Amazon Blowout Quarter - What's The Secret?

Amazon's announcement of it's second quarter results brought a massive increase in the price of the stock in its aftermath, creating billions in additional market cap for its investors. I did not think to cover it here until reading the excellent management blog, Curious Cat, and its take on the quarter. That post made me realize -- I knew Amazon, having worked with them in the past and I felt I could add some insight to their success here.

I had extensive experience working with Amazon in a previous job several years ago. I was running eCommerce for a luxury consumer products company at the time. We had made the decision to private-label outsource our website and fulfillment operations to Amazon. What I saw there was some of the best discipline around the implementation of automated processes I've seen. While it can leave you with a feeling of discomfort when outsourcing to rely so heavily on electronic processes, there was no doubt we quickly accrued positive benefits through waste reduction as a result of their processes. What I in effect saw were Lean principles in action.

We moved from a labor intensive inventory management process to a highly electronic one in which automated signals starting with consumer web orders triggered re-orders from our wholesale warehouse to Amazon distribution facilities. The end result was a highly efficient system that, outside of new product introductions, tended to run itself, allowing my team to focus its energy on marketing and customer acquisition and not inventory management. To see long-awaited improved financials is not surprising given what I saw several years ago when working with them. And I think I know their secret.