How Bezos Built Amazon: Obsessive About Customers, But Never a Fool
"Serve the customers, but also sometimes ignore them"
Friends,
This is a deep dive into Amazon’s history and how Jeff Bezos built it to its dizzying heights.
Read on as I break down how Bezos transformed a humble online bookstore into a global behemoth—spanning e-commerce, logistics, cloud computing, consumer hardware, publishing, grocery, robotics, and entertainment.
It’s remarkable that the same company delivering your groceries also powers much of the internet, produces TV shows, publishes books, and even competes with SpaceX through Blue Origin. To an outsider, this might look like a chaotic jumble. But to Bezos, it was part of a coherent, long-term strategy executed with ruthless discipline.
This piece draws on over 100 hours of research and five key books:
The Everything Store and Amazon Unbound by Brad Stone
The Generalist's Jeff Bezos Playbook
Working Backwards and The Amazon Way
Invent and Wander, a collection of Bezos’s shareholder letters and speeches
What to Expect in This Essay:
A breakdown of Jeff’s corporate strategy
The principles and management tactics that guided him
Key decisions that turned Amazon into what it is today
How AWS and Prime came to be
Lessons any builder, founder, or operator can take away
Customer obsession, with a caveat
A lot has been said about Amazon’s success but one thing that comes out glaringly is that Amazon is “Customer Obsessed”. Throughout its history, you can observe how there’s a commitment to going above and beyond to serve its’ end users. But sometimes these observations tell only half the story, Jeff also sometimes counteracted to his own strategies, creating an inconvenience to his customers and making them pay to resolve it.
From Amazon’s beginning, Bezos prioritized overserving buyers, often incurring significant financial risk and foregoing short-term profits in the process.
As some examples below show, Bezos obsessed over the customer, even when he didn’t need to, stressing the business in the process. It can also be easy to take the wrong lesson from these stories. Jeff also did the opposite when there was an opportunity large enough that would inconvenience the customer.
Bookstore to Kindle
Jeff Bezos consistently drove Amazon to innovate without waiting for external pressure. For instance, early in Amazon's history, despite rapid growth—selling $12,000 worth of books in its first week and gaining international customers within a month—Bezos didn't slow down or raise prices. Instead, he implemented a 30-day return policy, recognizing that customer trust was crucial for online sales at scale.
Another illustration of this forward-thinking strategy is the Kindle. Bezos initiated its development in 2004, and by its 2007 unveiling, it featured a bold pricing strategy. Defying traditional publishing models, Bezos insisted on selling e-books for $9.99, well below the $15 print cost, even at the expense of short-term unit economics.
This seemingly counterintuitive move was rooted in the conviction, articulated by Steve Kessel, that "Customers are smart, and we felt like they would expect and deserve digital books to be lower priced than physical books."
Doing this, fundamentally shifted the balance of power in Amazon’s favor within the publishing industry.
CEO leads the way
Amazon would not have reached these heights had Bezos been the sole believer in overserving customers, his managerial prowess is seen in how the rest of his team bought-in to this obsession and made it a foundational part of the companies operations.
A friend of mine even said, Bezos ordered his employees to craft “narratives” which were a sort of a short essay without having any bullet points, written in prose., which would silently be read before starting meetings.
This was a strange initiative for its time, one that Stone describes as “perhaps unique in corporate history.” Today, of course, many tech companies adhere to a version of this approach and champion a writing culture; Stripe is one of them.
Bezos soon took this strategy a step further. Whenever a team proposes a new product, they must do so by writing a press release for it first. The idea was to “work backward” from the ultimate pitch and the value it would deliver to customers.
In some meetings, Jeff would ask the team to leave a chair empty for the “customer”. The fact that this anecdote survived to tell the tale shows its strength. Those present would share it with their colleagues, who would in turn pass it on in turn.
By overdoing it, Bezos conveys just how seriously he takes serving the customer and gives permission for others to push beyond what might ordinarily seem “reasonable” in pursuing this end.
Costco and Sinegal / Any good idea is as good as it’s execution
Amazon's innovation wasn't limited to its founder. An employee's suggestion for subscription-based free rush delivery sparked the creation of Amazon Prime. Bezos intuitively set its annual fee at $79, mirroring his $9.99 Kindle pricing strategy, despite internal financial analyses deeming it "completely crazy."
A pivotal moment for Bezos's pricing philosophy came during a meeting with Costco founder Jim Sinegal. Sinegal, a seasoned retail veteran, shared Costco's secret to success: charging a modest 14% markup on all products to cultivate profound customer loyalty through "good quality products at low prices."
