Amazon's Retail Revolution Business Boomers

OK. You just type "www dot amazon dot com".

That takes you to our website.

The British do more of their

shopping online than any other nation.

Last year, tens of millions of British customers used Amazon

to buy £4.5 billion worth of goods.

It's the instant gratification part of it that is

so attractive to me and a little bit ominous.

Amazon is accused of changing the book business from this...

Just have a read through a couple of pages, see what you think.

..to this.

Amazon's ambitions now stretch way beyond books...

We're about to leave for Afghanistan.

-..into the world of media.

-Introducing Amazon Fire TV.

Its drive to cut prices puts the squeeze on competitors.

It's actually designed, from the ground up, to be a shark,

like it's designed to dissolve and destroy other businesses.

But Amazon is also creating new jobs in Britain.

It gives us an opportunity to access a marketplace that we would

never otherwise be able to access.

Start with the customer and work backwards.

Amazon's amazing story, from start-up to global titan,

is also the story of its founder Jeff Bezos.

He really is a tough boss.

He has driven that company and drives those people very, very hard.

We ask what Amazon's ever-growing business is doing to our economy

and our lives.

And we examine how Jeff Bezos' formula for success shapes

Amazon's culture and has made him such a happy billionaire.

HE LAUGHS LOUDLY

There aren't many places where Amazon doesn't reach these days.

In fact, the more remote the spot,

the more difference it's made to people's lives.

Online retailing really opens up the world to us.

You can't buy a rowing machine in John O'Groats,

but Fred Fermor's arrived the day after he ordered it on Amazon.

Although we live in quite a remote area, we still have the same choice

as someone walking down Oxford Street in London.

Across town at the hotel, the darts team's shirts also

came from Amazon, ordered by the manager, Andrew Mowat.

Before companies like Amazon or even the internet,

it was a lot more difficult for us to get things here.

We maybe had to do a 20 mile trip to Wick or Thurso,

or even worse than that, a 120 mile trip to Inverness.

John O'Groats has one shop.

The locals still use it, but it's never going to have all

the things they can find when they're back home, looking online.

What's a chap to do if he needs a fancy dress costume?

Ooh, yes!

Or even a special kind of mop for the family ferry business?

The convenience is irresistible, done at the click of a button,

you can buy it and basically, it's here the next day.

You don't have to live in John O'Groats to feel the lure of Amazon.

We asked teacher Melanie Collins to run an experiment with her

London class.

Year Six, I'm going to write a word on the board and I want you to think

about the first thing that pops into your head - what does this word mean?

20 years ago, there was just one answer.

I'm going to show you two pictures up on the board

and you're going to put your counters underneath what you thought of first.

OK. Mustafa, can you please come up

and count how many people thought of the river?

-Eight.

-Eight people, OK. Thank you.

The mighty river never really stood a chance.

14 people, OK, have a seat, please.

Most businesses would happily give their annual profits for that

level of customer awareness.

Amazon's ability to get into our heads is

the product of an unique company culture.

Its engineers in London are working on its growing film and TV service.

Scroll through that quickly.

It's got a bit of information about each of the actors.

Some of the other movies they were in.

-Hey, guys.

-Hey.

The British business is run by Christopher North,

an American who moved here ten years ago.

Everyone's kept in tune with the ideas of founder Jeff Bezos

through a kind of "Amazon think" they're all expected to sign up to.

We have 14 leadership principles at Amazon

and these are a set of principles that describe to us

the characteristics we need to exhibit to be a successful Amazonian.

And I think we've found that they are kind of glue that knits us together

as a company, even now today that we're 97,000 employees at Amazon.

The principles are on the website for anyone to see

and if you work at Amazon, you'll never forget them.

It would be the equivalent of...how the Ten Commandments influenced

Christianity. They're not just words.

You have to be able to embody these things on a day in

and day out basis, otherwise you just won't survive at Amazon.

Staff don't have to learn the leadership principles by heart,

but there's one idea that's drummed into them every day.

Customer obsession is the single most

important thing to Amazon,

the thing we've focused on from the very beginning.

Amazon executives and Jeff Bezos in particular will tell you

until you cannot stand hearing it any longer that they start

with the customer and work backwards.

Start with the customer and work backwards.

I don't think you should make any bones about it.

There's no socially wonderful thing about working

from the customer backwards. It's smart business.

You only have to visit your local Royal Mail sorting office

to see the impact of online retail.

E-mail has meant we're sending fewer letters,

but that's more than made up for by all the extra parcel deliveries.

Last year, Amazon alone sold an average of more

than £70 worth of goods to every man, woman and child in Britain.

Amazon account for a large amount of our traffic.

The difference in volume is ginormous.

Yeah, massive contributor to

the amount of traffic we pick up now.

Amazon's business is good news for some, but bad for others.

We're a little low on stock at the moment.

Across Britain,

book shops have been closing at the rate of more than one a week.

See you soon! I'll give you a call later, Mrs Carrington. OK. Bye-bye.

In Banstead, Surrey, Linda Jones is ready to name the culprit.

I've actually had people coming in and taking

photos of books on their phones and looking and saying...

