The managing director of Amazon UK opens up about what drives the company’s innovation – and the more paternalistic side to the business.
Amazon can split consumer opinion. People either love it for the shopping convenience, or take exception to it as the giant that’s disrupting the high street and not giving enough back. But Christopher North, managing director of Amazon UK, would like people to re-evaluate this reputation and see Amazon as a champion of small business.
The most significant fact he rattles off to support his argument is that last year, Amazon was responsible for over £1bn of exports from the UK, largely from small and medium-sized businesses.
That was through Amazon Marketplaces, which was created when Amazon opened up its own e-commerce platform to third parties, and includes product listings automatically translated for different countries.
Many small businesses will have used Fulfilment by Amazon and Amazon Logistics – services which tap into the company’s warehouse capacity and delivery networks, which again, Amazon developed for itself and now shares.
It’s the same story when you look at Amazon Web Services. It offers capacity on Amazon’s servers to other businesses, which can subscribe to cloud computing instead of going to the expense of investing in the hardware themselves. And both Kindle and Amazon Studios have opened up publishing and media opportunities to the public and small start-ups, says North.
“This concept of platforms that let entrepreneurs build and grow their businesses is one of the things I’m most excited about,” he adds. “When you look at the statistics [around exports], it gives you a sense of the scale of the economic impact it can have on entrepreneurs, how we’re helping them expand their business and how it’s benefiting the overall UK economy.”
Room to compete
For North, it’s less a case of Amazon ruining the high street and more about giving small businesses the chance to reach the world, as well as providing rural consumers with easy access to any product they might want.
He refers to statistics that suggest Amazon takes 10 per cent of total e-commerce turnover – and e-commerce accounts for 10 per cent of retail. “That means Amazon is at 1 per cent of overall retail,” he explains. “So there’s a very big retail pie and there’s room for a lot of people to compete for that.”
He also adds: “Our focus is not on our competitors. It’s not on the high streets. It’s about how we can serve our customers better, so that leads us every day to put our heads down and focus on the key questions. How do we expand our range? How do we make delivery faster? How do we lower our prices? How do we have the best possible customer service?”
The beneficiary of this approach is the consumer, he adds.
North is the first to admit that Amazon has changed “beyond recognition” in some ways since its launch in 1994. And growth has been phenomenal – globally, head count has grown from 40,000 to 180,000 in five years; in the UK, the company now has more than 10,000 permanent employees.
And with Amazon’s track record in disrupting industries from retail to publishing, it has naturally attracted suspicion. Tax, in particular, has been in the spotlight.
“We’ve been very clear and very consistent over the years on tax: we pay all the taxes that we are required to by law in every jurisdiction,” says North.
“We set out to structure our business in the way that lets us serve our customers the best,” he adds, explaining that its European tax structure – based out of Luxembourg – provides its European consumers with fast access to nearly 150 million products kept in any one of 29 warehouses. That wouldn’t be possible if products had to be delivered from one of nine UK warehouses.
But in May this year, Amazon did bow to pressure and change some of its tax structure for Amazon Retail, so that all purchases are accounted for and taxed at a local market level. That will play out in its next tax return, but the company is careful to point out that retail is a low-margin business.
North adds: “I think something that is increasingly well understood – but hasn’t always been – is that Amazon’s businesses are at very different stages of their evolution. Many are very low margin. But we operate at a scale where our more mature businesses do make a net contribution to our overall business. We choose to take the proceeds of those businesses and reinvest either in growing our existing businesses, building new features or innovations, or launching whole new businesses.”
And he credits long-term thinking, with innovation focused on the customer at all times, for Amazon’s success.
“We’re lucky at this stage of our growth to be a big enough company that we can afford to make a series of risky bets and know that not all of them need to succeed. We really like intelligent failure.”
In response to criticism about the workplace environment, North agrees that Amazon is an intense place to work. It’s the number two employer of MBAs in the country, he adds.
He is also proud of the company’s response to feedback from the warehouses, which has led to initiatives to shorten lunch queues and, more significantly, shorten the working week from five days to four.
“Unless we have succeeded or are succeeding in building a great workplace environment for all of our employees whether in corporate offices, in warehouses, in customer service centres or in technology development centres, it would be impossible for us to succeed [as a company],” he says.
“We certainly make mistakes, but I feel really good that we have a lot of mechanisms to identify where we can improve.”
Christopher North was a speaker on the Disruptive Innovation panel at the CBI's Annual Conference.