This conversation deeply resonated with Bezos. Within days, he reversed Amazon's existing pricing approach, instructing leadership to adopt an "everyday low prices" strategy. This meant aggressively slashing prices by 20-30% in many key categories and a firm commitment to matching any competitor's lowest price.
But when to bend the rules?
It's tempting to conclude from stories of customer-centric companies like Amazon that unwavering customer focus is the sole path to greatness, even at personal cost. However, a closer look reveals that this isn't always the complete picture. While prioritizing customers above competitors can be a powerful strategy, an inflexible adherence to this principle might, paradoxically, blind you to significant opportunities. Even Jeff Bezos, the quintessential "customer-obsessed" leader, demonstrated a willingness to compromise when presented with the right circumstances.
From Amazon's early days, Bezos recognized the potential for advertising revenue to subsidize product prices, ultimately benefiting the customer through lower costs. He believed that if customers ever had to choose between a cheaper platform with ads and a more expensive one without, the lower price would win out. Amazon, he insisted, had to be the price leader.
However, the introduction of sponsored listings presented a genuine dilemma. Many within Amazon worried that advertising could undermine the company's foundational principle of customer experience by potentially steering customers toward lower-quality, sponsored products rather than the best organic results. This concern was not unfounded; upon implementing advertising, Amazon observed a slight but consistent decrease in customer purchases.
Despite these internal reservations and the measurable impact on customer behavior, Bezos pressed ahead with advertising. The reason was clear: the financial windfall was simply too substantial to ignore. While advertising admittedly made the Amazon customer experience "a little worse," the enormous revenue generated—Amazon's advertising business delivered $17.29 billion in revenue in its most recent quarter, marking an 18% year-over-year increase (as of Q1 2024, the most recent publicly available data prior to July 2025)—far outweighed these incremental drawbacks. This demonstrates that in rare, extreme cases, strategically bending a fundamental principle can be the right move for long-term growth and competitive advantage.
Key takeaways:
Prioritize customer trust and satisfaction
Let your team see your mindset and instill it into them
Innovate before the competition catches up
Compromise on your own principles when the opportunity is good enough
Fail fast and fail big
One of the defining characteristics of Amazon under Jeff Bezos was its unique relationship with failure. As Bezos famously wrote in his 2015 shareholder letter, the same year Amazon hit an unprecedented $100 billion in annual sales, "I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins." This philosophy allowed Amazon to constantly reinvent itself, evolving from an online bookstore to an "everything store," then a cloud computing powerhouse, and eventually a media giant. This relentless pursuit of innovation, often through trial and error, highlights a crucial lesson for any business: don't just tolerate failure; embrace it as a necessary component of groundbreaking success.
Amazon's journey is punctuated by a series of high-profile experiments, some of which soared, while others crashed and burned. These ventures, ranging from ambitious new services to hardware development, paint a vivid picture of Amazon's "fail fast, fail big" mentality:
[The below list straight away extracted out of an article written by The Strategist here]
Amazon Auctions (Failure)
Amazon Web Services (AWS) (Success)
Kindle (Success)
Fire Phone (Major Failure): After four years and significant investment, Amazon's smartphone, the Fire Phone, debuted in 2014 to a dismal reception. Selling fewer than 100,000 units, it left Amazon with tens of millions of dollars in unsold inventory.
Amazon Go Store (Mixed Success): The ambitious concept of a checkout-less retail store took over five years and more than $10 million in development. While Amazon Go eventually launched and is operational, it hasn't revolutionized retail as broadly as many anticipated. This indicates that even groundbreaking ideas can face significant hurdles in scalability and widespread adoption.
Fulfillment by Amazon (FBA) (Success): Starting in 2002, Amazon invited third-party sellers to store their products in Amazon's warehouses. While it significantly increased Amazon's logistical complexity, it simultaneously boosted efficiency by optimizing the company's fixed costs. Despite initial challenges, Amazon persisted, transforming FBA into a core strength and a cornerstone of its marketplace strategy.
Amazon Studios (Success)
Haven Healthcare (Failure): In 2018, Amazon teamed up with JP Morgan and Berkshire Hathaway to form Haven, an ambitious initiative aimed at reducing healthcare costs for their employees and potentially all Americans. However, after three years with limited progress, Haven dissolved, highlighting the immense challenges of disrupting deeply entrenched industries like healthcare, even for formidable players.
Alexa (Major Success): Launched in 2014, Amazon's Echo device, powered by the voice assistant Alexa, was a phenomenal hit. Selling over 100 million devices in five years, Alexa not only created a new product category but also spurred intense competition from tech giants like Apple and Google, solidifying Amazon's position in the smart home market.