They'll look at the back and they will be there for some time

and they will leave and I know exactly what they're doing.

They are going to Amazon to order that book

because they can get it a lot cheaper.

Linda says Amazon's prices can make trading impossible for her.

For instance, David Walliams' new book, Demon Dentist, on Amazon, £5.

We have to retail it at £10.99, £12.99. We can't buy it for £5.

-< How much does it cost you to buy?

-It costs us to buy £8.99.

Amazon admits it sells some books at a loss.

I think you'd find across many retail businesses it's very

common for bestselling products to be sold at very low margins,

even sometimes at a loss, but ultimately,

we have to figure out how to make it all work.

Linda needs to take £10,000 a month, just to break even.

That hasn't been happening and for the past year,

she's been using her own savings to keep the shop open.

'I love books and I love book shops and it's all well

'and good having that passion,'

but I just can't afford to keep putting money into the business.

For Amazon's founder, book shops are just on the wrong side of history.

Complaining is not a strategy.

Amazon is not happening to book-selling,

the future is happening to book-selling.

Amazon didn't invent the idea of shopping from home.

Mail order catalogues had offered it for decades.

But this kind of thing started to feel distinctly low-tech

when a new vision appeared in the 1990s.

Imagine a world where every word ever written,

every picture ever painted and every film ever shot could be

viewed instantly in your home via an information superhighway.

Ordinary domestic phone lines offered access to an exciting future.

It all comes down to computers communicating.

And in fact, that's already happening on something called

the internet.

The internet was already a hot topic in New York in the early '90s.

It had caught the attention of a young Jeff Bezos.

The wake-up call was seeing web usage grow at 2,300% a year.

Back then, Bezos was a bright 20-something computer science graduate,

rising through the ranks of a Wall Street firm which

was pioneering computer-based trading.

There was plenty of talk about what the internet might

mean for business.

In 1994, there was this idea -

maybe the internet's going to be powerful enough that you can

use it to create a kind of intermediary between customers,

shoppers, and manufacturers. Well, that was a very vague idea,

but Jeff had this notion that maybe if you focused on one product

category, on the internet you can offer everything.

The question was - what's the first best product to sell online?

I made a list of 20 different products and sort

of force ranked them according to several different criteria

and ultimately picked books.

Bezos was already married to MacKenzie Tuttle

who he'd met at work.

But their domestic routine was about to be disrupted.

He wanted to break away from the investment firm,

roll up his sleeves and build a business.

The Bezoses packed up their apartment and left New York behind.

He was in such a hurry that he hired a removal truck,

he told them to drive west and that he would get started

and call them in a couple of days and tell them

where exactly on the West Coast they should go.

Once, young men were told to go west, in search of gold or land,

but in the '90s, they went west in search of geeks.

Bill Gates' Microsoft dominated the new world of personal computers

from his hometown of Seattle, Washington.

So there was plenty of tech talent around

and Bezos sent the removal truck there.

Also heading to Seattle from California was an experienced

programmer, Shel Kaphan, Amazon's first employee.

First we had to buy some computers and software.

We couldn't afford very big computers or very many computers.

We did have to be frugal cos there was not a huge amount of investment.

The garage at Jeff and MacKenzie's rented house became the office.

Bezos insisted on getting desks made from doors to save money.

It's become part of Amazon mythology.

The original example of another of those leadership principles -

frugality.

But employee number one always had his doubts about the desk doors.

If you ask the people building them, you'll learn that they were

actually more expensive than just buying a cheap desk.

Looks frugal, but it isn't really frugal.

I think frugality's in some ways a much misunderstood leadership principle.

Frugality doesn't mean cheapness, it doesn't mean penny-pinching.

It means making efficient use of scarce resources

and I think with the door desk idea,

the idea that you would improvise a desk

out of the materials at hand, you also have the idea of a kind

of scrappiness, or a kind of making do with what you have to hand.

After months of coding on the doors, Bezos' new business was launched.

Www dot amazon dot com.

That takes you to our website.

Amazon's eighth employee, Tod Nelson, had been

working as a waiter before he got the job that changed his life.

They had actually started shipping books in Jeff's garage.

Then they moved to this small warehouse.

Tod started working, ordering and despatching books.

He and his colleagues responded to a computer linked to Amazon's website.

They had a bell that whenever a customer had ordered a book,

there'd be a little ding and everyone would cheer, so you'd made another

sale, and within the first few days, it was - ding-ding-ding-ding-ding!

They had to turn it off because, you know, it was annoying.

By listing any book that could be ordered from distributors, Bezos'

small business would claim the title "Earth's Biggest Bookstore".

Over some large number of years, I think

internet book-selling is going to become a very large business.

At the end of each day, work in Amazon's offices stopped

and everyone, including Jeff and MacKenzie, went

down to the basement to help get all the orders into the last post.

There was this feeling you just couldn't do enough.

I was working 12-16 hour days, working most weekends.

I didn't take a vacation for the first two or three years.

But it's what I wanted to do. I was excited by my work.

It's the most fulfilling work I've ever done.

