The CRAZY Origins of Amazon Prime – Amazon Prime Business Documentary
In February of 2005, Amazon Founder Jeff Bezos announced the introduction of Amazon Prime – a bold bet that would change the future of the company forever. It may be hard to remember a time before the company was as big as it is today, but back then, Amazon was a very different business. At the time, Amazon was still mostly selling books and DVDs and they were much smaller – when Prime launched, the company was valued at under $20 billion dollars total and was struggling compared to some other larger and more successful competitors at the time like Ebay. But the introduction of Amazon Prime would help change the company’s fortunes permanently and helped catapult Amazon’s market valuation to over $1.8 trillion today and paved the way for it to become the most successful e-commerce company of all time.
Perhaps the most interesting part of the story though is that Amazon Prime wasn’t Jeff Bezos’ idea at all. The idea for Amazon Prime actually came from an Amazon engineer named Charlie Ward who originally submitted his idea to a digital employee suggestion box.
You see, Amazon had already been starting to experiment with free shipping at the time. The company had been offering free shipping to customers who spent at least $25 on their order and were willing to wait 8 to 10 business days for their shipment to arrive – a far cry from anything close to free two day shipping. But Charlie thought people might be willing to pay more for a subscription that offered the convenience of free shipping on every single order, no matter the transaction size.
As an engineer who was programming the check out experience at Amazon, Charlie had actually come up with the idea because he was annoyed by the inconvenience of having to refill his information and settings with every order and the complexities that were involved with Amazon’s existing shipping policies. It could be clunky and it was not a streamlined checkout experience for repeat customers which frustrated Charlie. So out of this personal frustration, he came up with the idea of a subscription service that would bypass shipping charges completely for a flat subscription fee each year. So he typed up a quick overview of his idea and submitted it to an employee suggestion box.
When Bezos saw Charlie’s idea in the suggestion box, he pounced on it and began to have a group of the company’s leaders create a proposal immediately. While Charlie’s idea had originally centered around free shipping, it was during this brainstorming stage that Bezos also suggested the idea of incorporating faster shipping into the subscription.
Eventually the company landed on the idea of a program that offered free-two day shipping and half price one day shipping for a $79 yearly membership fee. With the idea for Amazon Prime solidified, work began immediately on the top secret project which was code named Futurama internally. Jeff Bezos tasked the company with being ready to launch Prime on the day of the company’s Q4 earnings call – which was just four weeks away. When Charlie Ward and the rest of the engineering team told Jeff Bezos that it would be impossible to build the necessary functionality in just four weeks, Bezos made a deal with the team. He said they would split the difference and he would reschedule and push back the company’s earnings call, but the team had to figure out how to finish the project by then.
While the staff had to crunch in order to meet the deadline, the Futurama team was able to successfully build Amazon Prime in time to announce the day of the company’s earnings call and the rest is history.
While Amazon Prime has become a massive success now, at the time it was far from a sure bet. And many people, both inside and outside of the company, questioned the direction of the business and whether the move made sense. Wall Street analysts had concerns over the massive increase in expenses and feared that the service would give Amazon unsustainable shipping costs that they would consistently be footing the bill for and losing money on. And even some of the senior leadership within Amazon thought that it was a bad direction for the company to go in. One engineer who was working on the Futurama project was even worried that it could potentially bankrupt the company and sent an email to senior leadership expressing his concerns. The company built Amazon Prime in a very short period time and did not conduct in depth business studies or financial analysis to justify the program – it was a program that was built purely on an idea and the instinct and the belief that it would work. Because of all of the question marks surrounding the new business strategy, few people outside of maybe Jeff Bezos himself envisioned Amazon Prime evolving into the success it is today.
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