AMZN Amazon.com Inc

It is tough to be the retail king.

Online giant Amazon.com has been facing questions from regulators, politicians and consumers about its scale and breadth of its services, and how it leverages data in its business. There are even calls to break up the retailer.

For an inside look at these challenges, Wall Street Journal Editor in Chief Matt Murray spoke with Jeff Wilke, Amazon's chief executive, world-wide consumer, at the WSJ Tech Live conference. Here are edited excerpts.

MR. MURRAY: The perception of a lot of people is that you've morphed. This is one of the things the regulators raise -- you're in so many businesses that you have a data advantage that you've collected across all of those businesses. So, you get into a new business and your data advantage allows you to take over that industry very quickly. In a lot of ways, you're thought of as a data company more than a retail company.

MR. WILKE: There was a corner pharmacy where I grew up. The pharmacist had been there forever. When you walked in, he knew what you liked to buy. He would tell you about new arrivals and where they were in the store. He'd say, "Hey, Jeff, there's a bodybuilding magazine back in the corner that we just got that you might want to read."

That's the same thing we're doing.

Our main purpose in storing your purchases is so that we can recommend something that you might want to buy the next time. We don't sell that data to others. We don't use it to understand anything other than, when you arrive, what should we show you? What should we show you that you might be inclined to buy? It's a very different use of data than some other companies.

MR. MURRAY: One of the big criticisms of you is your private-label brands, that you're using data from retailers on Amazon. You're seeing what people like, and you're making your own products with that data that are competing with your own retailers. You've got a built-in conflict of interest with people using your platform.

MR. WILKE: Retailers have been doing private label for a long time. Private label for us is 1% of our sales. If you look at most of our competitors, it's 15%, 25%, 80% depending on the competitor.

MR. MURRAY: I've noticed over time, though, if I punch in a brand and a product, the Amazon brand will often come up in my search results right at the top or next to the top.

MR. WILKE: A search result is a ranked list of the stuff in response to the keywords that you type. Private brands don't get an advantage there. If a private brand shows up in a search result, it's because lots of customers are clicking on that particular private brand.

If you're seeing things at the top that aren't very popular, it's probably because it's a new thing and there's a merchandising widget that is featuring it. But it's not going to show up at the top of search results just because it's an Amazon private brand.

The other thing I would say about private brands is that we have a very strict policy on how we use data from sellers. We do not allow individual sellers' data to be used by the retail teams when they're thinking about what private-label products to launch.

The oversight question

MR. MURRAY: You've said in the past that you welcome scrutiny from regulators.

MR. WILKE: The reason we welcome scrutiny is we think the things we're doing are great for customers and great for citizens. We are growing. We're substantial. We think we deserve the scrutiny. When I look at retail, it's a giant market. It's probably $25 trillion. And we represent world-wide a little over 1%, and in the U.S. maybe 4% to 5%.

MR. MURRAY: How do you differentiate between user data and usage data? You have my user data, my name and other details of me I've given you, and you have my usage, what I've bought. Are they organized separately?

MR. WILKE: For a specific recommendation for you, we might look at your past purchases. If you come to buy toothpaste, you may see a widget at the top that says, "Reorder this toothpaste that you bought last time." That's tied to you.

But we also will look at things that you bought, and then what you bought next, like we do for all customers. That's more of an anonymized, "People who bought this also bought." That's just feeding [data] into a machine-learning or other algorithm to see if you can improve the results. Less personalized.

MR. MURRAY: When are drones really going to be capable to be doing a lot of Amazon deliveries?

MR. WILKE: Well, drones will make their mark when they're safe and cost effective. There are some big pros to them, because they can fly over traffic, they're really good for the environment, they're electric powered, so you can run them on renewable energy. But there's a lot of engineering work. All the announcements right now are pilots on a relatively small scale.

MR. MURRAY: What's the biggest challenge? They'll fly distances. Is that last specific problem getting to the right doorstep? Landing without hurting people?

MR. WILKE: We can do that pretty well. It's, "What if you have bad weather in the middle of a flight? As there are more drones in the airspace, how do those drones interact with helicopters, for example?" The FAA is spending a lot of time thinking about that.

(END) Dow Jones Newswires

October 24, 2019 19:14 ET (23:14 GMT)

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