That first tiny basement warehouse in Seattle is a world

away from what Amazon now calls its Fulfilment Centres.

With more than 100 million items for sale on the website,

keeping tabs on them across the network of warehouses is so complex

that only the central computer really knows where things are.

Amazon has such faith in it that any item can be stowed on any shelf.

The product is stored completely randomly around the building

and so the stower is allowed to pick any location that they want

to in order to put that product away.

The random arrangement is actually efficient because it reduces

the chance of a worker picking the wrong item,

which might happen if similar items were stored side by side.

A customer will come onto the website, order the product,

and the computer system will decide the best fulfilment centre

in which to pick that product and we have pickers

and the computer system will send to their hand-held scanner

that order that says "go pick Downton Abbey Series Two"

and it will also tell them where that product is.

The ordering process is almost completely automated.

But only a human being can walk down an aisle

and tell the difference between an icing bag and a cuddly toy.

They will scan the product and then the computer system knows that

product has moved from the shelf into the tote.

Because the computer knows how big things are,

it even tells the packers what size box to use for each item.

Then, only at the final stage,

the item is matched up with the customer's name and address.

It goes on to our outbound dock and it will get put on to

one of our many carriers' vehicles for onward delivery.

Back in John O'Groats, there's a new van load of online purchases.

-Hi.

-Morning.

Andrew, your costume's here.

Perfect.

Fred Fermor runs the ferry to Orkney.

Out of season, there's time to get things shipshape.

-Here's that mop you ordered.

-Thanks, Fred.

-I'll have a bottle of Red MacGregor, please.

-No problem.

And Andrew Mowat knows it's always easier to get the party started

with a Captain America costume.

Bezos was picky about who joined Amazon.

He originally interviewed everyone personally.

James Marcus passed the test.

He didn't overwhelm you in a sort of showbizzy titan of business way.

But he had a lot of brain power and a lot of focus

and after ten or 15 minutes of talking to the guy,

a certain kind of magnetism came into play, which was not

traditional and was that much more persuasive, I think, because of it.

Amazon was soon too big for everyone to meet Bezos, but new

recruits were fired up in sessions about him and the company history.

In the initial training, you talk about things that Jeff

would like and things that Jeff wouldn't like.

You learned his story.

Driving out in the Sedan and being in the garage

and founding the company. People love a winner.

And so, just being on that team felt like something.

It was the kind of job you could tell your future wife's

relatives about and they would be impressed.

At Christmas, the office staff were expected to help pack books at the warehouse.

It gave them a rare insight into those much discussed customers.

You would pick the weirdest things.

There was a lot of porn, there was a lot of scientific literature,

and I gift-wrapped once a copy of Mein Kampf.

Of course, I was hoping that whoever was sending it to someone

for a Christmas gift was sending it

as a kind of cautionary tale about man's inhumanity to man,

or see how far we can fall, but sadly,

the card that went inside the thing simply said "Merry Christmas".

By the late '90s, San Francisco was buzzing with dot com start-ups,

reinventing business.

And office life.

This is Nuskha. She's an old-timer here.

Been here since May!

Companies like pets.com were famous for spending their investors'

money with no sign of profits.

Amazon too was losing hundreds of millions,

while moving to ever bigger offices.

But in the dot com boom, new rules applied.

Wall Street gave companies a pass.

They said, "OK, we don't care if you make money yet.

"You're going to some day, but for now, just grow.

"Take that money, reinvest it in servers and marketing, whatever.

"Just grow until you hit the sky

"and we'll be there as loyal investors behind you."

Bezos and his staff think about Amazon's growth

as what they call the flywheel effect. It works like this.

If a customer's pleased with their Amazon purchase, they buy more,

and tell their friends, so Amazon gets more traffic.

That means it can offer more products, at lower prices,

which in turn attracts more customers.

The flywheel builds momentum and becomes unstoppable.

It seemed at that point that

there was nothing that Amazon couldn't conquer.

In 1997, Amazon floated on a rising stock market only two years

after it had opened for business.

It was heady days for the internet,

and the stock price did nothing but go up, up, up.

Amazon's hard-working staff had all been given stock options

when they joined.

One of the greatest absurdities at Amazon was that the reason

everyone was killing themselves was because of the possibility

that they would become hideously, unspeakably rich.

At the same time, no-one ever talked about this.

You know, it was very gauche to talk about it.

Everyone had to pretend

as though it was some kind of communist state, that everyone

was just working because they just loved working crazy, crazy hard.

But the reality, of course, underlying everything,

is that there was this hope of some enormous payoff.

And, for a while, it looked like that dream had come true.

-Did you read the Times this morning?

-Yes, I saw the Times this morning.

"At one point on Friday,

"Amazon.com's total stock market value

"surged past 30 billion,

"making it worth more than a major industrial company, like Texaco."

According to my calculations, you yourself are worth

somewhere in the vicinity of 9 or 10 billion today.

-I only say that because I've got a follow-up question.

-OK.

What's with the Honda?

This is a perfectly good car.

The image of Jeff is one of a sort of brilliant,

strategic, financial mind, and a delighted child, you know.