Amazon's willingness to launch these varied ventures, celebrating the successes while learning from the failures, illustrates a powerful approach to sustained innovation and market leadership. The sheer volume and diversity of its experiments underscore Bezos's belief that to achieve big wins, you must be prepared for big losses.
The fight with third-party sellers
Amazon's journey to becoming the "everything store" was not without its internal contradictions, particularly in its relationship with third-party sellers. Initially, persuading merchants to sell on a platform that was simultaneously their direct competitor posed a significant challenge. Why would a vendor choose Amazon over eBay, which, at the time, focused purely on facilitating sales without its own retail arm?
Jeff Bezos and his leadership team confronted this conundrum head-on during a pivotal weekend meeting at Bezos's home in 2000. Their solution was audacious and, at first glance, counterintuitive: instead of segregating third-party products to a separate, less visible section of the website, Amazon decided to integrate them directly onto its main product pages. This meant that customers Browse for a particular item, say a new book, would immediately see not only Amazon's own offering but also potentially cheaper used copies or alternative versions from external sellers right alongside.
This move was a game-changer. It not only brought a vast array of new products and competitive pricing to Amazon's customers, but it also fundamentally shifted the power dynamic. By exposing third-party sellers to Amazon's massive, aggregated demand, the platform made them increasingly reliant. This dependence, in turn, rendered sellers effectively powerless as Amazon shrewdly leveraged its immense scale and technological prowess to compete against them, often using their own sales data.
The competitive landscape intensified significantly with Amazon's foray into private-label brands. Starting around 2009, Amazon began rolling out its in-store brand, which ultimately became widely known as Amazon Basics. This strategic initiative marked a new chapter in Amazon's relationship with its marketplace sellers.
As noted by author Brad Stone, "Amazon closely monitors what [retailers] sell, notices any briskly selling items, and often starts selling those products itself." This practice meant that third-party merchants, by selling successfully on Amazon, were inadvertently providing their most formidable competitor with invaluable market intelligence. They were, in essence, aiding their own "most ferocious competitor" by paying commissions and helping Amazon identify lucrative product categories.
Lovefilm’s failed IPO & the streaming business
LoveFilm was a United Kingdom–based provider of DVD-by-mail and streaming video on demand in the United Kingdom, Sweden, Norway, Denmark and Germany.
Acquired by Amazon.com in 2011, the service had reached 2 million subscribers. It claimed over 70,000 titles, and over 4 million DVD, Blu-ray or game rentals per month in five countries. Through a series of acquisitions, Lovefilm quickly became the leading online DVD rental and streaming outlet in the UK and Europe. By 2011, it boasted 2 million subscribers and an extensive library of over 70,000 titles, processing millions of rentals monthly through a series of shrewd acquisitions that cemented its position as a leader in European online entertainment.
As the streaming business bloomed in the late 2000s Google made offers to Netflix and Lovefilm to acquire it proposing a 200 Million Euro offering.
However, when talks fell through, Lovefilm felt it had little choice but to prepare for an IPO. With streaming looming on the horizon, management understood that it needed fresh capital to pivot the business.
It was at this moment that Bezos made its move. By this point, Amazon was Lovefilm’s largest shareholder, which meant that the company required its permission to change its bylaws. It needed to do so to free up the stock to sell in its IPO. Amazon refused, arguing that instead of spending resources presenting itself to European investors, Lovefilm should simply sell its remaining equity to Amazon.
After months of brutal negotiation, Amazon acquired Lovefilm for £200 million – a year and a half after Google’s preliminary proposal and following significant further growth.
Flipkart and India Operations
When Amazon arrived late to a market, as it did in India, Bezos’ would act boldly to close the gap. Starting in 2004, employees at AWS’s Bangalore office advocated for launching an e-commerce site in the country. It would take until 2012 for Bezos to act, by which time ex-Amazonians Sachin Bansal and Binny Bansal had launched a competitor: Flipkart. It had a five-year headstart – six by the time Amazon India opened for business.
Informed by Amazon’s timid failure to conquer the Chinese market, Bezos plotted a more aggressive strategy to capitalize on the Indian opportunity. When the head of the Indian initiative brought him the results of the first few months of operations along with potential investments the mothership could make to accelerate progress, Bezos balked. “You guys are going to fail,” he said. “I don’t need computer scientists in India; I need cowboys. Don’t come to me with a plan that assumes I will only make a certain level of investment. Tell me how to win. Then tell me how much it costs.”
The message was clear: Bezos saw an opportunity in India; now was the time to get big fast. In the following years, Flipkart sold to Walmart, and Amazon succeeded in gaining a meaningful share in the market.
Internal bottleneck to revenue
In the mid-2000s, Amazon faced significant limitations in its internal storage and networking bandwidth. A single team managing all servers and traffic created a bottleneck that hindered innovation and the ability of other teams to execute their ideas due to insufficient computing power.
