Tricia Duryee is a former staff writer at AllThingsD, where she covered e-commerce, including Amazon.
One of the biggest misconceptions about the sale of The Washington Post this past week is that Amazon is the buyer. In truth, The Post was purchased by Jeff Bezos, the e-tailer’s chairman, president and chief executive. Who is this man, who lives 3,000 miles away in the other Washington and spent about 1 percent of his personal fortune on a newspaper? Let’s separate fact from fiction about Bezos.
1. Jeff Bezos is destroying independent booksellers.
Over two decades, Amazon has transformed how people buy books. At first, that meant low prices, resulting in readers buying more books online than at corner stores or big-box retailers. More recently, it has also meant distributing e-books to electronic devices.
But it’s hard to make the case that Amazon was solely responsible for destroying independent booksellers. That trend was largely underway before Amazon was founded in 1995. The year before, Barnes & Noble and the Borders Group captured nearly a quarter of all revenue from book sales. Of course, since then, those mega-retailers have struggled, too, as Amazon has led a shift from print books to digital.
Amazon’s success in the book industry can largely be attributed to its expansive catalog and its willingness to slash prices. Such cost-cutting measures were recently backed up by a federal court, which found Apple guilty of colluding with publishers to increase e-book prices.
Amazon maintains that it does more good than harm. At a news conference last year, it said Kindle owners buy far more books — not just digital but also print — than they did before owning a Kindle.
And given the company’s massive scale, some authors and booksellers have chosen to partner with Amazon rather than fight it. Independent authors can self-publish titles in return for sharing 30 percent of the revenue with Amazon. In 2012, the company said, 23 of those authors each sold more than 250,000 copies of their books, and more than 500 self-published books made Kindle’s top-100 bestseller lists worldwide. Through Amazon’s third-party fulfillment services, independent booksellers can sell their wares through a massive online channel for a cut of the revenue. In 2011, consumer purchases from 2 million independent sellers of all sizes made up nearly 40 percent of Amazon transactions.
2. Amazon’s biggest competitors are other big retailers such as Wal-Mart.
Amazon is the largest retailer on the Web, with tens of millions of items for sale. That makes it a competitor to Wal-Mart, Target and other Main Street retailers. However, Bezos has his sights set on a much broader swath of competitors, including Apple and Google.
All three companies are racing to build empires that include hardware, software and services. They each want to be the go-to company for movies, books, music and other content.
On the hardware front, Amazon is best known for its e-readers, but in the past year it has entered the tablet market, with its Kindle Fire competing with Apple’s iPad. It also is rumored to be working on a cellphone to rival the iPhone and Google’s Android. And it is offering a Netflix-like streaming video service and producing original TV series.
But potentially, its most under-the-radar businesses include Amazon Web Services, which lets consumer brands — such as Reddit, Foursquare, Pinterest and Netflix — rent infrastructure from Amazon rather than maintain their own hardware. Between Amazon’s interest in providing third-party Web services — and the massive amount of information it garners from its customers’ spending habits — Amazon is more of a data company than a retailer.
3. Bezos doesn’t know the ways of Washington.
In his letter to Post employees on Monday, Bezos attempted to dispel concerns that he is buying the newspaper to use as a platform for his personal agenda. “The paper’s duty will remain to its readers and not to the private interests of its owners,” he wrote.
But, although he lives thousands of miles away, Bezos is no stranger to Washington politics — Amazon has a large lobbying presence here. Last year, the company spent $2.5 million on influencing Congress and the executive branch. That’s slightly more than Apple, which spent $2.3 million, but less than other tech giants such as Google and Facebook. Amazon has been active on a number of issues, from online wine sales to cybersecurity, postal reform, free-trade agreements and broadband service — with its biggest priorities being state sales tax reform and antitrust concerns related to e-book pricing. While Bezos plans to remain in the other Washington, he’s already heavily invested in Beltway politics.
4. Amazon’s key advantage is that it doesn’t collect state sales taxes.
Many believe that Amazon’s successes stem from not having to pay sales tax in many states, giving it a price advantage over local retailers. Amazon says it is not opposed to the collection of sales tax — as long as there’s a simple, national system that is applied to all sellers, no matter their business model, location or level of sales. With that caveat, it has supported the Marketplace Fairness Act, passed by the Senatethis year. The act would give states the authority to collect sales tax online, as long as they have simplified their tax laws.
That hasn’t kept critics from being skeptical of Amazon’s intentions. Ahead of a legal obligation to collect sales tax, the company has secured sweetheart deals in some states: In return for opening fulfillment centers, which create thousands of jobs, states have given Amazon a grace period in which it doesn’t have to collect tax. Having a local presence typically means it must do so.
Still, there’s not overwhelming evidence that collecting taxes has negatively affected the retailer’s sales in those states. In fact, more than halfits revenue comes from jurisdictions where it collects sales tax.
5. Bezos doesn’t care what Wall Street thinks.
This mantra is repeated every time Amazon releases disappointing quarterly results. Despite the company’s profit roller coaster, Bezos doesn’t appear on conference calls with analysts to seek forgiveness.
But don’t confuse his lack of kowtowing with nonchalance about the bottom line. When I interviewed Bezos in September, he told me: “Take a deep breath and be patient. Deep yoga breaths, people!” Every new business inside Amazon takes five to seven years to become profitable, he claims.
“Take the long-term view, and the interests of customers and shareholders align,” Bezos wrote in a letter to shareholders last year. Investors are still waiting for that alignment to be consistent. Last year, Amazon reported a loss of $39 million; it earned a profit of $631 million in 2011.
With Bezos’s ownership of The Post, the tables will be turned. If he abides by those same beliefs as an owner, he will have to be the patient one, believing that aggressive investments today will return gains over the next decade. For The Post’s customers — in this case, readers — it could translate into new innovation and products that stress quality service over short-term profits. At least, one can hope.