And that laugh. I mean, really.

Really.

Jeff's laugh is memorable.

You know, when you talk to him, if you're in a meeting with him,

it's the thing you emerge talking about.

Oh!

HE LAUGHS

I loved the challenge of it when I was there,

especially at the beginning, and, frankly, I loved Jeff too.

But working down the hallway from his laugh, after a while,

it can, you know, get to grate on one.

-Thanks very much indeed.

-Thank you.

In 1997, the internet was still a novelty for British business.

'Botham's have set up what's called a website...'

Back then, the new technology was much hyped

but didn't always deliver.

The web promised universal access to information, but, then,

in the early days it involved unplugging the telephone

to use your dialup modem,

and then having to wait many, many minutes before every page loaded.

But it was still pretty exciting.

DIALUP TONE

Most big retailers didn't even have a website,

but there were already other online book-sellers competing with Amazon.

Simon Murdoch was running a British site called Bookpages

when he got a call from Seattle.

Jeff Bezos got in touch and arranged to come to London.

I think he talked to several businesses.

He met us in a hotel in central London.

Bezos said his staff in Seattle were already working

on a UK version of Amazon,

but Murdoch's book business created another possibility.

The first discussion was, "We're coming here anyway.

"Would you like to be part of it,

"or would you like us to compete with you?"

-Quite aggressive?

-Yes.

A deal was done for Amazon to buy Murdoch's business,

and for Murdoch to become head of Amazon's UK operation.

Amazon.co.uk is going to revolutionise book-selling,

because we're going to make a very large number of books

available to people very easily.

Initially, people were pretty nervous about

online shopping, I think. The idea of putting your credit card details

into a little box on screen was worrying.

Hello, Amazon.com. This is Deanne. How can I help you?

At first, Amazon set up call centres to take down the credit card

details of timid customers.

But most soon got used to the online routine.

Amazon helped encourage people to trust the actual process

of just buying something online.

Satisfied customers were persuaded to move from books to toys,

CDs, videos and more, as Amazon expanded its range.

We're trying to build a place where people can come, to find

and discover anything - with a capital A - that they

-might want to buy online.

-But any thing?

-Anything.

Amazon was becoming a giant retailer,

but Bezos decided it could be a marketplace at the same time.

That would be a way to spin Amazon's flywheel even faster.

Bezos would get more value from both Amazon's website

and its warehouses

by offering outsiders the chance to sell their products

on the website and use the warehouses

to store and dispatch them.

It's called Amazon Marketplace.

The fundamental innovation was inviting third party sellers,

not only on to our site, but to actually compete with us

directly on the very detail page. That's been so successful

that today more than 40% of all the units

sold on Amazon worldwide are sold by third party sellers.

And that's creating jobs, even in this Nottinghamshire village.

It's possible to make a living simply by spotting bargains

in supermarkets to sell on Amazon,

as Mark Reedman and Keith Whittle have discovered.

So, we've got a couple of dolls. We've not sold dolls before.

-How much was that, then?

-4.99.

-What do you reckon you can sell it for?

-We're selling for 17.

-Whoa.

Yes, you really can comb your local shops to find cheap stock

to sell on Amazon Marketplace, if you know what you're looking for.

Boots, or Sainsbury's, or Tesco's, or Argos,

there are certain times of the year where they will do deals.

It sounds easy, but like Amazon itself, this is a tech business.

They track prices using software.

In August, they bought a load of Star Wars Mr Potatoheads

and have been watching their price ever since.

It sort of dropped down at the beginning of the summer,

but as soon as we hit the November, Christmas period,

it's starting to rise, and will probably continue to rise.

It's a bit like trading on the stock market.

Mark and Keith store their goods until it's the right moment to sell.

Sometimes it means we have to sit on stock for six months,

so we're investing our capital,

but with a longer term aim that we'll make a profit on that.

Sometimes it's a bit of a lottery, but it normally pays off.

If you've got the space to keep hundreds of games,

gadgets and toys, Keith and Mark say you can earn your keep like this.

If you're looking at between £5-£7 a unit profit,

then you've only got to be turning over, say, 15, 20 units in a day,

and, over a week, over a month,

over a year, that adds up to be quite a decent salary.

That's about £100 profit a day, or about £37,000 a year,

as long as you're open for business seven days a week.

We've been labelled as a nation of shopkeepers,

but, actually, Amazon's sort of taken that for us as small retailers,

into the 21st century, where we can actually all sell

our goods and our wares, but without the need of that physical premises.

'The internet has been the most hyped industry of the century,

'but now, as shares collapse, it could wreck the future for us all.'

The stock market couldn't rise for ever.

At the start of the new century, nervous investors started to panic.

Well, all good parties come to an end.

And so, bang, stocks would go from 50 to five, in a month.

And that was the end.

Amazon staff, who'd watched with amazement as the stock price rose,

now saw it lose 98% of its value.

I lost millions of dollars of paper worth.

And that's the way it goes.

You know, there's just no way around that.

Only the very earliest joiners had enough share options to enjoy

the rewards that everyone had been hoping for.

