The Everything Store: Jeff Bezos and the Age of Amazon

by Brad Stone

In early 2002 late on a Monday night, Bezos called a meeting in Warren Jenson’s conference room to talk about how to turn the holiday-season free shipping into a permanent offer. This was one way he could redeploy his marketing budget. Jenson in particular was opposed to this. The CFO worried that free shipping would be expensive and wasteful, since Amazon would be giving discounts to all comers, including those customers who were inclined to place large orders anyway. Then one of his deputies, a finance vice president named Greg Greeley, mentioned how airlines had segmented their customers into two groups—business people and recreational travelers—by reducing ticket prices for those customers who were willing to stay at their destination through a Saturday night. Greeley suggested doing the equivalent at Amazon. They would make the free-shipping offer permanent, but only for customers who were willing to wait a few extra days for their order. Just like the airlines, Amazon would, in effect, divide its customers into two groups: those whose needs were time sensitive, and everyone else. The company could then reduce the expense of free shipping, because workers in the fulfillment centers could pack those free-shipping orders in the trucks that Amazon sent off to express shippers and the post office whenever the trucks had excess room. Bezos loved it. “That is exactly what we are going to do,” he said.