Bezos’s 2015 Shareholder Letter: One Culture, Two Businesses

The 2015 letter discusses corporate culture. Good or bad, corporate culture is always there: stable and hard to change. It may be an advantage or disadvantage. You can write it down, but in doing the actual work you discover it rather than create it. People and events gradually build it, and successes and failures shape it. A distinctive culture will suit particular people. Culture stays stable because people select themselves: those whose characteristics fit it enjoy it and stay; others leave. Fortunately, the world is large enough for companies with many distinctive cultures, all potentially successful. We have never thought ours is the correct approach; it is simply ours. Over twenty years, we have gathered like-minded colleagues who find our culture energizing and meaningful. One particularly distinctive characteristic is our attitude to failure. I think this is the best place in the world to fail—we have countless examples! Failure and success are inseparable twins. Innovation requires experimentation. If you know the result beforehand, it is not an experiment. Many large organizations want innovation but cannot tolerate the failures along its path. Exceptional returns often come from insights contrary to conventional wisdom, although conventional wisdom is usually right. Given a one-in-ten chance of a hundredfold return, you would surely take the bet every time. You would still lose nine times out of ten. But business lets you keep trying, and genuine success involves countless attempts. An aside: the American shopping event Prime Day also appears in this shareholder letter for the first time. #Bezos2015ShareholderLetterPartOne It’s All About The Long Term. To our shareholders: This year Amazon became the fastest company to reach 100 billion in annual sales. AWS also reached 10 billion in annual sales, faster than Amazon reached that milestone. What happened? Two seeds we planted rapidly became significant businesses without major acquisitions. At the surface, the two seem much alike: one serves consumers and the other businesses; one is known for brown boxes, the other APIs. Is their rapid growth under one roof merely coincidence? Luck certainly played a substantial role, but there is also a connection. Beneath the surface, they are not different. They share a culture: customer focus, a willingness to invent and fail, long-term thinking, and pride in operational excellence. Seen this way, AWS and Amazon retail are very similar. Good or bad, corporate culture is always there: stable and hard to change. It may be an advantage or disadvantage. You can write it down, but in doing the work you discover it rather than create it. People and events gradually build it, and successes and failures shape it. A distinctive culture suits particular people. Culture remains stable through self-selection: those who fit enjoy it and stay; others leave. Fortunately, the world is large enough for many distinctive corporate cultures, all potentially successful. We never thought ours was the correct approach; it is simply ours. Over twenty years, we have gathered like-minded colleagues who find it energizing and meaningful. One distinctive characteristic is our attitude to failure. I think we are the best place in the world to fail—we have countless examples! Failure and success are inseparable twins. Innovation requires experiments; knowing the outcome beforehand means it is not an experiment. Many large organizations want innovation without tolerating its inevitable failures. Exceptional returns often come from insights contrary to conventional wisdom, although that wisdom is usually right. With a one-in-ten chance of a hundredfold return, you would take the bet every time, despite losing nine times out of ten. Business allows repeated attempts; genuine success follows countless trials. AWS, Marketplace, and Prime are successful bets. We are fortunate to have those three pillars. They helped us become a large company, and some things require scale. To invoke our Seattle neighbor, however good an entrepreneur you are, you cannot build a 787 in your garage—and would not dare fly it if you did. Used well, our size enables services once unimaginable. Without care, however, scale can also slow us and suppress continued invention. Meeting teams, I am continually amazed by their enthusiasm, intelligence, and creativity. They accomplished much in the past year. I will highlight Prime, Marketplace, and AWS, without implying that other areas have been neglected. /Prime/ We want Prime to be an irresistible product. We increased items eligible for Prime two-day delivery from one million to thirty million. Free Same-Day Delivery launched in 35 cities worldwide, covering hundreds of thousands of items. We added music and photo cloud storage, the Kindle Owners’ Lending Library, and online video and TV. Prime now also offers members one-hour delivery on many items, launched just 111 days after conception. A small team built a customer-oriented app, selected a warehouse location in a city, identified and stocked 25,000 