-Was it then that you actually didn't need to work again?

-Yes.

Yeah, I retired when I was 37.

For less fortunate staff, there was a harsh new reality.

Amazon.com this is Lance.

Instead of hiring, for the first time,

Bezos was forced to lay people off.

And he had to persuade those that remained that,

whatever Wall Street said, Amazon would continue to grow,

and would one day make money.

Top executives from that time say that frankly there was

nobody inside Amazon who believed that this would one day be

a 50 billion, let alone 100 billion revenue company.

But they also say that Jeff never blinked once.

That he has ice water running through his veins,

and that he saw that internet shopping

is convenient, that prices can be lower when you centralise inventory.

And he just refused to blink.

Alongside the customer-centric mantra,

there's a toughness in Amazon's corporate culture.

Leaders...

And...

Hm. Curious.

He really is a tough boss.

He has driven that company and drives those people very hard.

And you either survive there because you buy into that culture,

and it's a culture that he has created,

or you leave because it's nothing you have any desire to be around.

Dave Cotter left Amazon after four years to set up his own business.

It's a social network for families, beginning with his own.

Amazon can be a very difficult place to work.

But I actually look back, super, super fondly

and revere the intellectual challenge that it provided.

It still can be really hard on a day in, day out basis to have

kind of everything that you do or everything that you're surrounded by,

kind of, be open for attack.

Nadia Shouraboura also left Amazon to launch a start-up,

bringing online technology to shops.

It could hardly be more intense than her old job.

Amazon was really the way of my life.

I lived at Amazon and I lived within Amazon.

I was married at Amazon,

and every hour of my waking day I was thinking about Amazon.

Here's one kind of crisis that all Amazon executives dread -

Bezos gets a customer complaint.

He forwards it to the person responsible, with a single,

cryptic addition.

You get an e-mail message and there is just a question mark in it.

I got one.

For me at the time it was just scary and terrifying

only because I hadn't been at Amazon very long.

So, immediate things - sweaty palms, panic, anxiety.

It's just drop everything, all hands on deck, we've got to address this.

What Jeff wants you to do is to go down, and not only fix it,

but fix it for ever.

Have a mechanism in place that that screw-up never, ever happens again.

Many companies might say this one customer had this one issue.

Jeff takes a very different perspective, which is

maybe there's a way to improve the system.

However long it takes,

you work away until that particular failure is impossible.

And then...

And then you report back.

And you get usually a smiley face after that, saying that,

yes, thank you.

Amazon survived the dot com crash - just - thanks to having borrowed

enough millions to stay afloat.

But Bezos always had ambitions way beyond mere survival.

The big ideas in business are often very obvious.

But it's very hard to maintain a firm grasp

of the obvious at all times.

In the mid 2000s, Bezos set the company on a new path,

using its existing assets to move beyond retail.

Just as it had offered warehouse space to outside sellers,

Amazon created a huge new business called Amazon Web Services

which rents out its computing power to outsiders.

The company also drew on its techy expertise to create an e-reader,

Amazon's first consumer product.

Selling it direct to its customers made the flywheel spin even faster.

The e-reader was created

in a secretive Amazon lab in Silicon Valley.

Amazon's new direction was a response to the success

of Apple's iTunes, played through its iPod.

Jeff had seen what had happened with music.

We were buying our ipods, they were very pretty, but then what we were

really buying was the music that went on top of them, the software.

And Jeff said, "Well, I'm not going to let that happen to books.

"Books is our core business, it's central to us.

"I'm going to get ahead of that."

And that's why he introduced the Kindle. so we would begin to buy

our books, and now our movies, and our other content, on the Kindle.

The first version of the Kindle was launched in 2007,

looking a bit like the poor relation of an Apple product.

But two years later, there was a new model that Bezos went out to sell.

Very few technologies have a lifetime of 500 years.

The physical book has had a great run.

-So that's it? Death of the physical book?

-I think

there will always be books.

It's not death, but if you look over some period of time,

it makes sense for it to continue to evolve.

So, if you believe, as I do, that long form reading is important,

then a device like Kindle

is important because it makes that easier.

The Kindle doesn't only let Amazon sell books electronically.

It's created a publishing business, too,

because anyone can use it to upload their own writing.

It's really democratising the ability to start and grow a business

as an author, turning authors, in a sense, into entrepreneurs.

This couple have done well

from Amazon's new self-publishing business.

Nick Spalding worked as a press officer for the police.

But he'd always wanted to be a writer.

Three years ago, he gave himself a final chance.

I set myself the challenge to see

if I could write an entire book in one sitting.

So I sat down on a Saturday morning and just started writing.

I had no idea how long I'd go for.

But I managed 30 hours

and had 50,000 words plus written at the end of it.

After a bit of editing, Nick's book was ready for the world.

He uploaded it to Amazon, for sale to Kindle owners.

If you've got all your ducks in a row before you sit down to do it,

it takes ten minutes.

You need to give your book a price.

If you keep it cheap, you'll sell more

and earn 35% of the sales price.

At some higher prices, you'll get a generous 70% in royalties.

