Amazon.com 2002 Annual Report Download - page 5

‚ We will make bold rather than timid investment decisions where we see a suÇcient probability of
gaining market leadership advantages. Some of these investments will pay oÅ, others will not, and
we will have learned another valuable lesson in either case.
‚ When forced to choose between optimizing the appearance of our GAAP accounting and
maximizing the present value of future cash Öows, we'll take the cash Öows.
‚ We will share our strategic thought processes with you when we make bold choices (to the extent
competitive pressures allow), so that you may evaluate for yourselves whether we are making
rational long-term leadership investments.
‚ We will work hard to spend wisely and maintain our lean culture. We understand the importance of
continually reinforcing a cost-conscious culture, particularly in a business incurring net losses.
‚ We will balance our focus on growth with emphasis on long-term proÑtability and capital
management. At this stage, we choose to prioritize growth because we believe that scale is central
to achieving the potential of our business model.
‚ We will continue to focus on hiring and retaining versatile and talented employees, and continue to
weight their compensation to stock options rather than cash. We know our success will be largely
aÅected by our ability to attract and retain a motivated employee base, each of whom must think
like, and therefore must actually be, an owner.
We aren't so bold as to claim that the above is the ""right'' investment philosophy, but it's ours, and
we would be remiss if we weren't clear in the approach we have taken and will continue to take.
With this foundation, we would like to turn to a review of our business focus, our progress in 1997,
and our outlook for the future.
Obsess Over Customers
From the beginning, our focus has been on oÅering our customers compelling value. We realized that
the Web was, and still is, the World Wide Wait. Therefore, we set out to oÅer customers something they
simply could not get any other way, and began serving them with books. We brought them much more
selection than was possible in a physical store (our store would now occupy 6 football Ñelds), and
presented it in a useful, easy-to-search, and easy-to-browse format in a store open 365 days a year,
24 hours a day. We maintained a dogged focus on improving the shopping experience, and in 1997
substantially enhanced our store. We now oÅer customers gift certiÑcates, 1-ClickSM shopping, and vastly
more reviews, content, browsing options, and recommendation features. We dramatically lowered prices,
further increasing customer value. Word of mouth remains the most powerful customer acquisition tool we
have, and we are grateful for the trust our customers have placed in us. Repeat purchases and word of
mouth have combined to make Amazon.com the market leader in online bookselling.
By many measures, Amazon.com came a long way in 1997:
‚ Sales grew from $15.7 million in 1996 to $147.8 millionÌan 838% increase.
‚ Cumulative customer accounts grew from 180,000 to 1,510,000Ìa 738% increase.
‚ The percentage of orders from repeat customers grew from over 46% in the fourth quarter of 1996
to over 58% in the same period in 1997.
‚ In terms of audience reach, per Media Metrix, our Web site went from a rank of 90th to within the
top 20.
‚ We established long-term relationships with many important strategic partners, including America
Online, Yahoo!, Excite, Netscape, GeoCities, AltaVista, @Home, and Prodigy.