items, hired staff, tested, iterated, and wrote new internal software—a warehouse-management system and a driver app—before launching on schedule ahead of the holidays. Today, just fifteen months later, Prime Now covers more than thirty cities worldwide. Prime Video offers exclusive work from exceptionally passionate storytellers. We want outstanding creators such as Jill Soloway, Jason Schwartzman, and Spike Lee to take risks here and push industry boundaries. Our original series have received more than 120 nominations and nearly sixty awards, including Golden Globes and Emmys. Many stories could not be broadcast through traditional cable media. Upcoming series and films include work by Jeremy Clarkson, David E. Kelly, Woody Allen, and Kenneth Lonergan. The Man in the High Castle, based on Philip K. Dick’s novel, imagines an America that lost World War II. Released on Prime Video on November 20, it became our most-watched program within four weeks. Reviews included ‘...Amazon’s The Man in the High Castle is simply this season’s best series’ and ‘The Man in the High Castle does what many other shows dare not even attempt.’ These shows benefit customers and feed the Prime flywheel. Members watching Prime Video are more likely to convert from trials to paid membership and renew subscriptions. Finally, the first Prime Day exceeded expectations: no previous day brought so many Prime trials. Global orders rose 266% from the same day last year. Fulfillment by Amazon (FBA) sellers were astonished by sales growth of nearly 300%. Prime has become a blend of physical and digital services offering whatever you want. Membership rose 51% year over year, including 47% growth in the United States and even stronger growth internationally. There are now tens of millions of members worldwide. You are probably one; if not, please join responsibly! /Marketplace/ Before launching Marketplace fifteen years ago, we tried and failed twice, with Auctions and zShops. We learned and persisted. Today, third-party sellers account for 50% of items sold. Marketplace gives customers more choice and benefits merchants: over 70,000 sellers each generate more than US$100,000 annually, creating roughly 600,000 jobs. FBA accelerates the flywheel because these items become Prime-eligible, improving Prime’s value while increasing seller sales. This year we developed Seller Fulfilled Prime. Sellers meeting high standards for shipping speed and consistent service can join Prime while fulfilling orders themselves at Prime speed. They have substantially increased sales and added hundreds of thousands of items eligible for two-day delivery—or next-day delivery in the United Kingdom and Germany. Amazon Lending also supports sellers. Since launch, we have provided more than 1.5 billion in short-term loans to micro, small, and medium-sized businesses in the United States, United Kingdom, and Japan; our loan amount is an impressive US$400 million. Stephen Aarstol, founder of Tower Paddle Boards, is a beneficiary. His business has become one of San Diego’s fastest-growing companies, benefiting customers and Amazon. We hope to expand Lending and are working with banks whose expertise can help manage financial risk. Alongside these major programs, we are globalizing them. Marketplace helps merchants reach customers worldwide. Previously, inconvenience restricted many to domestic sales. We built practical tools that last year helped sellers in 172 countries reach customers in 189. Cross-border sales now represent 25% of our total sales. To achieve this, we translated hundreds of millions of product pages and enabled conversion among 44 currencies. Even tiny merchants can now access global customers and supply networks. The result differs enormously from doing it alone. Plugable Technologies CEO Bernie Thompson says: ‘Getting our products to warehouses in Europe or Japan within a day or two changes the paradigm!’ India is another example. Last year, Amazon Chai Cart took tricycles into Indian streets, offering tea and drinks to small vendors while teaching them to sell online. In four months, teams traveled 15,280 kilometers through 31 cities, served 37,200 cups of tea, and contacted over 10,000 sellers. These and other conversations revealed a persistent belief that online selling is complicated and time-consuming despite its benefits. We therefore developed Amazon Tatkal, enabling small sellers to list products within an hour. Designed for small vendors, it provides essentials such as registration, photography, categorization, and basic selling skills. Since its February 17 launch, the service has reached sellers in 25 cities. We are globalizing FBA too, adapting it to sellers’ needs. In India, Seller Flex incorporates merchants’ warehouses into our network. Merchants reserve part of their space for inventory; we add the location to our network for more convenient logistics planning. Our teams provide technical help with layouts and IT infrastructure and teach our processes. We now have 25 Seller Flex sites in more than ten cities. ~To be continued Jeffrey P. Bezos (Chinese translation by Vinchent)