Click, Save, and Publish, and that is the end of the process.

Initially, I was a little bit sceptical.

Not that I doubted his writing ability but, as it was a new idea,

I just wasn't sure how it was going to work.

You sell one, you sell two, and it's a thrill.

Somebody you've never met, somebody you'll never meet,

has bought your book and is potentially reading it right now.

He would spend a lot of time in the evening

checking his sales figures on the laptop.

And I would be there, sort of rolling my eyes,

as he went, "I've sold another copy. I've sold another copy."

Gemma had to change her tune

when Nick followed up his first effort with a bawdy comic novel.

"Annika was a goddess, a blonde perfect, golden-skinned

"creature of myth. Or Sweden as they apparently call it these days."

It started to sell, and it started to sell more and more.

"Sean thought I'd be the perfect candidate,

"given that he knew I was horrifically single..."

For it to go to 1,000 over the course of an afternoon

was head-spinning, to be quite honest with you.

That year, Nick sold 430,000 books on Amazon.

And now he's sold the books to a traditional publisher -

-cashing in a second time.

-Um, yes, it was a six figure advance,

which is a lot for a first-time author.

Nick resigned from the police to write full-time.

He and Gemma have already made use of his new earnings.

I love Amazon. They've bought me a house.

If you look at the best-seller list, typically you'll find

nowadays that about one in five of our Kindle bestselling books

are self-published books via the Kindle Direct Publishing platform.

That's a worry for these publishers, gathering in London

to discuss the future of their business.

Amazon are undoubtedly the most important player in

the book world today, whether e-books or print books.

They really are the central platform around which the whole

publishing industry is operating these days.

There's no shortage of speakers to offer

views on the future of the business.

But none from Amazon itself.

Amazon is notoriously secretive.

We'd like to have Amazon speakers here.

But the way they operate,

they tend to not want to do things as part of an industry conversation

or as part of a dialogue, which I think is a shame.

Despite the threat from self publishing,

whether they like it or not, for many of these publishers,

Amazon remains their top sales channel.

They're torn between gratitude and fear.

The general feeling is that it is terrifying

and wonderful in equal measure.

There's no escaping the fact that Amazon is a dominant force.

And monopoly is never good for business,

and certainly never good for the consumer.

They're not in business to support publishers.

They're in business to make Amazon as successful as possible.

And some of the things that they do are contrary to the things

we would like. So you fight back.

And that's what I'm doing with HarperCollins.

And I think we are doing, as a business, very well.

And, you know, bring it on.

There's plenty of fighting talk to keep the spirits up.

We are an industry that has survived hundreds of years.

We are going to be here in hundreds of years.

APPLAUSE

But Amazon, and its founder Jeff Bezos,

are never far from people's minds.

Publishers think about Jeff Bezos

sort of like how they might think about God -

as a kind of very distant, inaccessible figure,

who is all-powerful and all-knowing.

But God loves us.

Yes, but God is vengeful.

The Amazon universe keeps on expanding.

The new Kindles still download books.

'Let's rehearse, huh?'

They also play Amazon's new TV and film productions.

Action!

There's a new set-top box, to watch them on TV.

We've packed in loads of entertainment.

Or play Amazon games.

ROARING

And now, in some American cities, there are Amazon grocery deliveries

from vans advertising Amazon productions.

'With Amazon Prime, you get something truly amazing...'

And there's Amazon Prime, a subscription service for

free delivery which cross-promotes other Amazon businesses.

'You'll get access to the Kindle Owners' Lending Library

'where Amazon Prime members can borrow bestselling books for free.'

DOORBELL RINGS

The Carelli family in Seattle live the complete Amazon lifestyle.

All right, thank you.

My parents use always use it for groceries and stuff, and sometimes,

if we're out of snacks for school, we ask, "Mom, did you order Amazon?"

And she's always, "Yep, it's on its way."

They're fed, entertained and provided with literature,

toys and almost anything they might want to buy, all by one company.

-Mum, who's this for?

-Everybody.

With our hectic schedules and the kids' different activities,

we always need things right away, kind of, on-demand shopping,

it's just been a really good service for us.

The Carellis are living proof of the flywheel effect.

Every Amazon service they use increases their use of the others.

I have to say that Amazon Fresh, because I liked it so much,

it made me want to use Amazon.com even more.

And the family's media consumption centres

on their membership of Amazon Prime.

You can watch movies if you're a Prime member,

stream it to your devices, and also if you have a Kindle,

you can borrow books if you have a Prime membership.

You don't have to pay.

-Do you have Kindles?

-We do, we have four.

Well, there's different types of Kindles,

like basic Kindle, a Kindle Fire, which is basically like a mini-iPad.

For the Amazon generation, visiting shops is just a waste of time.

It's a pain in the neck.

You just go into a grocery store and you have to look for everything.

On Amazon you just search it up with the press of a button.

It's easier.

Jeff Bezos isn't finished yet.

Let me show you something.

He recently revealed something on American TV that caught

the imagination of the world.

These are effectively drones,

but there's no reason they can't be used as delivery vehicles.

