Jeff Bezos clearly remembers the Eureka moment that led to the creation of It was May 1994, and he was working in his mid-Manhattan office, trying to get data about Internet usage. When Bezos found the numbers he was looking for, he was stunned: "Web usage was growing at 2,300% a year," he said. "Things just don’t grow that fast. It was a wake-up call."

The rest, as they say, is history. Bezos quit his job that summer, drove from New York City to Seattle, and founded in July 1995. Initially an online bookseller, Amazon now sells 18 million items including CDs, software, toys, video games, etc., etc. Although it has yet to make a profit, its capitalization on Wall Street exceeds that of General Motors. E-commerce is changing the way the world shops, and exemplifies this change as few companies do. Time magazine last year named Bezos its person of the year.

Bezos told the story about’s creation at Wharton last week when he and David Dyer, CEO of Lands’ End – another e-commerce pioneer – participated in CEO Exchange, a public television program moderated by CNN’s Jeff Greenfield. Over three hours, Bezos and Dyer shared their strategies and insights, their hopes and fears, with an auditorium packed with students and faculty members. The CEO Exchange program will air on TV later this spring.

Before Bezos launched, he saw it as an online extension of the mail-order business. He listed 20 products that were sold by mail-order and selected books because they were underserved by that marketing process. Bezos was convinced that the Internet would be a good way to sell books – after all, an online bookstore could offer a truly universal selection – but he also had lots of doubts. He told his family, who provided seed capital for, that there was "a 70% chance that it wouldn’t work." At the end of the first month of’s existence, however, the company, then based in a 400-sq. ft. garage – had orders from all 50 states in the U.S. and 45 countries. "We knew then that customers wanted this," Bezos said. "The rest was execution."

With 20-20 hindsight, what would he do differently about the launch? "We wanted to launch with 1.1 million book titles," Bezos said. "We were advised to launch with 300,000, but we waited until we had 1.1 million titles." In retrospect, Bezos believes that should have launched earlier, even if that meant having fewer books in its catalog. The larger number of books made it difficult for the company to fulfill orders.

As ventures beyond books into other products – the company brags it offers Earth’s largest selection of items – it faces a major challenge from Wal-Mart, which this year is expected to significantly step up its online presence. How will respond? Bezos says that the Internet’s potential is vast enough to have room for many winners, and different companies will pursue different models toward success. will win if it continues to create value for its customers. In other words, he argues, Wal-Mart’s entry need not lead to’s demise, which has often been predicted. "We have been called Amazon.toast, Amazon.bomb and, my personal favorite,, since we are clearly not for profit," says Bezos with his characteristic honking guffaw.

So when does Bezos expect to be profitable? Bezos responds that is famously unprofitable principally because it has been investing heavily in the future. "CNN invested for a long time before it turned profitable," he says. "What is different about us is our scale. But there’s new new math here." The key, Bezos says, is to focus on creating long-term value for customers.

Like, Lands’ End dramatically overhauled its operations to deliver value to customers over the Internet. Although 90% of the company’s apparel sales still come from its well-known catalog, CEO David Dyer says that Internet-based sales now account for nearly $100 million in annual revenues. Doing business over the web, he says, is not just a matter of placing "a few product pictures on the web. It is a new way of thinking. We don’t think of ourselves as a catalog company. We are a global direct marketing company."

Dyer, whose father and grandfather were retailers, loved the sound of cash registers as a boy, and was determined to find a job in the retail industry. Having worked years ago for Lands’ End, he left briefly to join television’s Home Shopping Network. Although he returned to Lands’ End, Dyer says his experience at the Home Shopping Network was positive. "It is important to make a difference to the place where you work, and also to learn as much as you can," says Dyer.

An avid flyer, Dyer also credits his hobby for having taught him three important lessons. "First, you must always aviate," he says, emphasizing that it is important to fly as much as possible and keep on the move. "Second, you must navigate. Ask where you are and where you want to go. And third, you must communicate." Each lesson has translated well into his business life, Dyer adds.

These lessons served Lands’ End well as it developed its online strategy. Dyer believes that companies must fulfill three conditions to succeed in e-commerce. One, it must have a trusted brand. Two, it must have proprietary products with profit potential. Three, it must have efficient distribution channels. "At Lands’ End, we had all three," Dyer says, which explains why the company has been able to move 10% of its sales online.

If a recession should strike, will e-commerce companies that are now flying high plunge earthward? Bezos and Dyer have different answers to that question. According to Bezos, has positioned itself as widely as possible primarily to insulate itself against a slowdown in one industry or another. Meanwhile, "the best thing we can do is to invest today," Bezos says. "Taking care of customers today means taking care of customers tomorrow. I always tell our employees, don’t be afraid of the competition. Be afraid of the customer."

Dyer says Lands’ End, too, has positioned itself to survive a possible recession in the future. "We have 29 million customer names in our files," he says. "This is an asset that is not valued on our balance sheet," but still an important asset. Quoting Warren Buffett, the CEO of Berkshire Hathaway, Dyer says: "In the short term, the market votes. In the long term, it weighs."