Bezos’s 1997 Shareholder Letter: It’s All About the Long Term

#BezosShareholderLetter1997 To our shareholders: Amazon.com crossed many hurdles this year. By year-end, we had more than 1.5 million users, grew more than eightfold, and generated$147 million in revenue. We expanded our market despite intense competition. But we believe this is Amazon.com’s true beginning. Today, e-commerce saves customers money and time. Tomorrow, personalization will accelerate the process of discovery. Amazon.com creates real customer value through the internet, and we hope to sustain our lead even as this large market takes shape. We are seeking opportunities online while new internet shoppers can form new relationships with merchants. Competitors are rising quickly. Many large companies have moved their services online and committed substantial resources to awareness, traffic, and purchases. We aim to consolidate and expand our position quickly while exploring e-commerce in other fields. We see real opportunities, but the strategy is not foolproof: confronting established market leaders requires critical choices and serious investment. #EverythingRevolvesAroundLongTermValue (It’s All About Long Term) We firmly believe that a key measure of success is the#long-term value we create for shareholders. This directly results from strengthening and expanding our current position. The stronger our market leadership, the more powerful our business model. Leadership can directly produce higher revenue, profits, capital turnover, and returns on investment. Our decisions have consistently reflected this focus. We assess leadership through key indicators: customer and revenue growth, repeat purchases, and brand strength. We have invested heavily to expand our customer base, improve the brand, and strengthen infrastructure to establish a lasting lead. We will continue doing so. Our long-term focus may lead us to weigh decisions differently from other companies. We therefore want to share our strategic direction with shareholders and confirm that it aligns with our ultimate goals: #WeWillFocusRelentlesslyOnCustomers *We will keep making decisions for the long term rather than short-term stock returns. *We will learn from successes and failures, analyze carefully, abandon projects that do not deliver returns, and increase investment in those that do. *Where there is a strong chance of extending market leadership, we will make bolder investment decisions. Success or failure will teach us something valuable. *If we must choose between better-looking financial statements and maximizing cash flow, we choose the latter. *We will share major decisions so you can assess whether our investments in long-term development are rational. *We will work to spend wisely. We know how important cost awareness is in an industry that can generate net losses. *Alongside growth, we will focus on long-term profitability and capital management. At this stage, we prioritize growth because we believe in the benefits of scale. *We will keep attracting and retaining excellent people. We prefer equity incentives to fixed pay, knowing that success depends on a motivated team. Its members must act as one, which means they must genuinely be part of the enterprise. We do not dare claim that this thinking is “correct,” but it is ours. Failing to establish a clear direction would be our responsibility. With that foundation, let us examine our progress this year (1997) and our plans: #CustomersFirst From the outset, we have sought to create lasting customer value. We realized that the web has always been the “World Wide Wait.” We therefore offered something customers could not obtain elsewhere: books. Our enormous selection exceeds any physical bookstore—our book inventory could occupy six football fields—and we made this bookstore easy to search and browse, open 24 hours a day, year-round. We have focused doggedly on improving the customer experience and substantially upgraded our online bookstore this year. We now offer gift cards, one-click shopping, and extensive reviews, previews, and recommendations. We cut prices dramatically while increasing value. Word of mouth is our strongest asset, and we are deeply grateful for customers’ support. Repeat purchases and recommendations have made Amazon.com the leading online bookstore. By many measures, Amazon.com came a long way this year: * Sales grew from$15.7 million last year to$147 million, an 838% increase. * Users grew from 180,000 to 1.51 million, a 738% increase. * Repeat purchases rose from 46% in last year’s fourth quarter to 58% in the same period this year. * Our website’s audience ranking rose from 90 th into the top 20. * We established long-term strategic relationships with major partners including AOL, Yahoo, Excite, Netscape, GeoCities, AltaVista,@Home, and Prodigy. #Infrastructure In 1997, we worked hard to expand our platform to accommodate rapid growth: * Amazon’s workforce increased from 158 to 614, and we especially strengthened management. * Distribution-center capacity grew from 50,000 to 280,000 square meters, including a 70% expansion of our Seattle warehouse and a new Delaware warehouse in November. * Inventory increased by 200,000 books by year-end, improving customer service. * Including proceeds from our May IPO and our 75 million loan, our assets reached 1.25 billion, giving us considerable strategic flexibility. #OurEmployees The year’s success came entirely from our intelligent, resourceful, hardworking team. I am fortunate to be part of it. High hiring standards will remain an important foundation of our success. Working here is not easy. In interviews, I say you can work long, hard, or smart, but at Amazon you must do all three. Yet we are doing something important, something we can tell our grandchildren about. Its difficulty is no joke. We are fortunate to have a passionate, self-sacrificing team. #NextYear’sGoals We are still early in learning how to create customer value through e-commerce. Our goals remain expanding the brand and customer base, requiring continued investment in infrastructure. We also see considerable room to serve international customers better, through faster shipping and a better experience. There are many ways to expand; prioritizing them is most important. We understand e-commerce much better than at Amazon.com’s founding, but must keep learning. We must stay alert despite present success. Obstacles to our long-term development include strong competition, growth challenges and decision risks, product and geographic expansion, and continuing investment to serve a larger market. Even so, as we have said, online bookselling and shopping have proved to be major opportunities, and many companies may prosper from them. We feel good about what we have achieved, and excited about what we may accomplish! Thank you to customers for their trust and support, to hardworking colleagues, and to shareholders for their support and encouragement. JEFF BEZOS (Chinese translation by Dedao user Vinchent)