Take a look up here so I can show you how it works.

-We're talking about delivery here?

-We're talking about delivery,

so there's an item going into the vehicle.

I know this looks like science fiction. It's not.

Wow!

Amazon isn't claiming its drones will be operating any time soon.

But its eye-catching video just happened to be released

ahead of Amazon's peak pre-Christmas sales period.

Of course this is a completely impractical way of actually

delivering products but it meant that everyone was talking about

Amazon and so people would go to the Amazon website and then buy stuff.

It's only 20 years since Amazon sold its first book.

Today, the company's valued at 170 billion

with an empire that caters for more and more of its customers' needs.

But some of its early staff think it's getting too powerful.

They're going to own the book, they're going to own the

information that goes in the book, they're going to own the shipping.

They can't own it all, you know.

So, I have mixed feelings sometimes about Amazon.

Sometimes I feel like, surely there are consumer items

that I should simply go downstairs and buy from the store

around the corner.

And not do the easy thing which is find the laundry bags on Amazon

and hit One Click.

You know, there's an element of guilt in there.

Do you think you're turning us into lazy

and perhaps slightly guilty consumers?

No, I don't think so at all.

I think that anything we can do to make consumers' lives easier,

including the shopping they need to do, is giving time

and money back to consumers they can spend doing something else.

You can't actually have the company that Amazon is,

and have it care about what it's doing to the ecosystem.

Because it's actually designed from the ground up to be a shark.

Like, it's designed to dissolve and destroy other businesses

by, like, undercutting them.

Whether because of how it works, or because of its sheer scale,

Amazon is increasingly on the radar of politicians and regulators,

especially in France.

For decades, French law has stopped books being discounted

by more than 5%, and that applies to Amazon too.

The novelist Aurelie Filippetti

has a second life as France's Minister of Culture,

with a particular passion for protecting the nation's bookshops.

Government and opposition are united in believing the existing

restriction on book discounting isn't enough to restrain Amazon.

Now a new law will also restrict

Amazon's free postage and packing offers.

But nobody in this Paris book shop seemed to mind.

The minister accuses Amazon of trying to eliminate competition

in the book business.

No, I certainly wouldn't accept that charge.

I don't think we're trying to eliminate the competition.

I think that UK customers, if I focus on the UK, which I know best,

have access to a lot of different choices

and price is one dimension on which retailers compete.

But books are only one industry which has complaints about Amazon.

Mark Constantine's Lush shops sell soap and other products the company

invents and manufactures from its headquarters in Poole, Dorset.

Here's a typical Honey I Washed the Kids.

You can cut this, have whatever size you like.

Made with English honey. Beautiful smell.

There are no Lush products on Amazon.co.uk

because Lush decided it wanted to control

all aspects of its retailing.

What upset Constantine

was what happened when customers tried to find them.

When you type in "Lush" inside Amazon,

you're then taken to products from a competitor,

so similar products to our own, but they are not ours.

Constantine was so incensed he took Amazon to court.

They have traded off our name. They have then damaged our reputation.

And then we lose business because the customer thinks

that we are not providing the quality that they expect from us.

Lush won its case.

Amazon declined to comment but says it intends to appeal.

But Constantine has a bigger objection to Amazon.

While Lush employs people

in its British factories and high street shops,

and pays corporate tax to the British government,

Amazon's UK operations pay a lower rate of corporate tax

through an Amazon subsidiary based in Luxembourg.

It's saying to society, "Here's a marketplace,

"but we're not going to make a contribution to you financially,

"unlike other marketplaces like the high street.

"We're going to reconfigure that and this is our business model."

So I think that's a fundamental attack on society.

The choice of having a single European headquarters

has nothing to do with tax or anything else.

It's simply the only way we could operate

a business of this complexity and scale.

For the choice to be in Luxembourg, tax was one consideration.

The French are also concerned about Amazon's tax arrangements.

What we've said very consistently is that we pay all of the taxes we are

obligated to pay everywhere in the world and we will always do so.

However people may feel in Europe,

back in Seattle, Amazon's tax affairs hardly raise an eyebrow.

In the United States,

tax avoidance is generally applauded.

You know, this is a country that happened to throw a whole

bunch of tea into the Boston harbour when the British wanted to tax them

on something that they thought was unfair.

And, so, it is not surprising at all

to, I think, most people who follow Amazon,

that it is doing what it can to pay as little in taxes as possible,

both in the US and abroad.

For a successful business, Amazon has one unusual feature.

It doesn't actually make money.

BEZOS LAUGHS

Well, we're a famously unprofitable company.

Since its founding, Amazon's sales have grown spectacularly.

But its profits have been minimal.

Bezos says that's deliberate

because he's still investing in new warehouses and new businesses.

It's very hard to beat a non-profit business.

Other companies have to make a profit or their investors will be angry.

Erm, Jeff has successfully made people want to support

a company that doesn't need to make a profit,

and that's an incredible business advantage.

However well Amazon's persuaded the markets

it doesn't need to make profits

or governments that it doesn't owe more taxes,

the company insists it's still a good corporate citizen.

