Tuesday, April 17, 2012

The Cost of 0.1 Seconds

April 23rd edition of Forbes focuses on Amazon and its boss Jeff Bezos. Amazon started in 1994 and since then, has defined what it takes to be the largest online retailer. The secret? It is always day one for the Internet at Amazon! From Forbes, “Amazon has metrics showing that a 0.1 second delay in page rendering can translate into a drop of 1% drop in customer activity.” What can that 1% drop in customer activity do to revenues? Assuming a 10% conversion rate (assuming most customers at Amazon are repeat and not just exploring the site), it translates into 48 million dollars!
Metrics like this keep Amazon growing at a 50% clip when retailers elsewhere are struggling to survive. The secret is their twin focus areas:
  1. Fulfilling the customer expectations/needs, and,
  2. Reduce waste in all processes to lower the costs of doing business.
Forbes says, “Amazon tracks its performance against 500 measurable goals. Nearly 80% relate to customer objectives”. The company’s annual reports reprint Jeff Bezos’s LETTER TO SHAREHOLDERS from their 1997 report. Why? Because (in Jeff’s words), “Our approach remains the same, and it’s still Day 1!”. 
And, that has been the signature difference between Amazon and other companies – a long-term focus on their business strategy and a relentless pursuit to achieve its goals without fretting over short-term reactions of the Wall Street.   
Amazon now claims to have more than 20 million products in stock, majority of them being non-media goods, 164 million customers, and achieved a 99.99% on-time delivery before Christmas in December 2011. But to Bezos, it means that one customer in 10,000 did not get their orders delivered on time – anything less than 100% is not satisfactory! That is the kind of focus it takes to be the number one online retailer and grow like Amazon.
Related Articles: Other Resources: Want to know more about supply chain processes and supply chain strategy? Check out my books on Supply Chain Management at Amazon.
© Vivek Sehgal, 2012, All Rights Reserved.

No comments:

Post a Comment