Over the next few years, Amazon’s team got to work exploring different computing primitives, from storage to messaging to processing payments. Bezos applied his signature pressure and ambition. “This has to scale to infinity with no planned downtime,” he said to one engineer about AWS’s storage functionality. “Infinity!”
In March 2006, AWS unveiled its first product, “Simple Storage Service” or “S3.” A few months later, “Elastic Compute Cloud” or EC2 followed. Though it would take time for the broader market to grasp how significant AWS was to Bezos’s business, this marked the moment that Amazon became a true tech company rather than a digital retailer.
Though AWS is the best example of Bezos’ penchant to build downward, it is not the only one. The fact that Amazon devised the most sophisticated fulfillment network is a testament to his willingness to build down to the box – the movement of packages from A to B. The invention of the Kindle showed a desire to build down to the book, Amazon’s elemental product.
Part of the reason both AWS and “Fulfillment by Amazon” (FBA) worked is that they served Amazon, first. As noted above, AWS emerged from a desire to free up internal teams. But it would not have been so ludicrously lucrative if it did not also serve other companies, too.
The same goes for FBA. Amazon needed a way to store and deliver its products. It built a world-class system of its own that it could subsequently rent out to other retailers. By assenting to have Amazon take care of its logistics, not only did these companies get to offload a competency they did not want to own, they benefited from Amazon’s rapid delivery network.
When Amazon was building it’s technology, the reputation was that it was a retailer. Nobody knew Amazon would be building something in technology.
It’s worth considering how the flaws of your existing reputation might work in your favor. Bezos hypothesized that one of the reasons incumbent computing companies did not recognize the power of AWS was because his firm had no reputation for building products in the space. “I think the big, established enterprise software companies did not see Amazon as a credible enterprise software company, so we had this long runway to build this incredible feature-rich product and service that is just so far ahead…”
In 2006, an early AWS engineer suggested pricing EC2 instances at $0.15 an hour – a break-even price. Bezos pushed for $0.10. “You realize you could lose money on that for a long time,” the engineer said. “Great,” Bezos replied.
As well as depressing your margins, find ways to conceal your earnings.
For years, Amazon successfully tucked AWS revenue into an amorphous line on its income statement called “other.” Only in 2015, when AWS’s revenue approached 10% of all Amazon sales, did Bezos break out the division’s performance.
It was a sign of just how well Amazon had disguised AWS’s success that many analysts expected it to be a dud – a low-margin distraction not worth investing. The reality was very different. By that point, AWS was growing 70% a year, with operating margins that were almost a full order of magnitude higher than the retail division’s. In 2024, AWS grew 19%, bringing in $107.6 billion in net sales, 17% of the company’s total.
Ultimately, Bezos may have exaggerated when he spoke of AWS’s seven-year headstart. There were four years between AWS’s initial launch and Microsoft Azure’s; Google Cloud arrived two years after that. But there is no doubt that Bezos’s savvy bought the division time and allowed it to earn a formidable lead.
Mini-crisis and fake urgency
How can you maintain authority over a growing workforce numbering in the hundreds or thousands? Old techniques no longer work. If you can, how can you ensure they heed what you say? Once out from under your watchful eye, will they follow through on your orders? Do they act as you want them to act?
One of Bezos’ solutions to the challenge of scaling authority is to spark episodic mini-crises. This is spiritually similar to Musk’s deployment of random “surges,” which rally workers around an unrealistic and artificial deadline and force total commitment.
Whereas Musk prefers to lead these surges from the trenches, launching them himself, Bezos sparks them reactively, usually when he feels Amazon is failing a customer. Because Bezos’ email address, jeff@amazon.com, is well-known, he receives a deluge of incoming messages, including from disgruntled customers. With the help of his assistants, Bezos reviews these messages and is liable to act upon the information contained within them.
One of his favorite maneuvers is to find a complaint email and forward it to the responsible team member, accompanied by a single character: “?” Contained in that question mark are any number of implicit interrogatives and expletives. What is going on here? How did you let this happen? Why are you ruining my life?
To receive one of these messages is to have a doomsday clock appear before your eyes. Amazon employees understand that once Bezos has distributed his question mark, you have 24-hours to solve the problem.
Read above text in more detail from here
Closing thoughts
Jeff Bezos didn’t build Amazon by following conventional rules. He bent them, broke them, rewrote them.
But beneath the ambition and aggression was a framework that anyone building a business can use:
Obsess over the customer but know when to compromise.
Act early, price boldly, and hide your profits.
Fail fast, but scale what works.
Build for yourself, then sell it to the world.