We've collected and remitted more than a billion pounds of VAT

on behalf of the exchequer, we have purchased many billions of pounds

of products from UK suppliers, we've spent over a billion pounds

in the past five years just on the delivery companies who do

the last mile delivery, and we've created many thousands of jobs.

There are new jobs in this warehouse,

which only exists because of Amazon.

AwesomeBooks was started in a spare room in Reading just seven years ago

by Mubin Ahmed and his brother.

For us it was really just getting the supply,

and almost, Amazon could take care of the marketing and everything

that would attract the sales that we needed.

They get books from libraries, charities, publishers,

anyone who wants to get rid of large numbers.

The company's software tells its staff

whether each book is worth listing on Amazon,

keeping to sell elsewhere, or can only be thrown away.

Awesome processes 18 million books a year, and sells around

five million to individual buyers, with Amazon the dominant outlet.

Ultimately, we wouldn't exist without Amazon.

And, so, our profits are their profits in a way,

and it's only fair that we have that symbiotic relationship

where, as we grow, they grow.

200 new jobs have been created here.

Mubin has adopted Amazon's customer-centric ideas.

At the end of the day,

the customer has dictated that online is more convenient,

and the price points are better for them,

and so the market has to adjust.

That adjustment has created losers as well as winners.

Your friendly local shopkeeper may feel the efficiency of online retail

comes with a high price in terms of our relationships.

We will become more insular as a society.

We will sit at home in our rooms and we will type in what we need.

We won't talk to anybody, we won't communicate,

our communities will become smaller.

And we won't see people. And I don't want that.

-Take care.

-Thank you.

-Bye-bye, now.

-Thanks, bye-bye.

-Bye, Jack.

Linda decided she had to stop using her own money to support

the business, and the book shop has now closed.

Is it in Amazon's interest that book shops go out of business?

No, I don't... No, I don't think so.

I think that Amazon does best in an environment where there's

a lot of thriving competition.

We're a company that appreciates competition

and it challenges us to do even better.

Can anything stop Amazon?

Well, competition between online and the high street may be taking

a new turn that could leave Amazon playing catch-up.

It's to do with Smartphones.

At the moment people go into shops

and they can check prices on their app,

check it on Amazon, find it cheaper and buy it.

So try something on in the shop but then buy it through a competitor.

And I think that retailers are waking up to this fact

and trying to create better experiences in the store.

In Silicon Valley, eBay believes we're about to witness

a blurring of on and offline shopping.

It wants to partner with traditional retailers

and has a whole demo area to show what's possible.

So Lisa clicks on these shoes, loves them,

looks at some of the photos, says, "You know what?

I'm going to get these, "they're right down the street."

This idea is click and collect, with a new personal touch.

And she notices she can check in automatically

when she gets to the store.

Fantastic. So she places the order.

And she knows when she then walks into the store,

the store assistant's going to say "Hey, Lisa, welcome to the store,

"we've got your pair of shoes ready."

We can do things with technology in the physical store

to make people understand, find and discover

and then purchase product in a far better way.

Some of these ideas are already out there, such as giant touch screens

to encourage customers to buy online even when they're out shopping.

Think Minority Report, right? The movie.

This is the possibility, right, of sort of...

You take these vertical surfaces and turn them into engagement,

where the consumers can actually interact.

And according to eBay,

Amazon's business model may not be as efficient as it looks today.

Having your own Fulfilment Centres, and many of them, is one way to go.

It's expensive. It makes you become a physical logistics company.

eBay's vision reminds us

that old-fashioned shops weren't actually such a bad idea after all.

Guess what? They have product sitting there.

So why then build another warehouse that's all around those?

Yet another place for trucks to show up and drop product

and that kind of thing, and instead take the inventory that's already

moved close to that consumer and get it to them right from that point.

Anyone trying to challenge Amazon will find its business is protected

by its massive investment in technology,

especially as it expands into media and tech services.

Today it's taking on much fiercer competition than shops.

In reality Amazon is competing with

Netflix and Facebook

and Apple and Google.

And those are the companies that have the ability to undermine

what Amazon has built all over those years.

I think the next ten years are going to be fun to watch

as all these little battles take place to see who's going to win.

Whatever happens, Jeff and MacKenzie have done OK.

He's now worth 27 billion according to Forbes Magazine.

She's become a novelist.

And he's bought a prestigious newspaper, the Washington Post.

Four, three, two one, ignition.

Oh, and he's started his own rocket company, Blue Origin,

to bring space travel to the masses.

Maybe one day, it'll deliver Amazon packages to the moon.

At this moment in time, boy, it looks like Amazon is

hitting on every cylinder.

But it is a moment in time, and I think it is entirely possible

as we go two years, five years down the road, things will change.

-Amazon will be disrupted one day.

-And you worry about that?

I don't worry about it cos I know it's inevitable.

Companies come and go.

And the companies that are the shiniest

and most important of any era,

you wait a few decades and they're gone.

And your job is to make sure that you delay that date?

I would love for it to be after I'm dead.

THEY LAUGH

The Open University delves further into how

businesses like Amazon continue to boom.

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