How One Bad Thanksgiving Shaped Amazon

It’s officially the holiday season, which means 70,000 people have temporary jobs at Amazon fulfillment centers to ensure that your gifts arrive exactly when they’re supposed to. While these jobs aren’t exactly easy or high-paying – there’s been plenty written about the not-so-awesome working conditions – it’s in many ways remarkable that Amazon is able to easily leverage the population of a small town less than 15 years after a panic-filled Thanksgiving led to the mammoth and tightly-controlled supply chain system that’s in place today.

The “Save Santa” incident, described in Businessweek reporter Brad Stone’s recent book The Everything Store: Jeff Bezos and the Age of Amazon, was an “all-hands-on-deck emergency” in 1998 resulting from one of the biggest problems an online store can have: there were far more orders coming in than shipments going out. This required all employees – including the executives – to work a graveyard shift at one of two warehouses. “They brought their friends and family,” writes Stone, “ate burritos and drank coffee from a food cart, and often slept in their cars before going to work the next day.” Bezos held contests to see who could pick items off shelves the fastest. Then he vowed the company would never have an inventory shortage again.

“The underlying truth is that Amazon becomes, like almost like all retailers, a different company during the holidays,” Stone explained to me over the phone. “Volume grows over the previous year. The already aggressive and fast-moving environment in the headquarters and fulfillment centers become manic. I describe it as two Amazons: one that operates for 10 months and the other that operates for two months out of the year.”

One of the reasons it runs so efficiently during those two crazy months now are lessons stemming from the holiday chaos of Amazon’s first 10 years. “It ranges from employees cleaning out the Pokémon section of ToysRUS.com or requiring all its white-collar workers to [work] at the distribution centers in Seattle,” says Stone.  “It’s harsh, but a character building moment for the company. Any Amazon employee remembers that time.”

One of the more memorable debacles involved distribution center in Georgia that had a massive backup of unfilled orders. The surprise culprit? A missing pallet of Pokémon Jigglypuffs. Thus, a search team was organized to scour the entire 800,000 square foot warehouse for the pallet. It was found — three days later and at 2 a.m. It was a great learning moment for the company, explains Stone, because “it showed just how fragile the system was.” And it showed the lengths employees would go to ensure on-time holiday delivery.

Today, Amazon has fulfillment centers in 14 U.S. states and in 36 cities around the world. They’re the brainchild of senior vice president Jeff Wilke, a student of Six Sigma who turned “distribution centers” into finely-tuned facilities that run on algorithms and the speed and accuracy of their workers — think Bezos’s 1998 picking contest taken to the extreme (and without the burrito cart). Wilke used to lead a whistlestop tour right before the holiday season, visiting fulfillment centers to check on progress (while wearing a flannel shirt to show solidarity with his on-the-ground employees). Now there are too many fulfillment centers to visit.

Today’s well-oiled Amazon “hides the chaos” of holiday shopping, explains Stone. This is in part what makes Amazon so appealing to consumers who aren’t into the shelves-askew, people-trampling hoard that symbolizes Black Friday at brick-and-mortars. And while the company has plenty of competition – from the Costcos and Walmarts of the world to online niche sites like Blue Nile to the local independent stores that many shoppers have vowed to support – there is no doubt that the frictionless nature of Amazon, combined with shipping products like Amazon Prime, give the behemoth a huge advantage. “Save Santa” may have just about saved Amazon, too.

Gretchen Gavett is an associate editor at the Harvard Business Review. Follow her on Twitter @gretchenmarg. This post originally appeared in the HBR Blog Network.

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9 replies »

  1. I remember 1998 well, I was working as an eCommerce programmer at the time. Everyone was furious that their packages didn’t arrive when promised. In fact, the first big eCommerce Christmas happened sometime in January. It was a train wreck and everyone knew it. Instead of declaring the whole system a failure and unsafe (as ACA detractors have done), they hired a new guy to completely revamp their warehouse and shipping operations and over the next few years slowly became the massive, efficient machine you see today. It’s easy to say now they were right to press forward. At the time, it wasn’t so certain. There were naysayers then as there are now.

    That’s how you respond to problems brought on by an unexpected flood of demand, on a scale you’ve never managed before (the web aged spawned a new saying, “more is different”). If you think your idea will work in the long run, you stay optimistic and do whatever it takes to make it work. That’s the lesson here.

  2. And Amazon’s drones are being developed to deliver product more quickly whereas ACA’s drones will be developed to check if you’re barbecuing too much red meat!

    All kidding aside, as others have said, it’s a shame a company like Amazon, Google or the like weren’t at least consulted on the website.

  3. “would the ACA’s detractors have looked at that first Christmas in 1998 and said, “It’s a train wreck, shut it down?””

    Amazon’s success is its array of choices, great service and price choice. You tell Amazon what you want and amazon takes its cues from it customers. Not even close to the ACA.

  4. One also can’t help but wonder if Amazon had been so publicly scrutinized, would the ACA’s detractors have looked at that first Christmas in 1998 and said, “It’s a train wreck, shut it down?”

  5. Indeed. But, as the book points out, Amazon was no overnight success. They struggled to refine their processes across many, many years. Though, one can’t help but wonder what would have happened had the Obama administration been able to sole-source HealthCare.gov to Amazon, as many people have already observed.

  6. I would recommend this book to everyone. I bought the hardcover. Couldn’t put it down. After I finished I bought the Kindle edition, for further study and easy citation on my blog. Lessons to be learned therein.