We're a company that wants to be weighed, and over time, we will be—over the long term, all companies are.[1]
Numbers
Comparisons
| Metric | Prior | 2000 | Δ |
|---|---|---|---|
| Customers served | 14 million (1999)[5] | 20 million[6] | |
| Sales | $1.64 billion (1999)[7] | $2.76 billion[8] | |
| Pro forma operating loss as % of sales (Q4) | 26% of sales (Q4 1999)[9] | 6% of sales[10] | |
| Pro forma operating loss as % of sales, U.S. (Q4) | 24% of sales (Q4 1999)[11] | 2% of sales[12] | |
| Gross profit | $291 million (1999)[13] | $656 million[14] | up 125%[15] |
| International sales | $168 million (1999)[16] | $381 million[17] | |
| Cash and marketable securities | $706 million (end of 1999)[18] | $1.1 billion[19] |
As reported (2000)
| Metric | Value |
|---|---|
| Average spend per customer | $134[20] |
| Q4 U.S. customers purchasing from non-BMV stores | Almost 36% (Q4 2000)[21] |
| Toysrus.com toys and video games sold (Q4) | $125 million (Q4 2000)[22] |
| American Customer Satisfaction Index score | 84[23] |
| Share price decline | down more than 80%[24] |
| Estimated share of retail commerce moving online (long-term) | some 15% of retail commerce[25] |
Notable quotes
In the physical world, retailers will continue to use technology to reduce costs, but not to transform the customer experience.
Amazon.com today is a unique asset. We have the brand, the customer relationships, the technology, the fulfillment infrastructure, the financial strength, the people, and the determination to extend our leadership in this infant industry and to build an important and lasting company.
Lessons
- In retrospect, we significantly underestimated how much time would be available to enter these categories and underestimated how difficult it would be for single-category e-commerce companies to achieve the scale necessary to succeed.[28]
Entities mentioned
Prior predictions revisited
- … 1999: “In the coming years we expect to benefit from the continued adoption of online commerce around the world as millions of new consumers connect to the Internet for the first time.” — The 2000 letter shows customer growth from 14 million to 20 million but does not explicitly address this prediction.[31]
- ✓ 1999: “the current online shopping experience is the worst it will ever be.” — The 2000 letter reaffirms this by describing how Moore's Law and bandwidth improvements will continuously improve the customer experience.[32]
- ✓ 1999: “Increased bandwidth will result in faster page views and richer content.” — The 2000 letter confirms bandwidth price-performance is doubling every 9 months, enabling richer customer experiences.[33]
- … 1999: “Further improvements will lead to "always-on access" (which I expect will be a strong boost to online shopping at home, as opposed to the office) and we'll see significant growth in non-PC devices and wireless access.” — The 2000 letter references investment in digital and wireless technologies as a bold bet but does not explicitly report outcomes on always-on access or non-PC growth.[34]
- ≈ 1999: “the time to profitability for each business should, in general, continue to shorten.” — The 2000 letter shows the U.S. pro forma operating loss shrinking from 24% to 2% of Q4 sales, consistent with shortening time to profitability, though profitability has not yet been achieved.[35]
- ✓ 1999: “Our customers and shareholders around the world can look forward to further geographic expansion from this base during the coming year.” — The 2000 letter reports international sales grew to $381 million from $168 million in 1999, confirming geographic expansion.[36]
Predictions
- We still believe that some 15% of retail commerce may ultimately move online. (long)[37]
- Amazon.com will be able to use 60 times as much bandwidth per customer 5 years from now while holding our bandwidth cost per customer constant. (medium)[38]
- we've set the goal of achieving a pro forma operating profit in the fourth quarter. (near)[39]
- Industry growth and new customer adoption will be driven over the coming years by relentless improvements in the customer experience of online shopping. (medium)[40]
Admitted mistakes
- We were significant shareholders in both and lost a significant amount of money on both. — The 'land rush' metaphor for the Internet was overextended; Amazon underestimated the time available to enter new categories and overestimated single-category e-commerce companies' ability to achieve necessary scale.[41]
vs. 1999
Added: Explicit admission of failed investments (living.com, Pets.com) and retirement of 'land rush' metaphor[42] · Technology deflation thesis (Moore's Law, bandwidth, disk space) as e-commerce growth driver[43] · Near-term profitability target (Q4 pro forma operating profit goal)[44]
Dropped: Day 1 mentality and urgency · Best-of-breed in every category principle · Drive toward profitability as theme (replaced by concrete Q4 target)
Moved: Capital efficiency as principle → Holding and conserving cash as demonstrated action ($1.1B cash position)[45] · International expansion as growth theme → International expansion as reported metric ($381M sales)[46]
Anecdotes
- Amazon invested in living.com and Pets.com as part of its 'land rush' Internet metaphor strategy; both companies shut down in 2000, costing Amazon significant money.[47]
- Amazon achieved a score of 84 on the American Customer Satisfaction Index, described as the highest ever recorded for a service company in any industry.[48]