes of transportation are volume constrained and not weight constrained. So when you go to fill up a UPS truck, for example, it’s not that you can’t put – at least with our assortment of products. I mean, I guess if you were shipping around cement or something it might be different…But with our assortment of products that truck is never too heavy. But it only has a certain amount of volume. And that’s what drives our cost structure. It trends with getting air out of the boxes. And so we have for several years now, been measuring how much air we ship around. And that’s been getting better every single year.
And we’ve also introduced – not to all of our fulfillment centers yet because we have a bunch of fulfillment centers and the scale is such that we have to kind of test things very carefully.. But we now have smaller envelopes that we can use to ship things like memory cards. And so we’re starting to add different box sizes and envelope sizes to further compress air out of our packages.
(Someone randomly slides a small “frustration-free packaging” example at Bezos from the other side of a long conference table in a rather impressive, athletic fashion)
BEZOS: (to the person who slid the box) You’re like an air hockey player.
BEZOS: But this is… I don’t even know what product this is.
WELL-COORDINATED AMAZON EMPLOYEE: Pedometer.
BEZOS: (picks up the small brown box and opens it) It’s a pedometer. But, you know, this is frustration-free packaging. It has to serve two functions… it can ship in its own package. You can just put a label directly on this and ship it to the customer. So you don’t have to over-box it.
That’s if the customer orders it alone. If the customer orders it with another product, this package is also designed so that it can be married with that other product and then put inside a bigger box.
But the frustration-free packaging does several things for us. It takes air out of the box, because the box is custom-made for the product.
When you build a package for the retail, the traditional retail environment the package is the advertisement. So that’s why they come in like clear blister packs…
CONSUMERIST: That you can’t open.
BEZOS: …that you cannot open without bleeding.
BEZOS: And so these packages are designed to be opened with no tools. And they’re also environmentally better because not only are you shipping less air around but there’s…less cardboard, less plastic, no twisty-ties. At the scale we are now, we can actually have productive conversations with manufacturers. Because this saves them money, too.
BEZOS: So the problem is, they have to make two SKUs. And the scale has to get to a certain level before it becomes worthwhile for them to make two SKUs. So now e-commerce has gotten big enough they can say, “Let’s make an e-commerce SKU. It’ll save us money because we don’t have blister packs” They don’t like blister packs either.
CONSUMERIST: No one does.
CONSUMERIST: Shoplifters. Shoplifters especially don’t.
BEZOS: We don’t have to worry about shoplifting. So there are a whole bunch of advantages to doing this and we’re going to be able to continue. I do get, you know, customers send me photographs of like, a box this big with a memory card in it and I send them on to our logistics team…
CONSUMERIST: Those are our people.
CONSUMERIST: We have a whole series about you…and your packaging.
BEZOS: I will leave you with the happy thought that we are very energized and over a number of years we’re going to resolve that.
CONSUMERIST: And actually I have to say, just anecdotally, that [the number of photos of ridiculous packaging sent to Consumerist] have dropped.
BEZOS: Yes. We’ve gotten better.
CONSUMERIST: Thank you so much.
BEZOS: It’s a pleasure.
CONSUMERIST: I really appreciate it.
BEZOS: Thanks for taking the time to do it. I appreciate it.