Amazon.com 2001 Annual Report Download - page 31

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Results of Operations
Net Sales
Net sales include the selling price of consumer products sold by us, less promotional gift certificates and
sales returns; outbound shipping charges billed to our customers; commissions and other amounts earned from
sales of new and used products on Amazon Marketplace, Auctions and zShops; amounts earned (fixed fees, sales
commissions, per-unit activity fees, or some combination thereof) for sales of retail products through our
[email protected] Program, including our strategic alliances with Toysrus.com and Circuit City; the
selling price of consumer products sold by us through our Syndicated Stores program, such as www.borders.com;
amounts earned (fixed fees, sales commissions, per-unit activity fees, or some combination thereof) in
connection with our Merchant Program, such as Target.com, which is scheduled to launch in the second half of
2002; commissions earned from third parties who utilize our technology services such as search, browse and
personalization; and amounts earned for miscellaneous marketing and promotional agreements.
Net sales were $3.12 billion, $2.76 billion and $1.64 billion for 2001, 2000 and 1999, respectively,
representing annual growth rates of 13% and 68% for 2001 and 2000, respectively. The reduced annual growth
rate in our net sales is reflective of several factors, including the larger base comparison that results from our
rapid growth in previous years, a shift in the source of our product sales towards new and used products sold
through Amazon Marketplace, and declines in general economic conditions.
Net sales for our U.S. Books, Music and DVD/Video segment were $1.69 billion, $1.70 billion and
$1.31 billion for 2001, 2000 and 1999, respectively. These results represent an annual decline in net sales for our
U.S. Books, Music and DVD/Video segment of 1% for 2001, and an annual growth rate of 30% for 2000. This
segment includes retail sales from www.amazon.com of books, music and DVDs/video products and for
magazine subscriptions. This segment also includes commissions from sales of these products, new or used,
through Amazon Marketplace and product revenues from stores offering these products through our Syndicated
Stores Program, such as www.borders.com. Amazon Marketplace represented 12% of total orders in our U.S.
Retail segments, primarily relating to our U.S. Books, Music and DVD/Video segment, during 2001. Amazon
Marketplace orders were nominal in the prior year. The slowing annual growth rate reflects several factors
including a shift in the source of our product sales towards new and used products sold through Amazon
Marketplace, a continuing focus on balancing revenue growth with achieving operating profitability, and declines
in general economic conditions.
Net sales for our U.S. Electronics, Tools and Kitchen segment were $547 million, $484 million and
$151 million for 2001, 2000 and 1999, respectively. These results represent an annual growth rate of 13% for
2001. Since our U.S. Electronics, Tools and Kitchen segment began in the second half of 1999, annual growth
rates for 2000 are not meaningful. This segment includes www.amazon.com retail sales of electronics, computers,
camera and photo items, software, computer and video games, cell phones and service, tools and hardware,
outdoor living items, kitchen and houseware products, toys and video games sold other than through our strategic
alliance with Toysrus.com, Inc., as well as catalog sales of toys, tools and hardware. This segment also includes
commissions from sales of these products, new or used, through Amazon Marketplace and commissions or other
amounts earned from offerings of these products by third-party sellers through our [email protected]
Program, such as our strategic alliance with Circuit City. Excluding online sales of toys and video games which,
since September 2000, have been sold at www.amazon.com primarily through our strategic alliance with
Toysrus.com and reported in our Services segment, annual growth rates for our U.S. Electronics, Tools and
Kitchen segment would have been 28% for 2001. Annual growth in net sales for our U.S. Electronics, Tools and
Kitchen segment reflects increases in units sold by our electronics, kitchen and housewares, and outdoor living
stores in comparison with 2000, offset by the effects of declines in average selling prices per unit, declines in
general economic conditions, and the fact that most online sales of toys and video games are now sold through
our strategic alliance with Toysrus.com and the corresponding revenue is therefore reported in our Services
segment.
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